Citizens Sav. Bank v. Sac City State Bank

CourtUnited States State Supreme Court of Iowa
Writing for the CourtConsidered by REYNOLDSON; REYNOLDSON
Citation33 U.C.C.Rep.Serv. 98,315 N.W.2d 20
Decision Date20 January 1982
Parties33 UCC Rep.Serv. 98 CITIZENS SAVINGS BANK, Appellant, v. SAC CITY STATE BANK, Appellee. 65513.

Page 20

315 N.W.2d 20
33 UCC Rep.Serv. 98
CITIZENS SAVINGS BANK, Appellant,
v.
SAC CITY STATE BANK, Appellee.
65513.
Supreme Court of Iowa.
Jan. 20, 1982.

Page 22

Harry T. Watts and Barbara G. Barrett of Dickinson, Throckmorton, Parker, Mannheimer & Raife, Des Moines, for appellant.

Thomas L. McCullough and Colin J. McCullough of McCullough Law Firm, P.C., Sac City, for appellee.

Considered by REYNOLDSON, C. J., and LeGRAND, UHLENHOPP, McCORMICK, and SCHULTZ, JJ.

REYNOLDSON, Chief Justice.

In this appeal we are required to examine, as a matter of first impression, several provisions of our Uniform Commercial Code (UCC), chapter 554, The Code, in order to determine which of two Sac City banks, as a prior secured lienholder, is entitled to the liquidated assets of a defunct auto dealership.

Following a bench trial on a petition for declaratory judgment filed by plaintiff Citizens Savings Bank (Citizens), the court held defendant Sac City State Bank (Sac City), as prior lienholder, was entitled to.$146,746.99, constituting the sale proceeds of the dealership assets. This amount currently is held by a third bank stakeholder. Trial court denied Sac City's counterclaim against Citizens for $72,582.51. This sum represented General Motors Corporation (GM) "holdbacks" paid to Citizens on the dealership's assignment. We affirm in part, reverse in part, and remand with directions.

This dispute centers around the validity of certain security agreements, their perfection, and the collateral to which the security agreements, if valid, extend.

Trial court's decree carefully distilled from the record the following relevant facts:

April 7, 1969: Sac City, which had previously been loaning money to Thomas Johnson, on this date receives a security agreement from him for a "loan" covering inventory and accounts receivable and proceeds therefrom. Inventory is defined as including but not limited to, all goods, merchandise, raw materials, goods in process, and finished goods. Accounts receivable includes, but is not limited to all accounts, notes, drafts, instruments, chattel paper and documents. The security agreement contains an after-acquired property clause.

Two provisions of said agreement, relating to all collateral secured, are pertinent to the case at bar:

5. Debtor will not sell, lease or otherwise dispose of any Collateral Inventory other than in the ordinary course of its business at prices constituting the then fair market value thereof, without written consent of Secured Party.

17. ... All rights of Secured Party hereunder shall inure to the benefit of the heirs, executors, administrators, successors and assigns of Secured Party; and all obligations of Debtor shall bind the heirs, executors, administrators, successors and assigns of Debtor.

November 17, 1970: Sac City files a financing statement numbered G-65180 covering the same collateral as the security agreement and listing the debtor as "Thomas S. Johnson d/b/a Tommy Johnson Chev. Co."

May 1st, 1972: The auto dealership is incorporated as "Tommy Johnson Chevrolet, Inc." (TJC, Inc.) All assets of the operating proprietorship of Thomas S. Johnson are transferred to the corporation. The corporation retains the same address, employees, telephone number and business. Evidence reveals that Sac City knew of the incorporation at least in the early part of May, if not before. Thomas S. Johnson executes a personal guaranty to Sac City on this date guaranteeing payment of indebtedness of "Tommy Johnson Chev., Johnson Motors, Tommy

Page 23

Johnson Chev. Inc. and Tommy Johnson" to Sac City.

May 1972 through November 1972: Payments made on two notes from Thomas S. Johnson which were executed on January 5, 1970 and February 19, 1971 and (drawn) on the dealership's corporate account in Citizens.

May 3, 1972: A resolution of the corporate board authorizing the corporation to procure loans from Sac City is executed by Corinne M. Johnson and Thomas S. Johnson, secretary and president of the corporation respectively.

October 24, 1972: Citizens files a financing statement covering inventory, some real estate and proceeds of said collateral and lists debtor as "Tommy Johnson Chevrolet, Inc. formally (sic) d/b/a Tommy Johnson Chevrolet Co., a/k/a Thomas S. Johnson, Sac City, Iowa 50583."

November 9, 1972: Thomas S. Johnson and his wife filed for a real property arrangement under Chapter XII of the Bankruptcy Act.

December 12, 1972: Sac City filed a claim in the Johnson bankruptcy for the amount of notes claimed here.

1972-1977: Sac City purchased consumer paper with full recourse from the corporation. Payments were made on the corporate account in Citizens. Approximately $88,000.00 of consumer paper remains unpaid.

January 3, 1973: Thomas S. Johnson and his wife filed a proposed plan with the bankruptcy court. Sac City accepted the plan.

January 23, 1973: Citizens requested a UCC lien search on the following: (1) Johnson, Thomas Stratford and Corinne Johnson, Husband and Wife d/b/a Tommy Johnson Chev., Inc., Sac City, Iowa; and (2) Tommy Johnson Chevrolet, Inc., formally (sic) d/b/a Tommy Johnson Chevrolet Co., a/k/a Thomas S. Johnson, Sac City, Iowa. The search revealed only Plaintiff's financing statement.

On the same date Citizens requested a UCC search on "Tommy Johnson Chevrolet Co., Sac City, Iowa 50583." Said search revealed the Sac City financing statement, G-65180, and General Motors Acceptance Corporation's financing statement.

February 1, 1973: Citizens assists (TJC, Inc.) in filing an SBA loan application. The application acknowledges Sac City's first lien.

July 24, 1973: (TJC, Inc.) executes a security agreement with Citizens. A security interest is granted in: accounts receivable, dealer holdbacks, warranties, dealer reserves and credits for parts returned to Chrysler Motors Corporation, Chevrolet Motor Division and GMAC.

November 11, 1975: Sac City files a continuation statement with the Secretary of State on items covered by the November 17, 1970 statement, G-65180.

March 7, 1977: Citizens again assists (TJC, Inc) with an SBA loan application on which Sac City's first lien is noted.

September 12, 1977: Evidence shows Citizens received a security agreement from the corporation covering: accounts, contract rights, general intangibles, furniture, fixtures, inventory, machinery equipment and after-acquired property and proceeds therefrom....

September 13, 1977: Financing Statement covering the above-described items is filed with the Secretary of State.

November, 1977: The corporation ceases doing business and assets are sold.

November 24, 1977: Sac City begins listing debtor as "Tommy Johnson Chev. Inc.," in its ledger.

September 13, 1977: Citizens requests a UCC lien search on, inter alia : (1) "Tommy Johnson Chev. Inc.," and (2) "Tommy Johnson Chev. Inc." The search reveals the Sac City financing statement G-65180 and its timely continuance.

April 28, 1978: Sac City withdraws its claims in the Thomas S. Johnson bankruptcy.

June 12, 1978: Supplemental bankruptcy court order stating Sac City's claim was withdrawn by reason of claim satisfaction from sale of secured property.

September 25, 1978: The instant action is filed.

Page 24

January 29, 1979: Thomas S. Johnson's bankruptcy plan was confirmed by the bankruptcy court.

(Citations omitted.)

Before proceeding to the substantive issues relating to lien priorities, we address three threshold questions: whether our review is in law or equity; whether the amount of Sac City's debt was adequately established; and whether our statutory law before or after January 1, 1975, the date significant amendments to our UCC took effect, applies.

I. Is Our Review in Law or Equity?

No factual dispute looms large in this controversy. For the most part, our determination is controlled by issues of law, thus we are not bound by trial court's legal conclusions. See Chown v. USM Corp., 297 N.W.2d 218, 220 (Iowa 1980). Nonetheless, Sac City contends the action was tried as a law action, thus seeking to insulate trial court's fact-findings from de novo review and to support the relief it obtained in the decree. Citizens asserts the case was tried in equity and should be reviewed de novo.

After Citizen's "Petition For Declaratory Judgment In Equity" was filed, Sac City successfully moved to transfer the cause from equity to law, and demanded a jury trial. Later Citizens, citing Freese Leasing, Inc. v. Union Trust and Savings Bank, 253 N.W.2d 921 (Iowa 1977), moved to transfer the case back to equity. This motion was not ruled on. The case was tried to the court in June 1980. Trial court did not rule on evidentiary objections and later entered its "decree."

Ordinarily, whether a declaratory judgment action is a legal or equitable proceeding is determined by the pleadings, the relief sought, and the nature of the case. Eldridge v. Herman, 291 N.W.2d 319, 321 (Iowa 1980); Freese Leasing, 253 N.W.2d at 925; see Iowa R.Civ.P. 267. We have consistently held, however, that we will consider and review a case on appeal in the manner it was treated below. See Life Investors Insurance Co. of America v. Heline, 285 N.W.2d 31, 35 (Iowa 1979); Brammer v. Allied Mutual Insurance Co., 182 N.W.2d 169, 172 (Iowa 1970); Bjork v. Dairyland Insurance Co., 174 N.W.2d 379, 382 (Iowa 1970). Where there is uncertainty, a litmus test we have applied is whether evidentiary objections were ruled on by trial court. See Sille v. Shaffer, 297 N.W.2d 379, 380-81 (Iowa 1980); Bjork, 174 N.W.2d at 382. A "decree" is generally considered a final order of an equity court, Black's Law Dictionary 369-70 (5th ed. 1979), although a decree would be included within the broad definition of a "judgment" found in Iowa Rule of Civil Procedure 219.

At trial the evidentiary objections were not ruled on and no protest was raised. There is no indication Sac City sought to implement its demand for jury trial. None of the trial motions...

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50 practice notes
  • Combined Network, Inc. v. Equitable Life Assur. Soc. of the U.S., No. 85-1983
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • December 16, 1986
    ...730 (Tex.Civ.App.1972); State v. Green Bay, 96 Wis.2d 195, 291 N.W.2d 508 (1980) with Citizens Savings Bank v. Sac City State Bank, 315 N.W.2d 20 (Iowa 1982); Chemical Bank v. Washington Public Power Supply System, 102 Wash.2d 874, 691 P.2d 524 (1984) (against local governmental bodies); Va......
  • Commerce Bank, N.A. v. Chrysler Realty Corp., No. Civ.A. 99-2017-KHV.
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    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • October 14, 1999
    ...to the amount indicated on Chrysler's March 31, 1998, dealer statement for Bierwirth. 4. In Citizens Savings Bank v. Sac City State Bank, 315 N.W.2d 20, 30 (Iowa 1982), the Iowa Supreme Court held that automobile dealer holdback funds are not "accounts" within the meaning of UCC § 9-106. If......
  • Van Sloun v. Agans Bros., Inc., No. 07-1852.
    • United States
    • United States State Supreme Court of Iowa
    • February 5, 2010
    ...a litmus test we have applied is whether evidentiary objections were ruled on by trial court." Citizens Sav. Bank v. Sac City State Bank, 315 N.W.2d 20, 24 (Iowa 1982); accord Passehl, 712 N.W.2d at 414. If so, the action is one in law. Passehl, 712 N.W.2d at 414 n. 6; Stanley v. Fitzgerald......
  • M-Z Enterprises, Inc. v. Hawkeye-Security Ins. Co., M-Z
    • United States
    • United States State Supreme Court of Iowa
    • April 21, 1982
    ...be served thereby, a new trial shall be awarded of such issue or of the whole case. See Citizens Savings Bank v. Sac City State Bank, 315 N.W.2d 20, 30 (Iowa 1982); Schneider v. Parish, 242 Iowa 1147, 1155-56, 49 N.W.2d 535, 540 (1951); Kinney v. Larsen, 239 Iowa 494, 500, 31 N.W.2d 635, 63......
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50 cases
  • Combined Network, Inc. v. Equitable Life Assur. Soc. of the U.S., No. 85-1983
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • December 16, 1986
    ...730 (Tex.Civ.App.1972); State v. Green Bay, 96 Wis.2d 195, 291 N.W.2d 508 (1980) with Citizens Savings Bank v. Sac City State Bank, 315 N.W.2d 20 (Iowa 1982); Chemical Bank v. Washington Public Power Supply System, 102 Wash.2d 874, 691 P.2d 524 (1984) (against local governmental bodies); Va......
  • Commerce Bank, N.A. v. Chrysler Realty Corp., No. Civ.A. 99-2017-KHV.
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • October 14, 1999
    ...to the amount indicated on Chrysler's March 31, 1998, dealer statement for Bierwirth. 4. In Citizens Savings Bank v. Sac City State Bank, 315 N.W.2d 20, 30 (Iowa 1982), the Iowa Supreme Court held that automobile dealer holdback funds are not "accounts" within the meaning of UCC § 9-106. If......
  • Van Sloun v. Agans Bros., Inc., No. 07-1852.
    • United States
    • United States State Supreme Court of Iowa
    • February 5, 2010
    ...a litmus test we have applied is whether evidentiary objections were ruled on by trial court." Citizens Sav. Bank v. Sac City State Bank, 315 N.W.2d 20, 24 (Iowa 1982); accord Passehl, 712 N.W.2d at 414. If so, the action is one in law. Passehl, 712 N.W.2d at 414 n. 6; Stanley v. Fitzgerald......
  • M-Z Enterprises, Inc. v. Hawkeye-Security Ins. Co., M-Z
    • United States
    • United States State Supreme Court of Iowa
    • April 21, 1982
    ...be served thereby, a new trial shall be awarded of such issue or of the whole case. See Citizens Savings Bank v. Sac City State Bank, 315 N.W.2d 20, 30 (Iowa 1982); Schneider v. Parish, 242 Iowa 1147, 1155-56, 49 N.W.2d 535, 540 (1951); Kinney v. Larsen, 239 Iowa 494, 500, 31 N.W.2d 635, 63......
  • Request a trial to view additional results

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