                                ’




                                    NO.    95-503
              IN THE SUPREME COURT OF THE STATE OF MONTANA

         .+                               1996


PACCAR FINANCIAL CORP.,
a Washington corporation,
     Plaintiff and Appellant,
     v.
LES SCHWAB TIRE CENTERS OF
MONTANA, INC., a Montana
corporation, and INSURANCE
COMPANY OF NORTH AMERICA,
     Defendants and Respondents.




APPEAL FROM:       District Court of the Fourth Judicial District,
                   In and for the County of Missoula,
                   The Honorablk Ed McLean, Judge presiding.



COUNSEL OF RECORD:

              For Appellant:

                   Patrick G. Frank, Worden,          Thane & Haines, Missoula,
                   Montana
              For Respondent:

                   John R. Velk, Blakley & Velk, Missoula, Montana



                                Submitted on Briefs:          February 15, 1996
                                                    Decided: July 23, 1996
Filed:




                                          Clerk
Justice James C. Nelson delivered the Opinion of the Court.

     Paccar    Financial    Corporation   (Paccar)   brought   this   action
against Les Schwab Tire Centers of Montana              (Les Schwab) and
Insurance Company of North America (ICNA) to recover damages for

the repossession of tires affixed to semi-trucks and trailers owned

by Paccar and leased to MPT Corporation and/or Arthur and Dena

Pamin (MPT).   The District Court for the Fourth Judicial District,

Missoula County, granted Les Schwab's and ICNA's Motion for Summary
Judgment as well as their Motion for Rule 54(b) Certification to
this Court.    We affirm.

     The following issues are presented for review:

     1.   Whether the District Court erred in determining that

Paccar had no interest in the tires purchased by MPT from Les

Schwab.

     2.   Whether the District Court erred in granting summary

judgment to ICNA because Padcar was not a named party to the surety

bond and did not have an insurable interest in the tires.

     3. Whether the District Court erred in determining that there

were no genuine issues of material fact.

                  Factual and Procedural Background

     From late 1987 through early 1989, Paccar entered into several

agreements with MPT over the lease of eighteen semi-trucks. To

protect its interest in the leased trucks, Paccar filed a financing

statement with the Secretary of State on May 17, 1989.
     From December 11, 1990, through October 5, 1991, MPT purchased

123 tires and related equipment from Les Schwab for mounting onto
                                     2
the eighteen trucks leased through Paccar as well as several trucks

owned by MPT.   On July 23, 1991, MPT executed a continuing security
agreement with Les Schwab setting forth the commercial and credit

terms under which MPT could have an on-going business relationship

with Les Schwab for the purpose of purchasing, on credit, goods and

services for use in its trucking business.        Les Schwab did not
perfect its lien on the tires until August 5, 1991.
     When MPT failed to pay for the tires, Les Schwab brought an

action in the District Court to repossess them.      The court found
that Les Schwab had made a prima facie showing of its right to

possession and ordered the sheriff to seize the tires.     Les Schwab

asked ICNA to issue a bond wherein ICNA agreed to indemnify and pay

all costs to the Defendants "in the event that the attachment or
taking of property of Defendant(s) is found to be wrongful."

     Paccar filed a motion to intervene in the case on August 8,
1992, but before the court could rule on the motion, Les Schwab and

MPT entered into a settlement agreement and the case was dismissed.

Paccar instituted the present action on November 17, 1992, alleging

a claim of conversion against Les Schwab for the repossession of

the tires and naming ICNA as a party because of the bond.

     On September 9, 1994, Les Schwab and ICNA filed a Motion for

Summary Judgment in this action.       The District Court granted the

motion on March 14, 1995.    Upon motion by Les Schwab and ICNA and

without objection by Paccar, the District Court certified, pursuant

to Rule 54(b), M.R.Civ.P., that its order granting summary judgment

is a final order and judgment.


                                   3
                               Standard       of    Review
        Our standard of review in appeals from summary judgment

rulings is de nmm.           Mead v. M.S.B., Inc. (1994), 264 Mont. 465,

470,    872 P.2d 782, 785. When we review a district court's grant of

summary        judgment,   we apply the same evaluation as the district

court based on Rule 56, M.R.Civ.P.                 Bruner   v.   Yellowstone   County

(1995),        272 Mont. 261, 264, 900   P.2d 901, 903.          In Bruner, we set
forth our inquiry as follows:

        The movant must demonstrate that no genuine issues of
        material fact exist.    Once this has been accomplished,
        the burden then shifts to the non-moving party to prove,
        by more than mere denial and speculation, that a genuine
        issue does exist. Having determined that genuine issues
        of fact do not exist, the court must then determine
        whether the moving party is entitled to judgment as a
        matter of law.   We review the legal determinations made
        by a district court as to whether the court erred.

Bruner,        900 P.2d at 903 (citations omitted).

                                    Issue 1.

        Whether the District Court erred in determining that Paccar

had no interest in the tires purchased by MPT from Les Schwab.

        Paccar   contends that under its lease agreement with MPT, the

tires became the property of Paccar when they were installed on the

trucks leased by MPT.          Paccar's lease agreements with MPT provide

in     part:

         [MPT] shall furnish, at its own expense, all necessary
        fuel, lubricants, grease, antifreeze, tires, tubes and
        all other replacement parts and supplies necessary for
        maintenance and lawful operation of the Equipment. . . .
        All parts installed and any modifications and alterations
        made in the course of the ordinary maintenance and repair
        of the Equipment shall become the property of [Paccarl
        and    shall   remain  the property of     [Paccarl  upon
        termination of this Agreement unless otherwise provided
        herein.
                                          4
       The threshold issue then is      whether the tires became so
affixed to the trucks leased by MPT that they became "accessions."
The District Court found that the tires were not accessions under

the common law because they did not become an integral part of the

trucks and remained independently identifiable and capable of being

removed without harm or damage to the trucks.

            The doctrine of accession stems from the equitable
       notion that an owner of a chattel is entitled to his
       chattel in the same or improved condition after it has
       been tampered with by an innocent trespasser.         The
       principle was not designed or intended to give the owner
       of the chattel more than he had to start with, but it was
       intended to assure he would not obtain his chattel in a
       condition of less value or usefulness than before it was
       changed by a third party.      Thus, if the chattel was
       improved or enhanced and the improvements could not be
       severed from the chattel without injury to it, the
       improvements passed to the owner.
Bank of America v. J. & S. Auto Repairs (Ariz. 1985), 694 P.Zd 246,

252

       In Bank of America,     the bank brought a replevin action to

recover a van upon which the bank held a purchase money lien.      The

automobile     repair shop which had repaired the van after its

apparent abandonment by the mortgagor, filed a counterclaim.       The

Supreme Court of Arizona held that if detachable parts, such as the

engine,    transmission and tires, can be removed without damaging the

vehicle,    they are not accessions.    Bank of America, 694 P.2d at

253.      The Arizona court also determined that while a buyer and

seller of a vehicle can make an agreement between themselves, they

cannot bind third persons not parties to the agreement.       Bank of

America,    694 P.2d at 250.

       Two years later, the Supreme Court of Oregon held in Bancorp
                                    5
Leasing v. Stadeli Pump (Or. 1987), 739 P.2d 548, that because a
truck el<gine    is readily severable from the truck, the engine does

not accede to the truck when installed by a third party after the

old engine fails.     Thus the Oregon court determined that the engine

in Bancorp did not become subject to the bank's security interest

in the truck under a security agreement giving the bank a security

interest in all accessions.       In Bancoro, the court stated that
where the added part is owned by a third party, or where a third

party has a security interest in the part, under the common law,

courts ordinarily will not conclude that the part acceded to the

vehicle unless it is not severable.      Bancoro, 739 P.2d at 553.
      In like manner, courts in other jurisdictions have ruled that

parts that are easily detachable from a vehicle, such as an engine
or tires,     do not become accessions to the vehicle.    See   Rabtoay

General Tire Co. v. Colorado Kenworth Corp. (Cola. 1957), 309 P.2d

616 (tires are detachable accessories and are not merged in motor

vehicle upon which they are placed); Olive's Store v. Thomas (Okl.

1956),     294 P.2d 562 (seller of tires and tubes was entitled to

replevin     and to recover possession of tires and tubes from truck

seller); Havas Used Cars v. Lundy (Nev. 1954), 276 P.2d 727 (engine
is not an accession as it is readily detachable without damage to

the rest of the automobile).

         In the case before us, the District Court concluded that

         no reasonable juror could conclude that tires, rims, and
         lug nuts become such an integral part of a motor vehicle
         or trailer that one would have to cause damage to the
         vehicle or trailer in order to remove those items.

In   addition,     the District   Court determined that    even     if   a

                                    6
reasonable juror could conclude that the tires became so affixed to

the trucks that they became accessions, 5 30-g-314, MCA, allows for
the removal of items commonly treated as accessions under the

common law.     Section 30-g-314, MCA, provides, in part:

          Accessions. (1) A security interest in goods which
     attaches before they are installed in or affixed to other
     goods takes priority as to the goods installed or affixed
     (called in this section "accessions") over the claims of
     all persons to the whole except as stated in subsection
     (3) and subject to 30-9-315(l).

     Paccar contends that it falls within the exception in 5 30-9-

314(3) (a),   MCA,   which    recognizes a   superior   interest in    any
accession to the whole          in favor of a subsequent good faith

purchaser for value of the whole. However, Paccar does not qualify
as a subsequent good faith purchaser of the whole (the trucks) as

Paccar owned the whole (the trucks) prior to MPT's purchase of the

tires from Les Schwab

     Paccar also contends that under 5 30-Y-301(1) cc), MCA, its
ownership     interest     in the tires is superior to Les Schwab's

unperfected     security     interest.   Section 30-Y-301(1) (cl,     MCA,

provides, in part:

     an unperfected security interest is subordinate to the
     rights of:
     .
     (c) in the case of goods, instruments, documents, and
     chattel paper, a person who is not a secured party and
     who is a transferee in bulk or other buyer not in
     ordinary course of business . . . to the extent that he
     gives value and receives delivery of the collateral
     without knowledge of the security interest and before it
     is perfected. .

      Paccar contends that it is a buyer not in the ordinary course

of business and that it gave value for the tires and received
delivery of the tires.            Paccar's     argument   fails in several

respects.      First,   Paccar incorrectly looks to its relationship with

MPT, rather than with Les Schwab.            Les Schwab was not a party to

the lease between Paccar and MPT and is not bound by its terms.

Bank of America, 694 P.2d at 250.

       Second, Paccar is not a buyer.        Buying requires an exchange of

cash or other property, and a sale requires "the passing of title

from the seller to the buyer for a price."            Sections   30-l-201(9)

and 30-2-106(l), MCA.         Paccar gave no money or other property to

Les Schwab or MPT subsequent to MPT's purchase of the tires from
Les Schwab.

       Finally, Paccar did not take delivery of the tires as required

under § 30-9-301(l) cc), MCA. The tires were delivered to MPT, not

Paccar.

       Therefore,       we conclude that Paccar had no interest in the

tires purchased by MPT from Les Schwab, and we affirm the judgment

of the District Court.

                                   Issue 2.

       Whether the District Court erred in granting summary judgment
to   ICNA   because Paccar was not a named party to the surety bond and

did not have an insurable interest in the tires.
        The District Court concluded that since Paccar failed to

establish any superior interests in the tires, Paccar has no claim

to assert against the bond provided by ICNA.          Paccar contends that,

as an intervener-defendant         in Les Schwab's original claim and

delivery      action,    Paccar is a beneficiary of the ICNA bond and
should thus be allowed to bring an action against the bond.

        Section 27-17-205, MCA, makes the beneficiary of a bond the
person or entity named therein.          The person or entity named in the
bond in this case was MPT, not Paccar.               Furthermore, we held in
Standard Sewing Machine Co. v. Smith (1915), 51 Mont. 245, 152 P.

38,   that sureties protect only the parties named in the bond.

        Since the ICNA bond was expressly written for the benefit of

MPT, only MPT can act upon and enforce the bond.             Accordingly,   we
affirm the District Court's grant of summary judgment to ICNA.

                                 Issue       3.

        Whether the District Court erred in determining that there
were no genuine issues of material fact.

         The District Court determined that Les Schwab, as the moving

party,     met its burden of proof in demonstrating that no genuine

issues of material fact exist.               Once that was accomplished, the

burden then shifted to Paccar to prove, by more than mere denial

and speculation, that a genuine issue does exist.           Bruner,   900 P.2d

at 903.      The District Court concluded that Paccar failed to meet

its burden.

         Paccar contends that there are genuine issues of material fact

that have yet to be resolved.       According to Paccar, the unresolved

issues are: (I) whether Paccar had actual knowledge of Les Schwab's

prior      security   interest   in the tires prior to Les            Schwab's

perfection,      and (2) which tires are subject to Les Schwab's

security interest upon perfection and which belong to Paccar.

         The issues raised by Paccar are not issues of material fact.


                                         9
Paccar's allegations of lack of actual knowledge are immaterial

because Paccar fails to satisfy the other elements necessary for
protection under § 30-9-301(l) (c), MCA.   In addition, Paccar has
demonstrated no ownership or   security interest in the tires and

there is no evidence that any of the tires repossessed by Les

Schwab belonged to Paccar.

     Accordingly,   we hold that the District Court was correct in
determining that there are no genuine issues of material fact in

dispute.

     Affirmed.




We Concur:




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