Beneficial Finance Co. of Black Hawk County v. Reed, 55492

• Decision Date: 14 November 1973
• Docket Number: No. 55492,55492
• Citation: 212 N.W.2d 454
• Parties: 13 UCC Rep.Serv. 974 BENEFICIAL FINANCE CO. OF BLACK HAWK COUNTY, Appellant, v. Henderson REED, Appellee.
• Court: Iowa Supreme Court

Page 454

212 N.W.2d 454

13 UCC Rep.Serv. 974

BENEFICIAL FINANCE CO. OF BLACK HAWK COUNTY, Appellant, v. Henderson REED, Appellee.

No. 55492.

Supreme Court of Iowa.

Nov. 14, 1973.

Edward D. McCoy, Waterloo, for appellant.

C. A. Frerichs of Fulton, Frerichs, Nutting & Kennedy, Waterloo, and David H. Correll, Waterloo, for appellee.

Submitted to MOORE, C.J., and MASON, REYNOLDSON, HARRIS and McCORMICK, JJ.

MASON, Justice.

Plaintiff appeals from judgment entered in favor of defendant in law action for deficiency judgment under the Uniforn Commercial Code. The action was instituted by plaintiff, Beneficial Finance Company (Beneficial), to recover of defendant, Henderson Reed, the unpaid balance of defendant's promissory note after allowing credit for payments made thereon and for proceeds received from an earlier repossession and sale of defendant's automobile by plaintiff under a secured loan agreement entered into between the parties. The matter was tried to the court without a jury.

October 8, 1969, Reed executed a promissory note in the amount of $1800 to Beneficial. Reed received $1278 under the note, of which $991 was used to purchase a 1965 Chevrolet, $165 paid off the balance on a prior debt owed to Beneficial and $122 was retained by Beneficial for premiums on group credit life and disability insurance. The remainder represented precomputed interest and service charges. The Chevrolet automobile had been pledged as collateral to secure the note.

Reed became delinquent on the account owed Beneficial and on February 2, 1971, Beneficial repossessed the Chevrolet and purportedly mailed Reed the following letter:

'TO: Henderson Reed

DATE: February 2, 1971

Mr. Reed:

This is to notify you that your repossessed car will be put up for bids and sold to the highest bidder. If you wish to make arrangements or bid on the car, call us immediately.

Beneficial Finance of Waterloo

Frank Meyo'

Thereafter, the prospective sale was advertised by Beneficial in the local newspaper, the car was sold at the highest bid of $150 and the proceeds were applied to Reed's account. The trial court denied Beneficial recovery for the balance of the account in light of the provisions of our commercial code.

From that judgment Beneficial appeals assigning as error: (1) the allowance of an amendment to Reed's pleadings to conform with the proof; (2) the finding the letter of February 2 addressed to Reed failed to comply with the Code; (3) the conclusion the sale of the automobile was not commercially reasonable; and (4) the court's interpretation of the applicable damage provision of the Code.

I. The contested amendment filed by Reed consists of two divisions. The first advances a fourth paragraph to his answer asserting three separate affirmative defenses: usury, failure to conduct the sale of the collateral in a commercially reasonable manner and failure to give proper notification of sale to Reed. In the second division the two latter defenses are set forth as the basis for a counterclaim. The trial court allowed only division I of the amendment.

Rule 88, Rules of Civil Procedure, reads in part as follows:

'* * * The court, in furtherance of justice, may allow later amendments, including those to conform to the proof and which no not substantially change the claim or defense. The court may impose terms, or grant a continuance with or without terms, as a condition of such allowance.'

Recently, in Smith v. Village Enterprises, Inc., 208 N.W.2d 35 (Iowa 1973), this court considered the propriety of the trial court's ruling allowing plaintiffs to amend their petition 16 days after submission of the case. We repeat as relevant what was said there:

In considering this matter we start with the principle that trial courts have broad discretion in allowing late amendments under Rule 88, * * *.

'This rule has always received liberal interpretation. Rule 88 contemplates amendments to conform to the proof at any time before final disposition. This includes the right to amend after conclusion of the evidence. Twin Bridges Truck City, Inc. v. Halling, 205 N.W.2d 736 (Iowa 1973) (allowing an amendment to conform to the proof eight days after trial); Hackney v. Tower, 260 Iowa 1101, 1107, 152 N.W.2d 257, 261 (1967) (permitting an amendment seven days after trial). See also W & W Livestock Enterprises, Inc. v. Dennler, 179 N.W.2d 484, 488 (Iowa 1970); Stauter v. Walnut Grove Products, 188 N.W.2d 305, 307, 308 (Iowa 1971).

'There cases demonstrate the Time of the amendment is not the determining factor. More important is whether it substantially changes the issues. If so, the amendment should not be allowed. Rule 88, R.C.P.; W & W Livestock Enterprises, Inc. v. Dennler, supra, 179 N.W.2d at 488.' (Emphasis in the original) Id. 208 N.W.2d at 37.

In light of the foregoing statements of law this assignment presents the question whether allowance of the amendment to conform to proof by the trial court materially changed the issues or substantially altered the defenses.

In his original answer defendant denied the allegations set forth in plaintiff's petition and alleged as an affirmative defense:

1. Plaintiff has failed to give defendant credit for all payments made under the terms of said note.

2. Plaintiff sold the security item given as security for said note and failed to properly credit defendant with the proceeds of the same.

3. Plaintiff conducted the sale of the security item in such a fraudulent manner as to deny defendant the full value of the security item.

At the close of all evidence defendant moved for leave to amend to conform to proof. In said proposed amendment defendant asserts as affirmative defenses: (1) that plaintiff's note was usurious; (2) that the security sale was not conducted in a commercially reasonable manner; and (3) that defendant received no notice of the time after which the sale would be carried out.

Plaintiff says it 'promptly objected to the admissions of the document (amendment to conform to proof) as a violation of rule 88, Iowa Rules of Civil Procedure.' However, plaintiff's objection is not set out in the record or in the clerk's certification of all pleadings and calendar sheet in the cause. Nevertheless, the court reserved ruling on the amendment and in its decree filed March 14, 1972, approximately 60 days after trial, noted in its conclusions of law that it would allow division I of plaintiff's amendment.

The basis of plaintiff's argument in support of this assignment is that by reason of the court's granting of defendant's motion to amend to conform to proof almost two months after the close of all evidence Beneficial was denied the opportunity to prepare against the new defenses asserted in the amendment.

This argument is predicated on the contention defendant's amendment substantially changed the defenses.

In the present case the trial court made no mention in its findings or conclusions as to whether the allegations set forth in the post-trial amendment asserted substantially the same theory of defense as was asserted in defendant's original answer. A finding on this question was made by the trial court in Smith v. Village Enterprises, Inc., 208 N.W.2d at 37 and in W & W Livestock Enterprises, Inc. v. Dennler, 179 N.W.2d at 488. The procedure adopted by the trial courts in the cited cases is certainly desirable and helpful to this court in passing on contentions similar to the one urged by plaintiff here.

Paragraph 3 of defendant's original answer, set out supra, charging the sale was conducted in a 'fraudulent manner,' and the second and third defenses raised in the answer as amended pertain to a single issue: whether Beneficial complied with the provisions of the Uniform Commercial Code, Secured Transactions, sections 554.9501--554.9507, with respect to notice of sale after repossession and the commercial reasonableness of such sale.

The defense of usury although not in issue under the answer as originally pled was not the basis of the court's opinion and is not the basis of Reed's argument on appeal.

The trial court did not abuse its discretion in allowing plaintiff to amend as here.

II. Plaintiff's second assignment of error concerns Beneficial's letter addressed to defendant of February 2 which is set out in its entirety, supra.

Section 554.9504(3) provides:

'Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor, and except in the case of consumer goods to any other person who has a security interest in the collateral and who has duly filed a financing statement indexed in the name of the debtor in this state or who is known by the secured party to have a security interest in the collateral. The secured party may buy at any public sale and if the collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations he may buy at private sale.'

The trial court made the following conclusions of law:

'* * * The letter purportedly sent to Defendant, and set forth in full above, concerns a private sale of the collateral and hence reasonable notification of the time after which such sale would occur must be sent to the debtor. Assuming that it was sent to debtor, the letter does not state the time after which any private sale is to be made. * * *

'Further, the...