Franklin State Bank v. Parker

Decision Date10 October 1975
Citation346 A.2d 632,136 N.J.Super. 476
Parties, 18 UCC Rep.Serv. 266 FRANKLIN STATE BANK, a Banking Corporation of the State of New Jersey, Plaintiff, v. Karl PARKER and Trudy Parker, his wife, Defendants.
CourtNew Jersey District Court

Daniel S. Bernstein, Plainfield, for plaintiff (Sachar, Bernstein & Rothberg, Plainfield, attorneys).

Karl Parker pro se.

COLEMAN, J.C.C. (Temporarily Assigned).

This is an action by the secured creditor for an alleged deficiency due after the sale of a repossessed automobile it had previously sold. Defendant, appearing Pro se, raised three defenses (1) improper notice of sale; (2) the sale of the automobile was not in a commercially reasonable manner, and (3) fraud.

The facts are as follows:

In April 1974 plaintiff repossessed the automobile for delinquent payment. After repossession defendant negotiated with plaintiff a new payment schedule and then defendant regained possession. In June 1974 defendant became newly delinquent in payments, and on June 20, 1974 plaintiff repossessed the automobile.

On June 26, 1974 defendant received notice that a private sale of the automobile would occur on June 29, 1974 at a designated time and place. On said date Carteret Auto Parts, Inc. was the only party that appeared at the sale and submitted a bid of $50. Plaintiff, feeling that this bid was low, held the automobile over three months, until October 1, 1974, allegedly waiting for additional bids. Not having received further bids, plaintiff sold the automobile to Carteret Auto Parts, Inc. for $50.

It further appears that when the automobile was offered for sale on June 29, 1974 it was not mechanically operational because defendant and his son were giving the automobile a tune-up, and the spark plugs, points and condensor had been removed preparatory to installation of new ones. The air filter also had been removed and placed on the floor of the garage near the automobile. This was the condition of the automobile when it was towed from defendant's garage.

At no time before or after the repossession did plaintiff make any attempts to determine, by inspection or otherwise, why the automobile was not mechanically operational. The most routine observation under the hood of the automobile by one slightly familiar with the trade would have detected the missing parts.

After plaintiff repossessed the automobile on June 20, 1974, defendant inquired of plaintiff if he could buy the automobile. The essence of the plaintiff's response was that defendant could not buy the automobile at the private sale. While this response effectively precluded the defendant from protecting his financial interest in the chattel, the Court is not persuaded that there was fraud involved.


We turn next to defendant's contention that the plaintiff failed to give reasonable notification of sale thereby violating the commercial reasonableness limitation of N.J.S.A. 12A:9--504(3). Though reasonable notice is not defined under the Uniform Commercial Code, official comments suggests that 'at a minimum it must be sent in such time that persons entitled to receive it will have sufficient time to take appropriate steps to protect their interests by taking part in the sale or other disposition if they so desire.'

Furthermore, the court recognizes that the Uniform Commercial Code provision for notice to debtor of proposed disposition of property should be construed and applied in a manner to effectuate the salutary purpose of protecting debtor.

It is axiomatic that 'process which is a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt.' Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950).

More specifically, in the context of repossessed collateral, the purpose of notice is to enable the debtor to protect his interest in the property by paying the debt, finding a buyer or being present at the sale to bid on the property or have others do so, to the end that it not be sacrificed by a sale at less than its true value. Mallicoat v. Volunteer Finance and Loan Corp., 57 Tenn.App. 106, 415 S.W.2d 347 (App.Ct.1966).

In the case Sub judice, the defendant debtor was given only three days notice of the impending private sale of the automobile, which is hardly sufficient to make the necessary arrangements for protection of his financial interest in the collateral. In Baber v. Williams Ford Co., 239 Ark. 1054, 396 S.W.2d 302 (Sup.Ct.1965), the court found seven days notice presented a jury question on the ultimate issue of commercial reasonableness. Accordingly, in light of the stated purpose of N.J.S.A. 12A:9--504(3), this court finds that three days notice was not commercially reasonable under the circumstances here presented.


N.J.S.A. 12A:9--504(3) also imposes an affirmative duty on the plaintiff to dispose of the collateral in a commercially reasonable manner, which signified that disposition should be made in keeping with prevailing trade practices among reputable and responsible business and commercial enterprises engaged in same or similar business. See Old Colony Trust Co. v. Penrose Industries Corp., 280 F.Supp. 698, at p. 715 (E.D.Pa.1968).

The court is mindful of the proposition that under N.J.S.A. 12A:9--507(2), mere inadequacy of price is insufficient in itself to establish that the resale was not commercially reasonable. See Fort Knox National Bank v. Gustafson, 385 S.W.2d 196 (Ky.Ct.App.1964). But on the other hand, gross inadequacy of price...

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