*1 negligence proxi- of actual Both issues ques- jury have been
mate cause should respectfully dissent Consequently,
tions. liability summary judgment
from performance clearly negligent
when caused damages sustained. Anne H. ALBRECHT and Jo
Donald (Plaintiffs),
Albrecht, Appellants EN FINAN
ZWAANSHOEK HOLDING
CIERING, B.V., corpora a Netherlands
tion; Bouw-En Ex and Zwaanshoek B.V.,
ploitatiemaatschappij, a Nether (Defen corporation, Appellees
lands
dants).
No. 90-263. Wyoming.
Supreme Court
Aug.
Petition Cross-Petitions
Rehearing Sept. 25, Denied 1991.*
* granted rehearing. have Justice Cardine would *2 bids in full When creditor under a nonrecourse note at
amount due of one item of collat- the foreclosure sale eral, the creditor lose his does securing in other *3 note? Is creditor’s retention of collat-
3. a making a year for while no eral over dispose it attempt pursuant of (Wyo.Stat. 34-21- Art. U.C.C. § § commercially seq.) 960 et unreasonable? a 4. When creditor retains year for over a after his of collateral extinguished security interest has been wrongful and continued retention 9, 5, operation Art. of U.C.C. must a allege a plaintiff demand for return of to state a cause of action the collateral Kite, Schultz, for conversion? Marilyn and Donald I. S. Hart, Chey- of Holland
James Belcher & wrongfully re- When creditor enne, L. and E. Murane and Alison William tained one item of collateral worth more Hart, Denver, of & Ruttenberg Holland redemption price than of other fore- Colo., appellants. collateral, for have the closed does court equitable power redemp- extend the Kepler Kepler Simpson, & Charles G. period until after the defendants tion Edwards, Larkin, Cody, P. Jr. and Ken- Leo wrong- have been ordered to Wells, Rogers L. Miller & New neth fully retained collateral? Karaczynski A. City, York and John 1-18-103, Wyo.Stat. must 6. Under Wells, Angeles, Cal., Rogers Los for & prop- his a debtor tender cash to redeem appellees. no erty, when the statute contains such URBIGKIT, C.J., THOMAS, Before and requirement? GOLDEN, CARDINE, MACY and JJ. ventures, prior As a business result debtors, a nonre- Appellants, as executed OPINION promissory Appellees note with for course promissory million. note stated $2 MACY, Justice. Appellants it interest.” “shall bear no Appellants and Jo Anne Donald Albrecht promissory payment of the note appeal from the district court’s Albrecht junior mortgage on a located ranch against Appellees of their claims dismissal County, Wyoming, in Teton and a Financiering, Holding En B.V. Zwaanshoek 75,000 Wyomi- of common shares Exploitatiemaat- and Zwaanshoek Bouw-en vest, Appellants Appel- Inc. delivered schappij, wrongful for the retention B.V. representing a stock certificate lees Appel- of collateral which and conversion 75,000 Appellants defaulted on the shares. provided promissory lants for a note, promissory Appellees and commenced note. judgment on the an action to obtain and remand. We reverse promissory note and to foreclose mort- following Appellants raise the issues: gage on ranch. The district court summary granted judgment in favor of principles judicata 1.Whether of res to this occurring Appellees, appealed claims based on facts bar involving Hold- entry prior Court. Albrecht v. Zwaanshoek judgment of a B.V., P.2d 1174 En prior judg- ing Financiering, issues not addressed portion (Wyo.1988),we affirmed ment. granting a judg- relitigate previous district court’s decision issues resolved its Appellees promissory on ment note deficiency judgment and such attacks were foreclosing mortgage. Following inappropriate because the doctrine of res mandate, our the district court entered a judicata, did not have judgment $2,663,- of Appellees favor ownership rights real be- figure That equaled 928.72. the amount cause did they not redeem within statu- promissory plus due on note the inter- tory redemption period, Appel- and that which, est promisso- terms allege any grounds lants failed to other note, ry began to after Appellants’ accrue upon grant which the district could court held, A default. foreclosure sale was appeal relief. This followed. Appellees $2,323,- bought the ranch for apply the We standard review 396.95. Because of the difference between *4 articulated v. Mostert CBL & Associ price judg- the sale and the amount of the ates, 1090, (Wyo.1987) 741 P.2d ment, (quot Appellees filed motion a with the ing Moxley Builders, Inc., district court to confirm the and Laramie sale to P.2d deficiency judgment. (Wyo.1979)): a award The district court the granted confirmed sale and a According to our standard of review deficiency judgment $165,- Appellees to for complaint will sustain a dismissal of a 266.60. only if it on shows its face that the plaintiff was not entitled to relief under day
On the last
of
statutory redemp-
the
of
In considering
set
facts.
such
period, Appellants
complaint
tion
filed the
motion, the
alleged
led
“facts
the com-
appeal. Appellees
which
to this
re-
plaint
sponded by filing
allegations
pur-
a motion to dismiss
are admitted and the
12(b)(6).
suant to
Appel-
light
W.R.C.P.
must
viewed in the
most
After
be
favor-
court, they
lants received leave from the
plaintiffs.”
able to
is a
Dismissal
drastic
complaint.
complaint
filed an amended
The
remedy,
sparingly granted.
and is
alia,
alleged,
Appellees
inter
that
retained
(Citations omitted.)
stock,
control of
Appellants
the
which
security,
as
Appellants
until after
Merger
that,
filed their
Appel-
and
Appellants argue
Ap-
once
note,
on
promissory
Ap-
lants defaulted
the
pellees
judgment
promis
obtained
on
pellees
obligation
had an
to sell the
stock
note,
merged
sory
promissory
note
commercially
manner,
pro-
to
reasonable
judgment
rights
and that their
to collat
vide notice of their intent
to retain the
securing
promissory
eral
note were ex
stock
full
of
satisfaction
all claims of
tinguished.
merger
The
doctrine is related
indebtedness,
Ap-
or to
to
estoppel
to the doctrines of collateral
pellants.
Appellees’
As a result
wrong-
of
prevent ex
res
and is utilized to
judicata
stock,
of
ful
retention
Appellants
litigation.
cessive
Brenton
Bank
State
of
they
claimed
were
to
entitled
one or more
(Iowa
possession purchased Appellees the debt.” Brenton State Bank Once the land and sat- at 585. debt, longer N.W.2d also million Jefferson, they See isfied the no $2 (Second) Judgments, supra Restatement promis- had terms of the addition, g. comment use of the at sory pledge pos- agreement note or the tempered by doctrine should be considera- sess stock. Am.Jur.2d, equity justice. 46 tions of Judgments Conversion Appellees’ We hold that Appellants argue that their amended extinguished they when stock were not ob- complaint Wyoming’s stated a claim under judgment promissory tained a on the note. version of the Uniform Commercial Code— into an entered (Article 9) against Transactions Secured promis- Appellees maintaining sory mortgage note on was secured commercially stock in manner which pledge the ranch and the the stock. alternative, Appel- In the unreasonable. on the promisso- Once defaulted erred argue lants district court note, ry Appellees could use Appellees dismissing against their claim satisfy A contrary the indebtedness. re- for conversion. *5 merger sult would be inconsistent with the response, Appellees first con promote doctrine and an re- unjust would Appel germane tend 9 is to that Article not sult. not allegations apply lants’ because it does Appellants argue also that their ob involving to real estate. transactions We Appellees ligation was satisfied when sub agree apply to that Article 9 does not this mitted successful bid on the ranch for the appeal not because the transaction at but promissory full amount of the note. To Wyo.Stat. issue real estate. involved this question, resolve we examine the (1991) how a 34.1-9-501 delineates se the promissory terms of note may proceed Article cured creditor note, pledge agreement. In the promissory pro when defaults. That section a debtor Appellants agreed pay to million. The $2 pertinent part: vides in promissory Appellants note also stated that security (d) agreement If the covers obligated pay not were to interest on the personal property, both real and se- agreement pay debt and that the to proceed part party may under this cured secured In the the stock. event of a may he personal property as to the or default, promissory note in called for per- proceed to the real and the as both begin To terest to to accrue. effectuate property sonal accordance with his agreement, parties that into a entered respect remedies in of the real pledge agreement by provisions property which case the security the stock as for part apply. do not agree promissory pledge on note. proceeding against A creditor ment stated that the stock as would serve defaulting pursuant security debtor to a security for the promisso sums due under personal real and which covers ry note. may subject property to Article Appellants' We hold obli- because case, Article 9 does to this not gation pay million was interest $2 however, Appellants’ issues because relate free, the stock did not serve to events which occurred after the stock for the the district court interest which longer subject security to a inter was no of Appellants’ declared was due as a result Wyo.Stat. est. 34.1-9-102 states could have used to default. stock applies: in pertinent part that Article 9 judgment pursuant Wyo. enforce * * * (a) (1988)(the 1-17-101 to -707 statu- Stat. §§ (i) (regardless of tory provisions relating to the To transaction its enforcement form) create a secur- judgments) pursuant not which is intended to but (c) fix- ity personal property or property interest defendant dealt with the documents, including goods, wrongful tures instru- in some manner within ments, intangibles, paper chattel general stated; definition of conversion first accounts; or (d) in cases where the defendant
[******] lawfully or without fault has come into
then,
possession
property,
(b)This article
in-
applies
security
exceptions, plaintiff
some
must show
including
terests created
contract
**
by plain-
that demand has been made
*.
tiff and that defendant has refused to
Am.Jur.2d,
See 68
Secured Transactions
the property;
(1973).
underlying
47-177
Once the
ob-
§§
(e)
property
value of
converted.
ligation
satisfied,
Am.Jur.2d,
generally
ceases
exist.
(Citation omitted.)
Secured
At
Transactions §
dispute
Ap
do not
that
point,
that
which secured
pellants’
complaint alleges
amended
that
collateral,
longer
indebtedness is no
stock,
legal
have
title to the
application
very
Article
becomes
they
entitled
may
require
limited.1 Article 9
still
during
Appellees
time
creditor to
issue termination statement
stock,
possessed
Appellees wrong
a release statement or to account
fully
retained
that the value
surplus realized from
the collection of
$2,663,928.72. Ap-
of the stock exceeded
disposition
account or from the
col-
pellees
contend that
conversion
-406,
Wyo.Stat.
34.1-9-404,
lateral.
§§
defective, however,
claim is
because the
-502,
(1991). Except
and -504
in the case
allege
failed to
amended
of a surplus,
provide
Article 9
does
they made a demand for the return of the
*6
possesses
situation which a creditor
Satterfield,
stock. In
581 P.2d at
the
property.
debtor’s decollateralized
1389,
held,
refusal
the Court
“Demand and
Appellants’
Since
deal
issues
with such a
merely
are
evidential and need not be
situation and because the stock
a
was not
independent act
shown where another
of
surplus realized from the collection of an
is in
conversion
evidence.” That case dealt
disposition
account or from the
equipment
field
which
defen
with oil
the
stock,
we hold that Article 9 does not
equipment
was not the
dant sold.
appeal
Appellants’
and turn to
claim
of
subject
pledge agreement.
The rule
for conversion.
that,
regard
pledges
upon
is
satisfaction
In
Sunny Day
v.
Re
Satterfield
debt,
original
pledged property
of
the
the
sources, Inc.,
1386,
(Wyo.1978),
581 P.2d
1388
pledgor.
the
Failure
must be returned to
938,
rt.
denied 441 U.S.
99 S.Ct.
ce
pledged property
the
return
constitutes
2153,
(1979),
(a) provided respect to Except as estate, Appellants states had twelve months agricultural real it is lawful for * * * Appellants in redeem. When which to any person whose real time, execution, of of failed to redeem that by virtue has been sold was, ranch far as California Civil Code states that a contract sale of concerned, Ru- interpreted give a done deal. See E. be are should to the effect Wyoming Mortgag- of dolph, Law Real parties. The mutual intent of If a contract es and if writing language is reduced to its explicit, clear and the court ascer- should
Waiver tain the intent of the from the writ- (West ing. Civil Cal. Code & Appellees argue §§ on the basis 1985). following paragraphs of the two contained pledge agreement, Appellants ex quoted provi- We hold that the waiver their
pressly each of claims. waived Appellees’ not apply sions do retention paragraph provides: first obligation of $2 the stock after the million Assignee designee its Neither nor shall pledge agreement was satisfied. The any liability as a result of sale incur states that it “shall terminate all when Collateral, disposition or or other of hereby, indebtedness and all obli- thereof, sell any part or for failure to gations hereunder, of Assignor shall have sale, dispose or of or offer otherwise fully paid and satisfied.” While any any part or thereof for Collateral promissory note obligation creates an reason whatsoever. interest, pay post-default million and $2 paragraph pertinent agreement The second states pledge only Appellants’ secures part: payment original $2 million. agreement pledge provide not does for or Assignee, its
Exculpation. None Appellants’ directors, secure designee, any or offi- interest. cers, The terms agents employees or thereof shall when the responsible Assignor $2 or or terminated million liable debt satisfied,
any
any
provisions
its affiliates
action
and the
do
taken
waiver
any
or omitted
be taken
it or
conversion claim.
them hereunder or under
related
pro-
and remanded for
Reversed
further
agreement,
or
ex-
instrument
document
ceedings
opinion.
accordance with this
cept
gross negligence
in the case of
* * *.
willful misconduct
THOMAS, J.,
specially concurring
files a
pledge agreement
also states:
opinion.
Agreement,
This
Termination.
CARDINE, J.,
opinion.
a dissenting
files
hereunder,
Assignee
shall
THOMAS, Justice, concurring specially.
all
terminate when
indebtedness secured
hereby, and all obligations
Assignor
recognize that, their
statement
hereunder,
fully paid
shall
have been
arguments,
their
issues and
time,
satisfied,
requested,
at
if
As-
dispose
invited
court to
of certain is-
*8
signee
As-
shall execute and deliver to
their
Consequently, they
sues in
favor.
signor
filing
for
in each office in which
complain
not be heard
if
should
some
any financing
the
statement relative to
adversely.
those issues are decided
Never-
Collateral,
thereof,
any part
or
have
shall
that,
theless,
disposed
I am
to the view
filed,
a termination statement under
appeal
when confronted with
from a
releasing
the Uniform Commercial Code
pursuant
12(b)(6),
to Rule
dismissal
Assignee’s interest therein.
W.R.C.P.,
only
the
function of this court is
rights
complaint
decide if
un-
the
Appellees’
We must
to determine whether
states
pledge agreement
upon
granted.
der the
a
relief can
terminated
claim
which
be
determination,
making
before
occurrence of the
that
court
the
events which
the
gave
accept
in
alleged
rise to
claim for
must
as true the facts
the
conver-
Polk,
pledge agreement provides
complaint. E.g., Mummery
sion.
the
Since
770
law,
by
(Wyo.1989); Champion
be
that it shall
construed
California
P.2d 241
Ser-
Well
vice,
Industries,
con-
look to California’s standards for
Inc. v. NL
769 P.2d
interpretations.
(Wyo.1989);
Wyoming
tract
De-
Section
Matthews
for the
security
P.2d 216 stock could not serve as
Agriculture, 719
partment of
sup-
interest due. This conclusion is not
County
(Wyo.1986); and
School
Carbon
any authority.
ported by citations to
Hospital,
v. Wyoming
State
District No.
recog-
(Wyo.1984).
IWhile
claims there- to ask for its return. by the foreclosure and stock to bother satisfied has to security interest ceased fore the trial the decision of the would affirm longer is no collateral. exist and stock court. However, in the interest is included since since inter- underlying obligation, and satisfied, the obligation not been
est to a subject is still
stock unpaid of the interest and deficiency unpaid portions of the
any other Appellees thereafter had a law-
judgment. Wyomivest stock.
ful to retain the respect conversion claim for to the With BROWN, Appellant Joe Walter stock, failure (Defendant), stated that an essential element have v. claim, alleged tortfeasor ac where Wyoming, The STATE subject possession property quired of the (Plaintiff). Appellee allege lawfully, is the claimant must prove that he made demand for No. 89-186. and that property return of the the defen Wyoming. Court of Supreme refused dant comply with his demand. Satterfield 23, Aug. Resources, Inc., 1386, Day 581 Sunny P.2d 938, (Wyo.1978), denied 441 cert. U.S. 2153, (1979). 60 L.Ed.2d Cali 99 S.Ct. requirement. law
fornia contains similar Angeles, 11
Minsky City Los Cal.3d 102, 726, P.2d n. Cal.Rptr. allege failed that demand had been
their Therefore, properly
made. the trial court their claim for conversion.
dismissed appellants
The failure make de- is undisputed. for return of the stock
mand case, made
In this no demand Albrechts Wyomivest through- stock
for return redemption period statutory
out fact,
the ranch foreclosure. counsel
appellees the stock certificate and mailed counsel, power back to Albrechts’ but
stock accept
Donald Albrecht would
stock, except suggest paid that it be into disposition. Appel- for judicial
the court day the re-
lants waited until before
demption period expired, request not to re- notify appellees
turn but “improper Wyo- retention of the
that their stock full
mivest constituted satisfaction” appellees’ It would claims. seem only in this
Albrechts were interested “bargaining chip” against ap- to use
as a unjust that
pellees. patently appellees It is charged with conversion when
should of default. It notes and subsection (c) given security provided as of this section those in the was to serve * * * agreement. note.” inter- A secured security “sums due Because default, rights, only party in reme- est due in case of how- was ever, that, although provided in majority dies and duties section 34.1- concludes rights 9-207. The referred default had occurred and interest was and remedies owed, in principal only paid, this subsection are cumulative. once “(b) default, designated. After the debtor has the Notwithstanding the sentence, rights provided preceding and remedies this pay- default in the part, provided security those in the ment of amount due may hereunder agreement (10) be cured provided days and those in sec- within ten after the by tion 34.1-9-207. due date thereof payment of the amount so due. outstanding The princi- “(c) they give rights To the extent that pal balance hereof shall bear interest at impose to the debtor and duties on the (2) the lesser of percent two over the party, secured the rules stated in the LIBOR highest Rate or the lawful rate may subsections referred to below per during annum in which except be waived or provided varied as Note is default. The LIBOR Rate respect compulsory with disposition (6) shall be the six month London Inter- (sections 34.1-9-504(c) of collateral quoted bank Offered Rate as to the Lon- 34.1-9-505) respect and with to re- don Branch of The Bank of America N.T. (section demption of collateral 34.1-9- & S.A. at 11:00A.M. London time on the 506) parties may agreement but the by date of default. The failure of Lender to by determine the standards which the option exercise this to accelerate the ma- rights fulfillment of these and duties is turity principal of the sum hereof shall to be measured if such standards are not constitute a option, waiver of such not manifestly unreasonable.” W.S. option shall remain continuously in (emphasis added). 34.1-9-501 force.” security agreement The exe- provided Since these remedies were by appellants cuted in this case stated that security agreement, and since the Collateral constitutes and will consti- “[t]he security agreement stated that it continuing tute was se- prompt for the curity owing for “all amounts payment, as and payable, when due and respect Note, to the Secured now and here- owing all amounts Assignee with re- outstanding” added), (emphasis spect Note, it is to the Secured now and here- after plain language from the of the added) outstanding.” (emphasis It appellees were entitled to enforce gave further the creditor the on de- provision part of the security fault interest on default. Collateral, “to proceeds thereof, and all representing monies majority opinion deprives appellees connection with the enforcement of the of the benefit of secured by improp- status fees) (including hereunder counsel erly converting the accrued interest into an in the manner set in the Secured unsecured debt. It par- closes the secured forth * * added) (emphasis Note ty’s door and sends a secured creditor away judgment to our enforcement of stat- provision “interest-due-on-default” remedy. majority’s utes for a decision of the paragraph note was included in a negative will have results on the commer- concerning lender’s remedies on default. practices cial of this state. Parties draft- provided Lender explicit himself with two ing promissory notes secured (1) remedies case of default: acceleration may be reluctant to defer interest accrua- debt, (2) accumulation of inter- provide ble for interest on default since long est so as the unpaid. debt remained may the creditor not hereafter look for provision This of the note read as follows: payment deprive to the collateral. We “6. The whole principal sum of flexibility financing in their ar- immediately this Note shall become due rangements, and for no reason. payable, Lender, option at the upon the failure of the pay any Maker to Since would include interest the obli- payment required gation hereunder within ten I must also (10) days if disagree is made majority’s to a with the conclusion that foreign account and within two busi- Article 9 of the Uniform Commercial Code