Audio Odyssey, Ltd. v. Brenton First Nat. Bank
| Decision Date | 22 September 2003 |
| Docket Number | No. 3:97-CV-40082.,3:97-CV-40082. |
| Citation | 284 F.Supp.2d 1159 |
| Parties | AUDIO ODYSSEY, LTD., an Iowa Corporation; Dogan A. Dincer; and Ann M. Dincer, Plaintiffs, v. BRENTON FIRST NATIONAL BANK, an Iowa Banking Corporation; Michael M. Bladel, Sheriff of Scott County, Iowa; John M. Norris, Deputy Sheriff of Scott County, Iowa; Charles A. Barton; John C. Bradley; Chris A. Pieper; Roger Hoffman; Merchants Bonding Company, a Corporation, Defendants. Audio Odyssey, Ltd., an Iowa Corporation; Dogan A. Dincer; and Ann M. Dincer, Plaintiffs, v. Bernard J. Hofmann; and Anderson & Nelson, a Professional Corporation, Defendants. |
| Court | U.S. District Court — Southern District of Iowa |
Stuart R. Lefstein, Dale G. Haake, Katz, McHard, Balch, Lefstein & Fieweger, PC, Rock Island, IL, for Plaintiffs.
Steven L. Nelson Davis, Brown, Koehn, Shors & Roberts, PC, Des Moines, IA, Terry J. Abernathy, Stephanie L. Hinz, Pickens, Barnes & Abernathy, Cedar Rapids, IA, Thomas C. Fritzsche, Michael J. Walton, Scott County Attorneys Office, Davenport, IA, Robert D. Houghton, Richard S. Fry, Diane Kutzko, Shuttleworth & Ingersoll, Cedar Rapids, IA, Realff J. Ottesen, Michael J. Walton, Ottesen & Walton, Davenport, IA, Gary L. Hayward, Asst U.S. Atty, United States Attorney, Des Moines, IA, for Defendant.
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
This matter comes before the Court on Cross Motions for Summary Judgment. A hearing on the motions was held August 29, 2003. Representing Audio Odyssey were Dale Haake and Stephen Fieweger of Katz, Huntoon & Fieweger. Representing Defendants Bernard J. Hofmann and Anderson & Nelson ("Law Firm") was Diane Kutzko of Shuttleworth & Ingersoll. Representing Brenton Bank, John Bradley, Chris Pieper, and Merchants Bonding ("Bank") was Stephanie Hinz of Pickens, Barnes & Abernathy. Representing Scott County Sheriffs Michael Bladel, John Norris, and Charles Barton ("Scott County") was Michael Walton of the Scott County Attorney's Office.
In 1977, Dogan Dincer began working at Audio Odyssey, Ltd. ("Audio Odyssey"), an electronics store located in Davenport, Iowa. He eventually became manager and part-owner of the business. In October 1991, Dincer bought out the majority shareholder's interest in the company and thereby became Audio Odyssey's sole shareholder. To finance the purchase, a $200,000 loan was negotiated with Brenton Bank, 85 percent of which was guaranteed by the Small Business Administration ("SBA").
A Security Agreement ("SA") signed by Dogan and Ann Dincer gave Brenton a security interest in Audio Odyssey's accounts, general intangibles, contracts, instruments, chattel paper, documents, inventory, furniture, machinery, equipment (including motor vehicles, trucks, and trailers), and fixtures located on the property. Audio Odyssey's loan obligations included making a monthly principal and interest payment, maintaining insurance on the collateral, and keeping current on tax obligations. In the event of default, the SA allowed Brenton, to accelerate the loan, enter the premises and take the collateral. The loan documents included a lease assignment ("Lease Assignment") which provided that in the event of default, the Bank could, without notice, enter the leased premises and, inter alia, remove all Audio Odyssey's property, sell all Audio Odyssey's property, and/or transfer and assign the lease.
In late 1994, Audio Odyssey began experiencing financial difficulties and fell behind on its loan obligations, including the loan mortgage, taxes, and insurance payments. Brenton agreed to accept interest only payments on the loan mortgage from November 1994 through February 1995. Despite this arrangement, by March 1995, Audio Odyssey's financial situation had not improved. In addition to being behind on its mortgage and taxes, Audio Odyssey was overdrawn on its business checking account. Brenton paid checks written on insufficient funds but informed Audio Odyssey not to perceive this as a willingness to cover overdrafts on an ongoing basis. In a letter dated March 27, 1995, John Bradley, Brenton's Vice President of Commercial Banking Services, warned Audio Odyssey that if it failed to cover the overdrafts and bring the mortgage into current status, Brenton may accelerate the entire principal balance on the loan. Around this time, in an attempt to remedy its financial problems, Audio Odyssey requested a line of credit from Brenton to purchase more merchandise; ultimately, the request was denied.2
By mid-July 1995, Audio Odyssey was behind on its mortgage and tax obligations, and its business checking account was overdrawn. On July 13, 1995, John Bradley contacted Roger Hoffman (R. Hoffman) of the SBA and informed him of the condition of Audio Odyssey's account. Bradley told Hoffman he feared the collateral was at risk. R. Hoffman verbally agreed that if a satisfactory workout could not be arranged, Brenton could seek a replevin action. That same day, Dincer made a $6,983 deposit at Brenton, telling Vice President Chris Pieper he wanted the deposit applied to Audio Odyssey's overdue mortgage and van payments. However, Brenton applied the funds to the overdrawn checking account instead.3
At 8:50 a.m., July 14, 1995, Bradley hand delivered a letter to Dincer informing him that Brenton was accelerating the loan and demanded the remaining balance of $126,000 by 9:00 a.m. Dincer told Bradley he could not come up with that amount in ten minutes and referred Bradley to his attorney, Steven Wing. At 12:00 p.m., Wing faxed Brenton a letter arguing Audio Odyssey was not in default. That afternoon, Brenton's attorney, Bernard Hofmann ("Hofmann") of Anderson & Nelson, filed an ex parte replevin action in Scott County District Court. The petition alleged (1) Audio Odyssey was delinquent on its loan payments, failed to maintain insurance on the collateral, and failed to pay tax assessments which may be levied against the collateral; (2) in the event of default, the SA gave Brenton the right of possession of the collaterial; and (3) without immediate action, the collateral was at risk of being destroyed, concealed, removed from the state, sold, transferred, or assigned. Hofmann filed the petition and posted a $300,000 bond.
Scott County District Judge James Havercamp reviewed the petition and discussed it with Hofmann. Hofmann explained that Audio Odyssey planned an "annual sale" that weekend and that the Bank feared the collateral would be sold or removed. Judge Havercamp also asked if notice was required. Hofmann explained Iowa's replevin statute gave the court discretion with regard to notice.
After reviewing the petition, Judge Havercamp signed the replevin order Hofmann had prepared. Pursuant to that order, a writ of replevin was issued by the Clerk of the Scott County District Court directing the Scott County Sheriff to deliver into Brenton's possession
All inventory, fixtures, accounts, furniture, equipment and machinery on property described as follows:
4050 square feet located at 1718 E. Kimberly Road, Davenport, Iowa, legally described as: part of the northwest quarter of the southwest quarter of section 18, township 78, range 4, east of the 5th p.m.... to the city of Davenport, Scott County, Iowa.
By this time it was late Friday afternoon. Hofmann took the writ to the Scott County Sheriff and told Sergeant Charles Barton he wanted the writ executed immediately. Barton explained that the deputies' shifts would be over soon, and there was no way to execute the writ that afternoon. Barton then asked if moving trucks and personnel were ready to remove the collateral. Hofmann told Barton those preparations had not been made. After calling and discussing the situation with Bradley, Hofmann asked Barton if the premises could be locked over the weekend and the property removed on Monday when trucks would be available. Barton reviewed the writ and said he could. Barton instructed Hofmann to fill out the "Directions to Sheriff" form. On that form, Hofmann directed the sheriff "if possible serve Dogan Dincer, President of Corporation — contact John Bradley at Brenton Bank, 323-3368 — he will meet with you at store with a locksmith."
The paperwork was given to Deputy John Norris. Hofmann told Norris a locksmith would meet him at the store. Norris compared the directions with the court order and found no discrepancies, so he left for the store. About 4 p.m., Norris served the writ upon Dincer at Audio Odyssey. Dincer and the employees in the store were asked to leave, the inventory and other collateral was secured, the locks were changed, and "No Trespassing" signs were posted on the front and back doors. Norris testified that he kept the keys to the premises. That night, Dincer called Judge Havercamp at his home and told the judge he disputed the replevin action. Judge Havercamp advised Dincer to hire an attorney.
Monday morning, under Norris' supervision, the moving company began removing and inventorying the items described in the writ. By the middle of the week, the inventory was complete. The premises were locked, and Norris handed the keys over to Brenton representatives.
On August 2, 1995, after discussions between Audio Odyssey's newly appointed counsel and Brenton proved unproductive, Audio Odyssey sent a certified letter to the Scott County Sheriff demanding surrender of the premises. Without a response by August 4, 1995, Audio Odyssey moved to dismiss the replevin action and to return the real estate. A hearing scheduled for August 22, 1995, was continued and never completed.4 On August 31, 1995, a court order was entered and a writ was issued ordering removal of the No Trespassing signs and allowing Audio Odyssey to enter the premises.
On May 16, 1997, Audio Odyssey and the Dincers commenced several lawsuits stemming from the replevin action on July 14, 1995. A lawsuit against Brenton, certain Brenton employees, the bonding...
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