This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1994).
STATE OF MINNESOTA
IN COURT OF APPEALS
Cindi Ann McCloud, f/k/a Cindi Ann Morgan,
f/k/a Cindi Ann Kuehn,
Norwest Bank Minnesota, N.A.,
Filed September 10, 1996
Washington County District Court
File No. C1955126
Joseph M. Hoffman, 1900 One Financial Plaza, 120 S. Sixth St., Minneapolis, MN 55402 (for Appellant)
Thomas J. Reiter, St. Paul Bldg.--7th floor, 6 West Fifth Street, St. Paul, MN 55102 (for Respondent)
Considered and decided by Huspeni, Presiding Judge, Randall, Judge, and Amundson, Judge.
U N P U B L I S H E D O P I N I O N
Appellant Cindi McCloud sued respondent Norwest Bank for unlawful repossession and conversion. The court denied her motion to amend to add a claim for punitive damages. Both parties moved for summary judgment. The court granted respondent's motion and denied appellant's. Because there are no material fact issues and respondent is entitled to summary judgment as a matter of law, and because appellant has not presented sufficient support for her motion to add punitive damages, we affirm.
On January 8, 1992, Cindi McCloud
entered into an installment loan agreement with respondent to finance the purchase of a vehicle; she granted respondent a security interest in the vehicle. In February 1994, appellant went into arrears on payments, with substantial arrearages accumulating by June 1994.
Commencing in April 1994, respondent mailed letters to appellant indicating its concern over her default. Appellant, however, had four different addresses during the course of the loan. Respondent had no record of any change of address notices. A bankruptcy notice,
indicating that appellant lived in Inver Grove Heights, provided the most recent address respondent had on file.
Appellant stated that she included notes with her loan payments notifying respondent of her address changes. Respondent has no record of these notes or letters. In addition, appellant included her current addresses on the checks or money orders sent for payment. Nevertheless, respondent's microfilm of the payment instruments was so poor that the collection agent was unable to decipher the addresses.
On September 8, 1994, respondent sent a "strict compliance" letter indicating to appellant that it would require strict compliance with the terms of the loan agreement, including timely payments, or it would exercise its rights, including repossession, under the contract. On September 21, 1994, respondent sent a "final demand" letter indicating that it had accelerated the loan, that the full loan amount was due within five days, and that, if she didn't pay, it would repossess the automobile. Appellant did not make the payment, but respondent and its recovery agent were unable to find either appellant or her vehicle in order to repossess it. On November 1, 1994, respondent charged off the loan because it was over 120 days past due. The charge off resulted in a 60-day cooling off period during which no collection activity occurred. On January 5, 1995, respondent sent another "final demand" letter to appellant, indicating again that she had to pay the entire loan balance within five days or respondent would repossess.
Respondent mailed all notices to the Inver Grove Heights address. The collection agent indicated, however, that he suspected appellant no longer lived there. A recovery agent determined that appellant lived in Landfall and repossessed her vehicle from her home in the early morning of January 11, 1995. None of the letters was returned as undeliverable prior to the repossession, but appellant said she received no letters warning of repossession. Only the January 5, 1995, letter was returned to respondent as undeliverable and after the car was repossessed.
Respondent posted four partial payments to appellant's account after the strict compliance and first final demand letters were sent. On January 20, 1995, after the deadline of the last final demand letter, a payment of $186 was erroneously posted but was later reversed because the vehicle had by then been repossessed.
D E C I S I O N
I. Motion to Strike Exhibit
A special term order deferred to this panel respondent's motion to strike an exhibit. The exhibit is a copy of a payment check mailed to respondent by appellant. A copy of the same check, part of the trial court record, is so poor that the address on the check is unreadable. The copy submitted in the appellant's appendix is substantially more clear, allowing one to decipher easily appellant's address written on the check.
Appellant argues that
copy of the check was in the record below, and since this is simply a
copy, it should not be considered
City of Willmar Mun. Utils. Comm'n v. Kandiyohi Coop. Elec. Power Ass'n
, 452 N.W.2d 699, 703 (Minn. App. 1990),
(Minn. Apr. 27, 1990). Appellant's argument that this check was in the record fails to consider what was at issue in this case. The issue is whether respondent could have discovered appellant's address in Landfall by looking at a copy of the check. On respondent's copy, which is the copy submitted to the trial court, appellant's address is not legible. On the copy appellant seeks to submit on appeal, acquired from the payor bank, the address is legible. Respondent, however, did not have access to this copy when it was trying to locate appellant.
Evidence not contained in the record below may not be considered by the court and must be stricken from the record.
Appellant also argues that respondent had had the original check at one time, so it could have obtained appellant's Landfall address by looking at the check itself. While the check itself would have provided respondent with appellant's Landfall address, there is no indication in the record that checks are viewed individually before processing. We grant respondent's motion to strike the challenged exhibit.
II. Summary Judgment in Favor of Respondent
On appeal from summary judgment, this court must determine (1) whether any genuine issues of material fact exist, and (2) whether the trial court properly applied the law.
Offerdahl v. University of Minn. Hosps. & Clinics
, 426 N.W.2d 425, 427 (Minn. 1988).
Appellant relies on
Cobb v. Midwest Recovery Bureau
, 295 N.W.2d 232 (Minn. 1980), for the proper procedure for lawful self-help repossession under Minn. Stat. §
at 237. The court also stated that if, after the strict compliance notice is sent, the creditor again accepts a late payment, that could "act as a waiver" of the rights asserted in the notice, thereby requiring another strict compliance letter before repossession can occur.
the repeated acceptance of late payments by a creditor who has the contractual right to repossess the property imposes a duty on the creditor to notify the debtor that strict compliance with the contract terms will be required before the creditor can lawfully repossess the collateral.
Appellant argues that (1) respondent did not provide proper notice prior to repossessing her vehicle, and (2) respondent accepted a late payment after the deadline set forth in the strict compliance letter; alternatively, appellant argues that questions of material fact remain on these issues. We conclude that the award of summary judgment was proper.
In its letter of September 8, 1994, respondent indicated that strict compliance with the terms of the contract would be required, that late payments would no longer be acceptable, and that any amount past due must be paid within five days. The letter of September 21, 1994, notified appellant that the entire balance of the loan was due within five days and failure to pay would result in repossession. The letter of January 5, 1995, duplicated that of September 21, 1994, demanding payment of the entire loan balance within five days, and stating that otherwise the vehicle would be repossessed.
Respondent addressed all these letters to appellant at her Inver Grove Heights address. Only one was returned to respondent as undeliverable and that was after repossession had occurred. Respondent made several attempts to locate appellant, including hiring two skip tracers, pulling up credit bureau reports, and looking at copies of payments to determine if a new address was listed thereon. While appellant states that she sent respondent notice of her new address for each move during the course of the loan, there is no indication of such changes in respondent's records; respondent obtained appellant's Inver Grove Heights address inadvertently from a bankruptcy court notice.
Respondent put forth a good faith effort to locate appellant so that the required notices could be sent to her. Giving notice under Minnesota Statutes Chapter 336 requires "taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it." Minn. Stat. §(1994). Respondent took such steps as were reasonably required to inform appellant that strict compliance would be required and that repossession was a possibility. Case law also indicates that actual notice is not required if all reasonable steps are taken to provide notice.
See Har-Ned Lumber Co. v. Amagineers, Inc.
, 436 N.W.2d 811 (Minn. App. 1989) (holding that notice properly directed to the intended recipient but not actually received is legally sufficient notice).
Further, as a matter of policy, if debtors could make themselves unreachable by not providing forwarding address information, banks would then be unable to provide them with actual notice of strict compliance and repossession. If a bank were not permitted to provide notice by mailing to the debtor's last known address, it would be unable to repossess collateral to recover its losses. We do not read either
or Minnesota statutes as requiring that legally sufficient notice be actual notice.
Appellant next argues that, even if the notice to her last known address was sufficient, once respondent discovered her address in Landfall, it should have sent her an additional notice of strict compliance. We disagree. Although respondent may have known that it was sending notices to an old address, respondent was not aware that the letters were not being forwarded. No letters had been returned as undeliverable before appellant's car was repossessed. Moreover, appellant's loan was seriously in default and had already been written off the books as a loan loss. Thus, requiring additional notice upon discovering appellant's new address would go beyond the reasonable steps required by
and would put respondent at risk of losing its collateral again.
B. Late Payments
Appellant also argues that the repossession was unlawful because respondent accepted late payments after it provided notice that strict compliance would be required. We disagree.
Although respondent accepted late partial payments on September 21, October 11, November 25, and December 12, 1994, the demand letter of January 5, 1995, provided sufficient notice of strict compliance to satisfy the duty imposed by
A more problematic question exists, however, regarding payment received by respondent on January 11, 1995, the day appellant's vehicle was repossessed. In accordance with respondent's usual payment process, the money order was processed on January 11 but rejected that night and was not credited to any account. On January 12, respondent determined that the payment was rejected because appellant's loan was in collections. A cashier's check was drafted in the amount of the payment and sent to the collections department to be applied as it determined. Because of an error by respondent, the payment was credited to appellant's loan account on January 20 instead of being returned to appellant. That payment was reversed upon discovery of the error. Respondent then attempted to deliver the cashier's check to appellant's attorney, who refused to accept it.
Appellant argues that the mere processing of this payment on January 11 constitutes acceptance of a late payment, thereby requiring another strict compliance notice before repossession can be lawful. Practically, however, a payment cannot be scanned immediately upon receipt to determine whether it should be processed. Respondent's simple processing of the money order on January 11, 1995, should not be construed to constitute acceptance of a late payment.
A question remains, however. Respondent erred in crediting the payment to appellant's loan account on January 20, 1995. Although this credit was immediately reversed, we must determine whether the error constituted the acceptance of a late payment. Respondent argues that this issue is controlled by
McNeill v. Dakota County State Bank
, 522 N.W.2d 381 (Minn. App. 1994).
, however, does not address the issue raised here
where a payment was accepted after the deadline set forth in the January 5 letter.
We acknowledge that respondent could be held accountable for its own error, although that error was immediately reversed. However, the repossession was lawful on January 11, the date it occurred. We believe the better rule is that a clerical error does not destroy the repossession's lawful character. Thus, we conclude that the January 20 credit to appellant's account was properly reversed and did not constitute acceptance of a late payment.
III. Punitive Damages Claim
Appellant also argues that the trial court erred in refusing to permit a claim for punitive damages. We disagree.
Minn. Stat. §subd. 1(a) (1994). In 1990, this subdivision was amended, changing "willful indifference" to "deliberate disregard," resulting in a "heightened standard" for punitive damages.
Bougie v. Sibley Manor, Inc.
, 504 N.W.2d 493, 500 n.4 (Minn. App. 1993). Deliberate disregard occurs if the defendant has knowledge of facts or intentionally disregards facts that create a high probability of injury to the rights of others and deliberately proceeds to act in conscious or intentional disregard of or with indifference to the high degree of probability of injury to the rights of others. Minn. Stat. §subd. 1(b).
Punitive damages shall be allowed in civil actions only upon clear and convincing evidence that the acts of the defendant show deliberate disregard for the rights * * * of others.
The trial court must find prima facie evidence in support of the motion in order to grant the moving party permission to amend the pleadings. Minn. Stat. §(1994). A prima facie case is one that would prevail in the absence of evidence invalidating it.
Blumberg v. Palm
, 238 Minn. 249, 253, 56 N.W.2d 412, 415 (1953). To prevail at trial, the moving party must present clear and convincing evidence of deliberate disregard of her rights. Minn. Stat. §subd. 1(a). Evidence of negligence or gross negligence does not warrant a claim for punitive damages.
Ulrich v. City of Crosby
, 848 F. Supp. 861, 868 (D. Minn. 1994).
On appeal, this court must examine appellant's evidence de novo to determine if the moving party presented a prima facie case in support of its motion.
Swanlund v. Shimano Indus. Corp. Ltd.
, 459 N.W.2d 151, 155 (Minn. App. 1990),
(Minn. Oct. 5, 1990). This court may not consider evidence presented by respondent when determining whether appellant met her burden of production for amending her complaint.
at 154. We conclude that appellant did not present sufficient evidence to allow a jury to conclude that respondent deliberately disregarded her rights with respect to the repossession of her vehicle.
Appellant also claims that she is entitled to punitive damages simply because respondent did not return her vehicle when notified that it had been wrongfully repossessed. We disagree. Failure to return the vehicle does not constitute clear and convincing evidence of deliberate disregard of her rights.
, 295 N.W.2d at 237-38 (respondent not liable for punitive damages because it had a good faith belief that its repossession was lawful).
Appellant argued alternatively that fact issues remain regarding whether respondent complied with the requirements set forth in
. We disagree. Even if material fact issues remained, there are no actual damages upon which an award could be based. It was clear at oral argument that there was no dispute regarding the value of the vehicle or the remaining balance on the loan, and respondent had waived any right to a deficiency judgment. Thus, this case is only about punitive damages, and appellant did not present sufficient evidence to allow a claim for them.
Cindi McCloud was named Cindi Kuehn at the time she entered into the loan agreement. After a divorce, she resumed her former name of Cindi Morgan. She has since remarried and her legal name is currently Cindi McCloud.
Appellant reaffirmed her debt to respondent and its security interest in her Chapter 7 proceedings.
The January 20 payment was initially processed by the bank on January 11, the day appellant's vehicle was repossessed. The payment was rejected, and then was routed to the collections department. The payment should have been returned directly to appellant, but an error caused it to be credited to her loan account. The bank reversed this error upon its discovery and mailed to appellant's attorney a cashier's check for return to appellant. Appellant's attorney refused the check and returned it to respondent.
, a letter dated June 17, 1986, indicated that entire payment of the debt was due June 27, 1986; a late payment was accepted June 19, 1986. Repossession was deemed lawful because no payment was accepted after June 27, 1986.