First City Bank-Farmers Branch, Texas v. Guex
| Citation | 677 S.W.2d 25 |
| Decision Date | 03 October 1984 |
| Docket Number | BANK--FARMERS,No. C-2613,C-2613 |
| Parties | 39 UCC Rep.Serv. 712 FIRST CITYBRANCH, TEXAS, Petitioner, v. Andre GUEX et al., Respondents. |
| Court | Supreme Court of Texas |
W.A. Pritchard, Dallas, for petitioner.
Glassman & Solis, Alan M. Glassman, Dallas, for respondents.
Three issues are presented in this Uniform Commercial Code case involving the rights of a debtor in default when personal property has been given as collateral to secure the loan. First, what constitutes "disposition" of the personal property by the secured party? Second, if the noteholder has disposed of the collateral in violation of UCC provisions, can the debtor recover damages for his actual losses in addition to monetary penalties provided for by statute? Third, are attorney's fees recoverable under the theory that they are part of the "loss" that the debtor has sustained when there has been a wrongful disposing of his collateral?
Andre Guex and Jack Marotte borrowed $5,000 from First City Bank--Farmers Branch and used the money to purchase a 26-foot sailboat and trailer. The bank retained a security interest in the boat and trailer. Initially, Marotte made the payments on the note, but subsequently quit. Thereafter, Guex started making the payments and obtained a written agreement from Marotte that after all payments on the note had been made to the bank and Marotte had been reimbursed for his interest, Guex would become the sole owner of the boat and trailer. After making several note payments, Guex likewise encountered financial difficulty, and failed to make two payments. The bank took possession of the boat and trailer. Marotte, fearful that he would lose his interest in the collateral, worked out an arrangement with the bank whereby he would pay the past due installments, late charges and repossession fee, and the bank would return the boat and trailer to him. For some reason, however, Marotte withdrew from the negotiations, and his close friend, Mary Ann Kaprielian, paid the bank the past due installments and other charges by a check drawn on her account. She also signed a promissory note for the unpaid balance of the Guex/Marotte debt. The bank released the collateral to Kaprielian. Two days thereafter, the bank advised Kaprielian that she could buy the boat and trailer by paying off the outstanding balance of the loan. The bank even prepared for Kaprielian an Application for Certificate of Title, which she signed and left with the bank to mail to Austin. At the same time, Guex attempted to pay off the loan, but was told by the bank that the boat and trailer had already been sold for $1,500. In any event, no sale to Kaprielian was ever consummated; the bank subsequently reversed itself and accepted Guex's cashier's check; and, the bank returned to Kaprielian her executed promissory note and security agreement, having marked "void" across those instruments. The bank advised Guex that he could get his boat from Kaprielian. However, it was not until some fourteen months later that Guex recovered the boat, which was by then in a damaged condition.
After a jury trial, judgment was rendered for Guex against the bank in the amount of $1,877.65 (ten percent of the principal amount of the original note plus the entire finance charges of $1,377.65, as provided for by statutory formula), and for attorney's fees totaling $4,200. The court of appeals affirmed the judgment of the trial court. 659 S.W.2d 734. We affirm the judgment of the court of appeals.
The bank contends that no disposition of the boat and trailer occurred within the meaning of Tex.Bus. & Com.Code Ann. § 9.504, because there was no sale or transfer of title of the boat and trailer to Kaprielian. Alternatively, the bank urges there was no evidence to support the finding of the jury that a disposition to Kaprielian had occurred. The bank further maintains there can be no award of statutory damages in the absence of harm to the debtor. The bank also argues that it was error to award Guex attorney's fees because they are not authorized by the Uniform Commercial Code; that attorney's fees do not constitute "any loss" under Tex.Bus. & Com.Code § 9.507(a); and, that Guex was not entitled to attorney's fees under Tex.Rev.Civ.Stat.Ann. art. 2226. Finally, the bank insists that even if attorney's fees do constitute "any loss," they cannot be recovered in addition to statutory damages.
Tex.Bus. & Com.Code § 9.504 provides "[a] secured party after default may sell, lease or otherwise dispose of any or all of the collateral" by "public or private proceedings" and unless the collateral is perishable or threatens to decline speedily in value, "reasonable notification of the time and place of any public sale or 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, ..." It is undisputed in this case that the bank gave no notice to Guex. Nor does the bank dispute that it released the boat and trailer after Kaprielian had signed a promissory note and security agreement covering the unpaid balance on the Guex/Marotte note and after Kaprielian had paid the late and repossession charges to the bank. The bank argues that disposition means sale and transfer of title, citing Tex.Bus. & Com.Code § 9.504(d), which provides:
When collateral is disposed of by a secured party after default, the disposition transfers to a purchaser for value all of the debtor's rights therein, discharges the security interest under which it is made and and [sic] security interest or lien subordinate thereto. The purchaser takes free of all such rights and interests even though the secured party fails to comply with the requirements of this subchapter or of any judicial proceedings (1) in the case of a public sale, if the purchaser has no knowledge of any defects in the sale and if he does not buy in collusion with the secured party, other bidders or the person conducting the sale; or (2) in any other case, if the purchaser acts in good faith.
This preceding paragraph is clearly a statement of the rights of the subsequent purchaser of the repossessed collateral. We fail to see how it supports the bank's argument in respect to disposition of the collateral. Although not speaking directly to what constitutes a "disposition," this court, in Tanenbaum v. Economics Laboratory, Inc., 628 S.W.2d 769, 771 (Tex.1982), held that the destruction of the collateral by the creditor was a disposition entitling the debtor to notice. Moreover, the very language of Tex.Bus. & Com.Code § 9.504(c) states that disposition of the collateral may be "by public or private proceedings" and "at any time and place and on any terms." The transactions between the bank and Kaprielian constituted proceedings on any terms. Kaprielian took possession of the boat. The bank took her promissory note and received her check for past-due installments, repossession charges, and late charges. Whether title to the boat and trailer were vested in Kaprielian is immaterial. A disposition occurred. Our conclusion is again reinforced by the language of the statute itself. Had the legislature intended the meaning urged by the bank, they would have omitted "or otherwise dispose" after "sell" and "lease."
Turning to the next point argued by the bank, that no evidence existed to...
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Table of cases
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