Bremer Bank, Nat'l Ass'n v. Matejcek, A17-1477

916 N.W.2d 688

BREMER BANK, NATIONAL ASSOCIATION, a national banking association, Respondent,

v.Kathryn MATEJCEK, Defendant,Jeffrey Matejcek, Appellant.

A17-1477

Court of Appeals of Minnesota.

Filed July 2, 2018

Garth G. Gavenda, Lindsay W. Cremona, Anastasi Jellum, P.A., Stillwater, Minnesota (for respondent)

Thomas R. Braun, Bruce K. Piotrowski, Restovich Braun & Associates, Rochester, Minnesota (for appellant)

Considered and decided by Connolly, Presiding Judge; Smith, Tracy M., Judge; and Bratvold, Judge.

BRATVOLD, Judge

Appellant Jeffrey Matejcek (Jeffrey) challenges the district court’s decision to grant summary judgment in favor of respondent Bremer Bank, National Association (Bremer Bank or bank) and to direct the entry of a money judgment against Jeffrey and his ex-wife, Kathryn Matejcek (Kathryn), jointly and severally, for amounts due on a defaulted loan that was secured by a motorhome. Jeffrey and Kathryn were joint debtors on the loan and jointly held title to the motorhome. In the Matejceks’ dissolution action, the district court awarded Kathryn the motorhome, directed her to sell the motorhome, and required her to deposit the sale proceeds with Bremer Bank. To facilitate Kathryn’s sale, Bremer Bank agreed to release its lien on the motorhome upon receipt of the sale proceeds; it also applied the sale proceeds to reduce the amount due on the loan.

Bremer Bank then pursued this breach-of-contract action for the remaining loan balance. While Jeffrey did not dispute either that he is a joint borrower on the defaulted loan or the amount owed on the loan, he objected to the motorhome’s sale, contending the price was short of its market value. On appeal, Jeffrey contends that the district court erred in granting summary judgment because Bremer Bank failed to give notice and dispose of the motorhome in a commercially reasonable manner, as a secured party is required to do under Minnesota’s version of the Uniform Commercial Code (UCC)—Secured Transactions. Bremer Bank contends that the UCC provisions were not triggered because it did not sell the motorhome.

Because the undisputed facts establish that Bremer Bank did not sell the motorhome, we conclude that the district court correctly determined that Bremer Bank did not dispose of the motorhome, as defined in relevant UCC provisions, when it consented to Kathryn’s sale of the motorhome to offset the amount owed on the loan. We also conclude that the district court did not abuse its discretion in denying Jeffrey’s request for a continuance to pursue additional discovery. Thus, we affirm the district court’s decision.

FACTS

In January 2013, Jeffrey and Kathryn executed, as joint borrowers, a promissory note to Bremer Bank for a loan in the amount of $340,459.04. Jeffrey and Kathryn also executed a separate agreement providing Bremer Bank with a security interest in a 2013 Winnebago Tour motorhome that they jointly purchased with the borrowed money.

In 2016, Jeffrey commenced a marital dissolution action in Rice County. Jeffrey and Kathryn failed to make several monthly loan payments to Bremer Bank. In September 2016, Kathryn informed Jeffrey and Bremer Bank that she wished to sell the motorhome, and had received an offer of approximately $170,000. Jeffrey objected to a sale at $170,000, stating that he believed the motorhome’s value was $225,000. In October 2016, Kathryn informed Bremer Bank that she had found a potential buyer for the motorhome at $175,000, and offered to pay the net proceeds to Bremer Bank in exchange for the bank releasing its lien against the motorhome. Jeffrey again objected to selling the motorhome at the proposed price.

At about the same time, Bremer Bank conducted its own valuation analysis of the motorhome, "through information from the National Automobile Dealers Association, which indicated a potential value of $168,700.00-$234,400.00." Bremer Bank concluded that it would incur "at least $25,305.00" in expenses should it repossess, hold, and sell the motorhome, resulting in a net value to Bremer Bank of "$143,395.00-$199,240.00." Bremer Bank deemed $175,000 to be "a very good recovery," and informed Kathryn that it would agree to this sale price.

Kathryn brought a motion in the dissolution action to authorize transfer of the motorhome title to her name alone and to obtain approval of the proposed sale. At the hearing on Kathryn’s motion, Jeffrey’s attorney stated that Jeffrey did not oppose the transfer. On November 1, 2016, the district court issued an emergency order transferring title of the motorhome from Jeffrey and Kathryn jointly to Kathryn individually. The order directed that Kathryn "shall attempt to sell and shall sell the motorhome in a prompt and prudent manner, acceptable to the secured party (Bremer Bank), and shall pay the net sale proceeds to Bremer Bank, not to exceed the amount actually owing by the parties to Bremer Bank." Finally, the order reserved for future determination which party had liability for any deficiency on the amount owed to Bremer Bank. Separate from the district court proceedings, Bremer Bank informed the Minnesota Department of Public Safety that it consented to the transfer of title to Kathryn individually.

Although the original prospective buyer backed out, Kathryn found another buyer willing to purchase the motorhome at the same price. Kathryn completed the sale and, in November 2016, Bremer Bank received a wire transfer in the amount of $175,000, after which the bank directed release of its lien against the motorhome. Bremer Bank applied $175,000 to the debt obligation, leaving a principal balance of $104,587.56.

Bremer Bank did not receive any further loan payments and filed this breach-of-contract action in Washington County against Jeffrey and Kathryn for the remaining balance of the loan. Kathryn failed to respond to the summons, and the district court entered default judgment against her for the total amount due under the promissory note.

In April 2017, Bremer Bank moved for summary judgment against Jeffrey "for the amounts due and owing under the Note." In support of its motion, Bremer Bank argued that no material facts were in dispute regarding the enforceability of the promissory note or Jeffrey’s default under its terms. Jeffrey opposed the motion, claiming there was a genuine issue of material fact regarding who sold the motorhome. In the affidavit filed in support of his opposition, Jeffrey conceded that he executed the loan agreement, but averred that he never agreed to a "short sale" of the motorhome.¹ Jeffrey also attested that Bremer Bank "agreed to allow the sale" of the motorhome. Jeffrey contended that, if he prevailed at trial with a finding that Bremer Bank sold the motorhome, then the bank was not entitled to judgment because it had failed to give him the required statutory notice and failed to sell the motorhome in a commercially reasonable manner, as required by the applicable provisions of the UCC. See Minn. Stat. §§ 336.9-611(b) (2016) (notice to debtor), .9-610(b) (2016) (commercially reasonable disposition). Finally, Jeffrey argued that the district court should not grant summary judgment to Bremer Bank because discovery had not yet been completed, and further discovery would elicit material facts. Jeffrey and his attorney filed affidavits in support of the request for more discovery.

On July 25, 2017, the district court granted Bremer Bank’s motion for summary judgment. The district court determined that the statutory provisions cited by Jeffrey did not apply "because the motorhome was sold by Kathryn." The district court noted that it was undisputed that "at no point in time did [Bremer Bank] repossess the motorhome." Thus, the district court concluded there was "no sale giving rise to a notice requirement under Minn. Stat. § 336.9-611." The district court also concluded that additional discovery was "irrelevant" because Bremer Bank had "no role in the sale of the motorhome." The district court entered judgment against Jeffrey in the total amount of $114,723.69, which included outstanding principal, interest, collection costs, attorney fees, and other statutory costs. This appeal follows.

ISSUES

I. Did the district court err in determining that UCC requirements for sale

of collateral by a secured party did not apply because Bremer Bank did not sell or dispose of any collateral when it consented to Kathryn’s sale of the motorhome?

II. Did the district court abuse its discretion in denying Jeffrey’s request to pursue further discovery?

ANALYSIS

I. The district court did not err in determining that there was no genuine issue of material fact regarding whether Bremer Bank sold or disposed of the motorhome.

This court reviews a district court’s summary judgment decision de novo. Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC , 790 N.W.2d 167, 170 (Minn. 2010). "In doing so, [appellate courts] determine whether the district court properly applied the law and whether there are genuine issues of material fact that preclude summary judgment." Id. A fact is material if its resolution will affect the outcome of the case. O’Malley v. Ulland Bros. , 549 N.W.2d 889, 892 (Minn. 1996). We "view the evidence in the light most favorable to the party against whom summary judgment was granted." STAR Ctrs., Inc. v. Faegre & Benson, L.L.P. , 644 N.W.2d 72, 76-77 (Minn. 2002). This appeal requires application of the UCC, as codified by Minnesota law. Thus, this case also presents a question of statutory interpretation, which is a question of law that receives de novo review. Berglund v. Comm’r of Revenue , 877 N.W.2d 780, 783 (Minn. 2016).

Under the UCC, after a default by a debtor, the secured party and the debtor have enumerated rights as provided by Minn. Stat. §§ 336.9-601 to .9-628 (2016 & Supp. 2017). A secured party’s rights after default include collection and enforcement of the debt, repossession of collateral, and disposition of collateral. See Minn. Stat. §§ 336.9-607, .9-609, .9-610. A...