Chittenden Trust Co. v. Maryanski, 242-79

• Decision Date: 08 April 1980
• Docket Number: No. 242-79,242-79
• Citation: 138 Vt. 240,415 A.2d 206
• Parties: , 28 UCC Rep.Serv. 1237 CHITTENDEN TRUST COMPANY v. Janet MARYANSKI a/k/a Janet Cheshire.
• Court: Vermont Supreme Court

Page 206

415 A.2d 206

138 Vt. 240, 28 UCC Rep.Serv. 1237

CHITTENDEN TRUST COMPANY v. Janet MARYANSKI a/k/a Janet Cheshire.

No. 242-79.

Supreme Court of Vermont.

April 8, 1980.

Blum Associates, Inc., Burlington, for plaintiff.

Stephen S. Blodgett and Denise R. Johnson of Blodgett & McCarren, Burlington, for defendant.

Before BARNEY, C. J., DALEY, BILLINGS and HILL, JJ., and COOK, District Judge, Specially Assigned.

DALEY, Justice.

This is an appeal from a deficiency judgment in favor of the plaintiff bank, as secured party. Plaintiff pleaded execution of two promissory notes, totalling $63,000, and an unpaid balance of $27,518 plus interest. Defendant admitted execution of the notes, but denied the existence of the unpaid balance. Under the heading "Affirmative Defenses," defendant pleaded, inter alia, that plaintiff failed to sell the collateral in a commercially reasonable manner, and that but for this failure the indebtedness would have been satisfied in full or substantially reduced.

The case was tried on the merits to the court. At the close of plaintiff's evidence, defendant moved to dismiss, V.R.C.P. 41(b)(2), and gave, as one ground for the motion, that plaintiff failed to meet its burden of showing a commercially reasonable disposition of the collateral. The court took the motion under advisement, and impliedly denied it when it issued its "Notice of Decision" in plaintiff's favor. Neither party requested findings and conclusions, and therefore judgment was entered but no findings were made. V.R.C.P. 52(a).

Defendant appeals, stating the issue as whether the plaintiff, as secured party, had the burden to prove that it disposed of the collateral in a commercially reasonable manner. 9A V.S.A. § 9-504(3). In her reply brief, defendant clarifies her position by stating that the issue is two-fold: (1) where the burden lies, and (2) whether plaintiff has introduced sufficient evidence to support a judgment in its favor. In response, by way of motion to dismiss and in its brief on the merits, plaintiff claims that by failing to request findings and conclusions defendant has limited herself to the issue of whether the judgment, based on the evidence, is clearly erroneous, and that by failing to raise or brief this issue, defendant has waived it.

Findings and conclusions are desirable because they are helpful for appellate review, Sykas v. Kearns, 135 Vt. 610, 612-13, 383 A.2d 621, 623 (1978), but they "are not necessary for purposes of review," V.R.C.P. 52(a). "Even in the absence of findings, we examine the record to see whether a given result is supportable, upon the assumption that the trial court had the evidence in mind." Quazzo v. Quazzo, 136 Vt. 107, 113, 386 A.2d 638, 642 (1978); accord, Moulton v. Moulton, 134 Vt. 125, 127, 352 A.2d 680, 681 (1976). Under this standard, we assume that the trial court made all findings necessary to support the result, but these presumed findings must not be clearly erroneous. Wilson v. Chadbourne, 395 A.2d 445, 447 (Me.1978). Furthermore, the result must be legally supportable, because the absence of findings in no way prevents this Court from addressing the appropriate questions of law. See Bolduc v. Coffin, 133 Vt. 67, 69, 329 A.2d 655, 656 (1974); Stevens v. Cross Abbott Co., 129 Vt. 538, 543, 283 A.2d 249, 252 (1971). Accordingly, plaintiff's motion to dismiss is denied, and we proceed to the merits of the case.

A secured party's disposition of collateral is governed principally by Part 5 of Article 9 of Vermont's Uniform Commercial Code, found in Title 9A. Section 9-504(3) of the Code provides, in part:

Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable.

(Emphasis added). The section then goes on to prescribe the requirements for reasonable notification to the debtor and other secured parties, and to specify the conditions under which the secured party may buy at the sale. Id.

Section 9 504(3) places a positive duty on the secured party to act, with respect to every aspect of disposition, in a commercially reasonable manner. Vic Hansen & Sons, Inc. v. Crowley, 57 Wis.2d 106, 113, 203 N.W.2d 728, 732, 59 A.L.R.3d 360, 365 (1973). Although the specifics of this duty "cannot be meaningfully described except in terms of particular fact situations," II G. Gilmore, Security Interests in Personal Property § 44.5, at 1234-35 (1965), in general it means that "(t)he secured party is required to utilize his best efforts to sell the collateral for the best price and to have a reasonable regard for the debtor's interest." First National Bank & Trust Co. v. Holston, 559 P.2d 440, 444 (Okl.1976); accord, Vic Hansen & Sons, Inc. v. Crowley, supra, 57 Wis.2d at 111-12, 203 N.W.2d at 731, 59 A.L.R.3d at 364; II G. Gilmore, supra, § 44.5, at 1234; J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code § 26-9, at 981-82, § 26-11, at 987 (1972). Of course, the fact that a better price could have been obtained does not necessarily mean that the sale was not commercially reasonable, § 9 507(2); First National Bank & Trust Co. v. Holston, supra, 559 P.2d at 444-45, but the secured party must make a good faith effort to maximize the value of the collateral, Central Budget Corp. v. Garrett, 48 App.Div.2d 825, 825, 368 N.Y.S.2d 268, 270 (1975); see § 1 203.

The Code fails to specify either the pleading and proof requirements or the remedy for breach of the commercial reasonableness duty. Therefore, we turn to "the principles of law and equity" to resolve these problems. § 1 103.

At least with respect to actions for deficiency judgments, the majority rule appears to be that the secured party has the burden of pleading and proving that any given disposition of collateral was commercially reasonable, and preceded by reasonable notice. See, e. g., Herman Ford-Mercury, Inc. v. Betts, 251 N.W.2d 492, 496 (Iowa 1977); First National Bank v. Rose, 188 Neb. 362, 364, 196 N.W.2d 507, 509-10 (1972); Clark Leasing Corp. v. White Sands Forest Products, Inc., 87 N.M. 451, 454, 535 P.2d 1077, 1080 (1975); First National Bank & Trust Co. v. Holston, supra, 559 P.2d at 444; Vic Hansen & Sons, Inc. v. Crowley, supra, 57 Wis.2d at 113, 203 N.W.2d at 732, 59 A.L.R.3d at 365; Annot., 59 A.L.R.3d 369 (1974). This rule seems sensible to us. As the New Mexico Supreme Court has pointed out:

It is scarcely a revelation to say that a plaintiff normally has the burden of proving his case. In light of the specific requirement of § 9 504(3) as to commercial reasonableness, it seems clear that a creditor, when suing for a deficiency, should allege and prove that disposition of the collateral was conducted in compliance with that statute.

Clark Leasing Corp. v. White Sands Forest Products, Inc., supra. Since the duty falls on the secured party, it is reasonable that the secured party should be charged with proving compliance with that duty. Vic Hansen & Sons, Inc. v. Crowley, supra. This is especially true because the secured party conducts the transactions that dispose of the collateral, and therefore the facts relevant to demonstrating commercial reasonableness are peculiarly available to him. See Condit v. Condit, 138 Vt. ---, ---, 413 A.2d 803, 804 (1980); 9 Wigmore on Evidence § 2486 (3d ed. 1940).

To support the judgment in favor of the plaintiff, the trial court must have found that plaintiff proved specific facts which, when viewed in totality, constituted a commercially reasonable disposition of the collateral. Upon careful review of the record, however, we can find no possible construction of the evidence that would support the minimal findings necessary to reach such a conclusion. Excluding the effect of modifying evidence, and taking the evidence in the light most favorable to the prevailing party, Green Mountain Marble Co. v. State Highway Board, 130 Vt. 455, 457, 296 A.2d 198, 200 (1972), the record is as follows. Defendant signed two notes, totalling $63,000 plus interest, which were secured by a...