Chapter 29
Secured Transactions
Case 29.1
Ky.App.,2010.
Citizens Nat. Bank of Jessamine County v. Washington Mut. Bank
— S.W.3d —-, 2010 WL 1404391 (Ky.App.)
Court of Appeals of Kentucky.
by Anthony and Kim Reynolds, and finding Citizens’ security interest in the same home was inferior to Washington
Mutual’s lien. The master commissioner found Washington Mutual’s filing of the foreclosure action accompanied by
the filing of a notice of
lis pendens
FN3 placed all creditors on notice of its claimed interest in and to the manufactured
home and created a priority claim in it, thereby defeating Citizens’ assertion of a priority claim against the home based
upon its later-acquired perfected security interest. After a careful review of the record, the law, and the arguments of
the Reynolds were purchasing both from Ms. Day. The Reynolds further executed a mortgage to Washington
Mutual Bank’s predecessor in interest that was recorded shortly after the deed conveying a security interest in the
Thompson Road property. There is no question the Washington Mutual Bank has a valid and first lien on the real
property. There is no specific mention of the mobile home on the mortgage. Additionally, the Reynolds did not
obtain a title certificate to the mobile home in their name. The evidence reveals that at the time of filing of the
Clerk’s Office claiming an interest in both the real estate and the mobile home. (E18, P724). The
lis pendens
and its
amendment both identified Citizens National Bank of Jessamine County as an interested party. Further, Citizens
was listed as a party defendant and properly served with the Complaint. On May 16, 2007, after being served with
the Complaint, Citizens and the Reynolds executed a Title Lien Statement regarding the mobile home, which was
recorded in the Garrard County Clerk’s Office on August 14, 2007. Both Washington Mutual and Citizens obtained
[1] Citizens filed exceptions to the master commissioner’s report and recommendations, claiming the filing of a notice
of
lis pendens
did not independently create a lien against property and did not take priority over liens filed subsequent
to the
lis pendens
filing. The trial court denied the exceptions and confirmed the master commissioner’s report by
docket order on November 2, 2007. Citizens’ subsequent motion to alter, amend or vacate the order was denied. This
appeal followed.
void. As did the master commissioner, Washington Mutual relies on
P.A. Stark
in support of its position. Washington
Mutual further claims that because the
lis pendens
was filed several months prior to Citizens’ perfection of its lien,
Citizens cannot acquire a superior interest even though Washington Mutual did not perfect its lien.
[2] We agree with Citizens. Kentucky’s
lis pendens
statute clearly applies only to real estate. KRS 382.440. In
Greene
v. McFarland,
43 S.W.3d 258, 260 (Ky.2001) (citing Black’s Law Dictionary 943 (7th ed.1999)), the Supreme Court of
which now governs priorities among competing lien claimants.
See Williams v. Fulmer,
695 S.W.2d 411 (Ky.1985). As
adopted in this Commonwealth, the UCC does not allow for the filing of a
lis pendens
on personal property such as
the manufactured home in issue here. We are unable to locate any Kentucky case applying the
lis pendens
doctrine
to certificated personal property and we are convinced none exists.
There is no question that Reynolds did not comply with the requirements of KRS 186A.297 FN7 and, therefore, the
Finally, it is important to note that the sole issue decided in this appeal is the priority of the competing liens of two
creditors. Nothing in this opinion should be construed to imply that Washington Mutual does not have an interest in
the manufactured home. Rather, we hold only that Washington Mutual’s claim against the home is junior to Citizens’
interest. Our holding also does not diminish the extent of Washington Mutual’s interest against the Reynolds.
For the foregoing reasons, the judgment of the Garrard Circuit Court is reversed and the cause remanded for entry of
FN1. Senior Judge Joseph E. Lambert sitting as Special Judge by assignment of the Chief Justice pursuant
FN2. The trial court, the master commissioner and the parties use the terms “mobile home” and
“manufactured home” interchangeably. However, the term “mobile home” has fallen out of favor in recent
FN3. KRS 382.440.
FN4. The home, a 1994 Fleetwood Stoneridge, is located at 422 Thompson Road, Lancaster, Garrard
FN5. KRS 378.010 states in pertinent part:
Every gift, conveyance, assignment or transfer of, or charge upon, any estate, real or personal, or right or
FN6. As previously noted, there is no dispute Washington Mutual holds a first and prior mortgage interest in
the real property.
FN7. KRS 186A.297 provides:
(1) When a manufactured home is or is to be permanently affixed to real estate, the owner may execute
and file an affidavit of conversion to real estate with the county clerk of the county in which the real estate is
(2) A county clerk shall not accept a surrender of a Kentucky certificate of title which displays an
unreleased lien unless it is accompanied by a release of the lien. When the county clerk files the affidavit of
Case 29.2
Conn.,2008.
First Nat. Bank of Litchfield v. Miller
285 Conn. 294, 939 A.2d 572, 65 UCC Rep.Serv.2d 470
Supreme Court of Connecticut.
CHAPTER 29: SECURED TRANSACTIONS 471
FIRST NATIONAL BANK OF LITCHFIELD
v.
Bruce V. MILLER et al.
Nos. 17750, 17774.
Argued Sept. 17, 2007.
Decided Jan. 29, 2008.
KATZ, PALMER, VERTEFEUILLE, ZARELLA and SCHALLER, Js.
SCHALLER, J.
*296 These consolidated appeals arise from the attempt of the plaintiff, First National Bank of Litchfield, to recover money it had
loaned to the defendants Linda Miller and Bruce Miller (collectively, Millers) to finance their purchase of a boat from the defendant
Norwest Marine, Inc. (Norwest). The plaintiff and Norwest appeal upon respective grants of certification, FN1**574 from the
judgment of the Appellate Court reversing the judgment of the trial court, which had concluded that the Millers were obligated to
repay the loan from the plaintiff. The issues before us in these certified appeals are whether the Appellate Court properly
concluded that: (1) the Millers did not accept the boat in question; and (2) General Statutes § 42–100c applied to the transaction.
We reverse the judgment of the Appellate Court.
FN1. We granted Norwest’s petition for certification, limited to the following question: “Did the Appellate Court properly
conclude that the [Millers] did not accept the boat in question?”
First National Bank of Litchfield v. Miller,
280 Conn. 931,
909 A.2d 957 (2006). We granted the plaintiff’s petition for certification, limited to the following questions: “Did the
Appellate Court properly conclude that: (1) the [Millers] had not accepted the boat; and (2) General Statutes § 42-100c
applied to the transaction?”
First National Bank of Litchfield v. Miller,
280 Conn. 940, 912 A.2d 475 (2006).
FN2. Specifically, the purchase agreement provided in relevant part: “Buyer states that he/she has inspected and
examined the equipment which is the subject of this [a]greement and determined that the equipment is of satisfactory
quality and is suitable for the purpose for which it is purchased.”
FN3. As had been their arrangement in previous transactions, the plaintiff paid Norwest a fee of approximately $1200 for
referring the financing to the plaintiff.
FN4. In a section of the retail installment contract entitled, “Seller’s Agreement with Lender,” the contract lists various
warranties and representations made by Norwest to the plaintiff, including: “The [p]roperty has been delivered to the
[b]uyer or [c]o-buyer(s), and said [p]roperty has been accepted.”
*298 At the Millers’ request, in the two weeks after Norwest and the Millers had signed the retail installment contract, Norwest**575
472 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
FN5. The plaintiff is holding the proceeds of the sale in an escrow account pending the outcome of this action.
The record reveals the following procedural history. The plaintiff brought this action against both the Millers and Norwest, alleging
that the Millers breached the retail installment contract by failing to make the monthly payments as required under the contract. As
FN6. The plaintiff also alleged that both the Millers and Norwest had been unjustly enriched to the detriment of the plaintiff
by the failed transaction, and that Norwest had violated the Connecticut Unfair Trade Practices Act, General Statutes §
42-110a et seq., by engaging in an unfair and deceptive act resulting in the plaintiff’s loss.
The trial court concluded that, because both the purchase agreement and the retail installment contract had so provided, the
Uniform Commercial Code, General Statutes § 42a-2-101 et seq. (code), applied to the transaction. Under the provisions of the
code, the court found that the Millers had accepted the boat, both by signing the purchase agreement and the retail installment
FN7. Because the plaintiff’s claim against Norwest had been pleaded in the alternative, the court noted that its judgment
in favor of the plaintiff and against the Millers extinguished the plaintiff’s claim against Norwest.
FN8. In his dissenting opinion, Judge Bishop disagreed with the majority’s conclusion that the issue of whether the Millers
had accepted the boat was a question of law. Instead, treating the question as one of fact, the dissent concluded that the
court’s determination that the Millers had accepted the boat was not clearly erroneous.
First National Bank of Litchfield v.
Miller,
supra, 97 Conn.App. at 400-401, 904 A.2d 1282 (
Bishop, J.,
dissenting). The dissent also took issue with the
majority’s conclusion that § 42-100c applied under the facts of the present case, on the ground that the statute applies
(1982) (same). Application of this deferential standard of review to a trial court’s factual finding is in accordance with the nature and
limitations of this court as an appellate tribunal, and correctly recognizes that the trial court is the appropriate forum for the
resolution of factual disputes. In applying the clearly erroneous standard of review, “[a]ppellate courts do not examine the record to
determine whether the trier of fact could have reached a different conclusion. Instead, we examine the trial court’s conclusion in
order to determine whether it was legally correct and factually supported.” (Internal quotation marks omitted.) *303
Lydall,
http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=162&FindType=Y&SerialNum=2011959386
Inc. v. Ruschmeyer,
282 Conn. 209, 246, 919 A.2d 421 (2007). This distinction accords with our duty as an appellate tribunal “to review, and not to
retry, the proceedings of the trial court.” (Internal quotation marks omitted.)
State v. Lawrence,
282 Conn. 141, 156, 920 A.2d 236
(2007).
FN9. The Appellate Court, in determining that the question of whether the Millers had accepted the boat was a question of
law subject to plenary review, relied on the principle that “when the evidence with respect to acceptance of goods admits
of only one reasonable conclusion, the issue becomes one of law.” (Internal quotation marks omitted.)
First National Bank
of Litchfield v. Miller,
supra, 97 Conn.App. at 394, 904 A.2d 1282, quoting 67 Am.Jur.2d 697, Sales § 578 (2003).
Because we conclude that the evidence reasonably would admit of more than one conclusion, it is not necessary for us to
474 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
contained a representation by Norwest that the boat had been accepted by the Millers. Although the Millers did not make this
representation, they signed the retail installment contract, which was a preprinted form that contained the representation under a
section *305 of the contract **579 entitled, “Seller’s Agreement With Lender.” FN13
FN10. The Millers misstate the trial court’s reasoning, asserting that the trial court grounded its finding of acceptance on
its conclusion that ownership of the boat transferred on May 16, 2000, when the plaintiff sent its check to Norwest in
FN11. The Millers contend that, because they did not have the opportunity to take the boat out for a test ride until
Memorial Day weekend, they did not have a reasonable opportunity to inspect the boat until that time, and, therefore, it
was legally impossible for them to have accepted the boat prior to that time. They rely on the principle that what is
reasonable is determined in reference to the applicable circumstances, in this case, that the item sought to be purchased
was a vehicle, and that the most reasonable manner to inspect a vehicle is to test drive it. We first reiterate that the
FN12. The Millers contend that this clause in the purchase agreement had no effect because it was boilerplate language
included on the purchase agreement form that they signed. They cite authority from other jurisdictions for the proposition
that the signing of a form acceptance prior to the receipt of goods is not determinative of acceptance. The trial court,
FN13. The Millers contend that the trial court improperly relied on this representation by Norwest to the plaintiff in the
retail installment contract because the representation appeared in the portion of the agreement that was between Norwest
and the plaintiff. The Millers also point to the fact that, when they signed the contract, no agent for Norwest had signed the
portion of the contract that contained Norwest’s representations and warranties to the plaintiff, and to the fact that, as of
FN14. The Millers urge us to find that none of these acts were inconsistent with Norwest’s ownership of the boat, based
on evidence they had presented that such alterations routinely were performed as part of the purchase of a boat. In
reviewing the factual findings of the trial court, we do not determine what we would have found had we been the fact
finder; rather, we determine only whether the evidence in the record supports the court’s findings.
FN15. As an alternate ground for affirmance of the judgment of the Appellate Court, the Millers contend that Norwest’s
representation to the plaintiff, in the seller’s agreement within the retail installment contract, that the boat had been
delivered to and accepted by the Millers, constituted a breach of the warranty that Norwest had made to the plaintiff, and
extinguished the Millers’ obligation to repay the loan. This argument has no merit. The warranties that Norwest made in
FN16. The June 6, 2000 letter stated in full: “We are returning to you three coupon books that relate to the above–
cancelled account. The account in question was a loan to finance a Donzi [Z]20 boat from Norwest Marine, Inc. As the
enclosed letters indicate, we never took delivery of the boat due to Norwest’s repeated failures to deliver a boat in good
working order. As the letters further indicate, the sale was cancelled within two working days following Norwest’s failure to
do so. In fact, the sale would have been cancelled on the first working day following Norwest’s second failure to deliver
FN17. General Statutes § 42–100c provides: “(a) If a debtor, upon receipt of a statement of his account under a retail
credit transaction, believes that there is an error in such statement as to the whole or any part of the amount shown as
owing to the creditor, he may, in writing, not later than sixty days from the date of mailing of such statement, so notify the
creditor, stating the basis or reasons for his belief that the statement is in error. The creditor shall within thirty days after
receipt of such notification send a written acknowledgment to the debtor, and no later than two complete billing cycles of
[5][6][7] This issue presents a question of statutory interpretation over which our review is plenary.
Windels v. Environmental
Protection Commission,
284 Conn. 268, 294, 933 A.2d 256 (2007). “When construing a statute, [o]ur fundamental objective is to
ascertain and give effect to the apparent intent of the legislature…. In other words, we seek to determine, in a reasoned manner,
the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually
does apply.” (Internal quotation marks omitted.)
Id.
Case 29.3
Del.Supr.,2009.
Hicklin v. Onyx Acceptance Corp.
— A.2d —-, 2009 WL 804618 (Del.Supr.)
Supreme Court of Delaware.
v.
CHAPTER 29: SECURED TRANSACTIONS 477
ONYX ACCEPTANCE CORP., Plaintiff Below, Appellee.
No. 317, 2008.
Submitted: Jan. 14, 2009.
Decided: March 27, 2009.
Reargument Denied: April 22, 2009.
Jeffrey P. Wasserman and Daniel C. Kerrick (argued), Esquires, of Ciconte, Wasserman & Scerba, LLC, Wilmington,
for Appellee.
Before STEELE, Chief Justice, BERGER and JACOBS, Justices.
JACOBS, Justice:
*1 Shannon P. Hicklin, the defendant below, appeals from a Superior Court order affirming a deficiency judgment of
the Court of Common Pleas arising from the repossession and sale of a car financed by the plaintiff below, Onyx
Acceptance Corporation (“Onyx”). On appeal, Hicklin argues that the Superior Court erroneously upheld the judgment
of the Court of Common Pleas, because the trial court: (1) applied an incorrect standard in determining the
repossessed the car. At that time, Hicklin was three payments past due and owed $5,741.65 under the contract.
The car, when repossessed, had minor defects-including a cracked windshield, dings, scratches, and a “check
engine” message-that would cost an estimated $1,365 to repair. Those defects were never repaired. According to the
Kelley Blue Book, the average wholesale price of a 1993 Ford Explorer at that time was $3,700.FN2
The repossessed car was driven to Dulles, Virginia and sold for $1,500 at a private auction operated by ABC
The Court of Common Pleas found that the fair market value of the car at the time of the sale was $2,335, using the
higher of the two disputed mileage figures to determine the wholesale value, and then subtracting the repair costs.
The court held that because the $1,500 auction price was greater than 50% of the car’s adjudicated value, the sale
was commercially reasonable. Consequently, the trial court ruled, Hicklin remained liable for Onyx’s deficiency and
was not entitled to statutory damages.
ANALYSIS
I.
[1][2][3] On appeal from the Court of Common Pleas to the Superior Court, the standard of review is whether there is
legal error, whether the trial court’s factual findings are sufficiently supported by the record, and whether those
findings are the product of an orderly and logical reasoning process.FN3Factual findings of the Court of Common Pleas
that are supported by the record will be upheld even if, acting independently, the Superior Court would have reached
proved that it had sold the car in a commercially reasonable manner. Onyx contends that the commercial
reasonableness test is flexible and permits a secured creditor, acting in good faith, to exercise business judgment and
flexibility in deciding how to dispose of collateral. Onyx further argues that it was not required to introduce evidence of
the prevailing trade practice in disposing of repossessed automobiles, and that even without such evidence, it
established that the time, place, and manner of the sale were commercially reasonable.
Del. C.
§ 9–610) states the general rule governing the disposition of collateral:
(a) After default, a secured party may ... dispose of … the collateral in its present condition or following any
commercially reasonable preparation….
(b) Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be
commercially reasonable….
CHAPTER 29: SECURED TRANSACTIONS 479
are deemed to establish conclusively that a secured party acted in a commercially reasonable manner under Section
9-610:
(b) A disposition of collateral is made in a commercially reasonable manner if the disposition is made:
(2) at the current price in any recognized market at the time of disposition; or
(3) otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the
(2) by a bona fide creditors’ committee;
(4) by an assignee for the benefit of creditors.
Our prior case law has articulated a standard substantially similar to the one established by Section 9-627(b)(3):
To be commercially reasonable the actions must be “in keeping with prevailing trade practice among reputable and
responsible business and commercial enterprises engaged in the same or similar businesses.”FN9
*4 The only safe harbor provision applicable here would be proof of “conformity with reasonable commercial practice
A. Onyx Failed to Prove the Sale of Hicklin’s Car Was Commercially Reasonable in Every Aspect
[6][7][8] The UCC affords secured parties greater rights than those available at common law-the ability both to
repossess collateral and to sue for a judgment on the underlying obligation-rather than having to elect between those
remedies. The UCC also requires the secured party to meet a high standard when disposing of collateral.FN14Although
obtaining a satisfactory price is the purpose of requiring a secured party to resell collateral in a commercially
that Onyx sold Hicklin’s car in a commercially reasonable manner. Onyx argues that private auctions generally yield
higher prices, and that because Hicklin’s car was sold to the highest bidder at a private auction, the sale must have
perforce been “commercially reasonable.” We disagree. Even if private auctions
generally
result in higher sales prices
than other methods, there is no evidence that the
specific
auction procedures employed by ABC here would have
480 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
trade practice are commercially reasonable, is not the exclusive way to prove commercial reasonableness.
Accordingly, Onyx was not required to introduce any evidence of practice in the trade. But, without such evidence,
Onyx cannot avail itself of that UCC provision to prove a commercially reasonable sale of Hicklin’s car.
C. Onyx’s Good Faith Does Not Establish the Commercial Reasonableness of the Sale
[9] Onyx next implies, without directly arguing, that because it acted in good faith when it sold Hicklin’s car, the sale
a commercially reasonable sale of collateral. Hicklin asserts, but without making any reasoned argument, that such a
failure bars a recovery of any deficiency, and Onyx does not address the issue at all. We hold that a secured party’s
failure to establish a commercially reasonable sale of repossessed consumer collateral bars it from recovering any
deficiency.
The UCC establishes a rebuttable presumption that secured parties in non-consumer transactions are entitled to
proper notice of the sale of collateral enables a debtor to ensure that the secured party follows procedures designed
to yield the highest available sale price.FN25Those same policy concerns are applicable in this case and under Article 9
in its current form, where the secured party has failed to establish that it sold the collateral in a commercially
reasonable manner. We therefore hold that a secured party’s failure to prove a commercially reasonable disposition of
CHAPTER 29: SECURED TRANSACTIONS 481
properly authenticate those documents under D.R.E. 803(6) as an “other qualified witness.” Alternatively (Onyx
argues) even if those records were erroneously admitted, substantial evidence supports the trial court’s evidentiary
ruling.
[11] Because we conclude that the trial court erred as a matter of law by granting Onyx a deficiency judgment, and
reverse the Superior Court’s affirmance on that basis, we address Hicklin’s evidentiary claim only insofar as is
committed no abuse of discretion in finding) that Jimenez was qualified to authenticate the repossession notice.
V. Hicklin is Not Entitled to Statutory Damages On Remand
*7 The final issue concerns Hicklin’s counterclaim for statutory damages based on Onyx’s alleged breach of the notice
provisions of 6
Del. C.
§ 9-611. The Superior Court held that Hicklin had failed to offer any support for her
counterclaim, and affirmed the trial court’s rejection of it. On appeal to this Court, Hicklin again argues that Onyx’s
FN1. The facts are summarized from the decisions below:
Hicklin v. Onyx Acceptance Corp.,
C.A. 07A-09–
FN2. Because the actual mileage on the car was disputed, its Blue Book value may possibly have been
higher. At the time Hicklin purchased the car, the certificate of title listed the car’s mileage as 84,030. The
odometer reading at the time of sale, however, was 57,708. If the mileage on the car were that lesser figure, it
would be worth $450 more.
FN3.
Wright v. Platinum Fin. Servs.,
930 A.2d 929 (Table) (Order), 2007 WL 1850904, at *2 (Del. June 28,
FN4.
Id.
FN6.
See Tony Ashburn & Son, Inc. v. Kent County Reg’l Planning Comm’n,
962 A.2d 235, 239 (Del.2008)
FN7. 6
Del. C.
§ 9–101
et. seq.
FN8.
Assocs. Fin. Servs. Co., Inc. v. DiMarco,
383 A.2d 296, 302 (Del.Super.1978) (overruled on other
grounds by
Wilmington Trust Co. v. Conner,
415 A.2d 773 (Del.1980)) (describing the commercial
reasonableness standard as imprecise).
FN10.6
Del. C.
§ 9-627(b)(3).
FN11.
See
6
Del. C.
§ 9–610 cmt. 9 (“A market in which prices are individually negotiated or the items are not
FN12.6
Del. C.
§ 9–627(b)(3) “does not allow the dealers in an industry to set their own low standards. The
practices must be reasonable among reputable dealers. The burden of proof is on the secured party to prove
that these conditions are met.”
See
Anderson, Uniform Commercial Code, [Rev] § 9-627:5, p. 1056.
FN13.
See
Anderson, Uniform Commercial Code, [Rev] § 9–627:5, p. 1056 (“if the secured party acts in
FN14. Under the UCC, a secured party may repossess collateral and seek a deficiency judgment, but under
FN15.
See
White and Summers, The Uniform Commercial Code, Fifth Edition § 34-11, p. 401.
FN16.
Id.
FN17. Nor should that presumption of commercial reasonableness always attach. In some circumstances a
FN18.
See, e.g., Wilmington Trust Co. v. Negron,
1994 WL 1547768, at *2 (Del.Com.Pl. April 20, 1994);
Friendly Fin. Corp. v. Hector,
1999 WL 1847444, at *1 (Del.Com.Pl. March 15, 1999). It is unclear why the
Court of Common Pleas adopted that presumption. The application of the 50% “shock the conscience
FN19.
See, e.g., First Heritage Nat. Bank v. Keith,
902 F.2d 33 (Table), 1990 WL 51417, at *4 (6th Cir. April
24, 1990) (stating that a sale of collateral at public auction is not conclusive proof of commercial
FN20.
See, e.g., Ford Motor Credit Co. v. Henson,
34 S.W.3d 448, 450 (Mo.App.2001) (holding that a secured
party who fails to provide information on the method, manner, or place of sale has failed to establish a
FN21.6
Del.
C. § 9-626(a).
FN22.6
Del. C.
§ 9-102(a)(23) defines consumer goods as goods “bought for use primarily for personal,
family, or household purposes.”Hicklin bought her car for personal use.
FN23.
See
Anderson, Uniform Commercial Code [Rev] § 9-626:4, p. 1048 (describing how under former
Section 9-507 there was a three-way split of authority on the consequences of a secured party’s failure to
FN24.
See Wilmington Trust Co. v. Conner,
415 A.2d 773, 780-81 (Del.1980). In
Conner,
this Court held that
the secured party’s failure to provide proper notice of the sale of collateral to the debtor creates an absolute
FN25.
Id.
FN26.
Sammons v. Doctors for Emergency Servs., P.A.,
913 A.2d 519, 535 (Del.2006).