Gulf Homes, Inc. v. Goubeaux

• Decision Date: 23 March 1983
• Docket Number: No. 16169,16169
• Citation: 136 Ariz. 33,664 P.2d 183
• Parties: , 37 UCC Rep.Serv. 1803 GULF HOMES, INC., an Arizona corporation, Plaintiff/Appellant/Cross-Appellee, v. Richard A. GOUBEAUX and Linda G. Goubeaux, his wife, and each of them, Defendants/Appellees/Cross-Appellants.
• Court: Arizona Supreme Court

Page 183

664 P.2d 183

136 Ariz. 33, 37 UCC Rep.Serv. 1803

GULF HOMES, INC., an Arizona corporation, Plaintiff/Appellant/Cross-Appellee, v. Richard A. GOUBEAUX and Linda G. Goubeaux, his wife, and each of them, Defendants/Appellees/Cross-Appellants.

No. 16169.

Supreme Court of Arizona In Banc.

March 23, 1983.

Rehearing Denied May 24, 1983.

Dan A. Sinema, Tucson, for plaintiff/appellant/cross-appellee.

Ronald W. Sommer, Tucson, for defendants/appellees/cross-appellants.

CAMERON, Justice.

Richard Goubeaux and Linda Goubeaux, husband and wife, purchased a mobile home from Gulf Homes, Inc. and made only a down payment and no installment payments. Gulf Homes repossessed the mobile home, sold it, and sued the Goubeauxs for the deficiency. Gulf Homes appealed from both a judgment against it for the commercially unreasonable disposition of the mobile home after repossession and from a denial of its deficiency judgment. The Goubeauxs appealed the judgment of the trial court denying them attorney's fees. We have jurisdiction under Ariz. Const. art. 6 § 5(3) and Rule 19(a), Rules of Civil Appellate Procedure, 17A A.R.S.

The issues presented on appeal are these:

1. Is the seller entitled to a new trial because of alleged inconsistent jury verdicts? 2. Is the seller entitled to judgment notwithstanding the verdict on the buyers' counterclaim for commercially unreasonable disposition of the mobile home pursuant to A.R.S. § 44-3153(A)?

3. Are the buyers entitled to judgment notwithstanding the verdict on the seller's claim for a deficiency because of our previous opinion in Gulf Homes, Inc. v. Goubeaux, 124 Ariz. 142, 602 P.2d 810 (1979)?

4. Did the trial court err in:

(a) denying the seller's motion to amend its complaint;

(b) not allowing the seller to state to the jury the amount sought by the buyers in their counterclaim; or

(c) permitting closing argument by buyers concerning the seller's failure to call additional witnesses on the issue of commercial reasonableness?

5. Are the buyers entitled to attorney's fees?

The facts necessary to the determination of these issues are as follows. The buyers, Richard A. and Linda G. Goubeaux, purchased a mobile home from seller, Gulf Homes, for the cash price of $9,666.00 plus a time price differential of $9,950.00 on an eleven year contract. The buyers paid $550.00 down and made no further payments. Seller repossessed the mobile home and proceeded to resell the home to itself at a public sale for the sum of $7,000.00. There is no indication that this amount was unreasonable. Thereafter, seller sued the buyers for the deficiency. A jury trial resulted in verdicts of $1,640.00 in favor of seller for the deficiency and $1,000.00 in favor of the buyers on their counterclaim as a statutory penalty under the Truth in Lending Act, 15 U.S.C. § 1640(a). The trial court also awarded attorney's fees to the seller. The matter was appealed and the Court of Appeals affirmed the trial court. Gulf Homes, Inc. v. Goubeaux, 124 Ariz. 147, 602 P.2d 815 (App.1979). We granted review and vacated the opinion of the Court of Appeals stating:

The judgment of the superior court in favor of appellee Gulf Homes on its claim for a deficiency and for an award of attorney fees is reversed. The order and judgment of the superior court denying damages and a new trial to appellants on their counterclaim for a commercially unreasonable sale of collateral is reversed. The judgment of the superior court on the remaining issues is affirmed. The case is remanded to the superior court for further proceedings consistent with this opinion. Gulf Homes, Inc. v. Goubeaux, 124 Ariz. 142, 146, 602 P.2d 810, 814 (1979).

On remand, a new trial was held on the question of the deficiency and on the issue of commercial reasonableness of the resale of the mobile home. The jury returned a verdict for seller's deficiency claim in the amount of $2,416.72, and verdict for the buyers on its damages counterclaim "in the amount fixed by law," which was later computed to be $15,534.51, the amount of the time price differential stated in the contract as $9,950.00, plus interest from 28 October 1977 to date of judgment, 31 August 1981. A.R.S. § 44-3153(A). As discussed later in this opinion, we note that the amount of $15,534.51 was incorrectly determined. Both parties moved for judgment notwithstanding the verdict; the buyers' motion as to the deficiency was granted but seller's motion as to damages for wrongful sale of the collateral was denied. Seller appealed the judgment and the buyers cross-appealed from the court's failure to award them attorney's fees.

INCONSISTENT VERDICTS

Seller claims first that it must have a new trial on the issue of commercial reasonableness because the jury returned a verdict in favor of seller's claim for a deficiency following sale of the collateral and in favor of the buyers on the counterclaim for an award under A.R.S. § 44-3153(A). To return these verdicts, argues the seller, the jury must have found that the sale was both commercially reasonable and commercially unreasonable. We do not agree. Under A.R.S. §§ 44-3150 and 44-3153, when a secured party who has retaken and disposed of collateral following the debtor's default sues to recover a deficiency under A.R.S. § 44-3150(B), he bears the burden of proving that the disposition was commercially reasonable. Gulf Homes, Inc. v. Goubeaux, supra, 124 Ariz. at 145, 602 P.2d at 813. See A.R.S. § 44-3150(C). The failure to carry this burden does not, however, act as an absolute bar to recovery of a deficiency arising from the resale of the collateral. The seller is still entitled to have the deficiency determined by the trier of fact. Where the sale is commercially unreasonable, this deficiency is subject to

a setoff of the damage to the debtor for failure to make a commercially reasonable sale. Chapman v. Field, 124 Ariz. 100, 105, 602 P.2d 481, 486 (1979).

In the instant case, because the amount which was bid for the mobile home at the sale was reasonable, the buyers were unable to show specific damages. The buyers, however, were able to show the sale was commercially unreasonable and could therefore rely on the specific provisions of the statute:

If the disposition has occurred the debtor or any person entitled to notification or whose security interest has been made known to the secured party prior to the disposition has a right to recover from the secured party any loss caused by a failure to comply with the provisions of §§ 44-3147 to 44-3153, inclusive. If the collateral is consumer goods, the debtor has a right to recover in any event an amount not less than the credit service charge plus ten per cent of the principal amount of the debt or the time price differential plus ten per cent of the cash price. A.R.S. § 44-3153(A).

This statute (A.R.S. § 44-3153(A)) includes a consumer goods remedy in the nature of a penalty, legislatively adopted to discourage noncompliance by creditors. See Merchandise Nat. Bank of Chicago v. Scanlon, 86 Ill.App.3d 719, 723, 41 Ill.Dec. 826, 829, 408 N.E.2d 248, 251 (1980) (§ 9-507 intended to impose a civil penalty). Adopted from § 9-507 of the Uniform Commercial Code, it is a "minimum recovery" to which the consumer is entitled regardless of his ability to show actual loss. See Uniform Commercial Code, § 9-507, Comment 1; J. White and R. Summers, Uniform Commercial Code, § 26-14 at 998 (1972). Accord, D.E.B. Adjustment Co. v. Cawthorne, 623 P.2d 82, 85 (Colo.App.1981); Allard v. Ford Motor Credit Co., 139 Vt. 162, 422 A.2d 940, 942 (Vt.1980); In re Crandall, 1 B.R. 752, 754 (Bkrtcy.W.D.Mich.1980).

In the instant case, the jury was properly instructed and awarded the seller damages for his deficiency. It awarded the buyers a set-off "in the amount fixed by law," meaning the sum prescribed by the penalty provision of A.R.S. § 44-3153(A). The buyers, by purchasing the mobile home and failing to make the payments, are liable for any deficiency resulting from their failure to make the agreed upon and bargained for payments. The seller, by failing to dispose of the repossessed mobile home in a commercially reasonable manner, is liable for any resulting damages to the buyer or in an amount equal to "the time price differential plus ten percent of the cash price." The two amounts, once determined, may be set off against each other. The jury was not inconsistent in finding the buyers liable for the deficiency and the seller liable for failing to dispose of the mobile home in a commercially reasonable manner. We find no error.

BUYERS' COUNTERCLAIM

The seller next contends that the jury verdict on the buyers' counterclaim must be reversed, and judgment notwithstanding the verdict entered in seller's favor. The basis for this contention is that the buyers failed to prove their counterclaim for recovery under A.R.S. § 44-3153(A) at the first trial, and since the buyers did not carry their burden of proving that the sale was commercially unreasonable at that time, they may not prove that the sale was commercially unreasonable at the second trial. Seller cites Crouch v. Truman, 84 Ariz. 360, 328 P.2d 614 (1958), in support of its position. Even were we to agree with sellers application of Crouch to the facts of this case, which we do not, see Markel v. Transamerica Title Ins. Co., 103 Ariz. 353, 362, 442 P.2d 97, 106 (1968), seller may not prevail for the reason that the buyers did not have the burden of proving that the sale was commercially unreasonable. It is appropriate that the seller have this burden, since it is the party more likely to be in possession of the facts necessary to show that the sale was commercially reasonable. It was the seller that had the burden which the seller failed to carry. As we stated in our prior opinion in Gulf Homes:

The evidence presented at trial failed to establish that the collateral was disposed of in a manner commercially reasonable. Gulf Homes, Inc. v. Goubeaux, supra,...