Liberty Nat. Bank of Fremont v. Greiner

• Decision Date: 07 July 1978
• Citation: 405 N.E.2d 317,62 Ohio App.2d 125,16 O.O.3d 291
• Parties: , 16 O.O.3d 291, 29 UCC Rep.Serv. 718 LIBERTY NATIONAL BANK OF FREMONT, Appellee, v. GREINER et al., Appellants.
• Court: Ohio Court of Appeals

Page 125

62 Ohio App.2d 125

405 N.E.2d 317, 16 O.O.3d 291, 29 UCC Rep.Serv. 718

LIBERTY NATIONAL BANK OF FREMONT, Appellee, v. GREINER et al., Appellants.

Court of Appeals of Ohio, Sixth District, Sandusky County.

July 7, 1978.

Syllabus by the Court

Compliance with the notice requirements of R.C. 1309.47(C) is a condition precedent to the recovery of a deficiency judgment and a creditor's failure to comply with such requirements is an absolute bar to the recovery of a deficiency judgment, even though the creditor's disposition of the collateral was otherwise commercially reasonable.

Stephen E. Hagerman, Fremont, for appellants.

Alexander Hyzer, IV, Fremont, for appellee.

POTTER, Presiding Judge.

On September 7, 1973, defendants-appellants executed and delivered to plaintiff-appellee their promissory note in the amount of $56,419.56. The note was a consolidation of several business loans made by appellee to appellants and was secured by security agreements covering thirteen used trucks. Appellants defaulted on payments of both principal and interest and, with the knowledge and consent of appellant Gary Greiner, appellee took possession of eleven of the used trucks in September of 1974. ¹ Appellee sold seven of the trucks at an auction and the remaining four vehicles were sold upon written bids. The amount received from the sale less certain expenses was applied to reduce appellants' indebtedness. Subsequently, appellee sought a deficiency judgment for the remaining balance of the promissory note and was granted said judgment in the amount of $39,515.20 by the Sandusky County Common Pleas Court. ² Prior to the entry of the judgment, the court, pursuant to Civ.R. 52, made findings of fact and conclusions of law. The conclusions of law pertinent to this appeal are:

"1. Plaintiff gave the defendants proper notice of its intended disposition of the collateral under Section 1309.47(C) of the Ohio Revised Code.

"2. Plaintiff's disposition of the collateral was commercially reasonable under Section 1309.47(C) of the Ohio Revised Code. * * *

"4. Plaintiff would be entitled to this deficiency judgment if it had failed to give defendants proper notice of its intended disposition of the collateral and/or failed to dispose of the collateral in a commercially reasonable manner because the deficiency represented the difference in the value of the collateral and the defendants' obligation to plaintiff."

Appellants now appeal to this court and file the following assignments of error:

"1. The trial court erred in finding that the plaintiff gave proper notice of its intended disposition of the collateral under Section 1309.47(C) of the Ohio Revised Code.

"1-A. The trial court erred in finding that any notice was given to defendant, Shirley Greiner.

"2. The trial court erred in finding that the disposition of the collateral was commercially reasonable under Section 1309.47(C) of the Ohio Revised Code.

"3. The trial court erred in finding that the plaintiff was entitled to a deficiency judgment."

Upon taking possession of the trucks, appellee was bound by R.C. 1309.47(C), which provides:

"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."

Appellee concedes that the collateral involved herein was not such as to exempt appellee from the reasonable notice requirements of R.C. 1309.47(C). Appellee also concedes that no notice of the intended sale was given by it to appellant Shirley Greiner, wife of appellant Gary Greiner and a co-signer on the promissory note, who was entitled to separate notice. Cf. Modern Finance Co. v. Enmen (1970), 25 Ohio Misc. 216, 267 N.E.2d 450, a decision under R.C. 1319.07, now repealed.

Appellant Gary Greiner did receive some notice of the intended disposition of the collateral when appellee repossessed the trucks and again when appellee sent a formal notice to Gary Greiner by certified mail. Appellants contend, however, that the notice given by appellee was inadequate and failed to comply with the notice requirements in R.C. 1309.47(C). Only the notice which was hand delivered to Gary Greiner when the trucks were repossessed, on or about September 9, 1974, was made part of the record. There is no contention that the notice sent by certified mail and received on October 7, 1974, differed in any respect from that which was hand delivered to appellant. In pertinent part, the notice read as follows:

"You are hereby given notice that the property secured by the financing statement or security agreement bearing the file number shown above will be sold on the tenth (10) day after receipt of this letter at Fremont, Ohio, and the minimum price for which the secured property may be sold is $4,000."

The notice also described the property, informed appellant that he would be held liable for any deficiency, and notified appellant on the last line of the notice letter that, "Any person may appear at the time and place of sale and bid on said property."

A reading of the first quoted portion of the notice would indicate that the vehicles were to be sold through a private sale. The information therein conveyed, i. e., the date after which the property would be sold, would satisfy the notice requirements of R.C. 1309.47(C) for a private sale. The last line of the notice letter, however, indicates that a public sale with competitive bidding would be held. Thus, aside from any other deficiency, the notice was patently ambiguous as to what type of sale would be held. In fact, two different methods of sale were utilized by appellee. Seven of the vehicles were sold by auction on October 23, 1976. Appellee advertised this sale in several area newspapers under the caption "Public Auction." The remaining vehicles were not at the place where the auction was held and were sold upon written bids. The date of that sale was not established.

Appellee argues that although the methods of sale differed, both the auction and the sale upon written bids were private sales. Appellee contends that despite the fact that the auction was advertised as public and the public did appear, the auction was a private sale because the auction was "with reserve."

We do not agree. R.C. 1302.41(C) provides that auctions are with reserve unless otherwise explicitly specified and the drafters' comments to that section state that an auction with reserve is the normal procedure. The term "public sale" is not defined in the code. Cases interpreting that term generally, and as used in the Uniform Commercial Code, have held that several conditions, such as publicity, competitive bidding and invitation to the public must be met before a sale can be classified as a public sale. The case law does not indicate that the distinction between auctions with reserve and auctions without reserve is relevant to the determination of the public or private character of the sale. See Annotation, 4 A.L.R.2d 575. The sale held by appellee on October 23, 1976, was advertised as open to the general public, the public did attend and competitive bidding was held. We find, therefore, that this auction was a public sale as the term is used in R.C. 1309.47(C).

R.C. 1309.47(C) requires that the secured party send the debtor reasonable notification of the time and place of the public sale. Clearly, the written notice received by appellant did not fulfill this requirement. The notice did not specify the time of the sale and the designation of Fremont, Ohio, as the place of the sale is too broad to constitute effective notice of the location. The notice of the location of the sale provided for in R.C. 1309.47 contemplates a reasonably precise designation of the place where the sale is to be held. Cf. Ohio Credit Corp. v. Harbour (1970), 24 Ohio Misc. 221, 259 N.E.2d 182, 53 Ohio Ops.2d 38, a decision under R.C. 1319.07, now repealed. We find, therefore, that the written notice received by appellant Gary Greiner was insufficient to comply with the mandate of R.C. 1309.47. We also find that the general advertisements of the sale placed by appellee in the classified sections of area newspapers did not constitute notice to appellants of the time, place and date of sale. See Morris Plan Co. of Bettendorf v. Johnson (1971), 133 Ill.App.2d 717, 271 N.E.2d 404.

As previously noted, in the case of a private sale R.C. 1309.47 requires only that the debtor be informed of the date after which the property will be sold. Appellee's sale of the four trucks upon written bids was a private sale. While the written notice received by appellant did contain the necessary information, when read as a whole the notice indicated that a public sale would be held. We find that the combination of the form notice for private sale with the language indicating a public sale would be held is inherently misleading and, as such, does not...