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 : September 1 7 , 1974
Decided: OEc f 8 1974
Filed : BEC 1 ? 1474
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 im-
m 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 pay-
ment had been made, plaintiff wrote a letter to defendant stat-
ing 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 Lynn-
wood'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 October 13, 1970
P. 0 Box 1434
.
Trout Creek, Montana 59874 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 pro-
cessing. Any sale of goods is subject to the
Chapter on Sales (Chapter 2) * * *
"(2) If the security interest secures an indebted-
ness, 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 dis-
position 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 custo-
marily 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 dlsposl-
tion 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. Approximately 350 people attended the
auction. Bidding on the equipment varied somewhat from item
to item depending upon the interest and the condition of the
particular piece of equipment. The mountain logger did re-
ceive competitive bidding. William Beaman, an employee of
Lymood Equipment Company, testified he had attended the auc-
tion 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:
"(3) * * * Sale or other disposition may be -
as a
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 con-
formity 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 commer-
c 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 . The l e t t e r was n e i t h e r
c e r t i f i e d nor r e g i s t e r e d . 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 determina-
t 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 . His
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 , be-
c 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
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 un-
supported, 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 notwith-
standing 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