Opinion
No. 5-836 / 04-1498
Filed February 1, 2006
Appeal from the Iowa District Court for Guthrie County, Paul R. Huscher, Judge.
A defendant appeals from a ruling and decree of foreclosure. AFFIRMED.
Thomas E. Salsbery of Davis, Brown, Koehn, Shors Roberts, P.C., and Patricia Shoff of Belin, Lamson, McCormick, Zumbach, Flynn, P.C., Des Moines, for appellant.
Richard K. Updegraff of Brown, Winick, Graves, Gross, Baskerville Schoenebaum, P.L.C., Des Moines, for appellee.
Heard by Zimmer, P.J., and Miller and Vaitheswaran, JJ.
Janet Dickinson appeals from a ruling and decree of foreclosure that awarded Panora State Bank in rem judgment on indebtedness owed under three promissory notes executed by Janet and her former husband, Robert Dickinson, and entered a decree of foreclosure against certain real property that secured the notes. We affirm the district court.
I. Background Facts and Proceedings.
Janet and Robert Dickinson purchased Patterson Supply Company (PSC) in October 2000. The business consisted of selling livestock supplies and related items, primarily at fairs and shows around the country. Panora State Bank loaned the Dickinsons money for the purchase and operation of PSC. The Dickinsons executed three promissory notes in favor of the bank, and secured their obligations with personal property used in the business. The Dickinsons further secured their obligations by granting the bank two mortgages on their Lake Panorama home (subject property).
PSC never turned a profit, and the business began to experience increasing difficulties as the Dickinsons' marriage deteriorated. Following a physical altercation in March 2003, Janet obtained a protective order against Robert that prevented Robert from coming onto the business premises. Shortly thereafter the Dickinsons defaulted on their obligations to the bank. They sought but were unable to locate an outside investor or a buyer for PSC.
In July 2003 the bank filed an action against the Dickinsons and PSC, seeking judgment against the Dickinsons for the amounts due under the promissory notes, and for a judgment in rem against the subject property. The bank also filed a separate replevin action regarding the personal property that secured the Dickinsons' indebtedness. The parties reached a stipulated resolution of the replevin action in November 2003, wherein the Dickinsons agreed to turn the personal property over to the bank and the bank agreed to forego in personam recovery against the Dickinsons.
The petition also named as a defendant Region XII Development Corp., a company that had loaned money to the Dickinsons. However, the company's interest was limited to the Dickinsons' personal property; it held no interest in the subject property.
Shortly thereafter the bank formed Patterson Supply Company of Iowa, LLC (PSCI) to incorporate the Patterson name and streamline the sale of the business or any business assets. Janet was hired by PSCI to assist in day-to-day business operations. When the bank was unable to find a buyer willing to purchase either PSCI as a going concern or the business inventory, it disposed of the business and business assets in locally advertised private sales occurring between November 2003 and January 2004. The proceeds from these sales were insufficient to pay the Dickinsons' indebtedness.
In March 2004 the bank acquired by assignment the first mortgage position on the subject property, and in May 2004 filed an amended petition seeking in rem judgment against and foreclosure of the subject property. The matter proceeded to trial in July 2004. Janet, who had been awarded the subject property in the decree dissolving the Dickinsons' marriage, contested foreclosure on two grounds: (1) she did not receive notice of the sale of the personal property as required by the Uniform Commercial Code (U.C.C.), and (2) the sale of that property was not conducted in a commercially reasonable manner. Concluding neither contention had merit, the district court entered judgment in rem against the subject property and ordered that a special execution be issued for its sale. Janet appeals.
II. Scope and Standard of Review.
Our review in this equity case is de novo. Iowa R. App. P. 6.4; West Des Moines State Bank v. Ralph's Distributing Co., 516 N.W.2d 801, 801 (1994). Although not bound by the district court's fact findings, we give them weight, especially when assessing the credibility of witnesses. Iowa R. App. P. 6.14(6)( g).
III. Discussion.
Janet contends the bank did not have a right to seek in rem foreclosure against the subject property because lack of proper notice and the absence of commercially reasonable sales deprived the bank of its right to seek a deficiency judgment. See Hartford-Carlisle Sav. Bank v. Shivers, 566 N.W.2d 877, 878 (Iowa 1997) (notice); West Des Moines State Bank, 516 N.W.2d at 802 (deficiency judgment). Like the district court, we conclude both contentions are without merit.
Pursuant to Iowa Code section 554.9611 (2003), the bank was required to send Janet "a reasonable authenticated notification of disposition" of the personal property. In this case the bank sent such a notice to Janet's correct address, in a timely manner and in a proper form, via certified mail. See Iowa Code §§ 554.9611-.9613. The postal service attempted delivery on Janet three times, then returned the letter to the bank as unclaimed. The bank did not attempt additional or alternate service before proceeding with the sales. Janet contends that, because the bank knew she had not in fact received the notice, but yet made no attempt to deliver the notice in person, by ordinary mail, or some other method, the notice was not proper.
Section 554.9611 defines the required notice in terms of sending rather than receipt. Thus, the question is whether the bank properly notified or gave notice to Janet "by taking such steps as may be reasonably required to inform [her] in ordinary course whether or not such [she] actually comes to know of it." Iowa Code § 554.1201(26); see also id. U.C.C. cmt. 26 ("`Notifies.' . . . This is the word used when the essential fact is the proper dispatch of the notice, not its receipt. Compare `Send.'"); id. § 554.9102(1)(bv) (defining "send"). When a secured party learns the notice was not received by the debtor, the question of whether reasonable notification requires a "second try" is a matter left "to judicial resolution, based upon the facts of each case. . . ." Id. § 554.9611 U.C.C. cmt. 6.
We agree with the district court, that under the particular facts of this case, a "second try," although perhaps advisable, was not required. Janet testified she was aware the post office was attempting to deliver a certified letter from the bank, but declined to pick it up as she was "communicating with Mr. Marso [a bank employee] on a daily basis [and i]f he had anything to say to me, he could say it to my face or deliver it in person." Like the district court, which specifically found Janet less credible than the bank's witnesses, we determine Janet refused to accept the letter. We also conclude that, because any lack of notice was due to Janet's own actions, the notice sent by the bank was sufficient.
We further conclude the bank conducted commercially reasonable sales. Janet forwards numerous contentions as to why the sales were not commercially reasonable. Her contentions are adequately addressed and aptly refuted in both the district court decree and ruling and the bank's appellate brief, and we find it unnecessary to address them in full here. We will, however, address what appears to be Janet's primary contention — that the bank should have attempted to sell the business and assets to nationwide, rather than local, buyers.
Janet contends the bank should have employed her or another individual to dispose of the business inventory at national livestock shows, or at least advertised the private sales in national trade publications. However, the record demonstrates doing so would have required the bank to place unwarranted trust in Janet or a third-party, incur significant additional expenses, or both, with little if any certainty that it would receive a greater return than it would achieve in a local sale.
Moreover, as Janet herself recognizes,
[t]he fact that a greater amount could have been obtained by a collection, enforcement, disposition, or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition, or acceptance was made in a commercially reasonable manner.
While "a low price suggests that a court should scrutinize carefully all aspects of a disposition to ensure that each aspect was commercially reasonable," it is not in and of itself sufficient to establish a lack of commercial reasonableness. Id. U.C.C. cmt. 2. We have carefully scrutinized all aspects of the sales conducted by the bank, and conclude, as did the district court, that they were commercially reasonable. We accordingly affirm the district court's ruling and decree of foreclosure.