Wilmington Trust Co. v. Conner

Decision Date26 March 1980
Citation415 A.2d 773
Parties28 UCC Rep.Serv. 900 WILMINGTON TRUST COMPANY, a Delaware Corporation, Plaintiff Below, Appellee, Cross-Appellant, v. Daniel B. CONNER, Jr., Defendant Below, Appellant, Cross-Appellee.
CourtSupreme Court of Delaware

Martin I. Lubaroff and Alesia Ranney-Marinelli, of Richards, Layton & Finger, and Elwyn Evans, Jr., Wilmington, for plaintiff-appellee, cross-appellant.

Douglas A. Shachtman, of Community Legal Aid Society, Inc., Wilmington, for defendant-appellant, cross-appellee.


HERRMANN, Chief Justice:

In this action to recover a deficiency judgment under the Delaware Uniform Commercial Code, 6 Del.C. § 9-502(2), 1 in an automobile repossession case, we are asked to decide: (1) whether the notice of resale of the automobile after repossession sent by the creditor to the debtor was defective under 6 Del.C. § 9-504(3); 2 (2) if so, whether the defective nature of the notice precludes the creditor from obtaining a deficiency judgment under the Code; and (3) whether the debtor, in his counterclaim under 6 Del.C. § 9-507(1), 3 is entitled to statutory damages.


On December 6, Daniel B. Conner, the defendant, entered into a conditional sales contract for the purchase of an automobile. The contract was assigned by the automobile dealer to the Wilmington Trust Company, the plaintiff. After failing to make four consecutive monthly installment payments, the defendant defaulted on the contract. Despite efforts to dispose of the vehicle, including advertising in a local newspaper, the defendant was unable to sell the vehicle or meet his obligations. Consequently, on August 22, the defendant voluntarily surrendered the vehicle to the plaintiff.

On August 24, the plaintiff sent to the defendant, by registered mail, written notice stating that the "present balance" of the defendant's account with the plaintiff was $4,013.09, and that unless payment was "made by September 4, * * * this unit (would) be sold in accordance with applicable law". This notice was received by the defendant on August 28.

The automobile was placed on the plaintiff's lot after repossession and was not sold until about 18 months later. The sale was private and the car was bought for $1,000.00.

The plaintiff brought suit in the Court of Common Pleas claiming that a deficiency was due and owing in the amount of $2,587.69. This amount was later reduced to $2,262.19. The defendant's answer alleged that the notice of resale was defective, that the sale was not commercially reasonable and, therefore, that the plaintiff was barred from collecting a deficiency judgment. The defendant also counterclaimed for statutory damages under § 9-507(1). Upon motion by the defendant, the Court of Common Pleas granted summary judgment in favor of the defendant. The Court held that a debtor was entitled to a statement in the notice of resale of the balance due on an installment sales contract. Since the figure in the notice did not reflect a refund credit of $654.61 for unearned finance charges and insurance premiums, as required by 5 Del.C. § 2908 4 and 5 Del.C. § 2906(g), 5 the Court of Common Pleas concluded that the notice was defective under 6 Del.C. § 9-504(3). 6 That Court further held that, pursuant to the line of Delaware authority represented by Commercial Credit Corporation v. Swiderski, Del.Super., 195 A.2d 546 (1963), the plaintiff was precluded from obtaining any deficiency judgment against the defendant due to the notice defect. In addition, the Court awarded the defendant $1,445.32 in statutory damages under § 9-507(1).

On appeal, the Superior Court reversed the judgment of the Court of Common Pleas. Although it accepted the latter Court's finding that the stated balance in the notice was unduly inflated because of the plaintiff's failure to credit the account with the unearned finance charges and insurance premiums, the Superior Court concluded that such figure is not required under § 9-504(3). Moreover, since the defendant could not show that he had been misled or frustrated in his attempts to redeem the vehicle by this alleged defect, the Superior Court held that the inaccurate balance was not a defect under § 9-504(3) for the purposes of the motion for summary judgment. The Superior Court did agree with the Court of Common Pleas, however, that the notice was defective, since the plaintiff failed to indicate in the notice whether the subsequent sale was to be public or private.

Nevertheless, the Superior Court found that under the line of contrary authority represented by Associates Financial Services Co., Inc. v. DiMarco, Del.Super., 383 A.2d 296 (1978), if the creditor-plaintiff could overcome the presumption that the value of the collateral equals the value of the debt it could collect a deficiency judgment. It also concluded that the award of statutory damages was invalid since the defendant had not shown that the collateral was a "consumer good" as required by § 9-507(1).

The defendant brought an appeal to this Court citing as error the holdings of the Superior Court that permitted the plaintiff to obtain a deficiency judgment if the specified conditions were met and that disallowed the award of statutory damages in favor of the defendant. The plaintiff cross-appealed from those portions of the Superior Court's decision that held that the notice was defective and that impliedly rejected § 9-507(1) as the debtor's exclusive remedy for dealing with a creditor's failure to comply with the notice provisions of § 9-504(3).


The defendant contends here that the notice provided him was defective for the following reasons: (1) the balance of the loan was overstated by $654.64; (2) the notice was received only five business days prior to the date after which a sale was to be made; (3) the plaintiff did not intend to sell the collateral quickly and thus, in retrospect, the notice period was unreasonable; and (4) the notice failed to explicitly specify whether the sale was to be public or private. Because of the conclusion we reach on the first of these arguments we need not decide any of the defendant's subsequent contentions.

Under the Uniform Commercial Code "reasonable notification" of the disposition must be given to the debtor. § 9-504(3). The Uniform Code, however, relegates the exact definition of "reasonable notification" to the individual states and, ultimately as a general rule, to their courts. See Delaware Study Comment, § 9-504(3). The purpose of the requirement of "reasonable notification" is threefold: (1) it gives the debtor the opportunity to exercise his redemption rights under § 9-506; 7 Camden National Bank v. St. Clair, Me.Supr., 309 A.2d 329 (1973); (2) it affords the debtor an opportunity to seek out buyers for the collateral, First National Bank & Trust Co. of Enid v. Holston, Okl.Supr., 559 P.2d 440 (1976); and (3) it allows the debtor to oversee every aspect of the disposition, thus maximizing the probability that a fair sale price will be obtained, Rushton v. Shea, D.Del., 423 F.Supp. 468 (1976). Any aspect of the notice that is contrary to these purposes necessarily prevents it from being "reasonable notification".

The Court of Common Pleas held that the plaintiff's failure to account in the notice for the rebate of unearned finance charges and insurance premiums constituted a defect in the notice. We agree. Certainly the insertion of an unduly inflated figure in the notice discourages and perhaps frustrates the attempts of the debtor to find another buyer or to exercise his redemption rights.

The plaintiff contends that § 9-504(3) does not require that the balance due be stated in the notice for a private sale since it only demands "reasonable notification of the time after which any private sale . . . is to be made." Therefore, it is argued, an error in the balance stated cannot be a defect in the notice under § 9-504(3). We cannot accept this conclusion. The adoption of this rationale would lead to the absurd conclusion that the notice of resale may contain misleading information of any kind so long as certain statutory catch words or phrases are also included. Moreover, whether § 9-504(3) requires that the balance due be placed in the notice of resale is tangential to the issue in question. The key issue is whether "reasonable notification" was given. We hold that this notice, which contained a stated balance that was inflated $654.61 above the amount actually owed, was not "reasonable notification".

The plaintiff argues that it was impossible to give the defendant a net balance, since the finance charges and insurance premiums were constantly accruing, and the plaintiff was unable to predict when the collateral would be sold. This argument is unavailing. Had the plaintiff provided the defendant, for example, with a figure as of September 4 with an addendum reasonably and accurately stating a method by which debtor could compute the accruing interest and insurance premiums, this issue might have been decided otherwise. But, in the light of the plaintiff's statutory duty under 5 Del.C. §§ 2906(g) and 2908 to rebate unearned finance charges and insurance premiums, a blatant assertion in the notice that the total amount under the contract was due, without reference to such possible rebates, was manifestly unreasonable.

We conclude, therefore, that the notice of resale sent by the plaintiff to the defendant was defective under § 9-504(3).


Having concluded that the notice of resale was defective, we turn to the effect this conclusion has on the plaintiff's ability to collect a deficiency judgment under the Uniform Commercial Code. A quick resumee of the governing statutory provisions, set forth at length, supra, is in order: The creditor's initial right to collect a deficiency judgment is established by § 9-502(2): "If the security agreement secures an indebtedness, the secured party...

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