FOR PUBLICATION
ATTORNEY FOR APPELLANTS:
ATTORNEY FOR APPELLEES:
SUSAN KOZLOWSKI
Kozlowski Law Offices
Crown Point, Indiana
DANIEL P. MURPHY
Murphy Law Office
Winamac, Indiana
IN THE
COURT OF APPEALS OF INDIANA
WARD ALLEN and ALLEN’S EXCAVATING,
)
)
Appellants-Plaintiffs,
)
)
vs.
)
)
FIRST NATIONAL BANK OF MONTEREY and )
CLAIBORN WAMSLEY, Individually and in his )
capacity as President, GEORGE WAMSLEY,
)
Individually and in his capacity as Sr. Vice
)
President, RANDY HOWARD, Individual and
)
in his official capacity, and DICK GEARHART,
)
Individually and in his official capacity,
)
)
Appellees-Defendants.
)
No. 66A04-0506-CV-364
APPEAL FROM THE PULASKI SUPERIOR COURT
The Honorable Patrick B. Blankenship, Judge
Cause No. 66D01-0301-CT-3
April 18, 2006
OPINION – FOR PUBLICATION
MAY, Judge
Ward Allen (“Ward”) appeals summary judgment in favor of the First National
Bank of Monterey, Claiborn Wamsley, George Wamsley, Randy Howard and Dick
Gearhart (collectively “the Bank”). 1 Allen contends the trial court erred in granting the
Bank’s motion for summary judgment because the Bank’s perfected security interest does
not preclude all liability for damages. We reverse and remand.
FACTS AND PROCEDURAL HISTORY 2
On May 20, 1999, Cheyenne Allen (“Cheyenne”) borrowed $35,000 from the
Bank. The note was secured by a mortgage on real property and by four pieces of
equipment including a 1982 Case 580D Backhoe (“the backhoe”), a 1969 JD350 Dozer, a
1983 International Dump Truck and a 1981 Tandem Trailer Beavertail.
George
Wamsley, the Bank’s senior vice president, signed the note for the Bank. The Bank filed
Financing Statements on the backhoe with the Pulaski County Recorder on May 25, 1999
and with the Indiana Secretary of State on May 28, 1999.
In July or August 1999, Cheyenne approached his father Ward about buying the
equipment from him. Ward agreed to buy the backhoe for $17,500 on the condition that
the Bank would allow Ward to pay the purchase price directly to the Bank instead of to
Cheyenne. Ward later talked with both Randy Howard and George Wamsley at the Bank
1
The individuals were sued individually and in their capacity as officers or employees of the Bank.
We note counsel failed to comply with Indiana Appellate Rule 46. Appellant did not attach a copy of
the trial court’s Order on Summary Judgment to his brief as required by Ind. Appellate Rule 46(A)(10)
(“The brief shall include any written opinion, memorandum of decision or findings of fact and
conclusions thereon relating to the issues raised on appeal.”).
App. R. 46(A)(5) provides: “Statement of Case. This statement shall briefly describe the nature of the
case, the course of the proceedings relevant to the issues presented for review, and the disposition of these
issues by the trial court[.]” Appellant’s Statement of the Case, with which Appellee agrees, merely states:
“This is an appeal of the trial court’s grant of summary judgment in favor of the Defendants against
Plaintiff on all counts. Plaintiff appeals that ruling.” (Br. of Appellant at 2; Br. of Appellees at 2.)
2
2
about buying the backhoe and making payments for it directly to the Bank. According to
Ward, both men agreed Ward could purchase the backhoe without taking out a new loan
by making payments to the Bank. This oral agreement was not reduced to writing.
Ward made monthly payments to the Bank until February 2001. 3
The Bank
subsequently notified Ward and Cheyenne that Cheyenne’s loan was in default. Dick
Gearhart called Ward and his wife Melissa numerous times concerning Cheyenne’s note.
According to Melissa, Gearhart stated the Bank had no intention of taking the backhoe
from them. George Wamsley asked Ward to encourage Cheyenne to make payments but
did not ask Ward to pay Cheyenne’s note.
On August 28, 2001, George Wamsley and another man went to Ward’s house
and, after a heated discussion and over Melissa’s objections, took the backhoe. 4
Melissa’s mother was present during this incident and because she feared for her safety
and that of her daughter and grandchildren, she went to her house next door “to get [her]
gun.” (App. at 115.) Melissa called the police because she felt threatened by George
Wamsley and his companion.
In subsequent discussions with the Bank’s president, Claiborn Wamsley, Ward
learned the Bank had a perfected security interest in the backhoe. In January 2003, Ward
sued the Bank for damages, alleging breach of contract, conversion and fraud. In April
2005, the Bank moved for summary judgment on the grounds that its perfected security
interest was superior to any interest Ward may have had in the backhoe. The trial court
3
4
Ward believes he paid the full amount for the backhoe to the Bank and to Cheyenne.
The backhoe was later sold and the proceeds applied to Cheyenne’s outstanding loan.
3
granted summary judgment for the Bank on June 1, 2005, entering findings of fact and
conclusions of law.
DISCUSSION AND DECISION
Summary judgment is appropriate when there are no genuine issues of material
fact and the moving party is entitled to a judgment as a matter of law. Ind. Trial Rule
56(C). When reviewing summary judgment, we apply the same standard as does the trial
court. Rogier v. Am. Testing & Eng’g Corp., 734 N.E.2d 606, 613 (Ind. Ct. App. 2000),
trans. denied 753 N.E.2d 8 (Ind. 2001). We do not weigh the evidence; rather, we
consider the facts in the light most favorable to the nonmovant. Id. Although a summary
judgment is clothed with a presumption of validity, we carefully scrutinize the trial
court’s decision to ensure the nonmovant was not improperly denied his day in court. Id.
Specific findings of fact and conclusions of law are neither required nor prohibited
in the summary judgment context. City of Gary v. Ind. Bell Tel. Co., Inc., 732 N.E.2d
149, 153 (Ind. 2000). Such findings aid our review of a summary judgment, but they are
not binding on this Court. Id.
Ward argues: “The crux of this appeal is whether or not [the Bank’s] perfected
security interest absolved the Bank of any liability for acts regarding [the backhoe] that
would be a tort, fraud or breach of contract.” (Br. of Appellant at 10.) He further asserts
there are genuine issues of material fact regarding his allegations of breach of contract,
fraud and conversion, which issues preclude summary judgment. The Bank responds its
perfected security interest is superior to Ward’s alleged interest in the backhoe and that
the facts negate at least one element of each of Ward’s allegations.
4
We assume for purposes of summary judgment there was an oral contract between
Ward and the Bank regarding the purchase of the backhoe. As the contract was not
reduced to writing, the issue is whether the Bank’s perfected security interest trumps the
oral contract between Ward and the Bank. It does.
Chapter 26-1-9.1 of the Indiana Code is based on Revised Article 9 of the Uniform
Commercial Code and governs secured transactions in Indiana. 5 Ind. Code § 26-1-9.1201 states a security agreement “is effective according to its terms between the parties,
against purchasers of the collateral, and against creditors.” 6
The security agreement Cheyenne signed provided he would “not try to sell the
property unless . . . [he] receive[d] [the Bank’s] written permission to do so.”
(Appellant’s App. at 29.) Although Ward discussed the purchase of the backhoe with the
Bank, the security agreement required written permission from the Bank before
Cheyenne could sell the backhoe. The security agreement stated: “No modification of
this security agreement is effective unless made in writing and signed by [the Bank] and
[Cheyenne].” (Id.) While Ward and the Bank may have orally agreed to modify the
5
With some exceptions not relevant to the case before us, these provisions govern transactions entered
into and liens created before Chapter 9.1 became effective on July 1, 2001. Ind. Code § 26-1-9.1-702.
6
The dissent suggests the Bank’s failure to disclose it had a security interest in the backhoe was
concealment of a known material fact. However, the Bank disclosed its security interest in the backhoe
by properly filing a financing statement on the backhoe with both the Secretary of State and the Pulaski
County Recorder. “While ‘attachment’ relates to the creation of a security interest by virtue of execution
of a security agreement, ‘perfection’ is an additional step which makes the security interest effective
against third parties.” Citizens Nat’l Bank of Evansville v. Wedel, 489 N.E.2d 1203, 1205 (1986). A
properly filed financing statement “serves as notice to the rest of the world the secured party has taken a
security interest in the collateral.” Brown v. Indiana Nat’l Bank, 476 N.E.2d 888, 891 (Ind. Ct. App.
1985), reh’g denied, trans. denied.
5
security agreement and allow Ward to purchase the backhoe, the modification was not
effective under the Code because it was not in writing.
Because the modification intended by the oral contract was not effective, the
Bank’s security interest in the backhoe was superior to any interest Ward may have had.
When Cheyenne defaulted on the loan, the Bank as the secured party had the right to take
possession of the backhoe. Ind. Code § 26-1-9.1-609(a) (“After default, a secured party .
. . may take possession of the collateral.”)
A secured party may take possession of collateral after a default “without judicial
process, if it proceeds without breach of the peace.” Ind. Code § 26-1-9.1-609(b).
Accordingly, the Bank had the right to take possession of the backhoe without resorting
to judicial process, as it attempted to do, but the Bank did not have a right to breach the
peace while doing so.
The statute codifies a long-standing principle in American
jurisprudence:
The case . . . presents the question whether the owner of personal
property, who is entitled to its possession, may by force retake it against the
resistance of the one in possession. Blackstone, who is the source of most
of our present law, says, on page 4, volume 3, of his Commentaries, that the
owner of goods, who has been deprived of the property in them, “may
lawfully claim and retake them wherever he happens to find them, so it be
not in a riotous manner, or attended with a breach of the peace; *** that this
natural right of recaption shall never be exerted where such exertion must
occasion strife and bodily contention, or endanger the peace of society.”
Singer Sewing Mach. Co. v. Phipps, 49 Ind. App. 116, 123, 94 N.E. 793, 796 (1911),
reh’g denied, trans. denied.
We addressed what constitutes a “breach of the peace” under a similar predecessor
statute: “[I]f the repossession is verbally or otherwise contested at the actual time of and
6
in the immediate vicinity of the attempted repossession by the defaulting party or other
person in control of the chattel, the secured party must desist and pursue his remedy in
court.” Census Fed. Credit Union v. Wann, 403 N.E.2d 348, 352 (Ind. Ct. App. 1980).
Melissa contested the repossession verbally and called the police.
Melissa’s
mother felt sufficiently threatened by the events to retrieve her gun from her home next
door. Despite this, the Bank did not desist from repossessing the backhoe and pursue a
judicial remedy.
Chapter 9.1 sets out the remedies available when a secured party fails to comply
with its provisions. For example, Ind. Code § 26-1-9.1-625 provides, in pertinent part:
(a) If it is established that a secured party is not proceeding in
accordance with IC 26-1-9.1, a court may order or restrain collection,
enforcement, or disposition of collateral on appropriate terms and
conditions.
(b) Subject to subsections (c), (d), and (f), a person is liable for
damages in the amount of any loss caused by a failure to comply with IC
26-1-9.1. Loss caused by a failure to comply may include loss resulting
from the debtor’s inability to obtain, or increased costs of, alternative
financing.
(c) Except as otherwise provided in IC 26-1-9.1-628:
(1) a person that, at the time of the failure, was a debtor, was an
obligor, or held a security interest in or other lien on the collateral may
recover damages under subsection (b) for its loss[.]
Ward had an interest in the backhoe as a purchaser of the collateral. He accordingly may
be able to recover damages, if any, caused by the Bank’s failure to comply with Ind.
Code § 26-1-9.1-609.
The Bank’s perfected security interest is superior to Ward’s interest in the
backhoe. However, the Bank may be liable for its failure to comply with Ind. Code § 261-9.1-609. We therefore remand so the trial court may consider this issue.
7
Reversed and remanded.
KIRSCH, C.J., concurs.
ROBB, J., concurring in part, dissenting in part with separate opinion.
8
IN THE
COURT OF APPEALS OF INDIANA
WARD ALLEN and ALLEN’S EXCAVATING,
)
)
Appellants-Plaintiffs,
)
)
vs.
)
)
FIRST NATIONAL BANK OF MONTEREY and )
CLAIBORN WAMSLEY, Individually and in his )
capacity as President, GEORGE WAMSLEY,
)
Individually and in his capacity as Sr. Vice
)
President, RANDY HOWARD, Individual and
)
in his official capacity, and DICK GEARHART,
)
Individually and in his official capacity,
)
)
Appellees-Defendants.
)
No. 66A04-0506-CV-364
ROBB, Judge, concurring in part, dissenting in part.
I agree with the majority’s resolution of the breach of the peace issue. However,
because I believe there are issues of material fact with respect to whether the Bank should
be estopped to assert a superior interest in the backhoe, I respectfully dissent from the
majority’s resolution of this issue.
There are several estoppel doctrines, including equitable estoppel, all of which are
based on the same underlying concept: “a person, who, by deed or conduct, has induced
another to act in a particular manner, will not be permitted to adopt an inconsistent
9
position, attitude, or course of conduct that causes injury to the other.” Roberts v.
ALCOA, Inc., 811 N.E.2d 466, 475 (Ind. Ct. App. 2004). Equitable estoppel is available
if one party, through its representatives or course of conduct, knowingly misleads or
induces another party to believe and act upon their conduct in good faith and without
knowledge of the facts. American Family Mut. Ins. Co. v. Ginther, 803 N.E.2d 224, 234
(Ind. Ct. App. 2004). The requirements for equitable estoppel are: 1) a representation or
concealment of material facts; 2) made with knowledge, actual or constructive, of the
facts and with the intention that the other party act upon it; 3) made to a party ignorant of
the facts; and 4) which induces the other party to rely or act upon it to his detriment. Id.
The majority assumes there was an oral contract regarding Ward’s purchase of the
backhoe. See slip op. at 5. Yet, despite knowing of its security interest in the backhoe,
the bank did not disclose this interest to Ward prior to entering into the agreement –
concealment of a known material fact. True, a financing statement disclosing the security
interest was properly filed. However, the security interest was not disclosed to Ward, and
given the informality of the dealings between Ward and the Bank, the Bank had reason to
know that Ward would not independently search the records before acting on the Bank’s
agreement that he need not take out a new loan to purchase the backhoe. Moreover,
according to the evidence favorable to Ward, the non-movant, the Bank affirmatively
stated an intention not to take the backhoe when Cheyenne’s loan went into default.
Ward paid the full amount for the backhoe before finding out about the security interest –
relying to his detriment on the Bank’s agreement without knowing the material facts.
Given this evidence, I would hold that there is at least a question of fact regarding the
10
Bank’s entitlement to assert its security interest given its conduct and statements prior to
repossessing the backhoe.
11
