Opinion
No. M 9306 CVF 019012.
Decided February 25, 1994.
Robert J. Morje, for plaintiff.
Legal Aid Society of Columbus and Leslie Varnado, Jr., for defendant.
This cause came on for trial to the court upon a stipulation of facts. The parties agreed that defendant Leon J. Wilson on July 18, 1991, acquired a loan from plaintiff, formerly known as "General Credit Company of Ohio, Inc.," in order to purchase a 1991 Plymouth Acclaim automobile. On October 2, 1992, defendant refinanced the installment loan with plaintiff, now known as "Fidelity Financial Services, Inc." The principal amount of the loan was $10,282.21 plus a finance charge of $4,331.13. The interest rate was twenty-four percent per annum. The total amount to be repaid by defendant was $14,613.34. The collateral for the agreement was the 1991 Plymouth Acclaim. Defendant defaulted on the promissory note in November 1992. Plaintiff repossessed the Plymouth on December 18, 1992. On the date of repossession, plaintiff sent a notice by certified mail to defendant. This document (Joint Exhibit "C") advised Wilson that he had defaulted on the stated note and if he desired to reinstate the agreement he would have to pay $931.10 within twenty days. The notice further provided that the repossessed Plymouth was stored at 1100 Rarig Avenue (no city designated) and was available for inspection. The notice then stated as follows:
"In the event the collateral is not redeemed in accordance with the foregoing it will be disposed of at a public or private sale, for cash, or by sealed bid delivered to Fidelity Financial Services, on or after the 8th day of January, 1993." (Emphasis sic.)
The additional provisions of the document stated that $4,000 was the minimum price for which the Plymouth would be sold; defendant was liable for any deficiency after the sale and plaintiff may bid on the vehicle. Finally, plaintiff's name and address were provided for any "payments or notice in connection with this matter."
The parties agree that the above notice was received by defendant. Defendant made no effort to reclaim the vehicle because of poor health, and the lack of employment. On March 17, 1993, plaintiff sold the collateral at a public auction, i.e., Ohio Banc Auction, to Kris Radio Quality Kars, Inc. of Mansfield, Ohio, for $6,800. At the time of the sale, defendant owed a balance of $11,713.48. After deducting the above stated $6,800, the remaining balance became $4,913.48 plus interest at twenty-four percent per annum from March 26, 1993.
Plaintiff brings this action to collect the balance and interest due on the stated account. Defendant answers plaintiff's complaint by alleging that plaintiff has failed to comply with the provisions of R.C. 1309.47(C) regarding proper notification prior to the repossession sale and, consequently, is not entitled to any deficiency owed under the loan agreement. Furthermore, defendant counterclaims and demands $5,359.35 because plaintiff violated R.C. 1309.47(C) as provided in R.C. 1309.50(A).
The first issue to be resolved by the court is whether plaintiff complied with the notice requirement of R.C. 1309.47(C).
R.C. 1309.47(C) provides:
"* * * 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 * * *." (Emphasis added.)
Some courts have held that a creditor's failure to comply with the notice requirements of R.C. 1309.47(C) stands as an absolute bar to recovering a deficiency judgment. Toledo Trust Co. v. Aldrich (1989), 65 Ohio App.3d 189, 583 N.E.2d 371. Moreover, R.C. 1309.47(C) has been interpreted to mean that a secured creditor must take reasonable steps to notify the debtor of his intentions to resell certain repossessed collateral. BancOhio Natl. Bank v. Freeland (1984), 13 Ohio App.3d 245, 246-247, 13 OBR 298, 299-300, 468 N.E.2d 941, 944. Therefore, the court must determine from the facts presented whether plaintiff took reasonable steps to notify defendant of the "time and place" of the public sale of the repossessed vehicle.
The facts confirm that defendant's repossessed vehicle was sold at a public sale by plaintiff. The evidence reveals that the only notification received by defendant failed to set forth any "time or place" for the said public sale (Joint Exhibit "C"). In fact, the notification sent by plaintiff made no mention of the March 17, 1993 public sale of defendant's repossessed vehicle at 3905 Jackson Pike, Route 104, Grove City, Ohio, being the Ohio Banc Auction. Therefore, the court concludes from the stipulated evidence and exhibits that plaintiff did not take reasonable steps to provide the notice required by R.C. 1309.47(C).
The next question the court must resolve is whether a creditor is barred from recovering a deficiency judgment when it fails to comply with the notice requirements of R.C. 1309.47(C). This question is extensively addressed by the court in Peoples-Merchants Trust Co. v. Dosis (May 21, 1980), Stark App. No. CA-5139, unreported, 1980 WL 98476. The Dosis decision notes that prior to the enactment of the UCC in Ohio, the failure of a secured party to give notice to the debtor of the sale of the repossessed property constituted a complete defense against a creditor's action to recover a deficiency judgment, citing Economy S. L. Co. v. Weir (1957), 105 Ohio App. 531, 6 O.O.2d 254, 153 N.E.2d 155, and generally Annotation (1974), 59 A.L.R.3d 401, 420-421.
R.C. 1309.50(A) provides a new remedy for a violation of R.C. 1309.47(C). Therefore, as mentioned in the Dosis decision, the courts face a predicament as to the remedy for a notice violation:
"The question thus becomes whether the remedy provided for in R.C. 1309.50(A) is the exclusive one available for the failure to give proper notice, whether it is supplemental to the remedy of denial of the deficiency judgment, or whether some new damage formula has been enacted. `The draftsmen of the Code did not explicitly deal with this obvious problem, and the courts have split in their interpretation of the relevant code provisions.'" Id. at 10.
The Dosis court discussed a review of the various applications by the different courts and then concluded:
"In most cases the court does not address the question of the propriety of both allowing statutory damages and denying the deficiency, because the question is very seldom raised." Id. at 11.
As a consequence of attempting to determine the appropriate remedy for a notice violation under R.C. 1309.47(C), the Dosis court concluded that "the punitive aspects of the former rule denying a deficiency judgment have been taken over by the provisions of R.C. 1309.50(A)." Id. at 14.
This court follows the Dosis decision and finds that the fact that a secured party has violated R.C. 1309.47(C) by failing to provide proper notice does not necessarily relieve the debtor from his obligation for any deficiency.
Therefore, the creditor must affirmatively prove the deficiency owed by the debtor and the debtor was given credit on his debt for the fair-market value of the collateral. The price obtained upon sale of the collateral is not conclusive proof of the fair-market value of the collateral but may be considered along with all other evidence. In the instant case, the court concludes from all the evidence submitted that the sale price of $6,800 was equivalent to the collateral's fair-market value. As stated above, the balance due after deducting $6,800 is $4,913.48. Consequently, the court finds for plaintiff and against defendant on plaintiff's complaint in the amount of $4,913.48.
Next, the court must consider defendant's counterclaim against plaintiff under R.C. 1309.50(A). Defendant argues that because plaintiff failed to comply with the notice requirements under R.C. 1309.47(C) as regards the public sale of defendant's repossessed vehicle, defendant is entitled to damages as calculated under R.C. 1309.50(A).
R.C. 1309.50(A) provides in pertinent part that:
"[T]he debtor * * * has a right to recover from the secured party any loss caused by a failure to comply with the provisions of sections 1309.44 to 1309.50, inclusive, of the Revised Code. If the collateral is consumer goods, the debtor has a right to recover in any event an amount not less than the credit service charge plus ten per cent of the principal amount of the debt or the time price differential plus ten per cent of the cash price."
First, the court must note that except for the failure to send proper notification to defendant of the public sale, the disposition of the repossessed vehicle was commercially reasonable. Therefore, the sole remaining issue is the application of R.C. 1309.50(A) with regard to a failure to notify as required under R.C. 1309.47(C). Defendant contends a debtor has a statutory right under these circumstances to recover damages in an amount not less than the credit service charge plus ten percent of the principal amount of the debt. In this case, the finance charge was $4,331.13 and ten percent of the principal amount ($10,282.21) equates to $1,028.22 for a total of $5,359.35.
In support of his position, defendant cites two cases, Soc. Bank, N.A. v. Cazeault (1993), 83 Ohio App.3d 84, 613 N.E.2d 1103, and Soc. Natl. Bank v. Hardmon (Oct. 11, 1990), Cuyahoga App. Nos. 57098 and 57206, unreported, 1990 WL 151666. In Cazeault, the appellate court affirmed the trial court's application of R.C. 1309.50(A) as it regards the notice requirements of R.C. 1309.47(C) but noted that Society Bank raised no issue with respect to this matter. However, in Hardmon, the appellate court clearly found that the damages under R.C. 1309.50(A) apply to any violations under R.C. 1309.44 to 1309.50, inclusive.
In Hardmon, the appellate court reviewed the trial evidence and concluded that the plaintiff-secured party proved that the disposition of the repossessed collateral was commercially reasonable; however, the debtor was not provided the requisite notice of sale as set forth in R.C. 1309.47(C). Thus, Hardmon holds that the damages provided for in R.C. 1309.50(A) embrace those instances when a secured party fails to furnish a debtor with notification of the time and place of a public sale as required under R.C. 1309.47(C).
The Hardmon court relied upon the following passage in determining the application of R.C. 1309.50(A):
"While the above code provision is phrased mainly in terms of improper disposition of the collateral, it would appear that the secured party's liability is not limited to liability for such disposition, since the provision also speaks in terms of failure to comply with all the default provisions of the Code. It thus appears to be a general rule of liability for any improper act on the part of the secured party after default, with particular emphasis on liability for improper disposition." 83 Ohio Jurisprudence 3d (1988) 432, Secured Transactions, Section 432.
In following the guidelines set forth above, the court must find for defendant on his counterclaim and against plaintiff in the amount of $5,359.35.
However, the amount awarded defendant must be reduced or set off by the plaintiff's award, i.e., the balance of the deficiency. This calculates as follows: $5,359.35 minus $4,913.48 equals $445.87.
Therefore, it is hereby ordered and adjudged that judgment is entered for defendant and against plaintiff in the amount of $445.87 plus costs and interest at the statutory amount from the date of this judgment.
The court hereby directs the municipal court clerk to serve upon all parties notice of this judgment and its date of entry upon the journal.
Judgment accordingly.