Eggeman v. Western Nat. Bank

• Decision Date: 18 June 1979
• Docket Number: No. 5059,5059
• Citation: 596 P.2d 318
• Parties: Harvey J. EGGEMAN, Appellant (Defendant below), v. WESTERN NATIONAL BANK, Lovell, Wyoming, Appellee (Plaintiff below).
• Court: Wyoming Supreme Court

Page 318

596 P.2d 318

Harvey J. EGGEMAN, Appellant (Defendant below), v. WESTERN NATIONAL BANK, Lovell, Wyoming, Appellee (Plaintiff below).

No. 5059.

Supreme Court of Wyoming.

June 18, 1979.

Ross D. Copenhaver, of Ross D. Copenhaver, P. C., Powell, for appellant-defendant.

Rick Anderson, of Darrah & Anderson, Powell, for appellee-plaintiff.

Before RAPER, C. J., and McCLINTOCK, THOMAS, ROSE and ROONEY, JJ.

ROONEY, Justice.

This is an appeal from an order denying a motion of appellant-defendant to vacate a sheriff's sale of defendant's real and personal On January 15, 1973, defendant and his wife gave plaintiff a promissory note in the principal amount of $41,000, and they secured the debt by a mortgage on two adjoining tracts of land near Lovell. The two tracts were purchased at different times. On one was a building, which was used by defendant in his business, known as Lovell Machine. The other tract was vacant.

property, which was made pursuant to a foreclosure action brought by appellee-plaintiff. We will reverse and order vacation of the sale.

On April 25, 1975, defendant gave plaintiff another note in the principal amount of $8,625, which was secured by collateral described only as "inventory and accounts receivable" in the note, and as follows in the security agreement:

"(a) All of debtor's inventory including all goods, merchandise, raw materials, goods in process, finished goods and all other tangible personal property now owned or hereafter acquired and held for sale or lease or furnished or to be furnished under contracts of service or used or consumed in debtor's business, * * * and in contract rights with respect thereto and proceeds of both. * * *

"(b) All accounts, notes, drafts, chattel paper, acceptances and other forms of obligations and receivables now or hereafter received by or belonging to debtor for goods sold by it or for services rendered by it, all guaranties and securities thereof, hereinafter called the 'receivables', all right, title and interest of debtor in the merchandise which gave rise thereto including the right of stoppage in transit, and all rights of debtor earned or yet to be earned under contracts to sell goods or render services and in the proceeds thereof, including all accounts receivable listed and described on Exhibit A attached hereto and by this reference made a part hereof."

There was no Exhibit A.

Defendant defaulted in payments on both notes, and plaintiff filed a complaint containing two claims for relief. One was against defendant for judgment on the balance due on the $8,625 note and requesting sale of the collateral in satisfaction thereof. The other was against defendant and his wife on the balance due on the $41,000 note and requesting sale of the mortgaged real property in satisfaction thereof. A copy of each note, a copy of the mortgage, and a copy of the security agreement ¹ were attached to the complaint. The answer admitted the making and delivery of the notes and denied the other allegations of the complaint.

The judgment recited that "it appearing to the Court" that defendant and his wife "authorized" their counsel to stipulate to the entry of judgment in the amount of $42,197.04 against them, specifically: (1) in amount of $38,431.05 against defendant and his wife, and that the "premises covered by the mortgage * * * be decreed sold According to law ; that the proceeds of the sale be brought into the Court and applied * * * (to) the amount due Plaintiff; and that Plaintiff have judgment And execution against the Defendants, and each of them, for any deficiency * * * " (emphasis added); and (2) in the amount of $3,765.99 against defendant, and that "the lien represented by the security agreement * * * be foreclosed; that the collateral listed in the security agreement be sold Under and pursuant to the judgment of this Court and the proceeds of such sale be applied toward the satisfaction and payment of the lien," (emphasis added); and judgment for deficiency to be rendered against defendant. There was no reference to the disposition to be made of any amount received from the sale in excess of the debt.

After such recitations in the judgment, the court ordered that "Plaintiff have Judgment according to that stipulation previously entered into between the parties hereto and as is set out previously in this Order." It was further ordered that defendant and The stipulation was not part of the record as designated for appeal. We must presume that the stipulation, which amounted to a confession of judgment, was made pursuant to §§ 1-16-201 and 1-16-202, W.S.1977, which provides that the warrant of the attorney confessing judgment be filed with the clerk of court. This is mentioned only to indicate the intention of the legislature to insure protection of the debtor when judgment is of the consent type.

his wife be barred from asserting any right to the two tracts of real property except for right of redemption (each tract was specifically described), and that defendant be barred from asserting any rights to the inventory and accounts receivable. Finally, it was ordered that the title "to the real property, inventory and accounts receivable herein described" be quieted in plaintiff, subject only to the rights of redemption, and "Plaintiff shall have foreclosure thereon As provided by law." (Emphasis added.)

A Notice of Foreclosure Sale of defendant's property was duly published. It read in part:

" * * * on January 20, 1978, at 11:00 o'clock A.M., at the front door of the courthouse at Basin, Big Horn County, Wyoming, the Sheriff of Big Horn County will sell the above-described real property, inventory and accounts receivable or so much thereof as may be necessary to satisfy Plaintiff Western National Bank's judgment with interest and costs, to the highest bidder."

The two tracts of real property were described separately in this notice as they were in the mortgage.

At the sale, both tracts of real property and the inventory and the accounts receivable were offered only as a whole and in one group. They were sold in that fashion for the high bid of James T. Frost in the amount of $67,500.

The sheriff tendered to defendant the amount in excess of the total judgment less expenses. At first, defendant refused to accept it. Then he consented to it being deposited by the sheriff in defendant's bank account. He expressed his willingness to return the same if the sale is vacated.

The inventory and accounts receivable were never listed or itemized. A list of the items taken into Frost's possession was attached to an affidavit of defendant. Most of the items listed thereon were equipment and supplies rather than inventory and accounts receivable. The term "inventory" does not include "equipment." Section 34-21-909(a)(ii) and (iv), W.S.1977.

Defendant contends that the remedy taken by plaintiff with reference to the default of the $8,625 note and of the security agreement was not pursuant to law, and he contends that the sale of the real property was illegal inasmuch as each tract was not separately offered for bid. Plaintiff contends that the sale was proper as a Judicial sale, wherein the several requirements of a sale by execution under a judgment are not applicable.

SALE OF INVENTORY AND ACCOUNTS RECEIVABLE

Under law, there are five principal remedies given to the secured party on default of the terms of a security agreement by the debtor. Since none of the remedies were properly used in this case, the sale of the personal property was not proper. The five remedies are:

1. Use of the real estate mortgage foreclosure procedures if the security agreement covers both real and personal property. ² Although both real and personal property were involved in this action, the security agreement does not cover real property. Therefore, this remedy is not available to plaintiff.

2. With reference to accounts receivable, as here, collect the same from those obligated thereon. ³ Plaintiff did not choose to pursue this remedy.

3. Any special remedy provided in the security agreement. ⁴ This security agreement did not set forth any special remedy. ⁵

4. Take possession of the collateral without judicial process ⁶ and either accept it in full satisfaction ⁷ or sell it. ⁸ The notice required for acceptance in full satisfaction was not here given. Here possession was not taken without judicial process, and the sale was made before plaintiff took possession. A sale under this remedy must be commercially reasonable. Section 34-21-963(c), W.S.1977. This is the remedy most commonly used. The usual reasons for not using it are: (a) inability to secure peaceable possession of the collateral, and (b) desire to be able to proceed against assets of the debtor, other than the collateral. Plaintiff did not use this remedy.

5. Take a judgment on the underlying obligation, and proceed under the judgment. ⁹ This seems to be the remedy attempted in this case. The procedure for this remedy is not set out in the Uniform Commercial Code, i. e., § 34-21-101, et seq., W.S.1977. The usual procedure for enforcement of judgments for money is set out in § 1-17-101, et seq., W.S.1977. Usually the judgment is executed on by issuance of a writ of execution. The sheriff levies the writ upon the goods and chattels of the debtor, taking them actually or constructively into his possession. The various items levied upon are then identified and are subject to valuation and inspection. If necessary, the sheriff then holds an execution sale. Such procedure is anticipated by the Uniform Commercial Code. ¹⁰

A writ of execution was not issued or levied in this case. The sheriff did not take possession of the goods, actually or constructively, and they were not otherwise specifically identified or evaluated. The usual execution and levy procedure was not followed.

But plaintiff contends that a judicial sale, as distinguished from an execution sale, was here held. A judicial sale is...