Security Federal Sav. & Loan v. Prendergast, 18128

• Decision Date: 27 June 1989
• Docket Number: No. 18128,18128
• Citation: 775 P.2d 1289,1989 NMSC 44,108 N.M. 572
• Parties: , 9 UCC Rep.Serv.2d 1400 SECURITY FEDERAL SAVINGS & LOAN, a savings and loan association, Plaintiff-Appellee, v. Robert and Linda PRENDERGAST, Defendants-Appellants.
• Court: New Mexico Supreme Court

Page 1289

775 P.2d 1289

108 N.M. 572, 9 UCC Rep.Serv.2d 1400

SECURITY FEDERAL SAVINGS & LOAN, a savings and loan

association, Plaintiff-Appellee, v. Robert and Linda PRENDERGAST, Defendants-Appellants.

No. 18128.

Supreme Court of New Mexico.

June 27, 1989.

[108 N.M. 573] Turpen, Cannain & Merchant, Lester C. Cannain, Albuquerque, for defendants-appellants.

Alan R. Wilson, Albuquerque, for plaintiff-appellee.

OPINION

SCARBOROUGH, Justice.

This suit arises out of the sale of secured collateral under Article 9 of the Uniform Commercial Code after default on a promissory note. Defendants-appellants, Robert and Linda Prendergast, claim the sale of the collateral was commercially unreasonable and appeal the granting of a deficiency judgment to plaintiff-appellee, Security Federal Savings & Loan (Security). We affirm.

In 1983, the Prendergasts borrowed $8,150.63 from Security Federal Savings & Loan and signed a promissory note giving Security a security interest in, among other things, a "1976 Huntsman 23 foot mini-mobile home." About three years later, the Prendergasts defaulted on the note and voluntarily gave possession of the mobile home to Security. Security then notified the Prendergasts that it intended to dispose of the mobile home by private sale some time after April 13, 1987. For the purposes of arranging a sale, Security placed the vehicle on the premises of a dealer in used autos, Triangle Auto Sales, where Triangle's customers could view repossessed vehicles and make written offers to purchase them. Security did not advertise the vehicle for sale.

On May 28, 1987, Security sold the 1976 Huntsman for $2,000, leaving a deficiency balance on the note of $4,286.02. The Prendergasts failed to pay any part of the deficiency and Security brought suit to collect it. At trial, the Prendergasts argued that Security had failed to comply with applicable provisions of the New Mexico Uniform Commercial Code concerning the disposal of repossessed collateral. The trial court found, however, that Security had given sufficient notice to the Prendergasts of the impending private sale and had sold the collateral in a commercially reasonable manner despite the lack of advertising. The district court awarded Security the amount of the deficiency, plus interest and reasonable attorney fees.

The issue raised on appeal is whether the sale was commercially reasonable when the vehicle was never advertised for sale.

Under the Uniform Commercial Code every aspect of the disposition of secured collateral must be commercially reasonable. NMSA 1978, Sec. 55-9-504(3) (Repl.Pamp.1987); Clark Leasing Corp. v. White Sands Forest Prods., Inc., 87 N.M. 451, 535 P.2d 1077 (1975). Section 55-9-504 places upon the creditor the good faith duty to the debtor to use reasonable means to see that a reasonable price is received for the collateral. Clark Leasing Corp., 87 N.M. at 454, 535 P.2d at 1080. The determination of commercial reasonableness will turn on the particular facts of each case, Villella Enterprises, Inc. v. Young, 108 N.M. 33, 35, 766 P.2d 293, 295 (1988), and where the evidence concerning commercial reasonableness is contradictory, the issue is a question of fact. Clark Leasing Corp., 87 N.M. at 454, 535 P.2d at 1080; Richardson Ford Sales, Inc. v. Johnson, 100 N.M. 779, 786, 676 P.2d 1344, 1351 (Ct.App.1984). The appellate issue is whether there is substantial evidence to support the finding.

In this appeal, however, the Prendergasts do not posture their argument in terms of a lack of substantial evidence. Indeed, a transcript of the proceedings before the trial court and the trial exhibits have not been provided for our review.¹ We have no idea what evidence may have been presented to the trial court concerning the method and manner of the private sale in question, other than the fact that customers of a certain dealer in used automobiles were somehow able to view the repossessed vehicle and submit written offers. Only the official court record, which includes the trial court's findings of fact and conclusions of law, are before us. Accordingly, our review is more limited than normally would be the case, and we focus solely on whether the lack of advertising is determinative.

Advertising, a form of notice to the public, may be an important factor in the commercial reasonableness of any sale. In the public sale of collateral to the highest bidder at a particular time and place, adequate notice to a relevant public is essential. See Villella Enterprises, 108 N.M. at 37, 766 P.2d at 297; see also Foster v. Knutson, 84 Wash.2d 538, 544, 527 P.2d 1108, 1114 (1974) (en banc) (setting standards for conducting a public sale). Advertising may even play an important role in certain private sales, e.g., Piper Acceptance Corp. v. Yarbrough, 702 F.2d 733 (8th Cir.1983) (invitation for bids placed in a monthly trade publication); Ford Motor Credit Co. v. Solway, 825 F.2d 1213 (7th Cir.1987) (advertisement of upcoming wholesale auction of automobile inventory sent to other dealers), although we see no reason why this should always be the case. Cf., Trimble v. Sonitrol of Memphis, Inc., 723 S.W.2d 633 (Tenn.Ct.App.1986) (reliance upon personal contacts within industry); Hall v. Owen County State Bank, 175 Ind.App. 150, 370 N.E.2d 918 (1977) (sale privately negotiated with used car and truck dealer); Swanson v. May, 40 Wash.App. 148, 697 P.2d 1013 (1985) (farm equipment marketed by locating it next to large "For Sale" sign bordering highway). Accord Richardson Ford Sales, 100 N.M. at 785-88, 676 P.2d at 1350-53. Rather than adequate notice to a relevant public of an impending public sale, notice calculated to achieve competitive bidding, the commercial...