Snake River Equipment Co. v. Christensen

• Decision Date: 08 November 1984
• Docket Number: No. 14275,14275
• Citation: Snake River Equipment Co. v. Christensen, 107 Idaho 541, 691 P.2d 787 (Idaho App. 1984)
• Parties: , 39 UCC Rep.Serv. 1902 SNAKE RIVER EQUIPMENT COMPANY, an Idaho Corporation, Plaintiff- Counterdefendant, Cross Claimant-Respondent, and First American Title Company, Plaintiff, v. Marion W. CHRISTENSEN and Elaine Christensen, husband and wife, Defendants- Counter Claimants-Third Party Plaintiffs-Appellants, and Madison Cooperative Associations, Inc., an Idaho Corporation, et al., Defendants-Respondents.
• Court: Idaho Court of Appeals

Page 787

691 P.2d 787

107 Idaho 541, 39 UCC Rep.Serv. 1902

SNAKE RIVER EQUIPMENT COMPANY, an Idaho Corporation, Plaintiff- Counterdefendant, Cross Claimant-Respondent and First American Title Company, Plaintiff, v. Marion W. CHRISTENSEN and Elaine Christensen, husband and wife, Defendants- Counter Claimants-Third Party Plaintiffs-Appellants and Madison Cooperative Associations, Inc., an Idaho Corporation, et al., Defendants-Respondents.

No. 14275.

Court of Appeals of Idaho.

Nov. 8, 1984.

Rehearing Denied Dec. 31, 1984.

Alan L. Morton (argued), and Callis A. Caldwell, of Johnson & Olson, Pocatello, for defendants-counter claimants-third party plaintiffs-appellants.

Earl Blower (argued), Stephen D. Hall and Reed L. Moss, of Peterson, Moss, Olsen, Meacham & Carr, Idaho Falls, for plaintiff-counterdefendant, cross claimant-respondent Snake River Equipment Co.

John B. Kugler, of Pocatello, for defendants-respondents Christman & Hopkins, Inc. and Recycle Contractors, Inc.

WALTERS, Chief Judge.

Suit was instituted by Snake River Equipment Company (SRE) to collect from Marion and Elaine Christensen certain debts arising out of three conditional sales contracts, a note and an open account, and also to foreclose the personal and real property liens created to secure those debts. The Christensens filed counterclaims against SRE and a third-party complaint against Huron Manufacturing Corporation, the manufacturer of an Easi-pour curb and gutter machine the Christensens had purchased through SRE. In their pleadings the Christensens alleged breach of warranty by both Huron and SRE and also alleged that SRE had wrongfully repossessed and disposed of collateral securing the debts owed to SRE. Summary judgment was entered for SRE on all six counts of the complaint and the Christensens appeal, asserting error by the lower court on several issues. We affirm.

In part I of the opinion, we address the issues raised by the Christensens concerning the disposition of collateral repossessed by SRE. The Christensens maintain that SRE was erroneously permitted to pursue multiple remedies after the Christensens' default, and that SRE was not entitled to a deficiency judgment after the repossessed collateral was sold. In part II we discuss the Christensens' attempt to respond to an amended complaint filed by SRE. We consider in part III whether the summary judgments entered on behalf of SRE were certifiable for appeal. In part IV we address the Christensens' allegations of unconscionable conduct by SRE. Finally, in part V we consider whether the summary judgment should have been entered prior to foreclosure of a deed of trust. Because each issue raised is relevant only to particular facts or procedural occurrences, those items will be discussed as needed in the respective parts of this opinion.

I

The Christensens' first two issues on appeal concern the disposition of collateral repossessed by SRE. During the period 1973 to 1975, SRE sold to the Christensens a new International tractor model 454, a new International tractor loader-backhoe, and a new Simms cab. The Christensens also bought used equipment from SRE during this period, including a crawler-dozer, a 12 yard pull scraper, and a trencher and blade for the model 454 tractor. Pursuant to Article 9 of the Uniform Commercial Code, I.C. § 28-9-101, et. seq., SRE financed the sales and retained a security interest in the equipment. In its complaint filed on May 17, 1976, SRE alleged in counts four and five that the Christensens were in default on payments to SRE for the equipment. SRE asked the court for an order authorizing repossession and sale of the collateral. SRE was granted summary judgments on July 9 and October 13, 1976 on its claims in counts four and five. Thereafter, SRE reacquired and, except for the used scraper, resold the equipment.

The Christensens argue on appeal that SRE could not repossess and sell the collateral as authorized by the U.C.C. once SRE elected to pursue a judicial remedy. The Christensens also assert that summary judgment for a deficiency entered after SRE disposed of the collateral was improper because the notice of sale and commercial reasonableness requirements of the U.C.C. were not met. We disagree.

A

The election of remedies issue is controlled by I.C. § 28-9-501(1) which authorizes the remedies available to a secured party when his debtor is in default. Section 501(1) provides:

When a debtor is in default under a security agreement, a secured party has the rights and remedies provided in this part and except as limited by subsection (3) those provided in the security agreement. He may reduce his claim to judgment, foreclose or otherwise enforce the security interest by any available judicial procedure .... The rights and remedies referred to in this subsection are cumulative. [Emphasis added.]

The Christensens support their position with pre-code authority that rigidly enforced the election of remedy rule. The U.C.C. drafters, however, intended section 501(1) to eliminate election problems. See 2 G. GILMORE, SECURITY INTERESTS IN PERSONAL PROPERTY § 43.7 at 1209-10 (1965); T. WHITE AND R. SUMMERS, UNIFORM COMMERCIAL CODE, § 26.4 at 1090-94 (2d ed.1980).

An early discussion of this issue after the U.C.C. was adopted occurred in In Re Adrian Research and Chemical, Inc., 269 F.2d 734 (3rd Cir.1959). The Adrian court held that the debtor "did not waive his right to rely on the collateral when he proceeded by execution and levy to enforce the judgment on the note against the debtor." 269 F.2d at 738. The cases since Adrian consistently construe section 501 to permit the pursuit of alternate remedies by the secured party. See, e.g. Ruidoso State Bank v. Garcia, 92 N.M. 288, 587 P.2d 435 (N.M.1978) (a secured party is not precluded from levying on the collateral under the security agreement by first suing on the debt and obtaining a default judgment); Peoples National Bank of Washington v. Peterson, 7 Wash.App. 196, 498 P.2d 884 (1972) (the secured party is entitled to institute an action on the promissory note and obtain judgment for the unpaid balance, to sell the collateral in the secured party's possession and, in addition, to judicially foreclose upon the security in the event the sale is abandoned).

We believe the district court properly interpreted I.C. § 28-9-501. Accordingly, we hold that the trial court did not err by allowing SRE to repossess and sell the collateral after receiving judgment on the underlying notes.

B

After receiving summary judgment authorizing sale of the collateral, SRE repossessed and sold the collateral. Thereafter, the Christensens moved to vacate the summary judgments; SRE made cross-motions seeking approval of its disposition of the collateral and a summary judgment for the resulting deficiency. The Christensens appeal from the trial court's entry of judgment for a deficiency, contending that summary judgment was improper because no notice of the sales was given and because the sales were not conducted in a commercially reasonable manner.

Article 9 of the U.C.C. requires that a creditor's disposition of the repossessed collateral be "commercially reasonable." Further, the creditor must give notice to the debtor of the time and place of a public sale or the time after which a private sale will be effective. I.C. § 28-9-504. In Idaho, failure of the secured party to dispose of the repossessed collateral in a commercially reasonable manner or to give proper notice to the debtor raises a presumption that the fair market value of the collateral at the time of repossession was equal to the outstanding debt. Mack Financial Corporation v. Scott, 100 Idaho 889, 606 P.2d 993 (1980). The district court found, and SRE does not deny on appeal, that SRE failed to give the requisite notice. Thus, SRE was required to rebut a presumption that the Christensens owed no deficiency in order to recover.

We hold, as did the district court, that SRE presented sufficient evidence to rebut the presumption that no deficiency existed. ¹ SRE presented written estimates of the equipment's value from independent experts. The costs incurred in repossessing and repairing the property to make it saleable were carefully documented and the sale proceeds were credited to the amount owed. This evidence showed both the fair market value of the equipment, and that the sales were conducted in a commercially reasonable manner. No evidence contradicting SRE's documentation was submitted by the Christensens. The presumption having been rebutted, and no genuine issue of material fact otherwise existing, the district court could grant summary judgment for a deficiency. See I.R.C.P. 56(c).

The Christensens maintain, however, that summary judgment was improper because a genuine issue of material fact did exist. An issue of fact arose, they insist, when they alleged that the sales of the repossessed collateral were not done in a commercially reasonable manner. No facts were presented to the trial court by the Christensens to support their claim of commercial unreasonableness.

We believe the Christensens' argument is misplaced. Even were the disposition of the collateral commercially unreasonable, the Christensens would be entitled to no more than they received as a result of SRE's failure to give adequate notice; i.e., a presumption that the value of the collateral equaled the amount of the indebtedness. See Mack Financial Corp. v. Scott, supra. Having already received the aid of the presumption, it would not further benefit the Christensens to litigate the commercial reasonableness of SRE's disposition of the repossessed equipment.

We conclude that SRE was not barred from repossessing and selling the collateral by first seeking a judicial remedy. Further, we find no error by the trial court in granting summary judgment for a deficiency following sale of the model 454 tractor and other equipment.

II

The Christensens' next issue on...