Mount Vernon Dodge, Inc. v. Seattle-First Nat. Bank

• Decision Date: 10 October 1977
• Docket Number: SEATTLE-FIRST,No. 3910-I,3910-I
• Citation: 570 P.2d 702,18 Wn.App. 569
• Court: Washington Court of Appeals
• Parties: , 23 UCC Rep.Serv. 247 MOUNT VERNON DODGE, INC., Appellant, v.NATIONAL BANK, a National Banking Association, Respondent.

Page 569

18 Wn.App. 569

570 P.2d 702, 23 UCC Rep.Serv. 247

MOUNT VERNON DODGE, INC., Appellant, v. SEATTLE-FIRST NATIONAL BANK, a National Banking Association,

Respondent.

No. 3910-I.

Court of Appeals of Washington, Division 1.

Oct. 10, 1977.

Allen Lane Carr, Inc., P. S., Allen L. Carr, Seattle, for appellant.

Davis, Wright, Todd, Riese & Jones, Allen D. Clark, Seattle, for respondent.

CALLOW, Judge.

The plaintiff , Mount Vernon Dodge, Inc., an insolvent automobile dealership, brought suit for the alleged conversion of assets taken by the defendant, Seattle-First National Bank, claiming under the terms of the security agreements and article 9 of the Uniform Commercial Code (RCW 62A.9). The trial court dismissed the plaintiff's complaint with prejudice and awarded judgment to the defendant in the sum of $7,596.34, together with interest, costs and attorney's fees. The plaintiff challenges (a) the denial of a jury trial, (b) the constitutionality of the self-help provisions of the Uniform Commercial Code, (c) the repossession of the security as not being accomplished in a commercially reasonable manner, and (d) the repossession of property claimed to be released equipment not included in the security of the lender.

The plaintiff filed its summons and complaint on March 31, 1972, and received an answer shortly thereafter. The note for trial docket was filed May 24, 1972. No jury demand was filed by the plaintiff. The trial date was set originally for September 24, 1973, but was continued by agreement until February 19, 1974. The order of continuance executed by both parties and filed September 11, 1973, showed the case as a "nonjury case."

On January 21, 1974, the defendant filed a motion for summary judgment, which was granted in part, the trial court finding the following facts as established for the purpose of further proceedings:

1. The security agreements and notes executed by Mount Vernon Dodge to Seattle-First National Bank are valid and enforceable obligations against Mount Vernon Dodge.

2. As of at least November 5, 1971, Mount Vernon Dodge was in default under the terms of such security agreements and notes.

On February 19, 1974, the date the case was to be tried as a nonjury case, a dispute had arisen between Kenneth Cook, a stockholder of Mount Vernon Dodge, and the plaintiff's attorney as to the conduct of the case, and Mr. Cook filed with the court a letter which the court considered to be a demand for jury trial. However, no jury fee was deposited. The court denied the demand for jury trial, permitted counsel to withdraw, continued the trial to May 1, 1974, and ordered the plaintiff to pay $500 in costs to the defendant at least 3 weeks before the trial date as a condition of pursuing the case.

Approximately 3 weeks before the scheduled trial date of May 1, 1974, the plaintiff's attorney reentered the case upon the assurance that Mr. Cook would disassociate himself from the case and allow the matter to be conducted by the attorney in accordance with his judgment. On approximately April 30, 1974, at the request of the defendant's counsel, the matter was stricken from the trial docket because witnesses for the defendant were not available. On May 9, 1974, a new note for the trial docket was filed, and on May 16, 1974, a demand for jury was filed on behalf of the plaintiff. The defendant's motion to strike the jury demand was granted and the matter was ultimately brought on for trial on April 15, 1975.

The trial court's findings show that Mount Vernon Dodge, Inc., was a Washington corporation engaged in selling and servicing automobiles, trucks and campers. From early 1969 until approximately August 6, 1971, the Seattle-First National Bank had been lending funds to Mount Vernon Dodge to finance its sales and service operations. As security for such loans, Mount Vernon Dodge granted to Seattle-First National Bank security interests in all of its assets, consisting of (1) all new and used automobiles; (2) all new and used trucks; (3) all new and used campers and camper units; (4) all equipment, including shop equipment and tools; (5) all inventory, including parts and accessories, gas, oil and miscellaneous supplies; and (6) all accounts receivable. The trial court found that the notes and security agreements evidencing the security interests were valid and enforceable obligations of Mount Vernon Dodge to the Seattle-First National Bank.

Earl Corwin was from July 1971 until November 4, 1971, the president of Mount Vernon Dodge. Bryan Bickmore was the designated dealer on the dealer franchise agreement between Mount Vernon Dodge and the Chrysler Motors Corporation, Dodge Division. In July 1971, Seattle-First National Bank notified Mount Vernon Dodge that it would no longer finance its operations without the addition of equity capital from new investors. From that time to November 1971, Corwin and Bickmore sought additional capital for the corporation and alternative sources of financing for Mount Vernon Dodge's operations. They found none.

During the period from July 1971 to November 1971, Mount Vernon Dodge purchased no new automobiles or trucks, and substantially few used automobiles or trucks, for purposes of resale. The corporation was in weak financial condition, with insufficient capital, insufficient cash flow, and an inability to obtain financing from any source. During this period, Mount Vernon Dodge was selling the inventory which existed as of July 1971, and the business was, in effect, winding up.

During October 1971, Mount Vernon Dodge breached its contractual commitments and trust arrangements with Seattle-First National Bank by selling automobiles and trucks in violation of the provisions of the notes and security agreements which were then in effect between the parties. Seattle-First National Bank made demand upon Mount Vernon Dodge for the indebtedness then due and owing under the notes and security agreements, and accelerated the indebtedness.

The trial court's findings further state in part:

8. During the period from July 1971 to November 1971, Mr. Corwin and Mr. Bickmore negotiated with numerous individuals, including Mr. Lloyd Vogel (and) Mr. Kenneth Cook on behalf of Lairmont, Inc., a Washington corporation owned by Mr. Vogel and Mr. Cook, for the sale of the shares of Mount Vernon Dodge.

14. As of at least November 1, 1971, Mount Vernon Dodge was insolvent; was in default under the terms of its Notes and Security Agreements with Seattle-First National Bank; had failed to pay its rent and, as a result, its lease for the facility was cancelled as of November 1, 1971; had overdrawn its checking accounts; had no means with which to pay the indebtedness to Seattle-First National Bank; and was unable to continue in business.

15. During the period from July 1971 through November 3rd, 1971, Mr. Vogel and Mr. Cook on behalf of Lairmont, Inc., made inventories and examined the books, records and assets of Mount Vernon Dodge and conferred on numerous occasions with Mr. Earl Corwin relative to the purchase of Mr. Corwin's shares of Mount Vernon Dodge. . . .

17. On or about November 3 and November 4, 1971, Lairmont, Inc., purchased the two-thirds interest of Mr. Earl Corwin in Mount Vernon Dodge. Lairmont, Inc., is a Washington corporation whose shares are owned by Mr. Vogel and Mr. Cook. . . . In purchasing the two-thirds interest of Mr. Earl Corwin in Mount Vernon Dodge, Mr. Vogel (and) Mr. Cook on behalf of Lairmont, Inc., were purchasing an empty corporate shell and they knew it. . . . Mr. Cook, as lessor of the facility to Mount Vernon Dodge, was involved in the purchase to gain access to the equipment and fixtures which would be left on the premises by Mount Vernon Dodge subsequent to the cancellation of the lease. Mr. Cook, as lessor, cancelled the lease of Mount Vernon Dodge, lessee, as of November 1, 1971.

18. As of at least November 1, 1971, all of the officers, directors and agents of Mount Vernon Dodge and Mr. Vogel, Mr. Cook and Lairmont, Inc., were aware that Seattle-First National Bank had made demand upon Mount Vernon Dodge for payment of all sums then due and owing and had notified Mount Vernon Dodge that it would, if payment were not forthcoming, have no alternative but to take possession of its collateral in accordance with the Security Agreements. All of such individuals and corporations were aware that Mount Vernon Dodge had no ability to pay the indebtedness to Seattle-First National Bank.

19. Mount Vernon Dodge, its officers and directors, and Mr. Vogel, Mr. Cook and Lairmont, Inc., had totally failed to demonstrate to Seattle-First National Bank sufficient reliability, either financially or otherwise, to enable Seattle-First National Bank to allow the collateral to remain on the premises. Seattle-First National Bank was entitled to, under the terms of its Security Agreements, and acted reasonably in taking possession of all of the collateral which it held as security for its indebtedness and storing such collateral in a secure location.

20. On November 5, 6 and 7, 1971, Seattle-First National Bank took possession of all the collateral in which it held a security interest, including:

(a) 1971 automobiles and trucks;

(b) 1971 campers and camper units;

(c) Used automobiles, campers and trucks;

(d) Parts, equipment and accessories, including shop equipment and tools;

(e) Inventory, including parts, accessories, gas, oil and miscellaneous supplies;

(f) Accounts receivable.

All actions taken by Seattle-First National Bank on these dates in taking possession of the collateral were reasonable and proper and consented to by Mr. Bryan Bickmore on behalf of Mount Vernon Dodge. Mr. Bryan Bickmore, on behalf of Mount Vernon Dodge, assisted Seattle-First National Bank in taking possession of the collateral. There were no improper actions taken by Seattle-First National Bank at any time on these dates.

21. The automobiles, trucks, campers and...