City Nat. Bank of Ft. Smith v. Unique Structures, Inc.

• Decision Date: 09 April 1991
• Docket Number: No. 89-2724,89-2724
• Parties: 14 UCC Rep.Serv.2d 682 CITY NATIONAL BANK OF FORT SMITH, Appellee, v. UNIQUE STRUCTURES, INC., Susie Arnall, and Henry O. Arnall, Jr., Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1308

929 F.2d 1308

14 UCC Rep.Serv.2d 682

CITY NATIONAL BANK OF FORT SMITH, Appellee, v. UNIQUE STRUCTURES, INC., Susie Arnall, and Henry O. Arnall Jr., Appellants.

No. 89-2724.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 13, 1990.

Decided April 9, 1991.

Rex M. Terry, Fort Smith, Ark., for appellants.

Michael K. Redd, Fort Smith, Ark., for appellee.

Before FAGG and BEAM, Circuit Judges, and ROY, ^* Senior District Judge.

BEAM, Circuit Judge.

The appellants, Susie Arnall and Henry O. Arnall, Jr., at the time of the events giving rise to this lawsuit, were in the business of selling mobile homes at retail in Poteau, Oklahoma. They incorporated their business as Unique Structures, Inc. The appellee, City National Bank of Fort Smith, Arkansas, under a dealer agreement with Unique, purchased some customer sales contracts. After many of these customers failed to make their monthly installments and after Unique and the Arnalls failed under their dealer agreement and personal guarantees to pay the balance due, City National filed this lawsuit. The bank sought a deficiency judgment on those loans for which the collateral had been repossessed and sold and the balance due on those loans for which the collateral had not been sold. Unique and the Arnalls now appeal the judgment of the district court in favor of City National. Jurisdiction is based upon diversity of citizenship.

Unique and the Arnalls argue (1) that whether notice of sale of collateral is reasonable is a question of fact for the jury under Arkansas law, (2) that the notices sent by City National did not meet the requirements of Arkansas law, (3) that there is insufficient evidence to support the jury's verdict, (4) that the jury's award was excessive, (5) that the district court erred in granting City National's motion for a directed verdict on their counterclaim for tortious interference with a contract, and (6) that the district court erred in granting attorney's fees to City National. We affirm.

I. BACKGROUND

In March 1987, Unique, as indicated, entered into a dealer agreement with City National. Under the terms of this contract, City National agreed to purchase Unique's consumer installment contracts for mobile homes, provided the mobile home purchasers were creditworthy and the installment contracts were otherwise acceptable to City National. According to the dealer agreement, the contracts were purchased by City National with recourse--that is, Unique remained liable to City National in the event a mobile home purchaser defaulted. In addition to Unique's dealer agreement with City National, the Arnalls each personally guaranteed the obligations of Unique so that if a purchaser of a mobile home defaulted on his or her installment contract the Arnalls would individually be responsible to City National for any balance due or any deficiency remaining upon the sale of the collateral (i.e., the mobile home).

Following a number of defaults by customers, City National, in September 1988, exercised its option under the dealer agreement to demand immediate payment for all contracts in default. The following month, after Unique and the Arnalls had failed to pay, City National declared the entire dealer agreement to be in default and filed this lawsuit. By the date of trial, in August 1989, fifty-eight customer loans, which had been purchased by City National pursuant to the dealer agreement, were in default. Some of the collateral for these fifty-eight loans had been repossessed and privately sold by City National. The remainder of the mobile homes had either not yet been repossessed by the time of trial or were repossessed but not yet sold.

Unique and the Arnalls argued at trial, among other points, that the notices of sale of the collateral failed to meet the requirements of Arkansas law and that the bank's disposition of the collateral was not commercially reasonable. The Arnalls argued further that City National had, prior to the lawsuit, released them from personal liability. In addition, Unique and the Arnalls filed counterclaims against City National, including an allegation that the bank had tortiously interfered with a contractual relationship between Unique and its employee, Stephen Post.

The district court granted City National's motion for a directed verdict on all the counterclaims. The district court also ruled as a matter of law that the notices for private sale of the collateral provided reasonable notification. The jury, in turn, awarded $710,000 in damages to City National, to be paid jointly and severally by Unique and the Arnalls. Following trial, the district court awarded City National $50,499 in attorney's fees.

II. DISCUSSION

A. Reasonableness of Notice as a Matter for Directed Verdict

Some of the mobile homes repossessed by City National, as noted above, were sold privately prior to trial. Arkansas Code section 4-9-504(3), an enactment of a provision of the Uniform Commercial Code, requires that a secured party send "reasonable notification" to a debtor "of the time after which any private sale [of collateral] ... is to be made." ¹ Ark.Code Ann. Sec. 4-9-504(3) (1987). Notices of the sale of this collateral were sent by City National to Unique and the Arnalls. The district court, upon City National's motion for a directed verdict, ruled that these notices were reasonable as a matter of law. Unique and the Arnalls argue, however, that under Arkansas law whether the notices were reasonable or not is always a question of fact for the jury. They contend that the Arkansas Supreme Court established this rule in Baber v. Williams Ford Co., 239 Ark. 1054, 396 S.W.2d 302 (1965). We disagree.

Baber involved an action by an automobile dealer (Williams) to recover a deficiency against a buyer of an automobile (Baber) on a contract for sale. Testimony at trial revealed that following the sale of the automobile to Baber, Williams transferred the note and contract for sale to the Ford Motor Credit Company. After Baber failed to make payments, the automobile was repossessed by the credit company and returned to Williams, with a demand that Williams repay the amount it had received on the transfer of the note and contract for sale. At this point--before Williams itself had the legal right to sell the car--Williams sent a letter to Baber providing him with a seven-day notice of private sale of the collateral. In reversing the trial court's decision directing a verdict for the dealer, the Arkansas Supreme Court stated:

We think, under the situation here existing, the question of whether the letter ... was reasonable notice was a question for the jury to decide. The letter ... shows that Williams had not then repaid the Ford Motor Credit Company, so was not in full possession of the car with right to sell. Not until Williams reacquired the paper from Ford, would Williams have had the right to sell the car.

Baber, 396 S.W.2d at 304 (emphasis added). Baber, therefore, did present an instance in which the reasonableness of the notice was a question of fact for the jury. But Baber did not hold that the reasonableness of notice is always a question for the jury. We believe that the Arkansas Supreme Court decided the case as it did because the secured party (Williams) did not have the right to sell the collateral at the time of notice--a peculiar fact which does not exist in the present case. ²

B. Sufficiency of the Notices

Unique and the Arnalls raise at least two objections with respect to the merits of the district court's ruling that the bank provided reasonable notification of sale as a matter of law. They argue that the notices did not contain all of the information required by Arkansas case law, and that in some instances notice either was not sent or the sale occurred before the date provided on the notice as the time after which a sale would occur. We again disagree with appellants.

Our standard of review for either the grant or denial of a motion for directed verdict is the same standard that governs the district court in its consideration of the motion. Accordingly, we must

(1) resolve direct factual conflicts in favor of the nonmovant, (2) assume as true all facts supporting the nonmovant which the evidence tended to prove, (3) give the nonmovant the benefit of all reasonable inferences, and (4) deny the motion if the evidence so viewed would allow reasonable jurors to differ as to the conclusions that could be drawn.

Dace v. ACF Indus., 722 F.2d 374, 375 (8th Cir.1983). "The trial court has not erred [in denying a motion] if there is substantial evidence--more than a mere scintilla of evidence--to support a verdict in favor of the party opposing such a motion." Jackson v. Prudential Ins. Co. of America, 736 F.2d 450, 453 (8th Cir.1984). ³

First, as indicated, Unique and the Arnalls argue that the notices sent by City National did not contain all of the information required by Arkansas law. More specifically, they contend that the Arkansas Supreme Court, in Brown v. Ford, 280 Ark. 261, 658 S.W.2d 355 (1983), established that a notice for private sale must, at a minimum, (1) advise the debtor that the collateral will be sold any time after ten days, (2) advise the debtor of the location of the collateral, and (3) advise the debtor that a deficiency will be claimed if the collateral sells for less than the amount of the indebtedness. Brief for Appellants at 27-28. According to Unique and the Arnalls, the notices sent by City National were not sufficient as a matter of law because the latter two points were not included in the notices.

We are convinced, however, that the notices sent by City National are sufficient under Arkansas law. Arkansas Code section 4-9-504(3) only requires a secured party to send "reasonable notification" to the debtor "of the time after which any private sale [of collateral] ... is to be made." Ark.Code Ann. Sec. 4-9-504(3) (1987). "Reasonable notification" is not defined...