B-W Acceptance Corp. v. Saluri

Decision Date11 January 1966
Docket NumberB-W,No. 51846,51846
Citation139 N.W.2d 399,258 Iowa 489
PartiesACCEPTANCE CORPORATION, Appellant. v. George J. SALURI and Dorothy V. Saluri, Appellee Cross-Appellants, and Iowa Zone Distributing Company, Incorporated, C. R. Jeffries, S. W. Jeffries, Henry Fingert, Sam Fingert, C. L. Lockridge, Dorothy M. Lockridge, and Polk County, Iowa, Appellees.
CourtIowa Supreme Court

Abramson, Myers & Myers, Des Moines, for appellants.

Henry Wormley and Anthony Critelli, Des Moines, for appellee cross-appellants.

I. Joel Pasternak and Daniel E. Hannan, Des Moines, for appellees.

BECKER, Justice.

The corporate background of plaintiff should be outlined. Borg-Warner Corporation manufactures coin operated laundry and dry cleaning machines. The manufacturer sells its product through its subsidiary, Norge Sales Corporation, and provides financing through its subsidiary B-W Acceptance Corporation, both separately incorporated. None of the three corporations have been incorporated in Iowa, nor are any of them authorized to do business in Iowa. B-W Acceptance Corporation, the finance company and holder of the chattel mortgages, is plaintiff herein.

Defendant Iowa Zone Distributing Company, Incorporated, is an Iowa corporation organized to distribute products manufactured by Borg-Warner pursuant to agreement with Norge Sales. Defendants C. L. Jeffries and S. W. Jeffries are stockholders of Iowa Zone and individually guaranteed various contracts entered into by Iowa Zone.

Defendant George J. Saluri and Dorothy V. Saluri, husband and wife, residents of Des Moines, Iowa had long been in the dry cleaning business when, on May 21, 1961, they purchased coin operated Norge (Borg-Warner) dry cleaning machines from Iowa Zone. The conditional sales contract signed in connection with the purchase provided for a total obligation of $40,113.88. On December 4, 1961, the couple purchased an additional group of dry cleaning machines under a conditional sales contract calling for payment of the sum of $21,163.83. The foregoing conditional sales contracts were assigned by Iowa Zone to B-W Acceptance Corporation. Both conditional sales contracts were guaranteed by Iowa Zone, and by C. R. Jeffries and S. W. Jeffries personally. It is on these contracts that plaintiff brings its action.

Defendants Saluri answered and filed a counterclaim. Defendants Iowa Zone, C. R. Jeffries and S. W. Jeffries answered and filed a cross petition. Defendants Henry Fingert, Sam Fingert and C. L. Lockridge and Dorothy M. Lockridge, joined as junior lien holders, all failed to appear. Default was taken against them. Polk County answered but no evidence or judgment respecting its position appears of record.

In count I plaintiff seeks judgment for $34,082.32 on the May conditional sales contract. In Court II plaintiff seeks judgment in the sum of $21,163.83, together with interest on the December contract. The trial court in its extended opinion gave careful consideration to the matters of accounting, and determined that on said counts the plaintiff was entitled to judgments as of September 25th, 1964, in a sum of $32,582.32, on Count I, and $21,163.83, on Count II. These amounts were reduced as hereafter indicated.

Cross Petitioner Iowa Zone alleged that its contract with plaintiff provided amoing other matters that there would be withheld by plaintiff finance company an amount equal to 5% of face value of the paper financed, less finance charges, on each sale made by Iowa Zone. This fund would be a reserve to the credit of the dealer. The money was to be paid to dealer when the obligation evidenced and secured by the paper was paid in full, provided no other paper was the in default. Iowa Zone claimed that it had $26,213.96 to its credit under this arrangement.

Cross petitioner also sought credit for $16,035, alleged to have been withheld by plaintiff in addition to the 5%. Both items were allowed to cross petitioner, constituting a $42,249.46 reduction in plaintiff's claim. Interest on the latter item was also allowed further reducing the balance due to $10,193.84, against the defendants George J. Saluri and Dorothy V. Saluri, Iowa Zone Distributing Company, Incorporated, C. R. Jeffries and S. W. Jeffries, and each of them. Neither party now argues nor urges reversal on the basis of the detail of the court's accounting methods.

The final decree provided for foreclosure of the mortgages and special execution. It also provided for general executions at plaintiff's request if the special executions were insufficient. The counterclaim of defendants Saluri was dismissed. Plaintiff appeals and George J. Saluri and Dorothy V. Saluri cross appeal.

I. Plaintiff first assigns error on the ground that where there are multiple defendants a counterclaim cannot be asserted unless it is common to all defendants. 'If there be but one defendant, he may file a counterclaim; if there be more than one defendant, then the counterclaim filed must belong to all of the defendants.' Shaw v. Ioerger, 203 Iowa 1256, 212 N.W. 719; Jordison v. Jordison Bros., 215 Iowa 938, 247 N.W. 491.

The trial court noted that all of the cases limiting the counterclaim in such manner were decided before adoption of Rule 30 of the Iowa Rules of Civil Procedure. 'Unless prohibited by rule of statute, a party and counterclaim against an opposing party on any cause of action held by him when the action was originally commenced, and matured when pleaded.' The court rules that any defendant may assert a counterclaim regardless of whether his co-defendants have an interest in it, unless prohibited by other rule or statute.

We have not passed on this point since the adoption of Rule 30, but now determine the foregoing interpretation by the trial court correctly states the law in relation to counterclaim in cases where there are multiple defendants.

II. Plaintiff's second error is the claim that the $26,213.96 set off representing the 5% reserve account of defendant Iowa Zone was improperly allowed because that claim had not, at time of trial, matured. This proposition requires recognition that plaintiff B-W and defendant Iowa Zone transacted large amounts of business involving purchases other than those made by defendants Saluri.

The record is that plaintiff is still the holder of conditional sales contracts assigned to it by defendant Iowa Zone which are substantially in default at the time of trial. These delinquent contracts represent total obligations in excess of $117,000, on various transactions concerning various vendees. The court felt that the $26,213.96 reserve could, and should be applied to the accounts represented in this action upon application by Iowa Zone.

The contract between the parties provides that Iowa Zone shall receive the funds when the obligations evidenced and secured by the papers have been paid in full, provided no other paper purchased is then in default. The clear purpose of this provision in relation to the 5% withholding is to provide a reserve account available to the plaintiff company protecting it in relation to all of the outstanding obligations until all are current. To become entitled to its reserve the dealer need not wait until all accounts are paid, but it must show that none are in default. Nothing in the contract provides that the plaintiff finance company is obligated to apply any portion of reserve to any given account.

'It is the court's duty to give effect to the language of the contract in accordance with its plain and ordinary meaning and not make a new contract for the parties by arbitrary judicial construction.' Bruhl v. Thul, Iowa, 134 N.W.2d 571, 573. It will be noted that Rule 30 of the Iowa Rules of Civil Procedure heretofore set forth ends with the phrase 'and matured when pleaded.'

'To allow a debt not due to be set off against one already due would be to change te contract and advance the time of payment.' 20 Am.Jur.2d, Counterclaim, Recoupment, Etc., section 57, page 275. See also Mattek v. Hoffmann, 272 Wis. 503, 76 N.W.2d 300, 57 A.L.R.2d 696 where in a somewhat analogous situation the Wisconsin Supreme Court held that a valid claim, not yet matured, could not be set off against a claim which is presently due and owing.

The defendants' brief and argument uses the term equitable set off. 'Generally, the law of setoff as applicable to demands not due is the same in equity as at law. A debt due at a future time cannot be set off in equity against a debt presently due, and equity has no power to prevent a party from collecting at law a debt due him because he owes the defendant a debt not due, which defendant may not be able to collect when it is due, if this fund is not stayed in his hands * * *.

'Equitable setoffs of unmatured obligations may be allowed under special circumstances, such as insolvency of the obligor, or probable difficulty in collecting the obligation at maturity, but such setoffs are largely within the court's discretion. Nonresidence of the plaintiff may constitute good ground for equitable setoff where the defendant's claim arose after commencement of the action.' 20 Am.Jur.2d, Counterclaim, Recoupment, section 59, page 277.

While this phase of the contract is wholly in favor of Plaintiff B-W, it is not illegal. "Likewise, the court may not alter a contract for the benefit of one party and to the detriment of the other or others, or make a new contract at the instance of one of the parties, or, by a process of interpretation, relieve one of the parties from the terms to which he voluntarily consented, or, because of equitable considerations, obviate objections which might have been foreseen and guarded against, * * *." Smith v. Stowell, Iowa, ...

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