Ayares-Eisenberg Perrine Datsun, Inc. v. Sun Bank of Miami, AYARES-EISENBERG

• Decision Date: 21 August 1984
• Docket Number: AYARES-EISENBERG,No. 83-2321,83-2321
• Citation: 455 So.2d 525
• Parties: 39 UCC Rep.Serv. 360 PERRINE DATSUN, INC., Edward M. Eisenberg, and Howard A. Ayares, Appellants, v. SUN BANK OF MIAMI, a Florida banking corporation, Appellee.
• Court: Florida District Court of Appeals

Page 525

455 So.2d 525

39 UCC Rep.Serv. 360

AYARES-EISENBERG PERRINE DATSUN, INC., Edward M. Eisenberg, and Howard A. Ayares, Appellants, v. SUN BANK OF MIAMI, a Florida banking corporation, Appellee.

No. 83-2321.

District Court of Appeal of Florida Third District.

Aug. 21, 1984.

Rehearing Denied Sept. 28, 1984.

Kenneth J. Duckworth, Miami, for appellants.

Fowler, White, Burnett, Hurley, Banick & Strickroot and A. Rodger Traynor, Jr., Miami, for appellee.

Before SCHWARTZ, C.J., and BARKDULL and JORGENSON, JJ.

JORGENSON, Judge.

We reverse the final summary judgment under review and, because questions of material fact remain, remand this action to the trial court for further proceedings consistent with the views expressed herein.

Ayares-Eisenberg Perrine Datsun [Ayares-Eisenberg] borrowed $30,000 from Sun Bank of Miami [Sun Bank] with which to purchase a computer system which, through a security agreement, served as collateral for the loan. Howard Ayares and Edward Eisenberg, officers of Ayares-Eisenberg, agreed to act as guarantors of the loan. Ayares-Eisenberg fell behind in its payments and Sun Bank took peaceable possession of the computer system and notified Ayares-Eisenberg, the debtor, and Ayares and Eisenberg, the guarantor-debtors [collectively the appellants] that the computer system would be sold by private sale to satisfy the outstanding $21,000 balance of the note. After eight months Sun Bank brought an action directly on the overdue note, seeking the entire outstanding balance of $21,000, and one month later, ostensibly unable to find a buyer for the computer system, gave it to a non-profit entity, without further notice to the appellants. The appellants balked, seeking the fair market value of the computer as an offset, alleging lack of notice and questioning the commercial reasonableness of the disposition. Eleven months after repossessing the computer, three months after beginning an action directly on the note, two months after giving the computer away and three days after the denial of its motion to strike the appellants' request for an offset, Sun Bank told the appellants that if they wanted the computer back they could come get it. The trial court then granted Sun Bank's motion for a summary judgment.

Article 9, Part 5, of the Uniform Commercial Code, Default, §§ 679.501-.507, Fla.Stat. (1981), provides that "[w]hen a debtor is in default under a security agreement, a secured party has the rights and remedies provided in this part.... He may reduce his claim to judgment, foreclose or otherwise enforce the security interest by any available judicial procedure," § 679 501(1), Fla.Stat. (1981). Thus, a secured creditor may avail himself of the default remedies provided in Part 5 and proceed against the collateral, as Sun Bank did by taking possession of the computer system, or the secured creditor may ignore the collateral and sue directly on the overdue note. Part 5 further states, however, that "[t]he rights and remedies referred to in this subsection are cumulative," § 679.501(1), Fla.Stat. (1981). By electing one remedy a creditor is not thereby precluded from pursuing other available remedies.

Nevertheless, there is authority for the proposition that once a secured creditor has chosen a remedy he must pursue it to fruition and only when the chosen remedy proves unsuccessful may he attempt the satisfaction of his debt by another method. See J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code § 26-4 (1972), and the cases cited therein. We agree. The record reveals that eight months after taking possession of the collateral, but before the statutory provisions as to the disposition of the collateral had been fulfilled, Sun Bank began an action directly on the note. We hold that Article 9 does not give a secured creditor the authority to harass a debtor by pursuing contemporaneously two or more remedies, see J. White & R. Summers, and that Sun Bank's obviously premature action directly on the note was therefore precluded and may not be resumed until fulfillment of the statutory requirements with respect to the disposition of the collateral.

When Sun Bank began its initial attack, by taking possession of the collateral, section 679.504, Florida Statutes (1981), required, with certain exceptions not relevant here, compliance with the following provision: "reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor," § 679.504(3), Fla.Stat. (1981) (emphasis added). Section 679.504(3), Florida Statutes (1981), also requires that "every aspect of the disposition including the method, manner, time, place, and terms must be commercially reasonable." Sun Bank does not deny that it failed to give the requisite notice before disposing of the collateral, but a question of material fact remains as to whether the disposition was commercially reasonable.

It would be unnecessary to remand this action for further proceedings were we able to follow the majority rule in Florida that failure to give the notice required by section 679.504(3) precludes an action to recover the balance owed on a note after disposition of the collateral, see Barnett Bank of Tallahassee v. Campbell, 402 So.2d 12 (Fla.1st DCA 1981), review denied mem., 412 So.2d 463 (Fla.1982); Barnett v. Barnett Bank of Jacksonville, 345 So.2d 804 (Fla.1st DCA 1977); Washington v. First National Bank of Miami, 332 So.2d 644 (Fla.3d DCA 1976); Hepworth v. Orlando Bank & Trust Co., 323 So.2d 41 (Fla.4th DCA 1975); Turk v. St. Petersburg Bank & Trust Co., 281 So.2d 534 (Fla.2d DCA 1973). We find, however, that the legislature has provided other relief which will require a remand for further proceedings.

Section 679.507(1), Florida Statutes (1981) (originally enacted as Act of Jan. 1, 1967, ch. 65-254, § 1, I, pt. 1 1965 Fla. Laws 684, 936), provides that

[i]f it is established that the secured party is not proceeding in accordance with the provisions of this part disposition may be ordered or restrained on appropriate terms and conditions. If the disposition has occurred the debtor or any person entitled to notification or whose security interest has been made known to the secured party prior to the disposition has a right to recover from the secured party any loss caused by a failure to comply with the provisions of this part. [Emphasis added.]

In Bank of Oklahoma, N.A. v. Little Judy Industries, Inc., 387 So.2d 1002, 1005 (Fla.3d DCA 1980), this court, construing section 679.507(1), adopted the following language from Norton v. National Bank of Commerce of Pine Bluff, 240 Ark. 143, 149, 398 S.W.2d 538, 541 (1966):

We do not agree with [the] contention that the bank's failure to give ... notice of the intended sale completely discharged [the debtor's] obligation. For the most part the Code follows the theory formerly applicable to mortgages, by which the debtor was entitled to any surplus realized upon foreclosure and was liable for any deficiency. [See U.C.C. § 9-504(2) (codified at § 679 504(2), Fla.Stat. (1981)).] The Code also provides that if the secured party has disposed of the collateral in a manner not in accordance with the Code "any person entitled to notification ......