JAMES TALCOTT INC v REYNOLDS

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No. 12756 I N THE SUPREME COURT O THE STATE O M N A A F F OTN 19 74 JAMES TALCOTT, I N C . , a New York C o r p o r a t i o n , P l a i n t i f f and A p p e l l a n t , MURRY REYNOLDS, d / b / a REYNOLDS & SON, Defendant and Respondent. Appeal from: D i s t r i c t Court o f t h e F o u r t h J u d i c i a l D i s t r i c t , Honorable Edward T. D u s s a u l t , Judge p r e s i d i n g . Counsel o f Record: For Appellant : McGarvey, M o r r i s o n , Hedrnan and Moore, K a l i s p e l l , Montana James D. Moore a r g u e d , K a l i s p e l l , Montana F o r Respondent : Alex C. Morrison a r g u e d , P l a i n s , Montana Submitted : Decided: Filed : BEC 1 ? 1474 September 1 7 , 1974 OEc f 8 1974 M r . J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n o f t h e Court. P l a i n t i f f , James T a l c o t t , I n c . , a N e w York c o r p o r a t i o n , F l a t h e a d County, b r o u g h t t h i s a c t i o n i n t h e d i s t r i c t c o u r t , / t o recover a d e f i c i e n c y judgment a g a i n s t d e f e n d a n t Murry R e y n o l d s . The j u r y h e l d i n f a v o r o f defendant and p l a i n t i f f a p p e a l s . On May 3 , 1966, d e f e n d a n t p u r c h a s e d a m o u n t a i n l o g g e r from S t a r Equipment Company i n M i s s o u l a , Montana. A mountain logger i s a device w i t h f o u r l a r g e tires, hinged i n t h e middle a n d a winch i n t h e b a c k . I t s p u r p o s e i s t o s k i d l o g s from t h e l o c a t i o n t h e y are f e l l e d t o a l a n d i n g , where t h e y c a n be l o a d e d onto a truck. To f i n a n c e t h e p u r c h a s e d e f e n d a n t e x e c u t e d a c o n d i t i o n a l s a l e s c o n t r a c t and a n o t e i n f a v o r o f p l a i n t i f f . The n o t e re- q u i r e d d e f e n d a n t t o make 39 m o n t h l y i n s t a l l m e n t s o f $426.96, and a f i n a l i n s t a l l m e n t o f $427.08, f o r a t o t a l c o n t r a c t p r i c e o f $17,078.52. The c o n d i t i o n a l s a l e s c o n t r a c t c o n t a i n e d a c l a u s e giving p l a i n t i f f the r i g h t t o declare a l l the installments imm e d i a t e l y d u e and p a y a b l e upon a n y d e f a u l t by d e f e n d a n t . Defendant took p o s s e s s i o n of t h e machine, completed t h e f i r s t f o u r payments b u t f a i l e d t o make t h e f i f t h . I n s t e a d of demanding t h a t a l l payments be i m m e d i a t e l y made, p u r s u a n t t o t h e d e f a u l t c l a u s e , p l a i n t i f f chose t o g r a n t an extension. During t h e n e x t f o u r y e a r s , when t h e c o n t r a c t s h o u l d h a v e been p a i d i n f u l l , d e f e n d a n t was g r a n t e d a t o t a l o f t e n e x t e n s i o n s b u t o n l y 24 o f t h e r e q u i r e d 40 payments were made. On November 1 8 , 1969, d e f e n d a n t made a s i n g l e payment. P l a i n t i f f t h e n n o t i f i e d d e f e n d a n t t h a t t h e n e x t payment would b e d u e i n December and r e q u e s t e d d e f e n d a n t t o n o t i f y him i f t h e payment c o u l d n o t b e made. Defendant d i d n o t respond t o t h i s l e t t e r a n d no o t h e r payments were e v e r made. Defendant t h e n attempted t o s e l l t h e machine t o s e t t l e t h e a c c o u n t b u t no i n t e r e s t e d b u y e r could be found. On June 29, 1970, some eight months after the last payment had been made, plaintiff wrote a letter to defendant stating that a representative from Lynnwood Equipment Company would pick up the machine and transport it to the Seattle area where it would be sold. In the early part of August 1970, defendant delivered the machine to Lynnwood's agent who transported it to the Seattle area where it was prominently displayed on Lynnwood's lot. After nearly two months of futile efforts directed toward selling the machine, plaintiff, on September 21, 1970, wrote to defendant advising him that Lynnwood was unable to sell the machine and recommending the machine be sold at auction in the latter part of October 1970. Plaintiff also requested defend- ant to contact him if this method of selling the machine was not acceptable. Again, defendant did not respond, so the following letter was written: "Mr. Murry Reynolds dba REYNOLDS & SON COMPANY P. 0 Box 1434 . Trout Creek, Montana 59874 October 13, 1970 Re: Account No. 3520 Dear Mr. Reynolds: Since you have not responded to our letter of September 21, we have authorized the sale of the mountain logger by Murphy Auctions, 757 Main Street, Edmonds, Washington. The equipment will be sold to the highest bidder on Friday, October 30, 1970. Very truly yours, JAMES TALCOTT, INC. R. W. Stotts, Jr. Credit Department On October 30, 1970, the mountain logger was sold by Murphy Auctions for $2,600. Plaintiff deducted the $2,000 less the expenses of the sale from the defendant's account and sued to recover the deficiency. Trial was held and the jury returned a verdict in favor of defendant. Plaintiff's motions for a directed verdict and for a judgment notwithstanding the verdict were denied. Three issues have been set forth for consideration: 1. Was the sale of the mountain logger commercially reasonable? 2. Did plaintiff comply with the notice of sale pro- visions of the Uniform Commercial Code? 3. Is plaintiff barred from securing a deficiency judg- ment if he failed to comply with the notice of sale provisions of the Uniform Commercial Code? In considering issue one, the pertinent provision of the Uniform Commercial Code is set forth. Section 87k-9-504, R.C.M. 1947, provides: " (1) 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) * * * "(2) 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. * * * "(3) 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 includinq 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 notitication ot the time atter whlch any prlvate sale or other lntended dlsposltion is to be made shall be sent by the secured party to the debtor * * *.I1 (Emphasis supplied) . The trial transcript reveals that Murphy Auctions is a major auctioneering outlet through which Lynnwood Equipment Company had transacted business on several occasions. The auc- tions are held three times a year and are preceded by substantial advertising in the Seattle Times and the Post Intelligence and by a brochure that is sent to prospective purchasers and interested parties. auction. Approximately 350 people attended the Bidding on the equipment varied somewhat from item to item depending upon the interest and the condition of the particular piece of equipment. ceive competitive bidding. The mountain logger did re- William Beaman, an employee of Lymood Equipment Company, testified he had attended the auction and the price received for the machine was a fair price considering the machine's condition at the time of sale. When the defendant was confronted with the preceding evidence, he attempted to show the unreasonableness of the sale by introducing evidence indicating a better price could have been received elsewhere, and that the machine could have brought a better price if it had been disassembled and sold for parts. On these two points the Uniform Commercial Code is explicit. Section 87A-9-504(3), R.C.M. 1947, states: as a "(3) * * * Sale or other disposition may be unit or in parcels * * *." (Emphasis supplied). Thus, the Uniform Commercial Code does not require the secured creditor to disassemble the collateral and sell it piece by piece. Section 87A-9-507 ( 2 ) , R.C.X. 1947,states: "The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the secured party is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. If the secured party either sells the collateral in the usual manner in any recognized market therefor or if he sells at the price current in such market at the time of his sale or if he has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold he has sold in a commercially reasonable manner * * *. I' (Emphasis supplied) . Thus, the reasonableness of the sale is determined not by the p r i c e t h a t i s u l t i m a t e l y r e c e i v e d f o r t h e c o l l a t e r a l , b u t by t h e manner i n which t h e s a l e i s c o n d u c t e d . W e have examined t h e t r a n s c r i p t c l o s e l y and have found no e v i d e n c e d e m o n s t r a t i n g t h e s a l e was c o n d u c t e d i n a commerc i a l l y u n r e a s o n a b l e manner. To t h e c o n t r a r y , t h e t r a n s c r i p t i s r e p l e t e w i t h e v i d e n c e t h a t p l a i n t i f f a c t e d i n good f a i t h and c o n d u c t e d t h e s a l e i n a c o m m e r c i a l l y r e a s o n a b l e manner. W e s o hold. I n c o n s i d e r i n g i s s u e two, w e examine t h e l e t t e r s e n t on October 1 3 , 1970 t o d e t e r m i n e i f p l a i n t i f f complied w i t h t h e n o t i c e p r o v i s i o n of s e c t i o n 87A-9-504, R.C.M. 1947. During t r i a l p l a i n t i f f ' s c r e d i t manager t e s t i f i e d he had w r i t t e n t h e l e t t e r and t h e l e t t e r would have been m a i l e d by h i s s e c r e t a r y i n t h e o r d i n a r y c o u r s e of o f f i c e p r o c e d u r e s . c e r t i f i e d nor r e g i s t e r e d . The l e t t e r was n e i t h e r Defendant d e n i e d r e c e i v i n g t h e l e t - ter. The Uniform Commercial Code d o e s n o t r e q u i r e t h e d e b t o r r e c e i v e a c t u a l n o t i c e o f t h e s a l e , it o n l y r e q u i r e s t h e c r e d i t o r take reasonable s t e p s t o assure t h a t t h e debtor i s n o t i f i e d . S e c t i o n 87A-1-201(26) R.C.M. 1947, s t a t e s : "(26) A person ' n o t i f i e s ' o r ' g i v e s ' a n o t i c e o r n o t i f i c a t i o n t o a n o t h e r by t a k i n g s u c h s t e p s as may be r e a s o n a b l y r e q u i r e d t o i n f o r m t h e o t h e r i n o r d i n a r y c o u r s e whether o r n o t such o t h e r a c t u a l l y comes t o know of i t . * * * I ' (Emphasis s u p p l i e d ) . I n Montana t h e r e c e i p t of a m a i l i n g i s presumed, i f t h e o f f i c e procedure of mailing i s c a r r i e d o u t . However, when t h e addressee d e n i e s r e c e i p t , t h e question i s l e f t t o t h e determinat i o n of t h e j u r y . Treasure S t a t e I n d u s t r i e s v. Leigland, 151 Mont. 2 8 8 , 443 P.2d 22; C r i s s e y v . S t a t e Highway Comrn., 147 Mont. 374, 413 P.2d 308; Renland v. F i r s t Nat. Bank of Grass Range, 90 Mont. 424, 4 P.2d 488. H e r e , the question is not whether t h e m a i l i n g w a s r e c e i v e d b u t w h e t h e r i t was p r o p e r l y mailed. P l a i n t i f f a r g u e s t h a t t h e October 1 3 n o t i c e of t i m e and p l a c e of s a l e was s u f f i c i e n t i n a l l r e s p e c t s , n o t i n g t h a t w h i l e d e f e n d a n t r e l i e d upon t h e f a c t t h e n o t i c e m i s s t a t e d t h e p l a c e o f s a l e he c o n t i n u a l l y emphasized h e d i d n o t r e c e i v e t h e n o t i c e . P l a i n t i f f f u r t h e r a r g u e s t h a t had d e f e n d a n t a d m i t t e d h e r e c e i v e d t h e l e t t e r of n o t i c e and had o f f e r e d e v i d e n c e t h a t he a t t e m p t e d t o a t t e n d t h e s a l e , b u t was d e n i e d t h e o p p o r t u n i t y b e c a u s e of d e f e c t of n o t i c e , t h e n and o n l y t h e n , would he have been e n t i t l e d t o r e c o v e r any damage he might have s u f f e r e d a s a r e s u l t of t h e defect. S e c t i o n 87A-9-507(1), R.C.M. 1947. Such i s n o t t h e s i t u a t i o n h e r e . How c a n it be a r g u e d t h a t d e f e n d a n t was p r e j u d i c e d by a n o t i c e he d e n i e s r e c e i v i n g , and t h e r e f o r e c o u l d n o t r e l y o n . To p e r m i t d e f e n d a n t t o r e l y on s u c h a n i s s u e would be t o a l l o w him t o a v o i d a n o b l i g a t i o n he f r e e l y and v o l u n t a r i l y e n t e r e d i n t o . H e r e , i n view of t h e r e c o r d made d u r i n g t h e c o u r s e of t h e t r i a l , it i s a b u n d a n t l y c l e a r from d e f e n d a n t ' s own t e s t i m o n y , when c o n s i d e r e d w i t h c o n f l i c t i n g t e s t i m o n y g i v e n i n h i s d e p o s i t i o n , t h a t he e i t h e r had a v e r y l o o s e b u s i n e s s o f f i c e o p e r a t i o n , o r a l a c k of memory on t h e answers t o t h e q u e s t i o n s asked a s t o when and i f h e r e c e i v e d v a r i o u s l e t t e r s , n o t i c e s and phone c a l l s . w i f e d i d most of h i s l e t t e r w r i t i n g . She and members of h i s f a m i l y p i c k up t h e m a i l , b u t i n answering why he c o u l d be s u r e he had n o t r e c e i v e d t h e n o t i c e of October 1 3 , he s a i d : "There i s a l o t of t h o s e I d o n ' t remember. But t h e r e a s o n I would have remembered t h e one t e l l i n g u s t h e day and d a t e it was t o be s o l d , bec a u s e m a t t o r n e y t o l d me I s h o u l d f i g u r e o u t a y way t o p r o t e c t m i n t e r e s t when i t was s o l d , y and c o n s e q u e n t l y I would have been p r e p a r e d t o d o that. I f I had known when." The r e c o r d shows and d e f e n d a n t a d m i t t e d t h a t p l a i n t i f f i n t e n d e d t o t a k e t h e equipment t o Washington, hoping t o f i n d a His better market for its collateral. At least twice before the sale defendant was invited to contact plaintiff if he disagreed with the proposed manner of disposition. Not only did defendant fail to respond, but he assumed from the very day plaintiff took possession, that the equipment would be put up for sale. The record is devoid of any proof by defendant, supported or unsupported, suggesting that the method of sale was commercially unreasonable. Clearly he failed to get past the provisions of section 87A-9-507(2), R.C.M. 1947, and that issue should not have been submitted to the jury. Plaintiff having acted in good faith and substantially complied with the provisions of the Uniform Commercial Code, and defendant having failed to introduce any contrary evidence, the trial court should either have granted plaintiff's motion for a directed verdict, or his subsequent motion for judgment notwithstanding the verdict. Judgment is reversed and the cause is remanded with directions to enter judgment for plaintiff-appellant. We concur: ,,,,,,--,-T---'--------Z-L-- ~hief/ustice- I' +--22-- Justices

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