Stone v. Cloverleaf Lincoln-Mercury, Inc.

• Decision Date: 26 May 1989
• Docket Number: INC,LINCOLN-MERCUR
• Citation: 546 So.2d 388
• Parties: 10 UCC Rep.Serv.2d 618 William A. STONE v. CLOVERLEAF, et al. 87-1039.
• Court: Alabama Supreme Court

Page 388

546 So.2d 388

10 UCC Rep.Serv.2d 618

William A. STONE v.CLOVERLEAF LINCOLN-MERCURY, INC., et al.

87-1039.

Supreme Court of Alabama.

May 26, 1989.

Howard Belser, Jr., Decatur, for appellant.

Steven E. Haddock and Jerry Knight of Hardwick, Knight & Haddock, Decatur, for appellees.

KENNEDY, Justice.

William A. Stone appeals from a judgment in favor of Cloverleaf Lincoln-Mercury, Inc.("Cloverleaf"), and Ford Motor Credit Company("FMCC").We affirm.

Cloverleaf and FMCC sued Stone on May 22, 1985, to recover a deficiency claimed after the voluntary repossession and resale of Stone's 1984Lincoln Mark VII automobile, which had been sold to him by Cloverleaf and financed by FMCC.

Following a nonjury trial, the judge entered a judgment against Stone in the amount of $17,200.00.

Stone purchased the automobile from Cloverleaf on August 27, 1984.He entered into a retail installment sales contract with Cloverleaf in which the dealer agreed to finance the balance of the purchase price, after a trade in, of $27,148.60.The contract provided for 60 consecutive monthly payments in the amount of $663.12, beginning on October 11, 1984.Cloverleaf took a purchase money security interest in the automobile; it then assigned the contract and security interest to FMCC and guaranteed partial payment in the event of default by Stone.

After making four payments, Stone defaulted in February 1985.On April 22, 1985, he contacted FMCC, and, with his consent, FMCC repossessed the car that same day.

Subsequent to the voluntary repossession, FMCC sent Stone, by certified mail, a written notice dated April 22.The notice confirmed the voluntary repossession and informed Stone that the automobile could be redeemed within ten days by payment of the amount due set out in the notice.Failure to redeem, according to the notice, would result in a private sale at any date after the expiration of the ten-day redemption period.

The notice was mailed to Stone's address shown on the installment sales contract.The postal service, on April 23, 1985, May 2, 1985, and May 8, 1985, left Stone notices that it was holding certified mail for him.Stone never picked up the letter.On May 9, 1985, the letter was returned to FMCC marked "unclaimed" and "postage due $.20."

FMCC sold the car on May 8, 1985, at the Sand Mountain Auto Auction in Boaz, Alabama, for $14,370.00.After application of the sale proceeds to the balance owing by Stone, FMCC computed an $11,874.96 deficiency.In addition, Cloverleaf, pursuant to its partial guaranty agreement, claimed that Stone owed it $3,315.80, the amount that it had paid FMCC.

At trial, the court, sitting without a jury, heard ore tenus evidence and awarded Cloverleaf and FMCC a judgment in the amount of $17,200.00, which reflected the claimed deficiency and attorney fees.

On appeal, Stone first argues that the notice of sale was deficient because the notice sent by certified mail did not have sufficient postage.Although not expressly stating so, Stone apparently contends that this alleged error would preclude FMCC and Cloverleaf from recovering their deficiency.

Stone admitted his default, but alleged at trial that the sale was conducted without notice and was not accomplished in a commercially reasonable manner.He filed no counterclaim for damages arising out of any purported lack of notice or out of the unreasonableness of the sale.

Neither insufficient notice of sale nor commercially unreasonable behavior by a secured creditor in accomplishing a sale constitutes an absolute bar to recovery of a deficiency.Rather, if either is accompanied by the secured creditor's bad faith in disposing of the collateral, and the conduct causes the debtor to suffer a loss, then the debtor is entitled to set off the loss against the total deficiency.First National Bank of Dothan v. Rikki Tikki Tavi, Inc., 445 So.2d 889, 890(Ala.1984);First Alabama Bank of Montgomery v. Parsons, 426 So.2d 416, 418-19, 421-22(Ala.1982);Valley Mining Corp. v. Metro Bank, 383 So.2d 158, 163-65(Ala.1980).

In the trial court, Stone claimed no loss as a result of the alleged defect in the notification of sale.Even assuming, arguendo, that no notice, or that insufficient notice, was given, such a defect would not provide Stone with an absolute defense to the deficiency.At best, he would be entitled only to recover damages in the nature of a set off against the total deficiency.

Having established what Stone may have had resulting from a defective notice, we must determine whether the notice was in fact deficient.We determine that it was not.

Section 7-9-504(3), Code of Alabama(1975), requires that a secured party give notice to a defaulting party prior to disposing of collateral.Failure to transmit notice, or transmission of insufficient notice, is in and of itself commercially unreasonable behavior.Parsons, supra, 426 So.2d at 418.

In the instant case, even though FMCC's notice was mailed with insufficient postage, the postal service attempted delivery to Stone on three separate occasions.Notices of the certified letter were left at Stone's address on April 23, May 2 and May 8, 1985(although it does appear that if Stone had claimed the...