Opinion ID: 1275069
Heading Depth: 1
Heading Rank: 2

Heading: Should F.S. Credit's judgment be reduced by $7432?

Text: The court of appeals adopted Shear's rationale that it should have credit for the full amount that BGFS and F.S. Credit received in settlement of the Clarksville Bank lawsuit involving Kettwig's crops grown in a subsequent year. The court noted F.S. Credit's claim in that case was predicated upon its same 1977 security agreement, and the final court order, made pursuant to the parties' stipulation, disbursed one-half of certain 1978 crop proceeds ($7432) to BGFS and F.S. Credit. The appeals court then concluded F.S. Credit had already collected $7,432 based on the 1977 agreement, and what it then chose to do with that sum was of no concern to the court, other than to hold F.S. Credit's judgment must be reduced by the full $7432. F.S. Credit does not dispute that its claim in the unrelated case was based on the same 1977 security interest, or that the structuring of the settlement distribution between BGFS and F.S. Credit purposely was arranged to satisfy Kettwig's 1977-78 open account with BGFS. F.S. Credit contends, however, that BGFS maintained a legitimate claim in the unrelated case, and there is no obligation under Iowa law for a tort victim to exhaust other means of recovery before pursuing a particular tortfeasor. Thus it argues any sum received by F.S. Credit out of the 1978 crops was of gratuitous benefit to Shear. F.S. Credit further asserts any amount it received merely reduced the amount of its damages and is not a setoff as Shear had no claim against it; there was no legal obligation for BGFS and F.S. Credit to divide the settlement to benefit Shear and the latter did not meet its burden to prove that F.S. Credit waived any part of its tort claim against Shear. This action is at law, therefore, our review is on errors of law. Hubby v. State, 331 N.W.2d 690, 694 (Iowa 1983); R.E.T. Corp. v. Frank Paxton Co., 329 N.W.2d 416, 418-19 (Iowa 1983). If the facts found by the court in a law action are supported by substantial evidence and justified as a matter of law, they are binding on the appellate court. Gere v. Council Bluffs Community School District, 334 N.W.2d 307, 309 (Iowa 1983); see also Iowa R.App.P. 14(f)(1). In evaluating the sufficiency of the evidence, we view it in the light most favorable to sustaining the trial court's judgment, and need only consider evidence favorable to the judgment, whether or not it is contradicted. Briggs Transportation Co. v. Starr Sales Co., 262 N.W.2d 805, 808 (Iowa 1978); Packwood Elevator Co. v. Heisdorffer, 260 N.W.2d 543, 544 (Iowa 1977). Independent claims not addressed in the findings but inconsistent with the judgment are considered to have been decided adversely to the losing party; review merely is to determine whether the evidence is adequate to support the findings that trial court is thus deemed to have made. Bahnsen v. Rabe, 276 N.W.2d 413, 414 (Iowa 1979). Here trial court must have determined the proof offered by Shear justified a credit of only $902.16 against F.S. Credit's claim for conversion of its security interest in Kettwig's 1978 crops. On the record before us, we can find no justification for disturbing trial court's resolution of the issue. The underlying legal theory is mitigation of damages. In a conversion action, the defendant may show payments made by a third person to the plaintiff with respect to the converted interest. Keota Produce Co. v. Chicago, Rock Island & Pacific Railway, 189 Iowa 1284, 1286, 179 N.W. 834, 835 (1920); 18 Am.Jur.2d Conversion § 111 (1965). Mitigation of damages is a special defense which must be pled and proved by the defendant, R.E.T. Corp., 329 N.W.2d at 422, or the defendant is limited to circumstances growing out of the plaintiff's testimony. See Ackerman v. Lauver, 242 N.W.2d 342, 346 (Iowa 1976); Iowa Power & Light Co. v. Board of Waterworks, 281 N.W.2d 827, 833 (Iowa Ct. App.1979); Iowa Code §§ 619.7, .8 (1975). Here Shear did not plead failure to mitigate as a defense, or that any other sums should be deemed paid in mitigation of this claim. Although F.S. Credit objected when the limited evidence relating to the settlement of the Clarksville Bank litigation was offered, it failed to obtain a ruling from the court and did not raise the question of failure to plead the special defense until its application for further review. We will consider the little evidence offered on this point for whatever weight it may have, while continuing to impose the burden of proof on Shear. See Ackerman, 242 N.W.2d at 346. An examination of the record as it concerns the unrelated litigation discloses that the Iowa State Bank of Clarksville sued these parties, as well as BGFS and others, requesting, along with other relief, that the priority of interests in the 1978 crops be established. Shear, which might have had some voice in the shaping of the final settlement, opted out early by paying into court the money due on the 1978 crops and requesting that it be dismissed from the litigation. The Clarksville Bank claimed to have loaned Kettwigs money during the period from 1967 through November 6, 1978, secured by a financing statement recorded with the County Recorder's office on September 5, 1972, and Renewed with the Secretary of State on July 25, 1977. It further alleged [t]hat Butler-Grundy County Farm Service Company ... extended credit to Kenneth Kettwig and filed certain financing statements. The order of court in the Clarksville Bank litigation obviously was not an adjudication; it merely confirmed the settlement made by the parties and protected the clerk of court in distributing the $15,364 held in escrow. We have no way of determining whether the Clarksville Bank, in agreeing to the sum paid F.S. Credit and BGFS, was motivated by the weakness of its own claim or the strength of theirs. [7] It may have feared the legality of financing statements to provide a security interest in the 1978 crops, its limited description of the real estate as shown on the financing statements, [8] or the validity of the renewal of its alleged security interest through the 1977 filing. Nor are we satisfied with the evidence relating to the division of the $7432 between BGFS and F.S. Credit. Although F.S. Credit concedes BGFS was paid in full on an open account, we assume business and legal considerations and not charity were the motivating forces. F.S. Credit apparently reimbursed BGFS for Kettwig's accounts through the 1977 growing season; the indebtedness later accrued by Kettwig to BGFS must have related to the 1978 crops, the proceeds of which were at stake in the Clarksville Bank action. There was no adjudication that F.S. Credit's claims would prevail. Kettwig's 1977 security agreement and financing statement revealed BGFS as the secured party. There is no indication in the record before us that BGFS ever assigned its security interest to F.S. Credit, a point not raised by Shear in this case. We do not choose to weigh the equities between BGFS and F.S. Credit without the benefit of a record. There is no evidence that F.S. Credit is obtaining more than one satisfaction for its claim against Shear for conversion of its interest in the 1977 crops. [9] The settlement obtained in the unrelated litigation was not paid with respect to the 1977 crops, which are the subject of this conversion action. In these circumstances, we hold trial court correctly charged F.S. Credit with only the $902.16 it actually received from settlement of the Clarksville Bank case. To the extent it modified trial court's judgment in this respect, we vacate the opinion of the court of appeals.