Camden Nat. Bank v. St. Clair

Decision Date10 September 1973
Citation13 U.C.C.Rep. Serv. 199,309 A.2d 329
Parties13 UCC Rep.Serv. 199 CAMDEN NATIONAL BANK v. Kathryn ST. CLAIR.
CourtMaine Supreme Court

Harmon & Jones by Rendle A. Jones, Camden, for plaintiff.

Domenic P. Cuccinello, Thomaston, for defendant.

Before DUFRESNE, C. J., and WEATHERBEE, POMEROY, WERNICK and ARCHIBALD, JJ.

WERNICK, Justice.

This is an appeal from a judgment for defendant, Kathryn St. Clair, entered in the Superior Court (Knox County) sustaining a judgment for defendant entered by a District Court (District Six, Division of Knox).

The District Court had made the following findings of fact which, because evidentially supported, were correctly upheld by the Superior Court.

On March 2, 1970, one Richard Arlen St. Clair, together with his mother, Kathryn St. Clair, acting as an accommodation maker, executed a promissory note in which they jointly and severally promised to pay to the plaintiff, Camden National Bank, the sum of $3,330.72 in monthly installments according to a specified schedule of payments. The note was given for a loan from plaintiff bank which provided funds for the purchase of a 1970 Chevrolet Nova automobile. The automobile was given as collateral security for the note.

After a few monthly payments had been made, there was a default in the required payments. On March 1, 1971 plaintiff bank seized the automobile and subsequently sold it at private sale in June of 1971. The amount obtained from the sale was $965.84 less than the amount remaining due on the note.

Plaintiff instituted the present action against defendant, as accommodation maker of the note, to recover the deficiency. The evidence adduced at trial was not sufficient to establish that plaintiff bank had complied with the notification requirements of the Uniform Commercial Code as embodied in 11 M.R.S.A § 9-504 (3). (The provisions of the Uniform Commercial Code as contained in Title 11 of the Maine Statutes will hereinafter be referred to as 'U.C.C.'). On this basis, plaintiff was denied recovery for the deficiency.

Prior to enactment in Maine of the Uniform Commercial Code, the decision of C. I. T. Corporation v. Haynes, 161 Me. 353, 212 A.2d 436 (1965) had settled that compliance with statutory requirements as to notification to the debtor (as then prescribed by R.S.1954, Chapter 119, § 9) was a condition precedent to a conditional sale vendor's right to recover a deficiency remaining after the conditional sale vendor had purported to extinguish the conditional sale purchaser's equity of redemption by disposition of the collateral security through exercise of a power of sale reserved in the conditional sale contract. 1 Since a condition precedent to a recovery by a plaintiff is generally a matter as to which plaintiff bears the ultimate burden of proof, it followed from C. I. T. Corporation v. Haynes, supra, that a secured creditor seeking to recover a deficiency judgment must sustain the ultimate burden of proof to establish compliance with requirements for notification of disposition of the collateral security.

The decisions by the District Court and the Superior Court in the case at bar appear to have applied this doctrine of C. I. T. Corporation v. Haynes, supra, as continuingly operative under the U.C.C. in specific relationship to the notification requirements of U.C.C. § 9-504(3); and because of the finding that plaintiff bank had failed to sustain the ultimate burden of proving compliance with the notification requirements for disposition of the collateral, plaintiff was denied recovery.

The correctness of this rationale is the sole issue raised by the appeal of plaintiff bank.

Plaintiff maintains that the enactment of the Uniform Commercial Code has overridden the doctrine of C. I. T. Corporation v. Haynes. Plaintiff seeks to support its position by the following analysis of the U.C.C.

In § 9-504 the U.C.C. undertakes to deal explicitly with the secured party's right to dispose of collateral after default and the effect of such disposition. In § 9-504(2)-as to an underlying transaction which, as here, is not 'a sale of accounts, contract rights or chattel paper'-it provides that

'. . . the secured party must account to the debtor for any surplus, and unless otherwise agreed, the debtor is liable for any deficiency.'

Coupled with this provision is the specification in § 9-507(1) concerning the 'secured party's liability for failure to comply' with various statutory requirements (including those as to notification to the debtor) that

'(i)f the disposition has occurred, the debtor or any person entitled to notification (and who has not been given one) . . . has a right to recover from the secured party any loss caused by a failure . . . (of such notification).'

The total impact of these express U.C.C. provisions, says, plaintiff, is a manifest design that non-compliance with the § 9-504(3) (3) requirements for notification as to disposition of collaterial is no longer a condition precedent to the right of the secured creditor to recover the deficiency remaining due after disposition of the collateral. Insofar as § 9-507(1) has afforded to the debtor a cause of action to recover such loss as the debtor can prove to have been caused by the failure of notification, the U.C.C. must be taken to have abandoned the absolutistic prophylatic-type protective mechanism constituted by the 'condition precedent to the recovery of any deficiency' approach of C. I. T. Corporation v. Haynes. It must be taken, rather, to have concentrated on whether actual detriment has been caused in a given situation by the secured creditor's failure to comply with requirements as to notification of disposition of collateral. Indeed, says plaintiff, the U.C.C. has gone so far in this latter direction that it has provided even against the eventuality that debtors may find it difficult, especially as to consumer goods, to prove actual damages attributable to the failure of notification; as to consumer goods, the U.C.C. in § 9-507(1) prescribes a formula by which the debtor will recover damages 'in any event' for the secured creditor' non-compliance with the notification requirements of U.C.C. § 9-504(3).

It is apparent that the essence of plaintiff's argument is the foundational claim that the cause of action established by U.C.C. § 9-507(1) is designed to be the exclusive protective mechanism afforded to the debtor for the failure of the secured creditor to meet statutory directives concerning notification of disposition of collateral.

We disagree with plaintiff's position and, therefore, deny its appeal. We decide that the doctrine C. I. T. Corporation v. Haynes remains the presently operative law of Maine-as consistent with the enactment in Maine of the U.C.C. and as a complement to it.

The present issue has been considered by many courts and has resulted in a variety of judicial attitudes. Conclusions differing from the one which we advance in this opinion may be found in cases such as: Atlas Credit Corporation v. Dolbow, 193 Pa.Super. 649, 165 A.2d 704 (1960); Banker v. Horn, 245 Ark. 315, 432 S.W.2d 21 (1968); Weaver v. O'Meara Motor Company, Alaska, 452 P.2d 87 (1969); Conti Causeway Ford v. Jarossy, 114 N.J.Super. 382, 276 A.2d 402 (1971); The Morris Plan Company of Bettendorf v. Johnson, Iowa, 271 N.E.2d 404 (1971).

It will be of little benefit that we here engage in extensive evaluation of all the cases. We deem it sufficient for present purposes to state that we...

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