Opinion
No. X06-CV-99-0152752-S
July 15, 2003
MEMORANDUM OF DECISION RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (#112)
This case is a collection action arising out of a retail installment sales contract for a 1993 Toyota Paseo. The defendants Daniel and Edith Alvarado entered into a retail installment sales contract with Shawmut Bank on November 11, 1995, and, that contract was sold and assigned by Shawmut to the plaintiff Sovereign Bank. The Alvarados were late with their monthly loan payments and in April of 1998, they stopped making monthly payments on their obligation.
On June 4, 1998, Sovereign repossessed the Alvarados' Paseo and on the same date sent notice advising them, among other things, that "the vehicle will be resold at Southern Auto Auction by private or public sale at anytime after 4:00 p.m. on June 24, 1998." The car was not redeemed by the Alvarados, and on July 1, 1998, the vehicle was sold at Southern Auto Auction for $3,250.
Southern Auto Auction is a "dealer-only" auction, so only those with a valid dealer's license may participate. On July 6, 1998, Sovereign notified the Alvarados that their vehicle had been sold, and informed them of the deficiency balance due after resale. Sovereign calculated the Alvarados' deficiency by adding the total outstanding balance on their loan ($9,871.56) to the cost of retaking and liquidating the vehicle ($425), and then deducting the vehicle's fair market value ($5,513).
Sovereign relied on the National Automobile Dealers Association (NADA) guidelines to determine the vehicle's fair market value. The amount collected on the resale was less than the vehicle's fair market value, and this fact is significant inasmuch as the defendants, pursuant to statute, were entitled to a credit for the actual sale price or the fair market value of the vehicle.
Sovereign then filed suit against the Alvarados, on May 7, 1999, to collect the deficiency, interest on the deficiency since the last payment made in April, 1998, attorneys fees, and costs. The operative amended answer and special defenses were filed on March 20, 2002, and the case then was transferred to the complex litigation docket pursuant to application by the defendants.
Sovereign now moves for summary judgment. "Summary judgment shall be CT Page 8413-cs rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law . . . A material fact is a fact which will make a difference in the result of the case . . . The party seeking summary judgment has the burden of showing the absence of any genuine issue as to all material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact . . . In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the non-moving party . . ." (Citations omitted; internal quotation marks omitted.) DaCruz v. State Farm Fire Casualty Co., 69 Conn. App. 507, 511, 794 A.2d 1117 (2002) "In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether such issues exist . . ." (Citation omitted.) Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). Amoco Oil Co. v. Liberty Auto Electric Co., 262 Conn. 142, 147-48, 810 A.2d 259 (2002).
In opposition to the motion for summary judgment, the Alvarados rely on the factual issues raised in their special defenses to the complaint, including Sovereign's alleged violation of the Retail Installment Sales Financing Act (RISFA), General Statutes § 36a-770 et seq. (first special defense), and Sovereign's alleged failure to act in a commercially reasonable manner pursuant to article 9, part 5, of the Uniform Commercial Code (UCC), General Statutes § 42a-9-501 et seq. (second special defense). Specifically, the Alvarados claim that Sovereign violated the notice requirement and failed to specify whether the resale would be private or public, failed to itemize the disposition of the proceeds, violated RISFA by including the costs associated with the resale in the deficiency and including a mileage deduction, erred in reporting the mileage deduction, and failed to conduct a commercially reasonable resale of their car. Each of these special defenses is addressed in this memorandum in order to determine whether a genuine issue of material fact remains in the case.
Notice of Repossession
In their first special defense and now in their position papers, the Alvarados contend that they were not provided notice of repossession by certified or registered mail as required by RISFA. This defense to the complaint, if not already abandoned during oral argument, is refuted by Sovereign's attachments to the motion for summary judgment, including return receipts signed by the defendant Daniel Alvarado, evidencing that CT Page 8413-ct the notice was sent by certified mail. Summary judgment is granted on this claim.
Failure to Specify Whether Resale Would Be Public or Private
RISFA provides in General Statutes § 36a-785 (d), that "[t]he holder of the contract shall give the retail buyer not less than ten days written notice of the time and place of any public sale or the time after which any public sale, or the time after which any private sale or other intended disposition is to be made . . ." The Sovereign notice states that: "The vehicle will be resold at Southern Auto Auction by private or public sale at any time after 4:00 p.m. on June 24, 1999." In fact, there was a private sale after 4:00 p.m. on June 24 (June 26, 1999). Sovereign's notice to the Alvarados therefore did provide the "time after which any private sale . . . is to be made."
There is no specific statute providing that the lender must specify whether the sale will be public or private. The creditor may choose either course.
Decisions in other jurisdictions have upheld notices similar to the one at issue in this case. A Kansas federal district court upheld a notice which read: "NOTICE IS HEREBY GIVEN THAT ON OR AFTER AUGUST 6, 1999, GENERAL ELECTRIC CAPITAL CORPORATION (GECC) WILL SELL AT A PUBLIC OR PRIVATE SALE THE FOLLOWING PROPERTY . . ." G.E. Capital Corp. v. Stelmach Construction Co., 45 UCC Rep.Serv.2d 675, 682 (D.Kan. 2001). The court concluded that GECC's notice was in compliance with the Kansas UCC, finding that one of the primary reasons for the notice requirement is to allow the debtor the opportunity to redeem the security by paying off the debt.
The notice sent to the Alvarados permitted them an opportunity to redeem the security, inasmuch as they were notified in advance of the sale that their car would be sold on or after June 24, 1999. In Hall v. Crocker Equipment Leasing, Inc., 737 S.W.2d 1 (Tex.App. 1987), the court held that the notice need not state whether the sale is to be private or public, and upheld a notice that was silent on that point. Similarly, in FDIC v. Lanier, 926 F.2d 462, 464 (5th Cir. 1991), the court upheld a notice providing that "the bank will sell the property at either a public or a private sale ten (10) days after the date of the communication." Id. The property was sold at a private sale and the court held that the notice was not defective, even though it did not specifically state that the property would be sold privately. Id., 465. See also Mount Vernon Dodge, Inc. v. Seattle-First National Bank, 570 P.2d 702 (Wash.App. 1977); Lloyds Plan, Inc. v. Brown, 268 N.W.2d 192, 193 (Iowa 1978); and CT Page 8413-cu All States Leasing Co. v. Ochs, 600 P.2d 899, 906 (Ore.App. 1979).
The Alvarados rely on Connecticut Bank Trust Co. v. Incendy, 207 Conn. 15, 540 A.2d 32 (1988), in support of their contention that the notice was defective. Incendy, however, is distinguishable. In that case, the creditors held a properly noticed public sale, but when the property remained unsold after the public auction, the creditors conducted a subsequent private sale without giving the defendant any notice. The sale by private means therefore did not conform to the original notice that there would be a public sale. In the instant case, Sovereign conducted one sale, which was a private sale in accordance with the notice that was sent to the Alvarados. Summary judgment is granted as to this claim.
Failure to Itemize Disposition of Proceeds
The Alvarados claim that Sovereign failed to provide a written statement itemizing the disposition of the proceeds as required by RISFA. General Statutes § 36a-785 (e) provides in pertinent part that "[w]ithin thirty days of the resale, the holder of the contract shall give the retail buyer a written statement itemizing the disposition of the proceeds. Any sum remaining after the satisfaction of such claims shall be paid to the retail buyer." The notice that was provided to the Alvarados does not include a breakdown of the distribution of the resale proceeds, but it does set forth the fair market value of the car, which number was subtracted from the debt to determine the deficiency.
Section 36a-785 (d) defines proceeds of the resale as "[e]ither the amount paid for such goods at such sale or the fair cash retail market value of such goods at the time of repossession, whichever is greater . . ." Sovereign included the fair market value in the deficiency notice, thus meeting the requirements of including in the notice the proceeds of the resale, which proceeds are defined as either the actual sale proceeds or fair market value. The motion for summary judgment is granted as to this claim.
Including the Costs of the Resale Violates RISFA
The Alvarados allege that Sovereign violated RISFA by including in the deficiency calculation its costs associated with the resale. General Statutes § 36a-785 (e) provides that "[p]roceeds of the resale shall be applied (1) to the payment of the actual and reasonable expenses thereof, (2) to the payment of the actual and reasonable expenses of any retaking and storing of said goods, (3) to the satisfaction of the balance due under the contract." The provision "reasonable expenses of CT Page 8413-cv resale thereof" by its plain meaning includes the cost of the resale.
The Alvarados argue that the cost of the resale should not be claimed by the bank when the fair market value instead of the actual resale proceeds is applied to calculate the deficiency. That distinction is not made in the statute, which specifically allows for payment to the creditor of the actual and reasonable expenses of the resale, without qualification as to whether the actual sale price or fair market value is applied. The motion for summary judgment is granted as to this claim.
Mileage Deduction Violates RISFA
The Alvarados claim that Sovereign violated subsection (g) of RISFA when it subtracted $850 as a mileage deduction from the fair market value calculation. General Statutes § 36a-785 (g) provides that "[t]he prima facie fair market value of such motor vehicle shall be calculated by adding together the average trade-in value for that motor vehicle and the average retail value for the motor vehicle and dividing the sum by two." The statute further provides that the "[a]verage trade-in value and average retail value shall be determined by the values as stated in the NADA guide." The Alvarados do not dispute that Sovereign used the correct NADA guide, but they challenge the use of a mileage deduction. The NADA guide specifically requires that both the "average trade-in" and "average retail" values include mileage deductions. The Alvarados argue that only the base guide-book value should be used in the fair market value calculation, but NADA's high mileage table clearly states that the values shown are "[t]o be deducted from base guide book values." Each and every page of the NASA guide includes the direction to "adjust for mileage." Section 36a-785 (g) does state that NADA values are to be applied, but the statute does not specify "base values" unadjusted by mileage. Courts are constrained to read a statute as written, and may not read into clearly expressed legislative provisions. Giamo v. New Haven, 257 Conn. 481, 494, 778 A.2d 33 (2001). Summary judgment enters on this claim.
Error in Reported Mileage Deduction Violates RISFA
The Alvarados also claim a RISFA violation because Sovereign inadvertently deducted $850 rather than the correct amount of $800 for the high-mileage adjustment. This error was reflected in the bank's post-resale notice. Post-resale notices are addressed in General Statutes § 36-785 (e) which merely requires that an installment creditor "[w]ithin thirty days of the resale . . . give the retail buyer a written statement itemizing the disposition of the proceeds." In Gaynor v. Union Trust Company, 216 Conn. 458, 582 A.2d 190 (1990). the post-resale notice CT Page 8413-cw contained errors in the fair market value and cost of repossession. The trial court reduced the deficiency accordingly. On review, the Connecticut Supreme Court held that "[t]he defendant's notice of disposition did not violate RISFA," despite errors contained within the post-resale statement. Id., 481. Thus, if a timely correction is made to an inadvertent mistake in a notice, then the notice is not held void for that reason. Summary judgment enters on this claim.
The Resale Was Not Commercially Reasonable
The Alvarados contend that the resale of their car at auction was not "commercially reasonable" as required by RISFA and the UCC. General Statutes § 42a-9-610 (b) provides that "[e]very aspect of a disposition of collateral, including the method, manner, time, place and other items, must be commercially reasonable."
The reasonableness of a commercial resale is ordinarily a question of fact. Gaynor v. Union Trust Company, supra, 216 Conn. 478. The Alvarados argue that the $3,250 resale price was less than half of their car's retail value, and more than 40 percent less than its wholesale value. They also rely on Connecticut Bank Trust Company v. Incendy, supra, 207 Conn. 28, which held that proof of the commercial reasonableness of a resale requires, in general, "evidence of such things as the amount of advertising done, the number of people contacted, normal commercial practices in disposing of the particular collateral, the length of time between the repossession and sale, whether any deterioration in the collateral has occurred, the number of bids received, and the price obtained." Id., 28. The Connecticut Supreme Court subsequently held in Gaynor v. Union Trust Company, supra, 216 Conn. 476, that "[i]n Incendy, we do not intend to establish strict evidentiary standards that must invariably be met in each and every case." In Gaynor, the matter went to trial and there was testimony from a used car dealer.
In the instant case, the affidavits in support of Sovereign's motion for summary judgment do not include any evidence to specifically demonstrate the commercial reasonableness of the sale at Southern Auto Auction. In the absence of any evidence that the sale was "commercially reasonable," summary judgment is inappropriate. The statutes at issue were designed to protect the consumer. The law has long held that presumptions in favor of the consumer are necessary because of the unequal distribution of power between the parties to these transactions. Mack Financial Corp. v. Crossley, 209 Conn. 163, 166, 550 A.2d 303 (1988).
Sovereign argues that because the Alvarodos were credited the fair CT Page 8413-cx market value rather than the actual resale value, the bank is not required to show that the resale was commercially reasonable. Crediting a consumer with the fair market value sufficiently legitimizes the sale, according to Sovereign, and only those dealers with valid licenses may attend and bid at Southern Auto Auction. There is no other reference in the bank's moving papers regarding the commercial reasonableness of the resale, such as whether any of the Incendy criteria were met.
The commercial reasonableness of the resale is a genuine issue of material fact in this case. Awarding credit for the fair market value of the vehicle does not render the issue moot. In any private sale, the compensation received could exceed the fair market value and, thus, result in a lower deficiency for the debtor. The motion for summary judgment on the commercial reasonableness issue is denied.
The court is authorized to consider a renewed motion for summary judgment if additional evidence is available to demonstrate the commercial reasonableness of the resale at Southern Auto Auctions. See Mac's Car City, Inc. v. American National Bank, 205 Conn. 255, 532 A.2d 1302 (1987), and Fiaschetti v. Nash Engineering Co., 46 Conn. App. 443, 706 A.2d 476 (1998).
CONCLUSION
Consistent with the foregoing, the motion for summary judgment (#112) is granted in part and denied in part.
ROBERT F. McWEENY