Massey-Ferguson Credit Corp. v. Peterson

• Citation: 626 P.2d 767,102 Idaho 111
• Decision Date: 24 December 1980
• Docket Number: MASSEY-FERGUSON,No. 12909,12909
• Parties: , 31 UCC Rep.Serv. 747 CREDIT CORPORATION, Plaintiff-Appellant, v. Arthur PETERSON, Defendant-Respondent.
• Court: United States State Supreme Court of Idaho

Page 767

626 P.2d 767

102 Idaho 111, 31 UCC Rep.Serv. 747

MASSEY-FERGUSON CREDIT CORPORATION, Plaintiff-Appellant, v. Arthur PETERSON, Defendant-Respondent.

No. 12909.

Supreme Court of Idaho.

Dec. 24, 1980.

Dissenting Opinion Jan. 22, 1981.

Rehearing Denied April 20, 1981.

Robert M. Nielsen, of Ling & Nielsen, Rupert, for plaintiff-appellant.

Jay D. Sudweeks, of May, May, Sudweeks & Shindurling, Twin Falls, for defendant-respondent.

BAKES, Justice.

This case concerns the question of damages arising from appellant Massey-Ferguson Credit Corporation's repossession of farm equipment owned by respondent Arthur Peterson. In a previous appeal, Massey-Ferguson Credit Corp. v. Peterson, 96 Idaho 94, 524 P.2d 1066 (1974) (Massey-Ferguson I ), we declared Idaho's prejudgment claim and delivery statute, former I.C. §§ 8-301 et seq., to be unconstitutional. In this appeal, we address the issue of Massey-Ferguson's liability, if any, for utilizing that unconstitutional statute to repossess Peterson's equipment.

In September, 1970, respondent Peterson assumed a retail installment contract on a Massey-Ferguson combine. Peterson's brother-in-law had previously purchased this combine from Zitlau Motors and had fallen behind on the payments. In November of the same year respondent purchased another Massey-Ferguson combine from Zitlau's under another retail installment contract. In June of 1971 respondent purchased a diesel tractor from the same dealer also under a retail purchase contract. Zitlau Motors assigned its interest under all these contracts to Massey-Ferguson Credit Corporation. U.C.C. financing statements were duly executed and filed.

Peterson used the equipment in farming operations and in custom farm work during 1971. In December, 1971, Peterson failed to make payments due under the contracts. At this time Peterson and appellant Massey-Ferguson Credit Corporation, acting through its area finance manager, Moore, entered into an extended series of negotiations in an attempt to bring the overdue contracts into a satisfactory state. Moore contacted Peterson almost every other week. Peterson made several promises to bring the contracts current. Those promises were never kept. The total amount past due under the contracts was slightly in excess of $11,000. On July 6, 1972, Peterson made a payment of $800 to appellant. Respondent Peterson claims that he and Moore had agreed that the payment would be credited toward the amount due on the tractor. Moore denied this. Moore applied the $800 payment to the amount due on one of the combines because, he testified, it was the oldest contract and had the largest amount due. At this time, the amount overdue on the tractor was approximately $3,000.

In late July, 1972, Peterson allowed Massey-Ferguson to take possession of one of the combines. Peterson asserts that at this time Massey-Ferguson agreed to permit him to use the other combine and the tractor "into the season." Massey-Ferguson admits that it agreed to allow Peterson to continue to use the equipment, but contends that Peterson was told he would have only one more week; that if payments were not made within the week, the remaining equipment would be repossessed.

After the agreed upon repossession of the first combine, there was no further contact between Peterson and Moore. Peterson failed to make any further payments and on August 4, 1972, Moore, acting on advice of counsel, instituted the instant action. ¹ In its complaint Massey-Ferguson sought to have the various items sold pursuant to the U.C.C. and to apply the proceeds to the balances due. It also sought a deficiency judgment in the event the debt exceeded the proceeds from the resale. As a part of the action, the appellant sought possession of the second combine (still in Peterson's possession) and the tractor pursuant to the Idaho claim and delivery statute, I.C. § 8-301 et seq. As required by the claim and delivery statute, appellant filed a bond and an affidavit for possession of the second combine and the tractor. The affidavit was addressed to the sheriffs of Gooding and Jerome Counties. On August 4, 1972, the Gooding County sheriff went to Peterson's farm accompanied by Moore and employees of Zitlau Motors. Peterson was not at home. The sheriff served Peterson's wife with a copy of the affidavit, undertaking and notice. Peterson's wife asked if she could call her lawyer, and the sheriff permitted her to do so. After discussing the matter with her lawyer, Peterson's wife did not object to the removal of the tractor. Peterson contends that his wife's apparent acquiescence was a result of her realization of the futility of any resistance. Massey-Ferguson contends that her acquiescence was more akin to consent.

Also on August 4, the Jerome County sheriff, accompanied by Moore, took possession of the second combine, which was located on a farm where Peterson was custom harvesting grain. Peterson was not on the farm at the time the sheriff took possession. The sheriff cut a chain or padlock in order to remove the combine. The severed chain or padlock belonged to the owner of the farm.

On August 10, 1972, Massey-Ferguson sent a letter to Peterson notifying him that he had until August 28, 1972, to redeem the equipment or it would be sold at private sale. During the period of redemption Zitlau Motors, on behalf of Massey-Ferguson, arranged to sell the repossessed items. The ultimate buyers of the tractor and one of the combines had possession of and made payments on the equipment prior to August 28. Peterson contends, and the trial court so found, that the sales of the tractor and the combine were completed prior to the expiration of the redemptive period. Massey-Ferguson contends that the sales were not completed until after August 28, and that any commitments made prior to that time were expressly conditioned upon respondent's failure to exercise his right of redemption. Peterson himself made no effort to redeem the collateral, allegedly because he thought any such efforts would prove useless.

On August 25, 1972, Peterson filed his answer to the appellant's complaint, generally denying the allegations thereof, and also counterclaiming against appellant for an allegedly unconstitutional seizure of the property, seeking general and punitive damages, costs and attorney fees. The basis for the respondent's counterclaim was the United States Supreme Court's landmark decision of Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), handed down on June 12, 1972, less than two months before the repossession. Fuentes struck down a Florida prejudgment replevin statute on the grounds that it failed to afford debtors any opportunity to be heard prior to the time their property was repossessed and thus constituted a deprivation of property without procedural due process of law in violation of the Fourteenth Amendment to the United States Constitution.

Massey-Ferguson filed a motion to dismiss Peterson's counterclaim. The trial court, treating the motion as a motion for summary judgment, found in favor of Massey-Ferguson and dismissed the counterclaim. This Court reversed on appeal. Massey-Ferguson Credit Corp. v. Peterson, 96 Idaho 94, 524 P.2d 1066 (1974). We held that the Idaho claim and delivery statute was constitutionally defective in that it failed "to provide for judicial supervision of the issuance of the order (for repossession), and the lack of any provision for a certain, immediate judicial hearing on the validity of the taking of the property ...." Id. at 99, 524 P.2d at 1071. This Court also stated that "(w) e find nothing which precludes a debtor from filing a damage action for wrongful taking of property as filed by (Peterson) in this case." Id. at 99, 524 P.2d at 1071.

Upon remand a trial was had before the district court. The district court entered judgment denying Massey-Ferguson's claim for a deficiency of $3,488.39 and awarding Peterson $10,000 general damages and $20,000 punitive damages, together with $13,677.50 in attorney fees and $374.25 in costs. The trial court found that Peterson's general damages stemmed from: loss of profits suffered as a result of his inability to perform custom farm work for the remainder of the season; losses suffered as a result of having to pay others to do farm work on his own farm; and damages due to emotional distress and embarrassment. The trial court denied appellant's claim for a deficiency judgment on the grounds that the repossession and resale of the equipment were not undertaken in a commercially reasonable manner. See I.C. § 28-9-504(3).

I

Appellant raises a number of issues on appeal. First, Massey-Ferguson maintains that the award of general damages is speculative and unsubstantiated by the evidence. It points to several glaring mathematical errors in the calculation of lost profits. Because we reverse the trial court's award of general damages on a single ground, we need not address all of appellant's allegations of error.

At the outset, we observe that there are two uncontroverted facts which affect the decision in this case. First, Massey-Ferguson did cause respondent to be deprived of his property without procedural due process by resorting to the procedurally unconstitutional claim and delivery statute. Massey-Ferguson Credit Corp. v. Peterson, 96 Idaho 94, 524 P.2d 1066 (1974). Secondly, it is clear that Peterson was in default and that under the U.C.C. Massey-Ferguson was entitled to possession of the collateral. ² Peterson contends that this latter factor is immaterial; that the determinative fact in this case is the admitted deprivation of constitutional rights. We disagree.

In the recent case of Carey v. Piphus, 435 U.S. 247, 98 S.Ct. 1042, 55 L.Ed.2d 252 (1978), the United States Supreme Court discussed the propriety of general damages in cases involving deprivations of procedural due process. The Court held that where the deprivation of a protected liberty...