Opinion
C.A. No. 99A-10-019 JEB.
Submitted: May 26, 2000.
Decided: September 29, 2000.
Defendants' Appeal from Decisions of the Court of Common Pleas — Judgment of Court of Common Pleas REVERSED —
Michael A. Pedicone, Esquire, 200 West 9th street, Suite 700, P.O. Box 1395, Wilmington, DE, Attorney for Defendants Below-Appellants.
Gary L. Smith, Esquire, 1400 Peoples Plaza, Suite 100, Newark, DE 19702-5706, Attorney for Plaintiff Below-Appellee.
OPINION
I. FACTS
This is an appeal from a decision of the Court of Common Pleas. The pertinent facts are as follows:
On November 1, 1990, Plaintiff Eddie R. Stone purchased a mobile home pursuant to a retail installment contract and security agreement with Capital Homes, Inc. That contract was later assigned to Green Tree Acceptance, Inc., who changed their name in 1992 to Green Tree Financial Corporation ("Financial"). On December 5, 1994, Green Tree Financial Servicing Corporation ("Servicing") was incorporated in Delaware as a wholly-owned subsidiary of Financial. On March 24, 1995, Financial was incorporated in Delaware.
On May 17, 1995, Financial filed a complaint in replevin in Superior Court seeking to obtain possession of the mobile home and alleging that Mr. Stone had defaulted on the contract by failing to make timely payments to Financial since November of 1994.
On July 1, 1995, Financial and Servicing entered into a "Subservicing Agreement" which provided that Servicing would:
manage, administer, service and make collections on each subject contract, and shall perform or cause to be performed all contractual and customary servicing activities of the holder of such subject contract to the subject contract obligor(s), in accordance with all applicable federal and state laws, rule and regulations and the provisions contained in the servicing agreement, if any, applicable to the sale of such subject contract.
See Opening Brief on behalf of Appellant, Exhibit B, "Subservicing Agreement", § 1.01.
On October 24, 1995, Servicing sent Mr. Stone a letter titled "Notice of Private Sale", which said in part, "[W]e have obtained possession of [the mobile home] . . . to get your property back, you must pay us the amount itemized below before it is sold." The amount demanded by Servicing was $30,419.30.
On October 24, 1995, a second letter was sent to Mr. Stone by Financial, which said in part, "[Y]our mobile home in account number 21309778 with Green Tree Financial Corporation, has been repossessed" and noting that several of the mobile home's fixtures were missing or damaged. Servicing eventually resold the mobile home and a deficiency balance remained on Mr. Stone's contract.
On February 10, 1998, Mr. Stone filed a complaint in the Court of Common Pleas under 6 Del. C. § 9-507, alleging that Financial and Servicing were liable as secured parties for failure to provide Mr. Stone with reasonable notification of the private sale and for failure to conduct the sale in a commercially reasonable manner, m compliance with 6 Del. C. § 9-504 (3). Servicing filed a counterclaim for a right to a judgment for the deficiency balance allegedly owed by Mr. Stone.
Title 6, Delaware Code Section 9-507 sets for the secured party's liability for failure to comply with the statutory provisions governing disposition of collateral.
Title 6, Delaware Code Section 9-504(3) provides in relevant part: "[E]very aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. . . .[R]easonable 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 . . ." 6 Del. C. § 9-504 (3).
On August 18, 1998, Plaintiff moved to dismiss Servicing's counterclaim, arguing that "plaintiff entered into a contract with Green Tree Financial Corporation and not Green Tree Financial Servicing Corporation." On October 8, 1998, the Court of Common Pleas dismissed the counterclaim of Servicing, finding that Mr. Stone's receipt of a "notice of private sale" from Servicing, a separate corporate entity from Financing who was neither the assignee nor stood in privity with Mr. Stone, was insufficient to satisfy requirement that the secured party provide the debtor with reasonable notification under 6 Del. C. § 9-504 (3).
See Motion to Dismiss Counterclaim, Court of Common Pleas Docket No. 7.
See Order and Decision on Plaintiff's Motion to Dismiss Counterclaim, Court of Common Pleas Docket No. 17.
On March 8, 1999, the Court of Common Pleas denied Servicing's motion for leave to file an amended counterclaim.
On August 27, 1999, Mr. Stone filed a motion for summary judgment against Financial and Servicing, arguing that Financial failed to comply with notice requirements of 6 Del. C. § 9-504 (3) by having Servicing send Mr. Stone the "notice of private sale" letter. On September 21, 1999, summary judgment was denied.
On September 27, 1999, Mr. Stone filed a motion for re-argument. On October 7, 1999, the Court granted Mr. Stone's motion, granted summary judgment against Financial and Servicing, and scheduled an evidentiary hearing to determine damages.
On October 21, 1999, judgment was entered against Financial in the amount of $39,022.89. Servicing was dismissed from the case with prejudice, following the Court's determination that only Financial, as the secured party, could be liable for damages under the cited authority.
On October 28, 1999, Financial and Servicing filed a joint appeal in Superior Court from rulings of the Court of Common Pleas, including: (1) the October 21, 1999 monetary award to Mr. Stone; (2) the October 7, 1999 grant of summary judgment against Financial and Servicing; (3) the March 5, 1999 denial of Servicing's motion for leave to file an amended counterclaim; and (4) the October 8, 1998 dismissal of Servicing's counterclaim.
II. STANDARD OF REVIEW
Appeals in civil cases from the Court of Common Pleas to this Court are on the record and not de novo. Questions of law are reviewed de novo. On an appeal, the standard of review "in addition to correcting errors of law, is "whether the factual findings made by the trial judge are sufficiently supported by the record and are the product of an orderly and logically deductive process'". This is the same standard of review for appeals from the Superior Court to the Supreme Court.
10 Del. C. § 1326 (c); Super. Ct. Civ. R. 72(g).
Henry v. Nissan Motors Acceptance Corporation, Del. Super., 1998 WL 961759, No. 98A-02-023, at *1, Quillen, J. (Oct. 21, 1998).
Mellon Bank v. Dougherty, Del. Super., C.A. No. 88A-DE-3-A, Steele, J. (Aug. 24, 1989) citing Smart v. Bank of Delaware, Del. Supr., C.A. No. 82A-DE-5, Christie, J. (Dec. 5, 1984).
Moss v. Prudential-Bache Securities, Del. Supr., 581 A.2d 1138, 1140 (1990), citing Levitt v. Bouvier, Del. Supr., 287 A.2d 671, 673 (1972).
III. DISCUSSION
The issue for this Court to consider on appeal is as follows: Did the Court of Common Pleas err as a matter of law in finding that the October 24, 1995, letter entitled "Notice of Private Sale" sent by Servicing to Mr. Stone did not satisfy the statutory requirement that the secured party provide the debtor with reasonable notice of a disposition of collateral under 6 Del. C. § 9-504 (3)?
In urging this Court that the above question be answered in the affirmative, appellants Financial and Servicing submit two arguments on appeal:
(1) The "Subservicing Agreement" between Financial and Servicing is actually an assignment of rights such that Servicing becomes the secured party under the installment contract originally between Financing and Mr. Stone; or
(2) If Financial is found to be the secured party, Financial properly delegated the sending of notice to Servicing as an agent of Financial under 6 Del. C. § 9-504 (3).
This Court finds that (1) the "Subservicing Agreement" between Financial and Servicing is not effective as an assignment of rights between Financing and Servicing such that Servicing becomes the secured party under contract, and (2) Financial, acting as the secured party, properly delegated the sending of notice to Servicing as an agent of Financial. The Court also finds, as a consequence, that Mr. Stone, the debtor, received reasonable notification of the disposition of collateral under 6 Del. C. § 9-504 (3).
The Court will address both of Appellants arguments in turn.
A. THE "SUBSERVICING AGREEMENT" IS AN ASSIGNMENT.
Appellants contend that the "Subservicing Agreement" between Financial and Servicing is an assignment of rights and duties in the contracts that Financial maintained.
As a general rule "terms of art are not required for a valid assignment". In examining a contract, a court's purpose is to interpret the intent of the parties. In the absence of ambiguity, a court may determine the parties' intentions by considering the express language of the agreement as well as "the alternative meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning."
United States ex rel. Kelly v. The Boeing Co., 9 F.2d 743 (9th Cir. 1993). See also E. Allan Farnsworth, Contracts § 11.3, at 786 (2d ed. 1990).
Sanford Investment Co., Inc. v. Ahlstrom Machinery Ho1dings, 198 F.3d 415, 419 (3rd Cir. 1999).
Id. at 421 (citing Hullet v. Towers, Perrin, Forster Crosby, Inc., 38 F.3d 107, 111(3rd Cir. 1994).
In applying these standards, the Court does not agree with appellants that the plain language of the "Subservicing Agreement" along with counsel's suggested alternative meanings conclusively indicates an assignment of rights by which Servicing turns into the secured party. To quote the "Subservicing Agreement":
See Opening Brief on behalf of Appellant, Exhibit B.
"WHEREAS, Green Tree services a portfolio of Contracts. . . .WHEREAS, Green Tree and Servicing desire to enter into an agreement whereby Servicing will be retained by Green Tree as the subservicer of the Contracts . . ."
In the "Subservicing Agreement". "Green Tree" refers to Green Tree Financial Corporation.
1.01 Scope: Responsibility for Contract Administration. This Agreement shall apply to all contracts, loans, notes, instruments, security agreements, mortgages and liens for the . . . financing . . . of real or personal property in which Green Tree has an interest or contractual relationship, whether as owner, holder, secured party, beneficiary, collection agent, servicing agent, trustee or otherwise . . ."
. . . 1.05 Enforcement (a) Servicing shall collect all payments of principal, interest, taxes, insurance . . . and other amounts due with respect to each Subject Contract in trust for Green Tree.
(b) Servicing shall have the right to sue, to enforce or collect on Subject Contracts in its own name or, if required by law, as agent for Green Tree. (emphasis added).
A fair reading of these provisions indicates that Financial and Servicing entered into an agreement where Servicing would service Financial's contracts for a fee, including managing, administering, and collecting payments in trust for Financial.
Additionally, Financial's own conduct supports a finding that it was the secured party in this case. On October 24, 1995, Financial sent a letter to Mr. Stone reading "[Y]our mobile home in account number 21309778 with Green Tree Financial Corporation, has been repossessed" and with an address listing for Green Tree Financial Corporation. On May 14, 1997, a subsequent notice was sent to Mr. Stone indicating that he owed a deficiency balance to Financial.
The notices were sent under the mantle and authority of Financial and explicitly reference Mr. Stone's account with Financial. These communications to Mr. Stone, coupled with the limited language of the "Subservicing Agreement", strongly indicate to the Court that Financial considered itself the secured party and had not assigned or transferred such rights of a secured party to Servicing.
Therefore, the Court finds that the "Subservicing Agreement" did not effect an assignment of rights between Financing and Servicing such that Servicing becomes the secured party under contract between Mr. Stone and Financial.
B. FINANCIAL, AS THE SECURED PARTY, DELEGATED THE SENDING OF NOTICE TO SERVICING IN SATISFACTION OF 6 Del. C. § 9-504(3).
Appellants contend that Financial, if determined by the Court to be the secured party, delegated the sending of notice of disposition to Servicing as an agent of Financial under 6 Del. C. § 9-504 (3).
The "Subservicing Agreement" created an express agency between Financial and Servicing. Financial, as the secured party, delegated some of its duties to Servicing, as evidenced by the directive that Servicing would "manage, administer, service and make collections on each Subject Contract" for Financial.
See Opening Brief on behalf of Appellant, Exhibit B, "Subservicing Agreement", § 1.01.
There are numerous cases where secured parties may delegate performance under Article 9, including self-help repossession under § 9-503 and the re-sale of repossessed collateral under § 9-504(1). The statutory language of § 9-503 and § 9-504(1) does not expressly permit a secured party to delegate its self-help repossession and re-sale rights, but Delaware courts routinely accept such delegation.
The statutory language of § 9-504(3) does not expressly allow delegation of the sending of notice. But it does not forbid it either. That section states in part that:
"[E]very aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. . . .[R]easonable 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 . . ." 6 Del. C. § 9-504 (3).
The fundamental rule of statutory construction is that a court must give a statute its plain meaning and avoid judicial interpretation if the statutory language is clear and unambiguous. Courts should avoid narrow interpretations that would lead to words of a statute would lead to "such unreasonable or absurd consequences as to compel a conviction that they could not have been intended by the legislature." However, the consequences must be found to be unreasonable or absurd either in the context of other provisions of the same legislation or from a clear inconsistency with the legislation's statutory purpose. Therefore, judicial construction in cases of perceived absurd or unjust results flowing from a literal interpretation of language "is a rule that is cautiously applied." 6 Del. C. § 9-504 (3) makes clear that "reasonable notification . . . shall be sent by the secured party to the debtor". This does not mean, however, that the secured party may not delegate this duty to another entity on the secured party's behalf. To do so would lead to the absurd and incongruous result within the context of Article 9 that delegation of self-help repossession under § 9-503 and the re-sale of repossessed collateral under § 9-504(1) are permissible, but delegation of sending reasonable notification under § 9-504(3) is not.
Bestemps v. Gibbs, Del. Super., C.A. No. 98A-04-003, 1998 WL 960759, at *2, Barron, J. (Oct. 22, 1998) (citing Coastal Barge Corp. v. Coastal Zone Indus. Control Bd., Del. Supr., 492 A.2d 1242, 1246 (1985)); McCormick v. Board of Education for the State of Delaware, Del. Super., C.A. No. 97A-10-003, 1998 WL 960733, at *1, Babiarz, J. (Aug. 27, 1998) (citation omitted).
Scarborough Village v. City of Rehobeth, Del. Super., C.A. No. 93C-07-032, 1995 WL 411789, at *4, Graves, J. (June 20, 1995) (citing Coastal Barge, 492 A.2d at 1246).
Copeland v. Beh, Del. Supr., 1991 WL 73951, at *5, Horsey, J. (April 23, 1991) (withdrawn on other grounds).
Magill v. North American Refractories Co., Del. Supr., 128 A.2d 233, 236 (1956).
Further, forbidding delegation of the sending of notice by the secured party would be clearly inconsistent with the Uniform Commercial Code's statutory purpose of liberally construing the Articles in order to "simplify, clarify, and modernize the law governing commercial transaction . . . [and] to permit the continued expansion of commercial practice through custom, usage, and agreement of the parties".
Finally, allowing delegation of the sending of notice by the secured party does not contravene the very purpose of requiring reasonable notification under § 9-504(3), which is to protect the rights of debtors. As described by the Delaware Supreme Court:
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; (2) it affords the debtor an opportunity to seek out buyers for the collateral; 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 . . . Any aspect of the notice that is contrary to these purposes necessarily prevents it from being "reasonable notification".
Wilmington Trust Company v. Conner, Del. Supr., 415 A.2d 773, 776 (1980).
As noted by the appellant, delegating the sending of notice under § 9-504(3) does not threaten any of the purposes of reasonable notification any more than allowing a secured party to delegate the remedy of self-help repossession endangers the rights of debtors and third parties to be free from breaches of the peace.
In this case, it is uncontested that Mr. Stone defaulted on his payments. On October 24, 1995, he received a letter from Green Tree Financial Servicing Corporation, a subsidiary of Green Tree Financial Corporation, titled "Notice of Private Sale". He has offered no evidence of harm, confusion, or loss of opportunity that he suffered from receiving the letter from Servicing and not Financial.
The Court finds that this letter gives Mr. Stone, the debtor in default, "reasonable notification . . . by the secured party to the debtor" within the purpose and meaning of § 9-504(3). To interpret the letter otherwise would allow Mr. Stone to claim sanctuary for his wrongdoing and receive summary judgment in the amount of $39,022.89, in the process skewing the statutory purpose of § 9-504(3) and making a mockery of the protections it seeks for debtors — in short, a patently absurd and inequitable result.
IV. CONCLUSION
It is this Court's decision that the Court of Common Pleas erred in its determination that Mr. Stone did not receive notice by a secured party under § 9-504(3).
For the foregoing reasons, the October 7, 1999 grant of summary judgment by the Court of Common Pleas against Financing and Servicing is REVERSED AND REMANDED.
IT IS SO ORDERED. _______________________ John E. Babiarz, Jr.