American State Insurance Co. v. Miller, Adams & Crawford

HENRIOD, Chief Justice: Appeal from an order granting a motion to compel satisfaction of a default judgment. Reversed with instructions, with no costs on appeal. In May, 1973, defendants were parties to a construction bond issued in their behalf to assure payment of materialmen claims arising out of a church addition project. In connection therewith, the defendants signed an “Agreement of Indemnity” to hold plaintiff harmless if it paid such claims after failure of defendants to do so. Such agreement contained a provision that any collateral given to secure the coverage, would be in addition to the indemnity agreement provisions. Such collateral, consisting of a lien right belonging to them against certain condominium property in the area, was assigned to plaintiff and the assignment, although constituting additional security, apparently had no conditions attached to it save that which might be governed by the Utah Uniform Commercial Code, — particularly the provisions of Title 70A-9-501, et seq., Utah Code Annotated 1953. It was assigned, however, when requested by defendants that plaintiff pay off claims that were being pressed against them, in necessitous circumstances but not initially at the instance of the plaintiff. Plaintiff paid the claims at such instance and request. Under 70A-9-501, in case of the “debt- or’s” default under a security agreement, as here, the secured party has rights and remedies provided therein, except as limited by subsection (3), which provides that the rules included in the subsection there-inbelow (including 70A-9-504(3), which in turn required notice to the debtor of the secured parties’ intention to dispose of the security to satisfy the debt), could not be waived, — “but the parties may by agreement determine the standards by which the fulfillment of these rights and duties is to be measured if such standards are not manifestly unreasonable.” The lien rights mentioned above were assigned prior to the filing of plaintiff’s complaint, and were sold after the default judgment, and the proceeds of the sale were applied in satisfaction pro tanto of the judgment. All of the defendants properly were served with process, but none answered the complaint. The complaint mentioned the surety bond that was issued, and pleaded the Agreement of Indemnity, attaching a photocopy of the latter to the complaint. Upon failure of all and each of the defendants to appear and contest the matter, testimony was taken, and the original Agreement of Indemnity was admitted in evidence as Exhibit P-1, marked “Reduced to Judgment” by M. Howell, Deputy Clerk, as evidenced by the Judgment by Default signed by the trial judge as of October 17, 1974. On November 11, 1974, the plaintiff put in the Sheriff’s hands a Supplemental Order against all of the individuals defendant, and the process in each case was returned unserved because the defendants had left the state. On December 4, 1974, after such effort to collect on the judgment failed, the plaintiff sold its interest in the lien rights for $6,666, and applied it to the judgment. Defendants simply say they were worth more in their opinion. In April, 1975, plaintiff caused a Writ of Garnishment to issue, which provoked for the first time any response by defendants who filed a so-called “Motion to Compel Satisfaction of Judgment,”- — in this same action, — in which the sole basis for the relief prayed was an alleged agree-ment entered into between the plaintiff and defendants after the judgment which transferred the lien rights to plaintiff in satisfaction of the judgment already entered. There is no basis in fact for such claim since the assignment of the lien right [758] was transferred before the complaint ever was filed, — as the record clearly reflects, it having been recorded on March 8, 1974, whereas the complaint was filed on April 12, 1974. The Uniform Commercial Code was never mentioned in the motion by title, sections, amendment to the motion or otherwise. It came as an afterthought and showed up first in a memorandum of authorities after change of counsel, and in the briefs on appeal. It is obvious that the defense of payment of a debt or liability even if there had been such a circumstance claimed in this abortive pleading, certainly this was an issue that should have or could have been pleaded in the action,1 and that failure to have done so is a preventive from asserting it in a motion after judgment, whether you call it a waiver, an estoppel, an abortive move to vacate a judgment, a violation of the rules and substantive case law anent thereto, a collateral attack on, or going behind a judgment or otherwise. The least that could be said about such a tenuous and abortive defensive claim, is that it would be assertable only in an independent action in equity. To hold otherwise under the facts of this case would be pervertive of even loose or ambiguous rules of procedure, — and we are of the conviction that under the circumstances here where the only defense claimed is that of payment in full is vulnerable to the familiar Rule 8(c) of the Utah Rules of Civil Procedure. The judgment is reversed, except that part recognizing credit of the $6,666 conceded by plaintiff to be a credit against said judgment. MAUGHAN, J., concurs. WILKINS, J., concurs in result. Footnotes [1] F. M. A. v. Build, 17 Utah 2d 80, 404 P.2d 670 (1965); Hammond v. Caldar, 8 Utah 2d 333, 334 P.2d 562 (1959).