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IN THE COURT OF APPEALS OF IOWA No. 8-918 / 08-0074 Filed March 26, 2009 C & J LEASING CORP., ASSIGNOR TO FRONTIER LEASING CORP., ASSIGNEE, Plaintiff-Appellant, vs. BEASLEY INVESTMENTS, INC., d/b/a BRONZE BUNZ TANNING and SCOTT BEASLEY and HEATHER BEASLEY k/n/a HEATHER WILBUR, Individually, Defendants-Appellees. ________________________________________________________________ Appeal from the Iowa District Court for Polk County, Arthur E. Gamble, Judge.

Lessor appeals from a district court ruling awarding it damages in a breach of lease action against lessees. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Edward N. McConnell of Ginkens & McConnell, P.L.C., Clive, for appellant. Mark A. Critelli of Critelli & Hubbard, P.C., Clive, for appellee Scott Beasley. Heather Wilbur, California, pro se. Heard by Mahan, P.J., and Miller and Doyle, JJ.

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MILLER, J. Frontier Leasing Corp. appeals from a district court ruling awarding it damages in a breach of lease action against Beasley Investments, d/b/a Bronze Bunz Tanning, Heather Beasley (now known as Heather Wilbur), and Scott Beasley. We affirm in part, reverse in part, and remand for further proceedings. I. BACKGROUND FACTS AND PROCEEDINGS. In August 2004, Beasley Investments entered into a lease agreement with C & J Leasing Corp. for tanning equipment to be placed in its tanning salon operation, Bronze Bunz Tanning. Scott Beasley and Heather Wilbur, who were married at the time, each personally guaranteed performance of the lease. C & J Leasing purchased the tanning equipment it provided to Beasley Investments for $140,000. The lease provided that "[o]wnership of the equipment shall at all times remain in Lessor," but gave Beasley Investments the option to purchase the equipment for $17,053 at the end of the lease. Under the lease agreement, Beasley Investments was required to pay rent of $3432 each month for a period of fifty-nine months. The lease set forth late fees and interest to be paid on delinquent rent payments. It further provided that, in the event of lessee's default, C & J Leasing could require the lessee to pay "an amount equal to all unpaid rental payments" in addition to any other remedy available to it at law or equity. C & J Leasing later assigned the lease to Frontier Leasing, although it continued to act as Frontier Leasing's servicing agent for collection of the lease payments.

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Beasley Investments defaulted on the lease agreement by failing to make required monthly payments in May and August 2005. Around that same time, Beasley and Wilbur separated and eventually divorced. Their dissolution decree assigned the tanning business, its equipment, and accompanying leases to Wilbur. After the default, C & J Leasing took possession of the tanning equipment and sold it to a business operated by Wilbur's father, ML & HM Enterprises, Inc., for $125,000. It also entered into an agreement with ML & HM Enterprises for lease of the tanning equipment in November 2005. That lease required ML & HM Enterprises to make sixty monthly payments in the amount of $2814 each month with the option to purchase the equipment at the end of the lease for one dollar. C & J Leasing did not notify any of the defendants of its intended

disposition of the tanning equipment until after it had already disposed of the equipment. It also did not give the proceeds from the sale of the equipment to Frontier Leasing as the assignee of the original lease. C & J Leasing filed suit against the defendants in April 2006, seeking damages for their alleged breach of the lease agreement. Frontier Leasing was subsequently substituted as the plaintiff in the action after it assumed "direct management and servicing of" the Beasley Investment s lease. Beasley filed an answer, generally denying the allegations contained in the petition and asserting failure to mitigate as an affirmative defense. Beasley Investments did not file an answer, and Wilbur filed a pro se answer.

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The matter proceeded to a bench trial. Neither Beasley Investments nor Wilbur appeared at the trial. Beasley did appear and contested whether the disposition of the tanning equipment was commercially reasonable. Frontier

Leasing stipulated that Beasley did not receive notice of the sale of the equipment before it occurred. It asserted that the disposition was nevertheless commercially reasonable. Frontier Leasing sought $87,132.84 in damages from the defendants. Those damages included past due rental payments, late fees, and interest, in addition to the present value of the rent for the remaining term of the lease agreement and an amount representing Frontier Leasing's residual value in the equipment, less the $125,000 C & J Leasing received from the sale of the equipment. The district court entered a ruling in favor of Beasley, finding the sale of the tanning equipment was "not done in a commercially reasonable manner under the standards set forth in Iowa Code section 554.9627." The court further found while Frontier Leasing's "failure to give Scott Beasley notice of the sale of the collateral is not an absolute bar to a deficiency judgment under Iowa Code section 554.9626, [Beasley] has established [Frontier Leasing] failed to mitigate damages." It reasoned that had Frontier Leasing given proper notice to Beasley, "he would have cured the default and there would be no deficiency." The court accordingly determined Frontier Leasing was not entitled to any deficiency judgment against Beasley. It did, however, find Frontier Leasing was entitled to a deficiency judgment against Beasley Investments and Wilbur in the amount of $6416.65. The court calculated that judgment in part by subtracting the

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remaining amount due under the original lease from the total amount due under the lease C & J Leasing entered into with ML & HM Enterprises. Frontier Leasing appeals. It claims the district court erred in determining the disposition of the tanning equipment was not commercially reasonable and in failing to enter a deficiency judgment against Beasley. It further claims the court erred in calculating the deficiency judgments against Beasley Investments and Wilbur. II. SCOPE AND STANDARDS OF REVIEW. Our scope of review in this action is for the correction of errors at law. Iowa R. App. P. 6.4. The findings of fact in a law action are binding upon us if they are supported by substantial evidence. Iowa R. App. P. 6.14(6)(a).

Evidence is substantial if a reasonable mind would accept it as adequate to reach the same findings. Frontier Props. Corp. v. Swanberg, 488 N.W.2d 146, 147 (Iowa 1992). III. MERITS. Before reaching the merits of the issues Frontier Leasing raises on appeal, we believe some background discussion of the applicable provisions of Iowa's Uniform Commercial Code (UCC) will aid our analysis. Iowa Code

sections 554.9609(1)(a) and 554.9610(1) (2005) allow a secured creditor, such as Frontier Leasing, to repossess and dispose of collateral upon a debtor's default. Section 554.9615(1) requires the creditor to apply the proceeds of the disposition first to the expenses of the disposition and then to the satisfaction of

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the indebtedness secured by the collateral. The debtor or secondary obligor is liable for any deficiency under section 554.9615(4). Section 554.9610(2) provides that "[e]very aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable." A creditor is additionally required to provide the

debtor and secondary obligor with a "reasonable authenticated notification of disposition" within a reasonable time before the intended disposition. See Iowa Code

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