Gavin v. Washington Post Emp., Etc.

• Decision Date: 01 February 1979
• Docket Number: No. 12308.,12308.
• Citation: 397 A.2d 968
• Parties: Craig J. GAVIN, Appellant, v. WASHINGTON POST EMPLOYEES FEDERAL CREDIT UNION, Appellee.
• Court: D.C. Court of Appeals

397 A.2d 968

Craig J. GAVIN, Appellant, v. WASHINGTON POST EMPLOYEES FEDERAL CREDIT UNION, Appellee.

No. 12308.

District of Columbia Court of Appeals.

Submitted December 27, 1977.

Decided February 1, 1979.

Craig J. Gavin, pro se.

Thomas S. Templeton, New Carrollton, Md., for appellee.

Before KELLY, KERN and FERREN, Associate Judges.

FERREN, Associate Judge:

This is an appeal from a deficiency judgment against appellant, Craig J. Gavin, who defaulted on a secured promissory note held by appellee, Washington Post Employees Federal Credit Union (the Credit Union). After repossessing the collateral, a used automobile, the Credit Union resold it without giving the notice to Gavin prescribed by the Uniform Commercial Code (UCC), D.C. Code 1973, § 28:9-504(3). The trial court awarded the Credit Union a judgment for the deficiency after resale, less the 10% damage remedy prescribed in D.C. Code 1973, § 28:9-507(1) for the Credit Union's failure to comply with the default provisions (Part 5) of UCC Article 9.

Resolution of this appeal has had to await our en banc decision in Randolph v. Franklin Investment Co., Inc., D.C.App., 398 A.2d 340 (1979), in which we held that failure to give the requisite notice of resale of collateral under the UCC bars a deficiency judgment altogether. In addition, this appeal presents the question whether Gavin's voluntary surrender of the collateral eliminated his right under the UCC to receive notice of resale (as a matter of statutory interpretation, waiver, or estoppel). On the facts here we hold that the trial court's award of a deficiency judgment against Gavin must be reversed while the 10% damage award to Gavin, totaling $498.60, is affirmed.

I.

After a nonjury trial, the court found the following facts: in March 1974, the Credit Union lent $1,900 to Gavin, who signed a $2,208.60 note payable in 30 monthly installments, secured by a 1971 Dodge Charger. The "Security Agreement" included a provision that the "[d]ebtor will not sell or offer to sell or otherwise transfer the collateral or any interest therein without the written consent of the secured party." Having received no payment from Gavin since he left his job at the Washington Post in August 1974, the Credit Union informed Gavin of his delinquency on January 22, 1975, and again on March 6, 1975. After the first of these notices, Gavin had conversations with a number of Credit Union employees, asking for permission to sell the car (presumably to help pay the debt). He was told that he could do so but never received the required written consent.

On April 1, 1975, the Credit Union authorized the Laurel Adjustment Bureau to pick up Gavin's car. After doing so, the Bureau informed the Credit Union that the car's general condition was "fair," that the mileage was 65,495, that the right front fender was damaged, and that the Bureau would store the car. Sometime around the date on which the car was repossessed, Gavin had sent the keys to the Credit Union along with a note: "Here are my car keys, as per our conversation on the phone." After confirming the Bureau's report on the condition of the car through a visual inspection by one of its own employees, the Credit Union authorized the Bureau on May 5, 1975, to sell the car for $350. (According to the Bureau, $350 represented the higher of the two bids it had received.) The Credit Union did not give Gavin any notice of the sale.

Subsequently, the Credit Union sued Gavin for a $1,249.53 deficiency plus interest and costs. Gavin counterclaimed for damages for violation of the UCC notice requirement. The trial judge agreed with Gavin that the Credit Union had violated D.C. Code 1973, § 28:9-504(3).¹ The court nevertheless held that Gavin had the burden of proving the fair market value of the automobile, but had failed to demonstrate that the value exceeded the resale price of $350; that in accordance with our (now vacated) opinion in Randolph v. Franklin Investment Co., Inc., D.C.App., 368 A.2d 1151 (1977), the Credit Union had established a deficiency of $1,153.72 representing the balance due on the note ($1,442.72) plus the cost of repossession ($61) less the $350 resale proceeds; and that the Credit Union's violation of the notice requirements entitled Gavin under D.C. Code 1973, § 28:9-507(1) to a $498.60 setoff comprised of the "original credit service charge" ($308.60) and 10% of the "original loaned amount" ($190).² Thus, the court awarded the Credit Union a net deficiency judgment of $655.12.³ The trial court subsequently denied Gavin's Motion to Amend and Supplement Findings of Fact and Conclusions of Law and his Motion for New Trial.

II.

The Credit Union's entitlement to a deficiency judgment cannot be sustained. In the first place, the trial judge erred in placing the burden on Gavin to prove the fair market value of the automobile at the time of resale. Even those jurisdictions interpreting the UCC to permit a deficiency judgment to a secured creditor who fails to give notice of resale place the burden on the creditor to prove that "the fair and reasonable value of the security [is] being credited to the debtor's account." Conti Causeway Ford v. Jarossy, 114 N.J.Super. 382, 276 A.2d 402, 404-05 (1971), aff'd, 118 N.J.Super. 521, 288 A.2d 872 (1972). See Randolph (en banc), supra, 398 A.2d at 347 n. 12. In any event, because the Credit Union did not give notice of resale, our decision in Randolph (en banc), supra bars recovery of a deficiency judgment here — unless the UCC is inapplicable to "voluntary" repossessions for Gavin waived or is estopped from relying on the notice requirement.

Because Gavin consented to having his car picked up and sold, and even delivered the keys himself, the Credit Union argues that this was a "voluntary," not an "adversary," repossession. The Credit Union accordingly asserts that it was not bound to honor the statutory notice requirements — and thus cannot lawfully be barred from obtaining a deficiency judgment.

A debtor's right to notice is not limited to situations in which the creditor has repossessed collateral without the knowledge or against the will of the debtor. In fact, even when a creditor contemplates a private sale and is accordingly required only to notify the debtor of "the time after which any private sale . . . is to be made," D.C. Code 1973, § 28:9-504(3), a debtor's voluntary delivery of the collateral for the purpose of having it sold by the creditor is not the equivalent of notice to the debtor of the time "after which" a private sale will take place. Nelson v. Monarch Investment Plan, 452 S.W.2d 375, 377 (Ky.1970). In such a case, the debtor is still "entitled to notification of a specific date after which the creditor may proceed to dispose of the collateral." Id.; see Morris Plan Co. v. Johnson, 133 Ill.App.2d 717, 271 N.E.2d 404, 407 (1971). All the more so, when a public sale is contemplated, entitling a debtor to a more precise notice of time and place of sale, we perceive no reason why a debtor's voluntary delivery of the collateral should preempt his right to strict compliance with the notice requirements. See Randolph (en banc), supra, 398 A.2d 345. It follows that Gavin's voluntary surrender of the automobile did not automatically extinguish his right under the UCC to notice of resale. See Barnett v. Trussell Ford, Inc., 129 Ga.App. 176, 198 S.E.2d 903 (1973); Nelson v. Monarch Investment Plan, supra; Morris Plan Co. v. Johnson, supra.⁴

This does not end the inquiry, however, for even though the UCC notice requirements apply to "voluntary" or "non-adversary" repossessions, we still have the question whether the principles of waiver or estoppel can preclude a debtor from asserting lack of notice.⁵

Arguably, D.C. Code 1973, § 28:9-501(3) prohibits waiver:

To the extent that they give rights to the debtor and impose duties on the secured party, the rules stated in the subsections referred to below may not be waived or varied except as provided with respect to compulsory disposition of collateral (subsection (1) of section 28:9-505) and with respect to redemption of collateral (section 28:9-506) but the parties may by agreement determine the standards by which the fulfillment of these rights and duties is to be measured if such standards are not manifestly unreasonable: . . .

[Emphasis added.][⁶]

On the other hand, at least two courts have indicated that § 28:9-501(3) precludes only "a pre-emptive waiver found in the security agreement itself"; it does not "deny a party the right to invoke the principles of waiver and estoppel which may apply to the subsequent transactions of the parties." Nelson v. Monarch Investment Plan, supra at 378 (debtor's delivery of automobile to creditor and related actions amounted to waiver or estoppel barring assertion of the right to notice in suit for deficiency judgment)⁷; see Grant County Tractor Co. v. Nuss, 6 Wash.App. 866, 496 P.2d 966, 969 (1972) (debtor's conduct, including return of collateral and written notice of election to rescind sale of farm equipment, held tantamount to waiver of right to notice of resale).

Even if we assume, for the sake of argument, that a debtor after default can waive or renounce the right to notice of resale, we find no basis for holding that the Credit Union can prevail here. Counsel for the Credit Union argues on appeal, as at trial, that because there had been "a voluntary action on the part of both the debtor and the creditor, . the provisions of the D.C. Code relating to involuntary repossessions do not apply." As indicated at note 5, supra, counsel in making this argument did not use the words "waiver" or "estoppel"; thus, we cannot know for sure whether counsel was injecting those equitable issues or, instead, was focusing more narrowly on the legal argument (which we have rejected) that a debtor who voluntarily surrenders collateral does not have a statutory right to notice. In any event, after taking the case under...