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Shenyang Jinli Metals & Minerals IMP & Exp Co., Ltd. v. Sivyer Steel Corp.

Court of Appeals of Iowa

January 9, 2020

SHENYANG JINLI METALS & MINERALS IMP & EXP CO., LTD., Plaintiff-Appellant,
v.
SIVYER STEEL CORPORATION, Defendant-Appellee, and TBK BANK, SSB f/k/a TRIUMPH COMMUNITY BANK, Garnishee-Appellee.

          Appeal from the Iowa District Court for Scott County, Joel W. Barrows and Mark D. Cleve, Judges.

         A judgment creditor appeals from a district court ruling that it was entitled to the judgment debtor's funds subject to a security interest.

          Jonathan M. Causey of Causey & Ye Law, P.L.L.C., Des Moines, for appellant.

          Douglas R. Lindstrom Jr., Davenport, for appellee Sivyer Steel Corporation.

          Richard A. Davidson of Lane & Waterman LLP, Davenport, for appellee TBK Bank.

          Heard by Vaitheswaran, P.J., Mullins, J., and Gamble, S.J. [*]

          VAITHESWARAN, Presiding Judge.

         This appeal pits a judgment creditor against a bank with a perfected security interest in the judgment debtor's property. The bank prevailed. On appeal, the judgment creditor raises several arguments for reversal including a contention that its entitlement to the judgment debtor's funds was not "subject to" the bank's security interest.

         I. Background Facts and Proceedings

         Iowa company Sivyer Steel Corporation (Sivyer) had operating loans with TBK Bank (TBK). The bank, in turn, had a perfected security interest in Sivyer's property, including its deposit accounts. Sivyer admitted to defaulting on certain loan payments. For a limited period of time, TBK agreed to "forbear from exercising any rights and remedies under the Loan Agreement" based on those defaults and agreed to continue making advances to maintain business operations.

         Shenyang Jinli Metals & Minerals Imp & Exp Co., Ltd. (Shenyang) supplied raw materials to Sivyer. Sivyer defaulted on its payments to Shenyang. Shenyang sued Sivyer for breach of contract and obtained a money judgment for $467, 982.55, plus interest and costs.

         Shenyang sought to collect its judgment by garnishing Sivyer's accounts at TBK. The bank filed an answer asserting it had "a valid, perfected and senior security interest in such accounts . . . and a right of offset to secure the principal amount of loans extended by [the bank] to [Sivyer]."

         Shenyang and TBK filed cross-motions for summary judgment. Shenyang asserted (1) Sivyer "was in default, but [TBK] lost its priority by failing to take affirmative steps to enforce its right of setoff"; (2) TBK "waived its right of setoff"; and (3) "TBK was liable to [Shenyang]" for the amount of the garnishment under Iowa Code section 642.13 (2017).[1] TBK asserted that (1) under controlling case law, "a bank's prior security interest in accounts is superior to a garnishment claim"; (2) the bank had "a perfected continuing security interest in the accounts and proceeds in the ...


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