Jones v. Morgan

• Decision Date: 11 February 1975
• Docket Number: Docket No. 18636,No. 3,3
• Parties: , 16 UCC Rep.Serv. 1450 Roderick JONES, d/b/a Jones City Garage, Plaintiff-Appellee, v. Willard E. MORGAN, Sr., Defendant-Appellant
• Court: Court of Appeal of Michigan — District of US

Page 419

228 N.W.2d 419

58 Mich.App. 455, 16 UCC Rep.Serv. 1450

Roderick JONES, d/b/a Jones City Garage, Plaintiff-Appellee, v. Willard E. MORGAN, Sr., Defendant-Appellant.

Docket No. 18636.

Court of Appeals of Michigan, Division No. 3.

Feb. 11, 1975.

Released for Publication May 7, 1975.

Leave to Appeal Denied May 21, 1975.

Jerry L. Sumpter, Cheboygan, for defendant-appellant.

Harold A. Johnson, Jr., Cheboygan, for plaintiff-appellee.

Before ALLEN, P.J., and KAUFMAN and O'HARA, ^* JJ.

KAUFMAN, Judge.

This appeal arises from a jury verdict for plaintiff in Cheboygan's 89th District Court. Plaintiff sued defendant on a promissory note with a balance of $1,900 and defendant counterclaimed for damages because of the manner in which plaintiff dealt with the repossessed collateral. The jury returned a verdict for plaintiff in the amount of $1,300.

Plaintiff Jones was a garage owner in Cheboygan who sold new and used vehicles. In April, 1969, plaintiff sold a used 1968 Pontiac LeMans to Willard Morgan, Jr., a minor and the son of defendant, Willard Morgan, Sr., who co-signed the note. The price of the car, less down payment, was $2,100, financed for 24 months. Plaintiff sold the note to a local bank, and defendant's son made one payment before defaulting. After default the bank repossessed the car, and notified defendant it would be sold at public sale on December 19, 1969. Since there were no purchasers for the car and since the note was with recourse, the bank charged plaintiff's account $605.28 and required plaintiff to pay the balance of the note of $1,334.20. The bank also returned the car to plaintiff's lot where it remained without sale for some 20 months before the trial in District Court. In 1971, plaintiff brought suit on the note. Defendant makes five claims of error which we will discuss Seriatim.

I. AS A MATTER OF LAW, DID PLAINTIFF ACT IN A COMMERCIALLY UNREASONABLE MANNER SO AS TO DEPRIVE HIM OF THE RIGHT TO RECOVER ON THE NOTE?

Two of the issues raised by defendant require a determination of whether plaintiff dealt with the collateral, the 1968 Pontiac LeMans, in a commercially reasonable manner. U.C.C. § 9--504(3); M.C.L.A. § 440.9504(3); M.S.A. § 19.9504(3) reads in part as follows '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.'

When there are contested issues of fact, the issue of commercial reasonableness is one for the trier of fact. Ennis v. Atlas Finance Co., 120 Ga.App. 849, 172 S.E.2d 482 (1969), First National Bank of Bellevue v. Rose, 188 Neb. 362, 196 N.W.2d 507 (1972). The jury in this case was instructed by the trial judge that if they found plaintiff to have acted commercially unreasonably by failing to dispose of the collateral for almost 20 months, they must find for defendant. ¹ The jury's verdict of $1,300 for the plaintiff in the face of the instruction indicates they did not find plaintiff to have acted commercially unreasonably, or not so unreasonably as to have deprived plaintiff of any recovery.

To reverse the finding of the jury we must find that their verdict was against the great weight of the evidence. Williams v. State Highway Dept., 44 Mich.App. 51, 205 N.W.2d 200 (1972). At trial, the jury heard testimony concerning the condition and value of the car at the time of repossession. Plaintiff tried to prove the auto was unsaleable, and defendant attempted to show the car's value equalled the amount outstanding on the note at the time of repossession. Plaintiff testified that the auto was in very poor condition when delivered to him and he was unable to sell it at auction or private sale. Defendant acknowledged one accident resulting in damage to the front of the car, another collision with a utility pole causing damage to the side, and an oil leak caused by a rock hitting the rear end of the vehicle. However, defendant denied plaintiff's claim that the car was 'caved in' at the top, sides and rear end and that it was inoperable. Plaintiff's counsel requested and the trial court granted a motion to allow the jury to view the automobile as it sat on plaintiff's lot.

The jury also heard testimony that an insurance company paid $311 to have the front-end damage repaired and that the money was not used to repair the vehicle. It is unclear from the transcript whether the bank or plaintiff received this money, but plaintiff did testify it would have cost considerably more than $311 to repair the vehicle.

Plaintiff testified that he wrote defendant two or three letters to ask him to come in and talk about the matter, or plaintiff would take further action. Defendant admits receiving the notice of public sale but denies receiving any other letters from plaintiff, although defendant's wife acknowledged receipt of one letter from plaintiff. Defendant testified he made no attempt to regain possession because he did not need the car, and his son no longer had any use for it.

While retention of depreciable collateral without sale for two years compels close scrutiny of the plaintiff's actions, viewing the transaction as a whole, we cannot find that it is unreasonable as a matter of law, nor that the jury's finding for plaintiff was against the great weight of the evidence.

As the sole arbiter of the credibility of witnesses, Hughes v. John Hancock Mutual Life Ins. Co., 351 Mich. 302, 88 N.W.2d 557 (1958), the jury apparently believed plaintiff's testimony that the vehicle was in so poor a condition on repossession that plaintiff could not resell it. Under these circumstances we will not substitute our judgment for that of the jury.

The jury's finding that plaintiff acted reasonably also determines defendant's argument that he was entitled to recovery on his counterclaim under U.C.C. § 9--507; M.C.L.A. § 440.9507; M.S.A. § 19.9507. This statute provides the remedy available to a debtor, the right to recover damages when a secured party acts unreasonably in disposing of collateral.

It is not necessary that such damages be affirmatively awarded to the debtor, but they may instead be set off against the amounts owed by the debtor to the creditor. Wilson Leasing Co. v. Seaway Pharmacal Corp., 53 Mich.App. 359, 371, 220 N.W.2d 83, 89 (1974). As we have noted, the jury's determination as to the existence and extent of commercial unreasonableness, not being against the great weight of the evidence, is binding.

II. AS A MATTER OF LAW DID THE RETENTION OF COLLATERAL BY PLAINTIFF CONSTITUTE SATISFACTION OF THE DEBTOR'S OBLIGATION?

U.C.C. § 9--505(2); M.C.L.A. § 440.9505(2); M.S.A. § 19.9505(2) provides that upon written notification a secured party may retain collateral in satisfaction of a debt. In the instant case, no written notification was made, and plaintiff denies he ever intended to retain the collateral as satisfaction of the debt. We could dispose of this argument by simply pointing to the fact that the jury rejected this contention as a matter of fact. The jury was charged:

'If you find that the plaintiff, in retaining the collateral for two years, has accepted such collateral in satisfaction of the debtor's obligation, then you must find in favor of the defendant.'

By finding for plaintiff in the amount of $1,300, the jury clearly rejected the argument of retention of collateral in satisfaction of the debt. We find no basis on which to reverse that finding.

However, since the proceedings here evidence a misunderstanding of U.C.C. § 9--505(2) by defense counsel, and since this section is virtually uninterpreted by our case law, we address ourselves to defendant's legal argument.

Defendant interprets § 9--505(2) to deprive a secured party of the right to sue on a note where he has retained collateral for an unreasonable period. While there is some authority for defendant's interpretation, White & Summers, Uniform Commercial Code, p. 980, fn. 89, § 26--8, Moran v. Holman, 514 P.2d 817 (Alaska, 1973), we think the better interpretation of § 9--505(2) is that it is a provision drafted for the benefit of the secured party by allowing him the option to retain collateral in satisfaction of the debt in certain specified situations and where he manifests that intent. A debtor who has been damaged by improper retention of collateral finds his remedy in U.C.C. § 9--507(1) which allows him to recover from the secured party 'any loss caused by a failure to comply with any of the provisions of Part 5 of the Uniform Commercial Code'. If the loss experienced by the debtor equals the amount due on the note, then, of course, the secured party will be entitled to no recovery. The debtor is sufficiently protected by § 9--507(1), without employing a strained reading of § 9--505(2) to imply retention in satisfaction where no such result was intended by the secured party. This result is in keeping with this Court's decision in Michigan National Bank v. Marston, 29 Mich.App. 99, 185 N.W.2d 47 (1970), which specifically rejects the contention that a creditor must sell the collateral before bringing suit on the note, the Court recognizing that:

'To the extent the creditor's inaction results in injury to the debtor, the debtor has a right of recovery.' 29 Mich.App. at 108, 185 N.W.2d at 51.

Such recovery is set off against any amounts due the creditor on the note, Cf. Farmers State Bank of Parkston v. Otten, S.D., 204 N.W.2d 178 (1973), Home Finance Co. v. Ratliff, 374 S.W.2d 494 (Ky.1964).

III. DID THE TRIAL COURT COMMIT REVERSIBLE ERROR BY FAILING TO ALLOW TESTIMONY OF THE 'BLUE BOOK' VALUE OF THE COLLATERAL?

At trial defendant called an area auto dealer as an expert in car valuation and he attempted to testify as to the value of a 1968 LeMans Sport Coupe as of the date of...