Tanenbaum v. Economics Laboratory, Inc.
| Decision Date | 03 March 1982 |
| Docket Number | No. C-806,C-806 |
| Citation | 628 S.W.2d 769,33 U.C.C.Rep. 124 |
| Parties | 33 UCC Rep.Serv. 124 Richard TANENBAUM, et al., Petitioners, v. ECONOMICS LABORATORY, INC., Respondents. |
| Court | Texas Supreme Court |
Roseman & Wiseman, Ralph David Stekin, Jr., and Terry G. Wiseman, Houston, for petitioners.
Glassman & Glassman, S. Mitchell Glassman, Houston, for respondents.
This is an appeal from a take nothing summary judgment in which the creditor sued for a deficiency judgment following default on a secured note and repossession of the collateral. The court of civil appeals reversed the trial court and remanded for trial. 620 S.W.2d 839. We reverse the judgment of the court of civil appeals and affirm the judgment of the trial court.
The sole issue before us is whether the retention of collateral in a secured transaction, without notice to the debtor, bars a suit for deficiency. Economics Laboratory, Inc., (Economics) sold certain items of commercial laundry equipment to Richard Tanenbaum (Tanenbaum) for use in his restaurant. The equipment was sold under two conditional sales contracts and Economics retained a security interest. The equipment did not function properly and after approximately two years Tanenbaum asked Economics to take possession of the equipment and credit his account in full. Economics took possession of the equipment and, after deciding that it was not economically feasible to repair the equipment, scrapped it. Tanenbaum was not given any notice of Economics intention to dispose of the equipment. Sections 9.504 and 9.505 1 control our disposition of this case. Section 9.504 provides in pertinent part:
(a) A secured party after default may sell, lease or otherwise dispose of any or all of the collateral in its then condition or following any commercially reasonable preparation or processing. Any sale of goods is subject to the chapter on Sales (Chapter 2)....
(b) If the security interest secures an indebtedness, the secured party must account to the debtor for any surplus, and, unless otherwise agreed, the debtor is liable for any deficiency....
(c) 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, if he has not signed after default a statement renouncing or modifying his right to notification of sale.... 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.
1972 Official U.C.C. § 9-504, comment provides in pertinent part:
... Although public sale is recognized, it is hoped that private sale will be encouraged where, as is frequently the case, private sale through commercial channels will result in higher realization on collateral for the benefit of all parties. The only restriction placed on the secured party's method of disposition is that it must be commercially reasonable....
Section 9.505 states in pertinent part as follows:
(b) In any other case involving consumer goods or any other collateral a secured party in possession may, after default, propose to retain the collateral in satisfaction of the obligation. Written notice of such proposal shall be sent to the debtor if he has not signed after default a statement renouncing or modifying his rights under this subsection. In the case of consumer goods no other notice need be given. In other cases notices shall be given to any other secured party who has a security interest in the same collateral and who has duly filed in the office of the Secretary of State or the County Clerk ... a financing statement indexed in the name of the debtor or from whom the secured party has received (before sending his notice to the debtor or before the debtor's renunciation of his rights) written notice of a claim of an interest in the collateral.
The laundry equipment involved in this case is not the type of collateral falling within notice exceptions of Section 9.504. Therefore, if Economics was going to use the provisions of Section 9.504, notice was necessary. Despite the fact that notice was required, the court of civil appeals, in reversing the trial court, cited as authority its prior opinion in Roylex, Inc. v. E. F. Johnson...
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