Weiner v. American Petrofina Marketing, Inc.

• Decision Date: 06 February 1986
• Docket Number: No. 66375,66375
• Citation: 11 Fla. L. Weekly 47,42 U.C.C.Rep.Serv. 810,482 So.2d 1362
• Parties: 11 Fla. L. Weekly 47, 42 UCC Rep.Serv. 810 Herbert WEINER, Petitioner, v. AMERICAN PETROFINA MARKETING, INC., Respondent.
• Court: Florida Supreme Court

Page 1362

482 So.2d 1362

11 Fla. L. Weekly 47, 42 UCC Rep.Serv. 810

Herbert WEINER, Petitioner, v. AMERICAN PETROFINA MARKETING, INC., Respondent.

No. 66375.

Supreme Court of Florida.

Feb. 6, 1986.

Neil G. Frank of Frank and Flaster, Fort Lauderdale, for petitioner.

W. Frank Greenleaf, of Welbaum, Zook, Jones and Williams, Miami, for respondent.

EHRLICH, Justice.

This is a petition to review a decision of the Fourth District Court of Appeal, reported as American Petrofina, Inc. v. Weiner, 460 So.2d 527 (Fla. 4th DCA 1984). The district court certified that its decision was in direct conflict with Florida First National Bank v. Martin, 449 So.2d 861 (Fla. 1st DCA 1984). We have jurisdiction. Art. V, § 3(b)(4), Fla. Const.

The question presented concerns the availability of a deficiency judgment to a secured party when he has disposed of collateral in a commercially unreasonable manner in violation of section 679.504(3), Florida Statutes (1983). The district court found that such failure by the secured party does not preclude him from obtaining a deficiency judgment as a matter of law. We agree.

In September 1982, Ray's Tires Co. defaulted on an obligation to respondent. Respondent repossessed the collateral which consisted of Goodyear automobile tires and tubes, pursuant to the valid security agreement with Ray's Tires Co. Respondent gave petitioner adequate notice that it would dispose of the collateral by private sale. Respondent returned some of the collateral to Goodyear Tire Company and sold that which remained to its wholly owned subsidiary. After disposition of the collateral there remained a deficiency of $133,902.44 plus interest owing to respondent.

Respondent sued petitioner for a deficiency judgment based upon a guaranty agreement signed by petitioner in favor of Ray's Tires Co. The trial court entered a final judgment denying respondent a deficiency, determining that respondent had not disposed of the collateral in a commercially reasonable manner as required by section 679.504(3). The Fourth District Court of Appeal reversed the trial court's decision, relying on Bank of Oklahoma v. Little Judy Industries, Inc., 387 So.2d 1002 (Fla. 3d DCA 1980), which held that a commercially unreasonable disposition of collateral did not foreclose a creditor from receiving a deficiency judgment.

The Uniform Commercial Code provides that, unless otherwise agreed, a debtor is responsible for any deficiency after disposal of the collateral: "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." § 679.504(2), Fla.Stat. (1983). Thus, unlike the common law where deficiency judgments were disfavored, the code expressly provides for them in conjunction with security agreements. See Turk v. St. Petersburg Bank & Trust Co., 281 So.2d 534 (Fla. 2d DCA 1973).

Although general principles of law and equity are applicable to supplement the provisions of the code, they will not prevail when in conflict with code provisions. ¹

Since deficiency judgments are specifically sanctioned by the code, the next inquiry is whether the code limits their application. Section 679.504(3) requires that when collateral is disposed of by a secured party, "every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable." The code nowhere provides that the creditor loses his right to a deficiency judgment if he does not act in a commercially reasonable manner. See J. White and R. Summers, Handbook of the Law Under the Uniform Commercial Code, § 26-15 at 1127 (2d ed. 1980). However, the code does supply the debtor with a remedy. Section 679.507(1) states:

If it is established that the secured party is not proceeding in accordance with the provisions of this part disposition may be ordered or restrained on appropriate terms or conditions. If the disposition has occurred the debtor or any person entitled to notification ... has a right to recover from the secured party any loss caused by a failure to comply with the provisions of this part.

See Ayares-Eisenberg Perrine v. Sun Bank, 455 So.2d 525 (Fal. 3d DCA 1984). If the collateral is disposed of in a commercially unreasonable manner, the debtor may not receive as great a credit against his debt as if the sale had been conducted in a commercially reasonable manner. The damages the debtor will suffer are equal to the difference between the price obtained in a commercially unreasonable sale and the fair market value of the collateral i.e. what it should have brought in a commercially reasonable sale. See White and Summers, supra, § 26-15 at 1133. Thus, the rights of the debtor can be adequately protected by determining the fair market value of the collateral at time of repossession and awarding the debtor an additional credit in the amount of the difference between the fair market value of the collateral as determined and the amount the collateral brought in a commercially unreasonable sale.

This rule is in accord with the spirit of the Uniform Commercial Code and its disfavor of penalties. Section 671.106, Florida Statutes states:

The remedies provided by this code shall be liberally administered to the end that the aggrieved party may be put in as good a...