Commerce Bank of St. Louis, N.A. v. Dooling

• Decision Date: 24 May 1994
• Docket Number: No. 62705,62705
• Citation: Commerce Bank of St. Louis, N.A. v. Dooling, 875 S.W.2d 943 (Mo. App. 1994)
• Parties: 23 UCC Rep.Serv.2d 649 COMMERCE BANK OF ST. LOUIS, N.A., Respondent, v. Margaret B. DOOLING, Appellant.
• Court: Missouri Court of Appeals

Page 943

875 S.W.2d 943

23 UCC Rep.Serv.2d 649

COMMERCE BANK OF ST. LOUIS, N.A., Respondent, v. Margaret B. DOOLING, Appellant.

No. 62705.

Missouri Court of Appeals,

Eastern District,

Division Two.

May 24, 1994.

Stephen G. Bell, St. Louis, for appellant.

Cyril J. Clancy, St. Louis, for respondent.

CRAHAN, Judge.

Defendant Margaret B. Dooling ("Borrower") appeals the judgment entered against her in a court-tried case brought by Commerce Bank of St. Louis, N.A. ("Bank") to recover a deficiency judgment, costs and attorney's fees following repossession and sale of an automobile. The dispositive issue on appeal is whether Bank satisfied its burden of proof that it provided Borrower with reasonable notice of its sale of the automobile, which is a prerequisite to Bank's right to recover a deficiency judgment after the sale pursuant to § 400.9-504(3) RSMo Cum Supp.1993. We reverse.

In April, 1989, Borrower co-signed a promissory note to enable her nephew to finance the purchase of a new automobile through an automobile retailer. The note was later assigned to Bank. In applying for the loan, Borrower completed a one page credit application. In the application, Borrower provided her home telephone number and her then current home address of 214 South Clay, Kirkwood, Missouri. ¹ She also listed the name, address and telephone number of her local employer.

In August of 1989, Borrower moved from her home at 214 South Clay to a new residence at 8989 Big Bend in Webster Groves, Missouri. ² Some time thereafter, Bank telephoned Borrower at work to inquire about a late payment. At that time Borrower informed Bank of her new home telephone number, which was entered on the credit application. The record does not disclose whether Borrower also advised Bank of her new address. No new address was noted on the credit application.

Some months later, Borrower's nephew defaulted. In November, 1990, Bank repossessed the automobile. Bank then made two unsuccessful attempts to mail a "Notice of Repossession and Intent to Sell or Dispose of Collateral" to Borrower. The notice stated that Bank had repossessed the car and that it would be sold at a private sale after 20 days from the date of the letter unless the automobile was redeemed by payment of the balance due plus repossession costs.

Bank first mailed the notice by both regular and certified mail to Borrower's former address of 214 South Clay, as listed on the credit application. Borrower did not receive either notice and both were returned to Bank bearing a postal label which incorrectly indicated a forwarding address of 8789 Big Bend. ³ Bank then sent a second notice by both regular and certified mail addressed to 8789 Big Bend. Borrower did not receive either notice and these too were returned to Bank, this time bearing a "no such address" stamp. Bank made no further attempts to notify Borrower of the sale.

In December, 1990, Bank sold the automobile at a private auction. ⁴ Following the sale, Bank mailed a "Notice of Sale of Collateral and Deficiency Due" to Borrower using the 8789 Big Bend address. Borrower did not receive this notice and it was returned to Bank bearing a "no such address" stamp.

In May, 1991, Bank brought this action to recover the deficiency by personally serving Borrower with the summons and complaint at her place of employment. The case was tried without a jury and resulted in a judgment in favor of Bank for $8,349.00, representing the amount of the deficiency, costs and attorney's fees.

Appellate review of a court-tried case is governed by the principles articulated in Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976). The judgment of the trial court will be upheld unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law. Id. at 32. The reviewing court accepts evidence and inferences favorable to the prevailing party and disregards all contrary evidence. Behen v. Elliott, 791 S.W.2d 475, 476 (Mo.App.1990).

The right to a deficiency judgment accrues only when there is strict compliance with the statutory requirements. Gateway Aviation, Inc. v. Cessna Aircraft Co., 577 S.W.2d 860, 863 (Mo.App.1978). The dispositive issue on appeal is whether Bank's evidence establishes that the disposition of the collateral here was commercially reasonable, or more specifically, whether Bank complied with the applicable notification provisions of § 400.9-504(3) RSMo Cum.Supp.1993. That section provides in pertinent part that "every aspect of the disposition ... must be commercially reasonable" and that "reasonable notification of the time after which any private sale or other intended disposition [of the collateral] is to be made shall be sent by the secured party to the debtor."

Section 400.1-201(26) RSMo 1986 defines notification as follows:

A person "notifies" or "gives" a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it.

The purpose of statutory notice is to apprise the debtor of the details of a sale so that the debtor may take whatever action he deems necessary to protect his interest. Cherry Manor, Inc. v. American Health Care, Inc., 797 S.W.2d 817, 821 (Mo.App.1990). A secured party's failure to give reasonable notification of the sale of collateral as mandated by § 400.9-504(3) precludes that party from obtaining a deficiency judgment. Id. at 820. The party seeking the deficiency judgment bears the burden of proving compliance with the § 400.9-504(3) requirements, including the burden of proving the sufficiency of the notice. Id. at 821. Any doubts as to whether there has been compliance with the provisions of § 400.9-504(3) are to be resolved in favor of the debtor. Id.

Bank correctly notes that the code requires only that a secured party send notice of a sale and not that the debtor actually receive it. See Lankheit v. Estate of Scherer, 811 S.W.2d 853, 858 n. 2 (Mo.App.1991). Bank further argues that, notwithstanding the additional information about Borrower contained in its records, it satisfied the notice requirement of § 400.9-504(3) by simply sending the notice to Borrower's last known residential address. As authority, Bank relies on § 400.1-201(38) RSMo 1986, defining "send:"

"Send" in connection with any writing or notice means to deposit in the mail ... properly addressed and in the case of an instrument to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances.

Our research has not disclosed any Missouri cases addressing this precise issue. However, other jurisdictions with comparable statutory provisions have held that mailing notice to the address specified in the instrument does not necessarily satisfy the requirement of "reasonable notification" when the creditor learns prior to the sale that the debtor has not received actual notice. Mallicoat v. Volunteer Finance & Loan Corp., 57 Tenn.App. 106, 415 S.W.2d 347, 350-51 (1966); In re Carter, 511 F.2d 1203, 1204-05 (9th Cir.1975). Under such circumstances, the statutory admonition that every aspect of the sale must be "commercially reasonable" and the overall obligation of good faith require the creditor to make use of other information at its disposal in an effort to provide actual notice. See Mallicoat, 415 S.W.2d at 350-51; Carter, 511 F.2d at 1204-05.

The facts of Mallicoat are particularly instructive. In Mallicoat, the creditor sent the debtor notice by registered letter which was returned unclaimed prior to the sale. The creditor made no further efforts to provide actual...