Norton v. National Bank of Commerce of Pine Bluff

Decision Date31 January 1966
Docket NumberNo. 5-3572,5-3572
Citation398 S.W.2d 538,240 Ark. 143,3 UCC Rep.Serv. 119
Parties, 3 UCC Rep.Serv. 119 Carroll D. NORTON, doing business as Norton Auto Sales, Appellant, v. NATIONAL BANK OF COMMERCE OF PINE BLUFF, Appellee.
CourtArkansas Supreme Court

Carlton Currie, Pine Bluff, for appellant.

Bridges, Young, Matthews & Davis, Pine Bluff, for appellee.

Harry E. Meek, Little Rock, and Joe C. Barrett, Jonesboro, amicus curiae.

GEORGE ROSE SMITH, Justice.

This case presents a number of questions of first impression under the Uniform Commercial Code.

On September 4, 1963, the appellant Norton, an automobile dealer, sold a 1957 Oldsmobile sedan to Billy Goldsmith, who executed a promissory note and a conditional sales contract for the unpaid purchase price. On the same day Norton in turn sold the note and contract to the appellee bank. Norton endorsed the note and executed a written assignment of the contract, with a provision that if Goldsmith should default in his obligation Norton would repurchase the contract for the amount due thereon (with costs and expenses).

Goldsmith defaulted after having made only two monthly payments. On January 9 the bank repossessed the car, notifying Goldsmith by letter that it had done so. On January 24, without notice either to Goldsmith or to Norton, the bank sold the car to one of its customers, by private sale, for $75.00. This left an unpaid balance of $277.88 on the debt. The bank demanded that sum from Norton, who refused to pay.

The bank sued Norton only. According to the undisputed evidence it had been the bank's uniform custom in the past to give Norton and other dealers an opportunity to repurchase such contracts. Norton had never failed to repurchase when asked to do so. The manager of the bank's personal loan department was unable to explain why in this instance the bank for the first time proceeded against the car without notice to the dealer. There is evidence that a 1957 Oldsmobile would sell for from $25.00 to $125.00. It is admitted that an automobile dealer is in a better position than a bank to obtain full value in the sale of a used car.

The circuit court, sitting without a jury, found that the bank had obtained a fair price for the car and entered judgment against Norton for the balance due on the debt. Norton contends that the bank should have given him notice of the proposed sale, so that he might protect himself by repurchasing the commercial paper and reselling the car himself. He insists that the bank's failure to give him notice discharged his entire liability.

We requested amicus curiae briefs from Joe C. Barrett and from Harry E. Meek, for which we are grateful. Mr. Barrett states that the Permanent Editorial Board of the Uniform Commercial Code makes its services available to appellate courts when the interpretation of the Code is in issue. Members of the Permanent Board assisted Mr. Barrett in the preparation of his brief.

The two amicus briefs discuss the provisions of the Code in greater detail than counsel for the litigants have done. Both amici are of the view that Norton was not entitled to notice that a private sale was contemplated, for the reason that Norton was not a 'debtor' within the pertinent section of the Code. Ark.Stat.Ann. § 85-9-504(3) (Add.1961). They seem, however, to reach the same result that would follow if Norton had been entitled to notice. That is, they concede that the bank acted improperly, that it should have given Norton an opportunity to repurchase the contract, and that it is liable to Norton for any damages he suffered as a result of the bank's misconduct. (One of the amici would award Norton, in addition to his actual damages, the finance charge and penalty set out in § 85-9-507 of the Code. The other would award the finance charge plus penalty when the actual damages cannot be fixed with reasonable certainty.)

It is our conclusion that Norton was a debtor within the terms of the statute and was therefore entitled to notice that a private sale was impending. The statute requires notice to a 'debtor,' with certain exceptions. Section 85-9-504(3). We dismiss two possible exceptions to the requirement of notice before reaching the main issue.

First, the Code dispenses with notice when the collateral to be sold 'is of a type customarily sold on a recognized market.' Section 85-9-504(3). We cannot approve the bank's contention that a used car falls in this category. Obviously the Code dispenses with notice in this situation only because the debtor would not be prejudiced by the want of notice. Thus a 'recognized market' might well be a stock market or a commodity market, where sales involve many items so similar that individual differences are nonexistent or immaterial, where haggling and competitive bidding are not primary factors in each sale, and where the prices paid in actual sales of comparable property are currently available by quotation. We agree with the view taken in Pennsylvania, that there is no recognized market for used cars. Alliance Discount Corp. v. Shaw, 195 Pa.Super. 601, 171 A.2d 548 (1961). What one 1957 Oldsmobile sells for does not fix the amount a different one may be expected to bring.

Secondly, 'except in the case of consumer goods' Norton, if he was a person having a security interest known to the bank, would have been entitled to notice of the proposed sale. Section 85-9-504(3). For the moment it is enough to say that all four briefs expressly or tacitly assume that the Oldsmobile was 'consumer goods,' because Goldsmith boutht it as a pleasure vehicle. Hence Norton may not have been entitled to notice under this section of the Code.

We come to the main question: Was Norton a 'debtor' to whom notice should have been given? The controlling definition appears in § 85-9-105(d): "Debtor' means the person who owes payment or other performance [our italics] of the obligation secured, whether or not he owns or has rights in the collateral, and includes the seller of accounts, contract rights or chattel paper. Where the debtor and the owner of the collateral are not the same person, the term 'debtor' * * * may include both where the context so requires * * *.'

Norton had promised to repurchase the contract for the amount due. He was a person who owed 'other performance' of the obligation. In our judgment the following illustration in Paragraph 4 of the official Comment to § 85-9-105 is conclusive of Norton's status as a debtor:

'4. A dealer sells a tractor to a farmer on conditional sales contract. The conditional...

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