Opinion ID: 1299095
Heading Depth: 1
Heading Rank: 7

Heading: Does Issue Preclusion or Equitable Estoppel Bar Citizens' Claim to the Proceeds of the Assets of TJC, Inc., Described in its Security Agreement?

Text: As noted in trial court's factual statement, Thomas S. Johnson and his wife Corinne filed for bankruptcy November 9, 1972. Sac City filed a claim on Johnson's promissory notes, asserting its claim was secured by its April 7, 1969, security agreement covering the inventory and accounts receivable of Thomas S. Johnson also known as Tommy Johnson Chev. Co. The testimony indicates that there were no funds in the bankruptcy estate and that on April 28, 1978, Sac City withdrew its claim to any property other than the assets upon which it claimed a lien. The president of Citizens, who was present, made no objection. The bankruptcy judge's Orders on Claims, entered June 5, 1978, merely approved the withdrawal of Sac City's claim. Later Sac City obtained an ex parte supplemental order stating: As to Claim No. 3 of Sac City State Bank, the attorney for Sac City State Bank having stated to the Court that such claim is being paid in full by the sale of the property secured to Sac City State Bank as part of its claim. The Sac City State Bank does withdraw its claim as to any other property of the bankrupt by reason of the satisfaction of his claim from the sale of the secured property. Trial court held the four prerequisites for invoking issue preclusion were not met in this case. See Hunter v. City of Des Moines, 300 N.W.2d 121, 123 (Iowa 1981); Schneberger v. United States Fidelity and Guaranty Co., 213 N.W.2d 913, 917 (Iowa 1973). We agree. Trial court, however, held Citizens could not rely on Sac City's failure to refile following the incorporation, on the basis of equitable estoppel and the sections 554.1203 and 554.1201(19) good faith requirements. Our above determinations dispose of this contention, because the section 554.9402(7) refiling requirement applies only in the name change situations where the filed financing statement becomes seriously misleading. This was not a name change case, but a conveyance of collateral to a different legal entity. Sac City could preserve its lien as to after-acquired property only by obtaining a security agreement from TJC, Inc., and filing a financing statement. To proceed further, however, the elements of equitable estoppel set out in Manson State Bank v. Diamond, 227 N.W.2d 195, 201 (Iowa 1975), were not established here by the necessary quantum of clear, convincing and satisfactory proof. That Citizens knew of Sac City's unperfected security interest is irrelevant in the ultimate determination of a priority dispute. See 35B Iowa Code Ann. § 554.9312, Official Comment (4), Example (2) at 453 (West 1967) (Whichever secured party first perfects his interest . . . takes priority and it makes no difference whether or not he knows of the other interest at the time he perfects his own.). Nor is it controlling that Citizens, before this matter went to litigation, thought Sac City had the first lien. There is no indication Citizens sought or had legal advice, and no evidence that Sac City changed position as a result of Citizens' ignorance of the legal consequences of the operative facts. We hold that neither issue preclusion nor equitable estoppel prevents Citizens from establishing its lien priority on the after-acquired assets of TJC, Inc.