Simmons Machinery Co., Inc. v. M & M Brokerage, Inc., s. 79-861

• Decision Date: 02 October 1981
• Docket Number: Nos. 79-861,79-889 and 79-891,s. 79-861
• Citation: 409 So.2d 743
• Parties: 33 UCC Rep.Serv. 419 SIMMONS MACHINERY COMPANY, INC. v. M & M BROKERAGE, INC. M & M BROKERAGE, INC. v. SIMMONS MACHINERY COMPANY, INC. CREDIT ALLIANCE CORPORATION v. M & M BROKERAGE, INC.
• Court: Alabama Supreme Court

Page 743

409 So.2d 743

33 UCC Rep.Serv. 419

SIMMONS MACHINERY COMPANY, INC. v. M & M BROKERAGE, INC.

M & M BROKERAGE, INC. v. SIMMONS MACHINERY COMPANY, INC.

CREDIT ALLIANCE CORPORATION v. M & M BROKERAGE, INC.

Nos. 79-861, 79-889 and 79-891.

Supreme Court of Alabama.

Oct. 2, 1981.

Rehearing Denied Feb. 5, 1982.

William H. Mills of Redden, Mills & Clark in No. 79-861, C. Stephen Trimmier of Trimmier & Hartman in No. 79-889, Charles L. Robinson and Patricia Clotfelter of Johnston, Barton, Proctor, Swedlaw & Naff, Birmingham, in No. 79-891, for appellants.

C. Stephen Trimmier of Trimmier & Hartman in No. 79-861, William H. Mills of Redden, Mills & Clark in No. 79-889, C. Stephen Trimmier of Trimmier & Hartman, Birmingham, in No. 79-891, for appellees.

ADAMS, Justice.

These consolidated appeals come to us from the Circuit Court for Jefferson County where they were tried together before a jury. This litigation arose out of disputed commercial transactions between the parties. Due to the numerous issues raised, each appeal will be considered separately.

I

SIMMONS MACHINERY CO., INC. v. M & M BROKERAGE, INC.

This appeal by Simmons Machinery Co., Inc. (Simmons), raises numerous issues arising out of an adverse judgment against it in favor of M & M Brokerage, Inc. (M & M). M & M was engaged in the brokerage of coal and in coal mining at times pertinent to this litigation. Simmons is a dealer in heavy machinery. Credit Alliance Corporation (Credit Alliance) is a finance company. M & M commenced an action against Simmons and Credit Alliance on June 28, 1977. The disputes that form the bases of M & M's complaint arise out of two transactions. One involves M & M's purchase of a drill from Simmons. The other involves a dragline purchased by M & M which was sold originally by Simmons. The dragline installment purchase contract was assigned at one time to Credit Alliance.

M & M's complaint against Simmons and Credit Alliance alleged various causes of action. Those pertinent to the issues raised by this appeal are causes of action alleging that Simmons converted the drill and failed to account to M & M for the proceeds of its sale. M & M alleged also that both Simmons and Credit Alliance failed to satisfy a recorded security interest in the dragline. The trial court, in its pre-trial order of September 27, 1979, granted summary judgment in favor of M & M against Simmons on the issue of liability for the alleged conversion of the drill. By the same pretrial order, summary judgment on the issue of liability was granted in favor of M & M against Simmons and Credit Alliance for alleged failure to satisfy the recorded security interest in the dragline. Except for the statutory penalty of $100.00 provided in Code 1975, § 7-9-404(1), for failure to file a termination statement by a secured party, the other issues of damages were submitted to the jury. The jury returned a verdict in the amount of $23,000.00 on M & M's conversion claim against Simmons. No other awards were returned by the jury. Simmons's counterclaim against M & M for breach of warranty of title on a drill traded to it by M & M was dismissed at the close of evidence pursuant to M & M's motion for a directed verdict.

After our review of the issues raised by the parties, we find no error in the action of the trial court or in the jury's verdict. We, therefore, affirm the judgment. We will consider separately the issues raised by each transaction.

The Drill

Summary Judgment

M & M purchased a new Drill Tech drill from Simmons on March 2, 1976, for a purchase price of $175,000.00. M & M received a credit of $41,000.00 toward the purchase price on its trade-in of a Chicago Pneumatic drill. The remainder of the purchase price M & M financed by executing an installment payment conditional sales contract and security agreement. The sales contract and security agreement were assigned by Simmons with recourse to Alabanc Financial Corporation (Alabanc).

Eventually, M & M defaulted on its payments. Alabanc, now the secured party, sent M & M a letter (infra) on November 16, 1976, demanding that M & M's account be brought current immediately and threatening resale of the drill if it was not.

M & M made no additional payments and apparently by agreement with Simmons, M & M allowed it to obtain possession of the drill on December 2, 1976. Simmons was not the secured party at the time it obtained the drill from M & M. On December 22, 1976, Alabanc reassigned M & M's purchase contract for the drill to Simmons. Simmons sold the drill on that same day to a third party at a private sale for $140,000.00. At the time of the sale the principal and interest due on the contract totaled $133,715.21. The entire balance of the sales price Simmons allocated to the costs and expenses of collection, repossession, and resale. Except for the letter from Alabanc of November 16, 1976, M & M received no further purported notice concerning the intended disposition of the drill.

In its pre-trial order of September 27, 1979, the trial court ruled that M & M had not waived its right to notice of intended disposition of the collateral by the secured party in interest, provided by Code 1975, § 7-9-504(3), and that the purported "notice" provided by Alabanc's letter of November 16, 1976, was insufficient to satisfy the same section of our code. Accordingly, the trial court entered summary judgment on the issue of liability against Simmons for conversion of the drill.

Simmons first argues that the trial court erred in holding that M & M had not waived its right to notice of the intended disposition of the drill. Whether a debtor can waive its right to notice under Code 1975, § 7-9-504(3), after default, previously has not been decided by this court. In essence, Simmons contends that M & M waived its right to notice by allegedly agreeing after default that if the arrearage was not paid by a certain date, the drill could be sold and the proceeds applied to liquidate the obligation.

Although the recently enacted amendments (Acts 1981, No. 81-312) ¹ to § 7-9-504 and other sections of Article 9 of our Uniform Commercial Code expressly allow a debtor to waive his right to notice after default, the present effective section is silent about this issue. The current § 7-9-504(3) 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.

Not all courts are in agreement as to whether a debtor may waive his right to notice under U.C.C. 9-504(3) after default. Some courts prohibit such a waiver. Hall v. Owen County State Bank, Ind.App., 370 N.E.2d 918 (1978). Other states allow a post-default waiver. Nelson v. Monarch Investment Plan of Henderson, Inc., 452 S.W.2d 375 (Ky.1970). Although our present § 7-9-504(3) does not specifically allow a post-default waiver of notice by a debtor, we are of the opinion that the better position on this issue is to allow such a waiver. We are mindful that a default debtor's right to notice of the intended disposition of the secured collateral is one of the most important rights affording a debtor protection of his interest in the secured collateral under the U.C.C. Accordingly, we hold that a post-default waiver by a debtor of his right to notice under § 7-9-504(3) can be made where the debtor knowingly and specifically agrees to waive his right to such notice. We reject the reasoning of Nelson v. Monarch Investment Plan of Henderson, Inc., supra, that recognizes an implicit waiver by the act of a debtor returning the collateral to the secured party and stating he did not want the collateral returned.

Having determined that a debtor can waive his right to notice under § 7-9-504(3), we now turn to the question of whether M & M effected a waiver of its right. The facts as alleged by Simmons show at the most that M & M voluntarily We find no inconsistency between M & M's act of agreeing to a surrender and sale of the drill if necessary, and M & M's insistence of its right to notice of disposition in the event M & M could not redeem the drill. The importance of the notice requirement of § 7-9-504(3) has been noted by our Court of Civil Appeals:

relinquished the drill to Simmons with the intention of either redeeming it, or having it sold and the proceeds applied to the outstanding debt. These facts are insufficient to constitute a waiver. Even under the cases cited by Simmons as supporting its position, the instant facts fail to show a sufficient manifestation of intent to waive one's right to notice under U.C.C. 9-504(3). Gavin v. Washington Post Employees Federal Credit Union, 397 A.2d 968 (D.C.Cir.1979); Citizens State Bank v. Sparks, 202 Neb. 661, 276 N.W.2d 661 (1979); McKee v. Mississippi Bank & Trust Company, 366 So.2d 234 (Miss.1979); Grant County Tractor Co. v. Nuss, 6 Wash.App. 866, 496 P.2d 966 (1972).

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