Grant County Tractor Co. v. Nuss, 418--III

• Decision Date: 08 May 1972
• Docket Number: No. 418--III,418--III
• Citation: 496 P.2d 966,6 Wn.App. 866
• Parties: , 10 UCC Rep.Serv. 1104 GRANT COUNTY TRACTOR CO., Inc., a Washington corporation, Appellant, v. Vernon E. NUSS and Jane Doe Nuss, husband and wife, Respondents, and Cross- Appellants.
• Court: Washington Court of Appeals

Page 866

6 Wn.App. 866

496 P.2d 966, 10 UCC Rep.Serv. 1104

GRANT COUNTY TRACTOR CO., Inc., a Washington corporation, Appellant, v. Vernon E. NUSS and Jane Doe Nuss, husband and wife Respondents, and Cross- Appellants.

No. 418--III.

Court of Appeals of Washington, Division 3.

May 8, 1972.

Rehearing Denied June 7, 1972.

Review Denied July 21, 1972.

Darrell E. Ries of Ries & Kenison, Moses Lake, for appellant.

John E. Calbom, Moses Lake, for respondents.

GREEN, Judge.

Plaintiff, Grant County Tractor Co., Inc., brought an action for a deficiency judgment on a contract and security agreement for the sale of certain farm equipment to defendants, Vernon E. Nuss and wife. Defendants filed an answer and counter-claim denying plaintiff's allegations and seeking rescission of the contract and damages by reason of the alleged defective condition of the equipment. The trial court entered judgment denying relief to either party. Both parties appeal.

The question presented by plaintiff's appeal is whether or not it is entitled to a deficiency judgment under RCW 62A.9--504 of the Uniform Commercial Code where one of several items of equipment in the possession of the secured party has been sold without reasonable notice of the sale having been first given to the debtor. The defendants' cross-appeal seeks review of the court's refusal to grant rescission, direct a refund of the downpayment and award damages for loss of profits.

On August 15, 1968, defendants purchased an Oliver diesel tractor, Model 1850, a Howard rotovator and a Brillion packer from the plaintiff under a written purchase security agreement. They made the required installment payments and used the equipment for farming. On July 1, 1969, defendants decided to exchange the Model 1850 Oliver tractor for a Model 1950T. To consummate this exchange, a new contract and security agreement was executed, replacing the prior agreement. The first annual payment of $3,867.10 was due and payable by defendants on September 1, 1969. They defaulted.

On January 8, 1970, defendants unilaterally and without request delivered the tractor, rotovator and packer to plaintiff's sales yard. Plaintiff's employees examined the equipment and determined that the rotovator and packer were not worth repairing and their only value was for salvage. On January 13, 1970, defendants through their attorney notified plaintiff in writing of their election to rescind the contract. In the early part of April 1970, about the time this action was instituted, plaintiff sold the tractor without first giving notice to defendants. Upon trial, the court found that the balance due on the contract was $3,507 but refused to enter judgment for this amount 'because Plaintiff failed to give notice to the Defendants of the sale of the tractor.' Plaintiff assigns error to this finding and conclusion.

The trial court accepted defendants' position that when plaintiff sold one item without notice to defendants, in violation of RCW 62A.9--504(3), plaintiff lost its right to a deficiency judgment. In so doing, it committed error.

The collateral in question is classified as equipment, rather than consumer goods. RCW 62A.9--108. RCW 62A.9--504 provides that a secured party in possession after default may sell, lease or otherwise dispose of the collateral. This statute also provides:

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(2) If the security interest secures an indebtedness, the secured party must account to the debtor for any surplus, and, unless otherwise agreed, the debtor is liable for any deficiency.

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(3) Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, 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, and except in the case of consumer goods to any other person who has a security interest in the collateral and who has duly filed a financing statement indexed in the name of the debtor in this state or who is known by the secured party to have a security interest in the collateral. The secured party may buy at any public sale and if the collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations he may buy at private sale.

These provisions authorized the plaintiff to sell the tractor, rotovator and packer, either as a unit or separately. The amount claimed by plaintiff as the balance due on the contract is an amount equal to the purchase price of the rotovator and packer, less their salvage value. Defendants do not contest this amount which the court found to be $3,507, but argue that the plaintiff is not entitled to a judgment for that amount because it failed to give notice of the sale of the tractor.

This issue is one of first impression in this state. Other jurisdictions have reached opposite results under similar provisions of the Uniform Commercial Code. One line of authority holds that failure to comply with the notice requirements of RCW 62A.9--504(3) results in a forfeiture of the right to a deficiency. Leasco Data Processing Equip. Corp. v. Atlas Shirt Co., 66 Misc.2d 1089, 323 N.Y.S.2d 13 (1971); Foundation Discounts, Inc. v. Serna, 81 N.M. 474, 468 P.2d 875 (1970); Braswell v. American Nat'l Bank, 117 Ga.App. 699, 161 S.E.2d 420 (1968); Skeels v. Universal C.I.T. Credit Corp., 222 F.Supp. 696 (W.D.Pa.1963). The other line of authority holds that the failure to give notice does not prevent a deficiency. Universal C.I.T. Credit Co. v. Rone, 453 S.W.2d 37 (Ark. 1970); Weaver v. O'Meara Motor Co., 452 P.2d 87 (Alaska 1969); T & W Ice Cream, Inc. v. Carriage Barn, Inc., 107 N.J.Super. 328, 258 A.2d 162 (1969); Mallicoat v. Volunteer Fin. & Loan Corp., 415 S.W.2d 347 (C.A.Tenn.1966). We adopt the reasoning of the second line of cases.

RCW 62A.9--504(2), quoted above, provides that the debtor is liable for a deficiency, if there is no agreement to the contrary. RCW 62A.9--507(1) provides:

(1) If it is established that the secured party...