Opinion ID: 1844159
Heading Depth: 1
Heading Rank: 3

Heading: Did GECC Elect to Retain the Equipment in Lieu of Payment?

Text: Iowa Code section 554.9505(2) provides in part: In any other case involving consumer goods or any other collateral a secured party in possession may, after default, propose to retain the collateral in satisfaction of the obligation. Written notice of such proposal shall be sent to the debtor if the debtor has not signed after default a statement renouncing or modifying the debtor's rights to notice and to object to retention of the collateral in full satisfaction of the obligation, under this subsection. This procedure is sometimes called strict foreclosure. See, e.g., J. White & R. Summers, Uniform Commercial Code § 26-8, at 1104 (1980). Under strict foreclosure, a creditor must ordinarily take possession of the collateral and notify the debtor of his intention to retain the collateral in satisfaction of the obligation, unless notice is waived. Id. at 1106. Even if these requirements have not been met, it is possible for a debtor to establish a strict foreclosure, thus forcing the creditor to accept the collateral in full satisfaction of the debt. Id. at 1107. In this case, Vashis attempt to establish strict foreclosure under section 554.9505(2), even though GECC did not send notice of its intent to do so. A debtor may, after default, waive his right to such notice. See § 554.9505(2); White & Summers § 26-8, at 1105-06. The problem with Vashis' strict foreclosure argument is that the court found that GECC did not elect to keep the collateral but kept it only because it had no choice; it was unable to find a purchaser for it. A debtor seeking to establish a strict foreclosure in satisfaction of the debt has the burden of establishing that the creditor manifested an intent to do so. Nelson v. Armstrong, 99 Idaho 422, 430, 582 P.2d 1100, 1105 (1978); Wisconics Eng'g Co. v. Fisher, 466 N.E.2d 745, 764 (Ind.App.1984). The trial court, finding the facts to be otherwise, properly rejected Vashis' strict foreclosure argument.