Southern Developers & Earthmoving Inc. v. Caterpillar Financial Serv. Corp..

• Citation: 56 So.3d 56,73 UCC Rep.Serv.2d 605
• Decision Date: 23 February 2011
• Docket Number: Nos. 2D09–6011,2D10–5669.,s. 2D09–6011
• Court: Florida District Court of Appeals
• Parties: SOUTHERN DEVELOPERS & EARTHMOVING, INC., a Florida corporation; and R. Anthony Gill, a/k/a Ronald A. Gill, Appellants,v.CATERPILLAR FINANCIAL SERVICES CORPORATION, Appellee.

56 So.3d 56

73 UCC Rep.Serv.2d 605

SOUTHERN DEVELOPERS & EARTHMOVING, INC., a Florida corporation; and R. Anthony Gill, a/k/a Ronald A. Gill, Appellants,

v.CATERPILLAR FINANCIAL SERVICES CORPORATION, Appellee.

Nos. 2D09–6011

2D10–5669.

District Court of Appeal of Florida, Second District.

Feb. 23, 2011.

Joseph R. Fritz, Tampa, for Appellants.Nicolette C. Vilmos of Broad & Cassel, Orlando, for Appellee.VILLANTI, Judge.

Southern Developers & Earthmoving, Inc., and R. Anthony Gill, a/k/a Ronald A. Gill, appeal the final summary judgment entered in favor of Caterpillar Financial Services Corporation (CAT) in its action for a deficiency judgment under a promissory note and security agreement covering industrial earthmoving equipment that CAT sold to Southern and subsequently repossessed. Because CAT failed to prove the amount of the deficiency judgment to which it was entitled, summary judgment was improperly granted in its favor. Therefore, we reverse the final summary judgment and remand for further proceedings. This ruling requires us also to reverse the subsequent final judgment for attorney's fees entered in favor of CAT.

In 2003, Southern purchased five pieces of industrial earthmoving equipment from CAT. Southern executed a promissory note and security agreement as part of the purchase, and Gill signed a personal guaranty of the note. The following year, Southern allegedly breached the terms of the note by failing to make the payments as required. Based on the terms of the security agreement, CAT retook possession of the equipment. CAT subsequently sold four pieces of the equipment through a private sale and the remaining piece of equipment through an Internet auction.¹ When those sales did not produce funds sufficient to cover the amount due under the note, CAT sued Southern for its alleged breach of the note, and it sued Gill for his alleged breach of the personal guaranty.

CAT's amended complaint alleged that it had sold the repossessed equipment in a commercially reasonable manner but had recovered less than the amount of the debt owed by Southern. CAT therefore sought a deficiency judgment from Southern. In its answer, Southern specifically denied that the sale of the repossessed equipment had been done in a commercially reasonable manner, and it also raised this claim as an affirmative defense.

CAT subsequently filed a motion for summary judgment, in which it again asserted that it had sold the repossessed equipment in a commercially reasonable manner. In support of its motion, CAT filed the affidavit of a “Special Accounts Representative,” who alleged that proper notice was given to Southern and Gill of both of the intended private sales and the subsequent Internet auction. The affidavit also authenticated the various sale notices that were sent to both Southern and Gill and alleged again that the sales were all commercially reasonable. However, neither the affidavit nor the motion provided any details of the sales transactions themselves. CAT did not file any of the contracts or purchase orders relating to the sales, and it submitted nothing to establish what amount it obtained for each piece of repossessed equipment. Further, neither CAT's motion nor its affidavit included any facts concerning the general practices and methodology of selling used equipment in the industrial earthmoving equipment industry.

In response to CAT's motion for summary judgment, Southern filed Gill's affidavit in which he alleged that, based on his experience in owning and using industrial earthmoving equipment, sale of the repossessed equipment through private sales or Internet auctions was not a commercially reasonable practice in the industrial earthmoving equipment industry. Gill alleged that this type of equipment was more usually sold through public auctions specifically held for this purpose. Attached to Gill's affidavit was a letter from Richie Brothers Auctioneers, which indicated that Richie Brothers would have purchased the equipment for $730,000—an amount $22,589.40 more than what CAT had obtained through its private sale and Internet auction. This unsigned letter from Richie Brothers was not sworn or certified, nor was it otherwise authenticated in Gill's affidavit. Further, Gill alleged in his affidavit that the $730,000 figure from Richie Brothers was not a firm price for the equipment but rather was a “floor” below which the auction price for the equipment would not go.

Despite this apparent factual dispute concerning whether the sale of the repossessed equipment was commercially reasonable and despite the lack of any documentation from CAT concerning the details of the sales it conducted, the trial court granted final summary judgment in favor of CAT in the amount of $140,812. This figure is the amount of the debt less the amount recovered by CAT through its private sale and Internet auction less the $22,589.40 difference between CAT's recovery and the amount listed in the Richie Brothers' letter. Notably, the judgment contains no finding of fact as to whether either sale of the repossessed equipment was conducted in a commercially reasonable manner. Southern and Gill now seek review of this final judgment.

Under Article 9 of the Uniform Commercial Code, as codified in section 679.609(1), Florida Statutes (2006), a secured party, such as CAT, may take possession of collateral after a default by the debtor. The secured party then “may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.” § 679.610(1). However, if the secured party wishes to preserve its right to seek a deficiency judgment, the secured party is not at liberty to dispose of the repossessed collateral in any manner it wants. Instead, “[e]very aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable.” § 679.610(2). This rule is in place “ ‘to protect the debtor, because [it] help[s] prevent the creditor from acquiring the collateral at less than its true value or unfairly understating its value so as to obtain an excessive deficiency judgment.’ ” Burley v. Gelco Corp., 976 So.2d 97, 100 (Fla. 5th DCA 2008) (quoting Allen v. Coates, 661 So.2d 879, 884 (Fla. 1st DCA 1995)).

If a secured party elects to repossess and resell its collateral, the debtor is liable for any deficiency remaining after the sale as a matter of law. See § 679.608(1)(d); see also Weiner v. Am. Petrofina Mktg., Inc., 482 So.2d 1362, 1364 (Fla.1986). However, the amount of the deficiency judgment to which the secured party is entitled is a matter of fact, not law. To establish entitlement to a deficiency judgment in a certain amount, the secured party must show that its disposition of the collateral was commercially reasonable but nevertheless resulted in the recovery of an amount less than the amount of the secured debt. Burley, 976 So.2d at 101. Accordingly, if the debtor places the commercial reasonableness of the disposition of collateral “in issue,” the secured party has the burden to establish that every aspect of that disposition was commercially reasonable. See § 679.626(2); see also Weiner, 482 So.2d at 1364–65; Burley, 976 So.2d at 100. Alternatively, the secured party may concede that its disposition of the collateral was commercially unreasonable, introduce evidence to prove the fair market value of the collateral at the time of repossession, and allow the debtor an additional credit for the difference between the fair market value and the amount obtained by the secured party at the commercially unreasonable sale. See Weiner, 482 So.2d at 1364. As applicable to this case, “commercial reasonableness” is defined as a disposition “in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.” § 679.627(2)(c).

Here, CAT's pleadings and its affidavit in support of its motion for summary judgment specifically alleged that its sales of the repossessed equipment were commercially reasonable. Southern disputed the commercial reasonableness of the sales in its pleadings. Thus at the summary judgment hearing, the commercial reasonableness of the sales was in issue and, to be entitled to summary judgment in its favor, CAT was required to establish that it sold the repossessed equipment “in conformity with reasonable commercial practices among dealers” of...