Mallicoat v. Volunteer Finance & Loan Corp.

• Decision Date: 03 December 1966
• Citation: 415 S.W.2d 347,3 UCCRep.Serv. 1035,57 Tenn.App. 106
• Parties: , 3 UCC Rep.Serv. 1035 Walter MALLICOAT et ux., Plaintiffs in Error, v. VOLUNTEER FINANCE & LOAN CORP., Defendant in Error. *
• Court: Tennessee Court of Appeals

Page 347

415 S.W.2d 347

57 Tenn.App. 106, 3 UCC Rep.Serv. 1035

Walter MALLICOAT et ux., Plaintiffs in Error, v. VOLUNTEER FINANCE & LOAN CORP., Defendant in Error.^*

Court of Appeals of Tennessee, Eastern Section.

Dec. 3, 1966.

Sumter D. Ferguson, Jr., Knoxville, for plaintiffs in error.

John K. King, Morton, Morton & Lewis, Knoxville, for defendant in error.

OPINION

McAMIS, Presiding Judge.

This action was instituted by Volunteer Finance & Loan Corp. as the assignee of Hull-Dobbs, an automobile dealer in Knoxville, to recover of Walter Mallicoat, Jr., and wife a deficiency arising from the repossession and sale under a Security Agreement entered into between the Mallicoats and Hull-Dobbs. A separate action was brought by the Mallicoats against Hull-Dobbs for breach of contract and fraud in the sale of the automobile.

The two cases were heard together without a jury and resulted in a judgment for $340.12 in favor of Volunteer Finance againt the Mallicoats and a judgment in favor of the Mallicoats against Hull-Dobbs for $628.58. The Mallicoats and Hull-Dobbs have appealed. (A separate opinion is being filed in the case of Mallicoat and wife against Hull-Dobbs).

The primary question in this case is whether Volunteer Finance complied with the provisions of the Uniform Commercial Code, Secured Transactions, T.C.A. § 47--9--101 et seq., with respect to advertisement and notice of sale after repossession.

On October 12, 1964, Mallicoat and wife purchased the car from Hull-Dobbs for the agreed price of $600.00, the 'Time Purchase Price' being $826.90. Of this amount $250.00 was paid in cash, leaving $576.90 to be paid in monthly installments of $38.46 each. After paying one installment the Mallicoats refused to make additional payments, claiming the car was defective and not as represented, and surrendered it to Volunteer Finance Company.

Volunteer Finance introduced its loan manager, Mr. Austin, and rested. The Mallicoats introduced no proof in this case.

Mr. Austin testified Volunteer Finance purchased the security agreement from Hull-Dobbs on the date of its execution and that he kept the records of the transaction thereafter. According to his testimony, after crediting one installment paid by the Mallicoats, the balance amounted to $538.40. After default and the return of the car by the Mallicoats, he notified them by registered letter that the car would be sold but he admitted the letter came back unclaimed. He testified the sale was advertised by posters but on cross examination admitted he was unable to state when or where it was advertised. There is no proof on that question and there is no proof of the contents of the letter and whether it gave the date of the proposed sale or merely stated in general terms that the car would be sold.

According to the witness Austin there was a public sale of the car on January 11, 1965, at which it was sold to Beeler Motor Company for $150.00. That amount was then credited on the contract leaving a balance of $388.40. An additional amount of $92.28 representing refund on 'credit life insurance' was also credited. The remaining balance with attorneys fees was the amount for which judgment was rendered.

T.C.A. § 47--9--504(3) provides in part:

'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.'

It is not contended the property here involved was perishable or 'of a type customarily sold on a recognized market.' There is no proof that Mallicoat was in a business requiring the use of an automobile. He testified he bought it to use in going to and from his place of employment. It is clearly not 'equipment', 'farm products' or 'inventory' as defined by T.C.A. § 47--9--109. We, therefore, hold that it falls within the category of 'consumer goods' as defined by the same Section of the Act.

After providing generally that the method, manner, time, place and terms of disposing of the collateral shall be 'commercially reasonable' the Act expressly requires that '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.'

The requirement that the property be disposed of in a 'commercially reasonable' manner seems to us to signify that the disposition shall be made in keeping with prevailing trade practices among reputable and responsible business and commercial enterprises engaged in the same or a similar business. It is general in scope and effect and is not mutually exclusive of the express requirement that notice of the intended disposition, whether by public or private sale, be sent to the debtor. The purpose of this notice, without doubt, is to enable the debtor to protect his interest in the property by paying the debt, finding a buyer or being present at the sale to bid on the property or have others do so, to the end that it be not sacrificed by a sale at less than its true value. Compare Range Motor Co. v. Tipton, 161 Tenn. 427, 33 S.W.2d 75, a suit under the Conditional Sales Statute.

In view of the undisputed proof in this case that the debtor did not receive the notice and that the secured creditor was aware that he had not received it, it is...