(specially concurring).
I concur.
This is another of many summary judgments in which oral arguments and the court’s comments, if any, were not recorded. Findings of fact or reasons for rendering judgment are absent. Good memorandum briefs were filed. I compliment the attorney who can convince a trial judge of the righteousness of his cause though he is wrong. I also compliment the attorney who can appeal and convince an appellate court of the righteousness of his cause when he is right.
In summary judgment proceedings, the court should request opposing attorneys to submit findings of fact and conclusions of law, and state the reasons why summary judgment should be granted or denied. Due to the silence of the court, we do not know the facts upon which the court relied, the basis upon which summary judgment was rendered and the reasons therefore. Generally, a formal summary judgment is not a fair “Declaration of Rights.” It has no appellate value and deserves no consideration. The trial court has shifted to this Court the burden of assessing the facts to determine whether a genuine issue of material fact exists.
This criticism of summary judgments has continued in the belief that the Supreme Court will return to its former position and welcome findings of fact or reasons given by a district judge for granting or denying summary judgment.
The only issue on this appeal is whether the bank, as a matter of law, had the right to accelerate payment of plaintiff’s promissory note because it deemed itself insecure under a good faith belief that prospect of payment was impaired.
This issue is a matter of first impression. We must marshall case authority, the rules of law involved and their application to the facts of this case.
Section 50A-1-208, set forth in Judge Lopez’ opinion, “has the dual elements of whether (1) a reasonable man would have accelerated the debt under the circumstances, and (2) whether the creditor acted in good faith.” Blaine v. G. M. A. C., 82 Misc.2d 653, 370 N.Y.S.2d 323 (1975); Sheppard Federal Credit Union v. Palmer, 408 F.2d 1369 (5th Cir. 1969); Universal C. I. T. Credit Corporation v. Shepler, Ind.App., 329 N.E.2d 620 (1975); II Gilmore, Security Interests in Personal Property, § 43.4, p. 1197 (1965).
Gilmore says:
* * * The creditor has the right to accelerate if, under all the circumstances, a reasonable man, motivated by good faith, would have done so. * * * The Code adopts such a rule in § 1-208:
A “reasonable man” is one with a “reasonable mind,” and “A reasonable mind is a sensible one, fairly judicious in its action, and at least somewhat cautious in reaching its conclusions.” [Emphasis by Court.] Anderson v. Welsh, 86 N.M. 767, 769, 527 P.2d 1079, 1081 (Ct.App.1974).
Section 1-208 “seems to recognize that acceleration is a harsh remedy which should be allowed only if there is some reasonable justification for doing so,.such as a good faith belief that the prospect of payment is impaired.” This is an equitable doctrine firmly established in the Uniform Commercial Code because acceleration is a severe covenant unfavored in the law. One who seeks to impose these severe conditions must not permit the debtor to assume that the covenant will not be strictly enforced and then “crack down” by rigidly insisting on enforcement without giving some notice and opportunity to comply. Williamson v. Wanless, 545 P.2d 1145, 1149 (Utah, 1976); State Bank of Lehi v. Woolsey, 565 P.2d 413 (Utah, 1977). Even without regard to the provisions of the Uniform Commercial Code, a court of equity will protect a debtor against an inequitable acceleration of the maturity of the debt. Seay v. Davis, 246 Ark. 201, 438 S.W.2d 479 (1969).
Judge Lopez’ opinion also sets forth the statutory definition of “Good Faith.” The test of good faith under that section is a wholly subjective one of honesty. It has been stated in various ways. The cases are collected in Farmers Co-op El., Inc., Duncombe v. State Bank, 236 N.W.2d 674 (Iowa, 1975).
“Good faith” as “honesty in fact” is essentially a subjective test which focuses on the state of mind of the person in question. Bowling Green, Inc. v. State Street Bank and Trust Co., 425 F.2d 81 (1st Cir. 1970). “It must be remembered that here we are dealing with the ‘good faith’ belief of the bank — that is, its state of mind.” [Emphasis by Court.] Fort Knox National Bank v. Gustafson, 385 S.W.2d 196, 200 (1964); General Investment Corp. v. Angelini, 58 N.J. 396, 278 A.2d 193 (1971). “The test as to the good faith of the creditor in accelerating under an insecurity clause is a matter of the creditor’s actual mental state and this is not negatived by showing there was no basis for the creditor’s belief . . . .” Blaine, supra. [370 N.Y.S.2d at 327.] “The test is not diligence or negligence; and it is immaterial that appellee [bank] may have had notice of such facts as would put a reasonably prudent person on inquiry which would lead to discovery, unless appellee [bank] had actual knowledge of facts and circumstances that would amount to bad faith.” Riley v. First State Bank, Spearman, 469 S.W.2d 812, 816 (Tex.Civ.App.1971); Richardson Company v. First Nat. Bank in Dallas, 504 S.W.2d 812 (Tex.Civ.App.1974); First State Bank & Trust Co. of Edinburg v. George, 519 S.W.2d 198 (Tex.Civ.App.1974). The good faith “test requires honesty of intent rather than absence of circumstances which would put an ordinarily prudent holder on inquiry in order to constitute good faith. ... In short, it is an issue of honesty of intent rather than of diligence or negligence. Some term it the ‘white heart’ test.” [Emphasis added.] Eldon’s Sup. Fresh Stores, Inc. v. Merrill, Lynch, Etc., 296 Minn. 130, 207 N.W.2d 282, 287 (1973).
Nothing in the definition of “good faith” suggests that in addition to being honest, the creditor must exercise due care or reasonable commercial standards or lack of negligence to be in good faith. Industrial Nat. Bank of R. I. v. Leo’s Used Car Ex., Inc., 362 Mass. 797, 291 N.E.2d 603 (1973). The standard of this test is what facts the bank actually knew, or believed it knew, not what it could or should have known. Van Horn v. Van De Wol, Inc., 6 Wash.App. 959, 497 P.2d 252 (1972), 61 A.L.R.3d 241 (1975). By a “good faith” belief, I mean one resting on a reasonable assessment of the facts available to the bank. See State v. Sanchez, 88 N.M. 378, 540 P.2d 858 (1975), rev’d, 88 N.M. 402, 540 P.2d 1291 (1975).
To sum up in precise language, “The test is what the particular person did or thought in the given situation and whether or not he was honest in what he did.” Balon v. Cadillac Automobile Company of Boston, 113 N.H. 108, 112, 303 A.2d 194,196 (1973). No one but that particular person can possibly know what his good faith is. Custom Panel Systems, Inc. v. Bank of Hampton, 143 Ga.App. 681, 239 S.E.2d 558 (1977).
By using the “good faith belief” doctrine, the main problem to solve is how a trier of fact can obtain knowledge of the minds of others, to whose states we have no direct, introspective access. This knowledge can only be obtained from perceptible manifestations in speech, conduct and behavior of a person, or reasonable inferences to be drawn therefrom. This requires a trier of the fact to glean from the testimony and evidence such manifestations in speech, conduct, and behavior of a person that it can know or infer what a person thought in a given situation and whether the person was honest in what the persop did. It is foreseeable that an expert opinion may be necessary to assist the trier of the fact.
From memorandum briefs filed in the district court and briefs filed on this appeal, these rules of law and their meaning were not submitted in depth to the trial court or to this Court.
Under these rules, for the bank to make a prima facie case to support a summary judgment, the bank must prove that from facts which it actually knew or believed it knew, it deemed itself insecure; that under these circumstances, a reasonable person would believe that prospect of payment was impaired, would accelerate the maturity of plaintiff’s promissory note and seize and sell a part of its security; that in taking this action, the bank made a reasonable assessment of the facts, thought that it had the right to take this action, and in acting as it did, its intention was honest.
The record shows: the loan officer of the bank testified that plaintiff’s note was past due on January 20, 1976; that the bank extended the payment to April 1, 1976 and waived any prior default. The reason the note was extended was to have an orderly liquidation of the security. Plaintiff was told that the bank would be unable to finance him in the future. Prior to February 13, 1976 the bank reviewed the collateral. It was questionable whether the bank was secure when its security was matched against the indebtedness, and as of February 13, 1976, the bank felt that it was secure if the security remained at value. The security exceeded the indebtedness by $20,000, and by February 13,1976, it deteriorated in value by $10,000.
On March 3 or 4, 1976, the bank declared plaintiff to be in default because plaintiff threatened bankruptcy, that the collateral was in jeopardy, and on that basis, it accelerated the notes. The president of the bank testified that plaintiff gave the bank an ultimatum that the bank was either going to re-finance him or charge off $50,-000, or he would take bankruptcy. There was no doubt in his mind that plaintiff intended to go into bankruptcy because that’s what he said they were going to do. Nevertheless, the bank did not fear that it would be treated by any bankruptcy court in any manner other than a secured creditor. Upon the advice of counsel, the bank felt it was to its advantage to marshall all plaintiff’s assets covered in the security agreement despite plaintiff’s objections. Plaintiff did not go into bankruptcy.
Even though the bank had extended payment of plaintiff’s note to April 1,1976, and waived any default, the bank, on March 9, 1976, filed a petition against plaintiff and requested an order to show cause, in which petition the loan officer swore that “all such notes evidencing such indebtedness are in default.” Based upon these facts, plaintiff was not in default. A genuine issue of material fact exists (1) whether the bank deemed itself insecure and (2) whether under these circumstances a reasonable person would accelerate the maturity of plaintiff’s promissory note and take the action it did.
Plaintiff’s affidavit and testimony controverted the bank’s, and, in addition, according to plaintiff’s affidavit, plaintiff was in the process of securing financing from other sources at the time the bank seized his property. The bank refused to cooperate and mislead plaintiff by stating that plaintiff was ineligible for certain F.H.A. government financing when in fact plaintiff was eligible; that the bank knew plaintiff was not in default. Nevertheless, in a concerted effort to eliminate plaintiff from the farming business, the bank, in bad faith, caused plaintiff’s property to be seized and disposed of. Based upon these facts, a genuine issue of material fact exists on the good faith belief of the bank in taking the action it did.
Summary judgment should be reversed.