Regions Bank v. Thomas
| Decision Date | 16 October 2017 |
| Docket Number | No. W2015-00798-SC-R11-CV.,W2015-00798-SC-R11-CV. |
| Citation | 532 S.W.3d 330 |
| Parties | REGIONS BANK v. Thomas D. THOMAS, et al. |
| Court | Tennessee Supreme Court |
David R. Evans and Timothy L. Mickel, Chattanooga, Tennessee, for the appellant, Regions Bank.
Richard E. Charlton, Memphis, Tennessee, and Kirk L. Clements, Goodlettsville, Tennessee, for the appellees, Thomas D. Thomas, Helen L. Thomas, and The Thomas Family Living Trust.
Jeffrey S. Bivins, C.J., delivered the opinion of the court, in which Cornelia A. Clark, Sharon G. Lee, Holly Kirby, and Roger A. Page, JJ., joined.
We granted this appeal to determine whether the Court of Appeals correctly applied the statutory "rebuttable presumption rule" under Article 9 of the Uniform Commercial Code, as codified at Tennessee Code Annotated section 47-9-626, in reversing the trial court and concluding that the Plaintiff, Regions Bank, was not entitled to recover a deficiency from the Defendants, Thomas D. Thomas, Helen L. Thomas, and The Thomas Family Living Trust. We conclude that both the trial court and the Court of Appeals erred in their respective applications of the "rebuttable presumption rule." Accordingly, the judgment of the Court of Appeals is reversed, the judgment of the trial court is vacated, and this matter is remanded to the trial court for further proceedings as set forth herein.
This is the second appeal in this case, which arises out of a secured transaction between LGT Aviation, Inc. ("Debtor"), and the predecessor to the Plaintiff, Regions Bank ("Regions"). The pertinent facts are adequately set out in the two prior opinions of the Court of Appeals and are only briefly restated here. See Regions Bank v. Thomas , 422 S.W.3d 550 (Tenn. Ct. App. 2013), perm. app. denied (Tenn. Sept. 11, 2013) (" Regions I "); Regions Bank v. Thomas , No. W2015-00798-COA-R3-CV, 2016 WL 1719325, at *1 (Tenn. Ct. App. Apr. 27, 2016), perm. app. granted (Tenn. Oct. 21, 2016) (" Regions II ").
Debtor borrowed in excess of $2,300,000 from Regions' predecessor for the purchase of a 1981 Hawker 700-A aircraft ("Aircraft"), which secured the loan. Defendants Thomas D. Thomas, Helen L. Thomas, and The Thomas Family Living Trust (collectively, "Guarantors") jointly and severally guaranteed the loan. Following Debtor's default by failure to maintain insurance on the Aircraft, Regions accelerated Debtor's payment obligations. Debtor did not repay the accelerated loan, and in October 2007, Regions filed suit against Guarantors, seeking recovery of the outstanding loan balance, interest, costs, and attorney's fees. While suit was pending, Regions repossessed the Aircraft, expended funds to render it flightworthy, and then expended additional funds to render it marketable. Regions ultimately sold the Aircraft at a private sale on December 2, 2008, for $875,000. Debtor continued to timely make all payments due on the loan until the Aircraft was sold.
The trial court held a hearing over several days in May 2011, after which it entered judgment in favor of Regions. The trial court found that Debtor had breached the loan agreement and that the breach constituted a default, that Regions had disposed of the Aircraft in a commercially reasonable manner, and that Regions was entitled to recover a judgment for a deficiency in the amount of $1,642,771.91, plus pre-judgment interest in the amount of $945.15 per day for 859 days. Guarantors appealed.
The Court of Appeals affirmed in part and reversed in part. Regions I , 422 S.W.3d at 567. The Court of Appeals affirmed the trial court's conclusion that Debtor had breached the loan agreement and had defaulted by failing to maintain insurance on the Aircraft, that Regions had not waived the breach and default, and that Regions had not acted in bad faith. Id. The Court of Appeals, however, reversed the trial court's finding that Regions had sufficiently complied with the notice requirements of Tennessee Code Annotated sections 47-9-611 and -613, and concluded that Regions' sale of the Aircraft had not been commercially reasonable on this basis. Id. The court vacated the trial court's deficiency judgment and remanded the case to the trial court for further proceedings, including discovery, on the amount of the deficiency, if any, to which Regions was entitled under Tennessee Code Annotated section 47-9-626. Id. at 566–67. The court deemed all remaining issues pretermitted. Id. at 567.
On remand, no additional discovery was conducted and the trial court indicated that it would decide the case based upon the evidence previously introduced at trial, together with any additional evidence and deposition testimony already obtained but that the parties now wished to introduce. The parties were permitted to and did file proposed findings of fact and conclusions of law. On March 27, 2015, the trial court entered its "Findings of Fact, Conclusions of Law, and Judgment."1 The trial court concluded that Regions had met its burden to rebut the presumption under Tennessee Code Annotated section 47-9-626 and that Regions was entitled to recover a deficiency in the total amount of $1,210,511.51. Regions II , 2016 WL 1719325, at *4. Guarantors again appealed.
The Court of Appeals reversed. Id. at *1, *11. The Court of Appeals determined that, in order to rebut the presumption under Tennessee Code Annotated section 47-9-626, the burden was on Regions to prove that Guarantors could not have redeemed or purchased the collateral for an amount equal to the sum of the secured obligation, expenses, and attorney's fees had proper notice been provided. Id. at *10. The court further determined that Regions had failed to introduce any evidence to meet its burden of proof in this regard. Id. at *11. Accordingly, the Court of Appeals concluded that Regions had not rebutted the statutory presumption by presenting evidence that the sale of the Aircraft still would have yielded proceeds less than the sum of the secured obligation, expenses, and attorney's fees had proper notice been provided to Guarantors. Id. Therefore, Regions was not entitled to a deficiency. Id. The Court of Appeals further concluded that Guarantors lacked standing to seek any surplus pursuant to Tennessee Code Annotated section 47-9-625. Id. at *6–7.
Regions filed an application for permission to appeal pursuant to Rule 11 of the Tennessee Rules of Appellate Procedure. We granted the application.
This case involves the interpretation of a statute, which is a question of law subject to de novo review with no presumption of correctness. See Hardy v. Tournament Players Club at Southwind , 513 S.W.3d 427, 433 (Tenn. 2017). More particularly, it involves the application of a statutory presumption, which is a question of law, which we review de novo with no presumption of correctness. See Borner v. Autry , 284 S.W.3d 216, 219 (Tenn. 2009). We review the trial court's findings of fact following a bench trial de novo upon the record with a presumption of correctness, "unless the preponderance of the evidence is otherwise." Tenn. R. App. P. 13(d) ; Cross v. City of Memphis , 20 S.W.3d 642, 644–45 (Tenn. 2000). We review issues related to the admission or exclusion of evidence at trial, including the admission or exclusion of expert testimony, for an abuse of discretion. See Otis v. Cambridge Mut. Fire Ins. Co. , 850 S.W.2d 439, 442 (Tenn. 1992), on reh'g (Mar. 29, 1993).
This case involves a secured transaction governed by Article 9 of the Uniform Commercial Code ("UCC"), as adopted in Tennessee in its revised form effective July 1, 2001. Tenn. Code Ann. §§ 47-9-101 to -709; 2000 Tenn. Pub. Acts 2402–540. This Court previously has explained the scope of UCC Article 9:
Article 9 provides a comprehensive statutory framework governing the secured transaction process, from how a creditor perfects its security interest to how it forecloses on that interest. After default, a secured party may take possession of the collateral and may sell or otherwise dispose of it. Tenn. Code Ann. § 47-9-610(a) (2001). In so doing, "[e]very aspect of [the] disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable." Tenn. Code Ann. § 47-9-610(b) (2001).
Auto Credit of Nashville v. Wimmer , 231 S.W.3d 896, 899–900 (Tenn. 2007). In addition to this requirement of commercial reasonableness in the disposition of the collateral, UCC Article 9 sets forth mandatory requirements regarding the provision of notice. Tenn. Code Ann. § 47-9-611 ;2 Auto Credit of Nashville , 231 S.W.3d at 900.3
At this stage of the proceedings, it has been conclusively determined that Regions failed to comply with the notice requirements of Tennessee Code Annotated section 47-9-611 in its disposition of the Aircraft. See Regions I, 422 S.W.3d at 567. This triggered the "rebuttable presumption rule," as codified at Tennessee Code Annotated section 47-9-626. As codified, the rebuttable presumption rule provides:
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