FIRST NATIONAL BANK OF the BLACK HILLS, STURGIS, So. Dak. now Norwest Bank of Black Hills, N.A., Plaintiff and Appellee, v. Kenneth BEUG, Defendant and Appellant.
No. 15212.
Supreme Court of South Dakota.
Decided Feb. 11, 1987.
400 N.W.2d 893
Considered on Briefs Oct. 26, 1986.
MORGAN, Justice.
Kenneth Beug (Beug), defendant and appellant in this action, appeals from a summary judgment awarded to First National Bank of the Black Hills (Bank) and from the dismissal of Beug‘s counterclaim. We affirm the trial court on all issues.
Beug was a farmer and ran a large-scale farming operation near the city of Sturgis, South Dakota. Beug and Bank at various times negotiated loans, the proceeds of which were used for seed, machinery, equipment, and operating expenses. Beug‘s notes with Bank were secured through various security agreements on Beug‘s machinery, equipment, and crops. Copies of the most recent note, dated October 26, 1981, and the Uniform Commercial Code finаncing statements were attached to Bank‘s original complaint. Beug does not dispute the authenticity of the note or the financing statements. The most recent note became due on February 10, 1982. At the request of Beug, the note was extended by Bank to March 12, 1982. No payment was made on March 12, 1982, or thereafter, and Beug remains indebted to Bank at the time of this appeal. Beug sold his farm sometime prior to December 10, 1982, which was before the repossession of the property.
On April 18, 1983, Bank proceeded under the Uniform Commercial Code self-help provisions,
Although Beug‘s pro se briefs are long and somewhat confusing, we divine six issues of arguable merit. Firstly, Beug claims Bank‘s self-help repossession violated his due process rights under the United States Constitution. Secondly, Beug claims that Bank failed to prove that he was in default on the note and also failed to prove that Bank had a secured interest in the repossessed equipment. Thirdly, Beug claims that the repossession effectuated under the court order was unlawful since the sheriff was not involved. Fourthly, Beug claims that the trial court erred by not allowing him an exemption for grain under
In his initial point of appeal, Beug claims that the self-help provisions of
Beug next claims that Bank failed to prove default on the note and also failed to prove that it had a security interest in the property seized. Generally speaking, Beug is correct in his contention that default and a secured interest must be present prior to repossession. We note here that the trial court made a specific finding of default on the part of Beug and also made a specific finding that Bank had a security interest in the property repossessed. Before reversing the trial court we must find clear error in these findings. Bennett v. Jansma, 329 N.W.2d 134 (S.D.1983).
We initially deal with the issue of whether Beug was in default on the note. The term “default” is not defined in the Uniform Commercial Code, thus, we must look to other sources for a definition.
‘Default’ triggers the secured crеditor‘s rights under Part Five of Article Nine. But what is ‘default?’ Article Nine does not define the word; instead it leaves this to the parties and to any scraps of common law lying around. Apart from the modest limitations imposed by the unconscionability doctrine and the requirement of good faith, default is ‘whatever the security agreement says it is.’
J. White & R. Summers, Uniform Commercial Code § 26-22, at 1085-86 (2d ed. 1980). Beug‘s note with Bank provides an adequate definition of default.
In the event that the undersigned does not pay the interest on this Note when due ... or in the event that the undersigned shall suspend business, or in the event that the holder of this Note shall in good faith believe that the prospect of due and punctual payment of this Note is impaired, then, in such event, the holder of this Note may, at its option, declare this Note to be forthwith due and payable and therеupon this Note shall be and become due and payable, together with interest accrued hereon, without any presentment, demand, protest or other notice of any kind ....
It is clear from the foregoing quote that default occurs when, inter alia, the debtor does not pay interest on the note when due. There is no dispute among the parties on this issue. Beug freely admits that he did not pay the note or interest on the note when it came due.
Beug also contends that since Bank gave him an extension he is not in default on the note. While it is clear from the record that Bank did give Beug one thirty-day extension, there is no evidence to indicate that any other extensions were granted by Bank. As a result, we cannot say that the trial court was clearly erroneous in determining that Beug was in default.
Beug also disputes whether Bank has a security interest in the property seized. Beug does not deny that Bank originally had a security interest in the repossessed equipment. He now claims that Bank, by its subsequent actions, waived its previously existing security interest. Beug‘s contention stems from Bank‘s refusal to loan him further funds to make payments on the secured machinery or to plant a crop. Bank officials told Beug it was not “in Bank‘s best interest” to loan him any further funds. Beug claims that this statement amounted to a waiver of Bank‘s security interest. We consider this a makeweight argument. By way of this statement, Bank was merely telling Beug that they could no longer loan him money due to his current financial condition. Bank in no way waived any previously existing security interest.
Beug‘s next complaint centers around the repossession of his equipment subsequent to court order. On June 2, 1983, the trial court signed an order authorizing the Meade County Sheriff to seize Beug‘s machinery. In actuality, Bank repossessed the equipment using its own agents. Beug claims that since the sheriff was not involved the repossession was illegal, however, Beug does not cite a single authority to support his position that repossession by one othеr than the sheriff amounts to an unlawful repossession. As a result, he waived this issue. First Nat. Bank of Minneapolis v. Kehn Ranch, Inc., 394 N.W.2d 709 (S.D.1986); State v. Grooms, 359 N.W.2d 901 (S.D.1984); Corbly v. Matheson, 335 N.W.2d 347 (S.D.1983); State v. Shull, 331 N.W.2d 284 (S.D.1983); Graham v. State, 328 N.W.2d 254 (S.D.1982). In actuality, repossession by Bank may well have proven more economical than repossession by the sheriff inasmuch as no sheriff‘s fees were incurred. Furthermore, Beug shows absolutely no prejudice suffered by him as a result of Bank‘s repossession. He received a full and complete accounting as оrdered by the court.
Beug, in his reply brief, attempts to show a breach of the peace during the court-ordered repossession. While there was conflicting testimony on this issue, we fail to see the significance of any breach of the peace that may have occurred. While the Uniform Commercial Code provides
In his fourth claim, Beug alleges the trial court erred by not granting him an exemption for the 1,089 bushels of grain seized by Bank. Beug claims that under
Beug next contends that the trial court improperly granted the deficiency judgment to Bank. Initially, Beug claims that the judgment of deficiency was improper since there was no judgment on Bank‘s original complaint. This is simply not the case. The trial court granted summary judgment on Bank‘s original complaint on October 4, 1985. In the alternative, Beug argues that even if the deficiency was properly before the court, the court should not have included costs of preparing the equipment, interest costs during the sixteen months Bank was in possession of the equipment before sale, and costs of the sale. Beug claims that he should not be required to pay those expenses because Bank did not proceed in a commercially reasonable manner since it waited sixteen months to sell the equipment.
In support of this contention, Beug cites Farmers State Bank of Parkston v. Otten, 87 S.D. 161, 204 N.W.2d 178 (1973). Otten involved the repossession of a truck-tractor and trailer by the co-signer of the note. The co-signer was apparently acting in concert with the bank. The Otten collateral was sold some thirteen months aftеr the co-signer took possession. Otten is clearly distinguishable from the case at hand. The actions of the bank and co-signer in Otten were clearly outside the requirements of the Uniform Commercial Code. “No proceedings were ever taken for sale or other disposition of the collateral under our Uniform Commercial Code....” Otten, 87 S.D. at 163, 204 N.W.2d at 179. The Otten court also held that the excuses for delay of the sale “were either immaterial or not supported by the evidence.” Id. at 167, 204 N.W.2d at 181.
To determine the reasonableness of the sale involved in this case, we must look to the circumstances surrounding the repossession and subsequent sale. The sale itself was in accordance with the Uniform Commercial Code. The only questionable issue is the length of time between repossession and sale. Initiаlly, we note that Beug vigorously contested the legality of the repossessions and made numerous motions for return of the collateral. It also appears from the record that Beug and Bank were negotiating during this fourteen to seventeen month period in an attempt to resolve the dispute. Furthermore, at least some of the equipment was placed on a private farm machinery sale lot in an attempt to effectuate a sale. Bank also alleges that the delay was necessary to wait for a season of the year that would be best for the sale of the farm items. In view of the foregoing, we affirm the trial court‘s determination that the sale was conducted in a commercially reasonable manner.
Beug‘s final point of contention is thаt the trial court erred in dismissing his counterclaim. Beug claims that he was unfairly prejudiced by the trial court‘s granting Bank‘s motion to dismiss prior to
Having disposed of the foregoing issues, we affirm the trial court.
WUEST, C.J., SABERS, J., and FOSHEIM, Retired Justice, concur.
HENDERSON, J., concurs in result.
MILLER, J., not having been a member of the Court at the time this action was submitted to the Court, did not participate.
HENDERSON, Justice (concurring in result).
Beug‘s complaints of Bank‘s wrongdoing are numerous. At first blush, Beug‘s briefs aрpear to be highly damaging to Bank‘s request for affirmance of a summary judgment.
Beug strenuously objects to a summary judgment herein, on a deficiency, because he maintains there was never actually a motion for summary judgment filed. Rather, he complains that the court treated a “Motion for Sale” as a Motion for Summary Judgment and cites Olson v. Molko, 86 S.D. 365, 195 N.W.2d 812 (1972), as authority. However, a check of the settled rеcord index clearly reflects that a Motion for Summary Judgment on Deficiency was filed on August 28, 1985, and two separate Motions to Dismiss or in the Alternative for Summary Judgment were filed, the first on May 25, 1984, and the second on July 5, 1984.
In concurring in result only, I am acting cautiously as there is obviously (a) self-help repossession and (b) court-ordered repossession. Factually, the background is that Bank first “self-helped” and later on, ostensibly acted under court order. However, it is not the first “self-help repossession” under
Beug cites the following authorities in opposition to this type of procedure. Bloomquist v. First Nat‘l Bank, 378 N.W.2d 81 (Minn.App.1985), which in turn cites
It appears that this pro se appellant, Beug, reached out for authority to support his position. I cannot agree with the majority opinion that Beug cited no authority to “support his position that repossessiоn by one other than the sheriff amounts to an unlawful repossession. As a result, he waived this issue.” Author citing majority opinion at 896.
In my opinion, Bank acted with unlawful repossession procedure (contrary to explicit court order) and committed a breach of the peace for which it is theoretically answerable in damages under the Uniform Commercial Code. See
In this case, there was a full and complete accounting, approved by the court, in which Beug had an opportunity for input. Also, Beug was given notice and opportunity to be heard before аdditional items of collateral (including grain) were seized by Bank; a meaningful hearing was granted unto him. As the United States Supreme Court has held: “What the Constitution does require is ‘an opportunity [to be heard] granted at a meaningful time and in a meaningful manner. . . .‘” Boddie v. Connecticut, 401 U.S. 371, 378, 91 S.Ct. 780, 786, 28 L.Ed.2d 113, 119 (1971) (emphasis in original) (citation omitted) (quoted in State v. Weiker, 366 N.W.2d 823, 834 (S.D. 1985) (Henderson, J., dissenting); Daugaard v. Baltic Co-op. Bldg. Supply Ass‘n, 349 N.W.2d 419, 424 (S.D.1984); McMacken v. State, 325 N.W.2d 60, 62 (S.D.1982) (Dunn and Henderson, JJ., dissenting)).3 Under the circumstances of this case, if I conceptually express that Bank acted with unlawful procedure, it does not follow, ipso facto, that summary judgment should not have been granted. Beug did have his “day in court” on the grain seizure. “Due process,” aside from all else, means fundamental fairness. Pinkerton v. Farr, 220 S.E.2d 682, 687 (W.Va.1975). The constitutional guarantee of “due process” requires that law, in its regular course of administration, through courts of justice, as well as officers of the courts, shall not act arbitrarily, unreasonably, or capriciously. Further, the means selected shаll have a real and substantive relation to the object sought to be achieved. Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934).
Here, I am convinced that there was a technical violation of the law by Bank officials acting in private capacity, rather than having the sheriff do his bounden duty. This technical violation was not outrageous to such extent that Beug has a compensable cause of action in the law. Neither should these acts of repossession be blessed as a modicum of high example for