Court Opinion

ID: 7880308
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:21:38.854833+00
Date Added: 2024-06-11T16:31:33.634788
License: Public Domain

SNELL, Justice
(dissenting).
I respectfully dissent.
The majority has reversed the trial court relying on a specious reason. That reason, as stated by the majority, is that “the debt- or’s motives in selling the property” present a genuine issue of material fact. That being so, the majority finds a procedural error, stating that the trial court should not have decided this factual issue in a proceeding under section 639.63 to discharge an attachment.
The majority’s reason and its reliance are specious because the debtor’s motives are not disputed and therefore present no issue of material fact to be decided in a trial. The bank accused Manke of selling his business property “the Country Garden Store” and planning to place the proceeds beyond the reach of his creditors. The majority agrees that in the proceeding to discharge the attachment, Manke’s oral testimony in support of his motion to discharge was properly accepted by the trial court since the bank did not object. Manke testified that he intended to use the proceeds to pay his creditors, but not the bank. Specifically, he stated he was going to pay his home mortgage, miscellaneous small debts, taxes and attorney’s fees. In so testifying, Manke admitted that he was going to place the proceeds beyond the reach of one creditor, the bank, by paying off other creditors. Manke’s motive was to prefer creditors and he admitted it. There is no motive by Manke that is disputed to try out. His motive is laid as bare as fossilized bones.
The real question that the trial court answered and the majority deflects is whether Manke’s admitted acts provide a legal ground for the bank’s attachment of his business property. The bank, the majority, and I agree that the summary judgment procedure is proper to decide legal issues. That is exactly what the trial court was left to decide after Manke’s testimony and the bank officials’ testimony. The procedural glitch, if any occurred, was waived by the bank; the parties and the court moved on to the real business at hand.
It is clear that what really gagged the bank was the prospect of not being paid and Manke’s paying off his home mortgage instead. The majority may be similarly disquieted. Irrespective of the rectitude involved, nothing prevented the bank from protecting itself by other legal means. It could have refused to loan money to Manke initially if it thought it needed a mortgage on his business as additional security. It could have obtained a judgment on Manke’s defaulted note earlier. Only after Manke had advertised the business property for sale at auction, and received and accepted a private offer of $45,000, did the bank employ the most disfavored of legal remedies — the attachment.
*22In Frudden Lumber Co. v. Clifton, 183 N.W.2d 201 (Iowa 1971), we recognized that the motion to discharge an attachment under section 639.63 should be considered as a motion for summary judgment. A summary proceeding by motion for the discharge of attached property in a law action is essentially at law. Bell v. Courteen Seed Co., 197 Iowa 120, 124, 196 N.W. 1006, 1008 (1924). The case is not triable de novo. Id. In holding that Manke was not converting the Country Garden Store real estate to place its cash proceeds beyond the reach of all of Manke’s creditors, the trial court relied on our holding in Rockport Co. v. Wedgewood, Inc., 447 N.W.2d 126 (Iowa 1989). The trial court found that Manke merely preferred other creditors over the bank, a choice sanctioned in Rockport.
In Rockport, the debtor, who operated a shoe store, notified all of its creditors that proceeds from a bulk sale transfer of inventory would be paid to creditors with a security interest in that inventory. The transfer was challenged by an unsecured creditor, who attached and seized the inventory. On the debtor’s suit for wrongful attachment, we held that preferential treatment among creditors, outside bankruptcy and absent fraud, was not a justification for an attachment under section 639.3(10). Rockport, 447 N.W.2d at 132.
The debtor in Rockport announced its uncontroverted intention to use the proceeds of the transfer to pay its secured creditors. In fact, the secured creditors had a superior right to the sale proceeds over the plaintiff, because a security interest in collateral continues into the proceeds of the collateral under Iowa Code section 554.9306. Also, the preferred creditors in Rockport were bona fide creditors of the defendant. We concluded that the debtor was not converting assets and placing the proceeds beyond all creditors’ reach. Id.
In the case at bar, Manke indicated a desire to pay his home mortgage, miscellaneous small debts, taxes and his attorney’s fees. There is no evidence from this statement nor is any presented by the bank that any of the money obtained from sale of the real estate would be used for a purpose other than paying existing creditors. The argument is made that payment of Manke’s home mortgage creditor should not count as a creditor because the homestead is exempt from levy under Iowa Code section 561.16 and payment would personally benefit Manke. Thus, it is argued, the ground for attachment is satisfied that Manke is placing the proceeds beyond the reach of his creditors, namely Farmers National.
Some indication of rejection of this proposal appears in Frudden, 183 N.W.2d at 201. In Frudden, a truck was found to be exempt property and the attachment was therefore discharged. The fact that the debtor’s exemption inured to the benefit of his wife and family was of no consequence.
Similarly, the fact that a home mortgage creditor will be paid instead of the bank is not determinative. There is no indication by statute that a preference of this type provides evidence to support the ground for attachment alleged. The trial court relied on our analysis in Rockport that a disappointed unsecured creditor may not attach a debtor’s assets under section 639.-3(10) merely because the debtor was paying another bona fide creditor. Rockport, 447 N.W.2d at 131. The substance of the transaction objected to is a nonfraudulent preferential transfer outside of bankruptcy.
The trial court properly analyzed the legal issue, applied the law as we set out in Rockport, and decided the only critical matter of law left in the case as it was presented by the parties. In so doing, the trial court achieved the correct result under the law with the efficiency we have encouraged. I would affirm.
McGIVERIN, C.J., and HARRIS and NEUMAN, JJ., join this dissent.