WILLIE R. BROCK V. COMMUNITY TRUST BANK
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RENDERED:
FEBRUARY 11, 2005; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-000301-MR
WILLIE R. BROCK
APPELLANT
APPEAL FROM PERRY CIRCUIT COURT
HONORABLE JOHN DAVID CAUDILL, SPECIAL JUDGE
CIVIL ACTION NO. 02-CI-00626
V.
COMMUNITY TRUST BANK
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
JUDGE.1
COMBS, CHIEF JUDGE; MINTON, JUDGE; AND MILLER, SENIOR
MINTON, JUDGE:
Willie Brock defaulted on the monthly payments
due under a retail installment contract and security agreement
held by Community Trust Bank.
its collateral, Brock’s SUV.
1
So the bank repossessed and sold
When the bank sued Brock to
Senior Judge John D. Miller sitting as Special Judge by assignment
of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky
Constitution and KRS 21.580.
recover a deficiency judgment, Brock defended on grounds that
the bank’s sale of the collateral was unreasonable.
Specifically, Brock claimed that the bank’s Notice of Sale of
Collateral cut short his redemption rights by placing a deadline
on his ability to redeem the collateral, which was three days
before it was scheduled for auction.
Brock argued that under
the applicable provisions of the Uniform Commercial Code, his
redemption rights extended to the actual sale of the collateral
to a buyer.
Brock also claimed that the bank violated the
Kentucky Motor Vehicle Installment Sales Contract Law by
including a processing fee in the original principal balance
financed.
The circuit court rejected both of Brock’s arguments
and granted summary judgment for the bank.
We agree with the
circuit court and affirm.
After repossessing Brock’s SUV, the bank sent Brock a
letter on January 5, 2001, informing him of the impending sale
of the collateral.
The letter stated:
The 1997 GMC Jimmy . . . in which we
hold a security interest, has been
repossessed and we hereby notify you that
this collateral will be sold for cash by
public sale on the 18th day of January, 2001,
at the hour of 10:00 A.M. eastern time, or
thereabout. The sale will be conducted by
ADESA of Lexington Auto Auction, 672 Blue
Sky Parkway, Lexington, Kentucky, 40509.
You may redeem the described collateral
by payment in full of the balance of your
security agreement which is now $19,967.26
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plus any fees incurred on or before
January 15, 2001, at 5:00 P.M. eastern time.
Any personal property that may be located in
the collateral must be redeemed by January
15, 2001 at 5:00 P.M. eastern time . . . .
If the amount realized from the sale fails
to pay your entire indebtedness, cost of
retaking, storage and sale preparation, you
will be held liable for the deficiency.
Community Trust Bank reserves the right to
bid.
The auction took place, as scheduled, on January 18,
2001.
Brock’s GMC Jimmy was sold, but the sums realized from
the sale were insufficient to cover all of Brock’s debt.
So on
December 9, 2002, the bank filed an action for a deficiency
judgment against Brock in the amount of $10,279.46, plus
interest and attorney’s fees.
In his answer, Brock asserted that the notice he
received from the bank regarding the proposed sale of his
vehicle was insufficient.
Specifically, Brock argued that the
notice “prematurely terminated his redemption rights and was,
therefore, unreasonable as a matter of law, thereby estopping
the Bank from recovering the deficiency and/or entitling him to
statutory damages that would exceed the debt.”
The bank filed a motion for summary judgment.
And on
January 29, 2004, the Perry Circuit Court granted summary
judgment to the bank in the amount of $10,183.13, plus interest
and attorney’s fees in the amount of $1,541.91.
follows.
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This appeal
Summary judgment is only appropriate if the movant’s
“right to judgment is shown with such clarity that there is no
room left for controversy.”2
Summary judgment must be
“cautiously applied,” and the trial court should not render a
summary judgment “if there is any issue of material fact.”3
Brock’s first argument is that the bank’s notice of
sale did not conform to the requirements of the Uniform
Commercial Code.
Brock argues that the applicable statutory
requirements mandate that a debtor’s right of redemption remains
valid until the time of sale.
Because the bank informed Brock
that he must redeem his collateral by paying the default in full
by January 15, 2001, rather than the actual date of sale,
January 18, 2001, he argues the notice was deficient.
As a
consequence of this defective notice, the sale was not
commercially reasonable; and the bank is barred from recovering
its deficiency.
The bank argues in opposition that Brock was
properly notified because his redemption rights terminated at
the time it entered into a contract with ADESA for the
“disposition” of the vehicle.
Because this case involves Brock’s default on an
installment sales contract, the Uniform Commercial Code (UCC)
controls.
The UCC, as incorporated in this state through
2
Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476,
482 (Ky. 1991).
3
Id. at 480.
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Kentucky Revised Statutes (KRS) sections 355.1-101 through
355.10-102, was amended in July 2001.
Since the relevant events
affecting the outcome of this case occurred in January 2001, we
note that the statutes cited in this opinion refer to the “old,”
pre-amendment version of the UCC.
With regard to the proper disposition of collateral,
KRS 355.9-504(3) states:
Disposition of the collateral may be by
public or private proceedings and may be
made by way of one (1) 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 . . . shall be sent by the secured
party to the debtor if, except in the case
of consumer goods, he has not signed after
default a statement renouncing or modifying
his right to notification of sale.
(Emphasis added.)
In the comments following UCC 9-504, which is
identical to KRS 355.9-504, the drafters explain that the
section “does not restrict disposition to sale:
the collateral
may be sold, leased, or otherwise disposed ofsubject of course
to the general requirement . . . that all aspects of the
disposition be ‘commercially reasonable[.]’”
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KRS 355.9-506 further provides that a debtor in
default has the right to redeem the repossessed collateral;
however, any such redemption must be completed “before the
secured party has disposed of collateral or entered into a
contract for its disposition under KRS 355.9-504 . . . .”4
We must disagree with Brock’s argument regarding the
deficiency of the bank’s notice.
First, Brock was given proper
notice of both the termination of his right of redemption and
the time and place of the sale.
KRS 355.9-504(3) only requires
that notification to the debtor include “the time and place of
any public sale.”
The bank gave Brock adequate warning of the
date, time, and location of the public auto auction.
As such,
the bank’s notice cannot be considered statutorily deficient.
Second, as noted in the comment to UCC 9-504, the
“disposition” of collateral is not limited to sale.
Rather,
collateral may be “sold, leased, or otherwise disposed of” so
long as the disposition is commercially reasonable.
As previously stated, KRS 355.9-506 says that a
debtor’s right of redemption exists until “the secured party has
disposed of collateral or entered into a contract for its
disposition.”
The record indicates that the bank contracted for
the disposal of Brock’s vehicle on January 15, 2001, so that it
could be prepared for sale by ADESA at a public auto auction.
4
KRS 355.9-506.
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The auction in this case was a commercially reasonable means of
disposition; and the bank’s actions in transferring the vehicle
to ADESA two days before the auction were necessary and rational
to ensure the sale’s commercial viability.5
Since the bank reasonably contracted for the disposal
of the vehicle on January 15, 2001, in anticipation of its
commercially reasonable sale at auction, we hold that Brock’s
right of redemption was terminated at the time the bank
transferred it to ADESA.
Had the ensuing sale been commercially
unreasonable, it is arguable that Brock would have retained the
right to redeem.
But because the auto auction was a
commercially reasonable means of conducting a sale, Brock’s
redemption rights were properly terminated when the bank
contracted with ADESA for the vehicle’s disposition.
Brock’s second argument is that the bank did not offer
sufficient evidence of its contract with ADESA.
Again, we
disagree.
Included with the bank’s motion for summary judgment
was the affidavit of its collection manager, Kim Boggs.
In her
affidavit, Boggs stated that she had personal knowledge of the
bank’s records concerning Brock’s account; that Brock was in
default; that on or before January 15, 2001, the bank entered
5
The vehicle, which was assumedly located in Perry County, had to be
transferred to Lexington and cleaned in preparation for sale.
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into a contract with ADESA; and that pursuant to the contract,
the collateral was delivered by the bank to ADESA and
subsequently sold.
Brock argues that the affidavit is “objectionable
hearsay and non-admissible non-expert opinion regarding
statutory interpretation” because it “purports to describe the
contents of a contract that the Bank has failed to enter into
evidence.”
But we fail to see how the affidavit amounts to
hearsay, and we do not believe that Boggs represents herself as
an expert on the proper interpretation of the UCC.
In Smith v. Hillard,6 the Court held that “‘[o]n the
whole affidavits are the least satisfactory form of evidentiary
materials on which to base a summary judgment . . . .
Nevertheless it is well settled that a summary judgment may be
rendered solely on the basis of affidavits . . . .”7
Because
Brock has not offered any “countervailing affidavits” to oppose
Boggs’s statements, we believe the circuit court properly relied
on Boggs’s affidavit in granting summary judgment.
Finally, Brock argues that the bank violated the
Kentucky Retail Installment Sales Contract Act8 and the Kentucky
6
408 S.W.2d 440 (Ky. 1966).
7
Id. at 442.
8
KRS 371.210 – 371.990.
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Motor Vehicle Installment Sales Contract Act.9
Specifically,
Brock claims that the bank improperly assessed a $75.00
“Processing Fee to Creditor” in the principal balance on his
financing statement.
Because the MVISCA “limits the principal
balance to the cash sale price minus the down payment plus
amounts for insurance and other benefits and official fees,”
Brock argues that the bank’s assessment of the $75.00 fee was
inappropriate; therefore, Brock asserts that all finance charges
should be forfeited because of the bank’s “intentional
violations of the statute.”10
We find this argument completely flawed.
Brock claims
that the processing fee violates RISCA and MVISCA because it is
“a cost of doing business that the creditor is passing on to the
consumer.”
But, as the bank argues:
[Brock] received a benefit from [the bank]
by virtue of the $75.00 fee. A full credit
report was required due to [Brock’s]
economic circumstances and consequently
administered for the fee. Without a credit
report, [Brock] could not have contracted to
purchase the vehicle. . . . If [Brock] had
chosen another method to contract for the
vehicle (e.g. if [he] had paid cash for the
automobile) then a credit report would not
have been necessary and the fee would not
have been charged.
9
KRS 190.090 – 190.990.
10
See KRS 371.990 and 190.990.
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Furthermore, as the bank mentions, Brock was never
actually assessed the processing fee.
After looking at the
parties’ retail installment contract, it is clear that the
$75.00 fee was not financed as part of the principal of the
loan.
Although the $75.00 fee was initially added into the
balance, it is subsequently deducted on the line titled, “Less:
Prepaid Finance Charges.”
So the $75.00 processing fee was not
included in Brock’s principal balance, and there is no evidence
that the bank violated the RISCA or the MVISCA.
For these reasons, we agree with the Perry Circuit
Court’s decision to grant summary judgment in favor of the Bank
and affirm the deficiency judgment against Brock in the amount
of $10,279.46, plus interest at the rate of 13.5% per annum, and
attorney’s fees of $1,541.91.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Karen Alfano
Hazard, Kentucky
David M. Knights
D. Lyle McQuinn
Lexington, Kentucky
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