Opinion ID: 1299095
Heading Depth: 1
Heading Rank: 8

Heading: Was Citizens Rightly Awarded the GM Holdbacks?

Text: Sac City, counterclaiming in this action, alleged that it was entitled to $72,582.51 that GM paid Citizens as holdbacks due to TJC, Inc. Under the dealership contract TJC, Inc., purchased cars from GM and paid the dealer price plus a two percent holdback amount. The contract provided that all holdback amounts were to be paid or credited to the dealer periodically, after deducting any sums due from the dealer to GM. Citizens' 1973 security agreement signed by TJC, Inc., covered, inter alia, accounts receivable and dealer holdbacks. Its 1977 security agreement with the corporation included accounts, general intangibles, and contract rights. Sac City contends its security agreement with Thomas S. Johnson covered accounts receivable, thus it had a prior lien on the sum due from GM to TJC, Inc. Citizens first asserts that Sac City's security agreement was with Johnson, not TJC, Inc., and therefore any amounts owing the corporation pursuant to its dealership contract with GM would not be covered by Sac City's security agreement. Citizens further argues that the holdback amounts could not be classified as an account. Although section 554.9106 has been amended, the basic definition of account throughout this relevant period has been a right to payment for goods sold or leased or for services rendered. See 3 Uniform Laws Annotated § 9-106, at 182 (1981). The money paid to Citizens by GM was not an account receivable because TJC, Inc., had not sold or leased anything to GM or rendered any service to GM in the usual meaning of a service contract. Either of the above grounds is sufficient to prevent Sac City from recovering on its counterclaim. As it had the burden to show that it was entitled to the holdback sum, we are not required to determine whether this fund was a general intangible, covered by Citizens' security agreement. See § 554.9106, The Code. We affirm trial court's decree denying Sac City's counterclaim. We reverse its judgment insofar as it decrees that Sac City has a first lien on the proceeds from the sale of the assets of TJC, Inc. But because we are in equity and in order to effectuate justice, Local Board of Health v. Wood, 243 N.W.2d 862, 871 (Iowa 1976); Hansen v. Kaperonis, 243 Iowa 1257, 1265, 55 N.W.2d 284, 288 (1952), we remand for further proceedings to provide Sac City an opportunity to prove the amount of the section 554.9306(2) identifiable proceeds, if any, generated by the sale or liquidation of the inventory and accounts receivable covered by its security agreement, and for decree awarding it such amount, all consistent with this opinion. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH DIRECTIONS.