Case Title: Comer v. Green Tree Acceptance, Inc.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1993-08-26T00:00:00Z

Document:
Comer v. Green Tree Acceptance, Inc.1993 WY 112858 P.2d 560Case Number: 92-283Decided: 08/26/1993Supreme Court of Wyoming
Dale 
L. COMER and Colleen K. Comer, 

Appellants 
(Plaintiffs),

v.

GREEN 
TREE ACCEPTANCE, INC.,

 Appellee 
(Defendant).

Appeal 
from The District Court of Crook County, Dan R. Price II, 
J.

Paul 
J. Drew, Drew & Carlson, Gillette, for 
appellants.

Bruce 
S. Asay, Cheyenne, for appellee.

Before 
MACY, C.J., and THOMAS, CARDINE, GOLDEN and TAYLOR, 
JJ.

THOMAS, 
Justice.

[¶1]      In this case, we 
revisit the concept of strict foreclosure of a security interest. The single 
issue is whether Green Tree Acceptance, Inc. (Green Tree) effected a strict 
foreclosure with respect to a mobile home as to which it held a security 
interest. The debtors, Dale L. Comer and Colleen K. Comer (the Comers), sought a 
declaratory judgment holding they were not responsible for a deficiency, 
contending in the trial court that a strict foreclosure of the mobile home had 
been accomplished by Green Tree obtaining title in its own name. The trial court 
adopted the position advanced by Green Tree to the effect that, since it had 
furnished an appropriate notice of private sale to the Comers and had not 
violated any provision of the Wyoming Uniform Commercial Code (UCC) in any 
respect, it was entitled to a dismissal of the Comers' complaint. We hold the 
trial court failed to correctly apply Wyoming law in arriving at its decision in 
this case. The dismissal of the case by the trial court is reversed, with 
directions to enter judgment in favor of the Comers. 

[¶2]      The Comers state 
the issue for review in their Brief of Appellants as:

     If a secured creditor 
repossesses its collateral, a mobile home, and thereafter releases its lien and 
causes a certificate of title to be issued to the secured creditor as owner of 
the mobile home, has the secured creditor effected a strict foreclosure on its 
collateral?

Green 
Tree, as appellee in the case, says the issue on appeal 
is:

Did 
the Appellee utilize the appropriate procedure in repossessing and transferring 
its security interest?

[¶3]      The Comers 
purchased a new mobile home on May 24, 1985 and executed a security agreement 
with the seller. The seller then assigned its security interest in the mobile 
home to Green Tree. Green Tree appropriately filed a financing statement 
reflecting its security interest in the mobile home. Almost four years later, 
the Comers sold the mobile home to another individual who made a cash payment 
and agreed to assume the payments on the loan balance. That agreement was 
accepted by Green Tree, but the Comers were not released from liability on the 
debt. The Comers' purchaser failed to make the payments under the contract, and 
default occurred in the fall of 1989.

[¶4]      In January of 
1990, Green Tree notified the Comers of the default and the amount due. Default 
was not cured within the thirty days allowed by Green Tree, and Green Tree 
repossessed the mobile home. On March 1, a notice from Green Tree was addressed 
to the Comers, which they received on March 13, 1990, advising them the mobile 
home had been repossessed and, at any time after ten days, it would be sold at a 
private sale. The Comers also were advised of their right to redeem the property 
by paying the balance due at any time prior to a sale. The Comers did not redeem 
the mobile home.

[¶5]      On April 2, 1990, 
the county clerk of Crook County issued a certificate of title showing Green 
Tree was the owner of the mobile home, upon proof it had been repossessed from 
the Comers' purchaser. Prior to April 2, on March 21, 1990, Green Tree had 
executed a Certification of Taxes Paid in which it certified that it was the 
true and lawful owner of the mobile home; it had filed a termination statement 
in which it certified, as the secured party, that it "no longer claims a 
security interest under the financing statement * * *"; and it had executed an 
Affidavit of Repossession of a Motor Vehicle stating that it was made for the 
purpose of establishing ownership. At some later time, Green Tree had the mobile 
home appraised, sold it, and was left with a deficiency. Green Tree then sought 
to recover the deficiency, contending the Comers remained liable for 
it.

[¶6]      On June 20, 1991, 
the Comers sought a declaratory judgment by a complaint filed in the district 
court. The complaint requested that the court declare Green Tree had effected a 
strict foreclosure of its collateral and, for that reason, was not entitled to a 
deficiency judgment. The district court found Green Tree had given proper notice 
of its intent to sell the collateral at a private sale; had transferred title to 
its name to facilitate the sale; and had not sent the statutory notice of intent 
to retain the collateral in satisfaction of the obligation. The district court 
ruled strict foreclosure required Green Tree to affirmatively indicate an intent 
to retain the collateral in satisfaction of the obligation and, on November 24, 
1992, an order was entered dismissing the Comers' 
complaint.

[¶7]      The UCC, as 
adopted in Wyoming, WYO. STAT. §§ 34.1-1-101 to -10-104 (Supp. 1993 and 1991 
Repl.), preserves the historic rights and remedies of the parties when money is 
loaned and a repayment is secured by personal property. On default, the creditor 
or secured party can reduce the claim for the money owed to judgment and proceed 
to levy upon the collateral, in which case the judicial sale is a foreclosure of 
the security interest. WYO. STAT. § 34.1-9-501 (1991 Repl.). Alternatively, the 
creditor or secured party can obtain possession of the property; cause it to be 
sold; and pursue a claim for any deficiency. WYO. STAT. § 34.1-9-504 (1991 
Repl.). The disposition of the collateral may be by public or, under some 
limited circumstances, private sale. WYO. STAT. § 34.1-9-504(c). In addition, if 
sixty percent of the debt has not been paid, the creditor or secured party may 
propose to retain the collateral in satisfaction of the obligation. WYO. STAT. § 
34.1-9-505(b) (1991 Repl.). If this latter remedy is pursued, notice of such a 
proposal is required unless it has been waived by the debtor. The UCC also 
preserves the right of the debtor to redeem the property, but that right must be 
exercised prior to the time that the secured party has disposed of the property 
or made a contract for its disposition under § 34.1-9-504, or prior to the time 
the obligation is satisfied under § 34.1-9-505(b).

[¶8]      In this appeal, 
the Comers contend Green Tree elected to retain the mobile home in satisfaction 
of the obligation when it released its lien and caused title to be placed in its 
name. We hold, in agreement with the Comers' contention, that, when a secured 
creditor repossesses collateral and causes the title in the secured property to 
be placed in its name, it has effected a strict foreclosure. The election to 
retain the collateral in satisfaction of the debtor's obligation precludes the 
creditor from then seeking any deficiency.

[¶9]      This rule is 
supported by the provisions of the UCC and the cases interpreting those 
provisions. The default provisions in the UCC do not automatically transfer 
title to the secured party upon default. Jeweler's Fin. Services, Inc. v. 
Chapes, Ltd., 181 Ga. App. 872, 354 S.E.2d 200 (1987). The provisions found in 
the UCC grant broad rights to the secured party to repossess the security in 
order to sell or otherwise dispose of that property upon default. When the 
creditor repossesses the secured property, however, it obtains only the right of 
possession, not title. Jeweler's. Under the UCC, default does not divest a 
debtor of all right and interest in the secured property, nor is the secured 
party, the creditor, vested with the unlimited power to deal with the property 
as it wishes. Wells v. Central Bank of Alabama, N.A., 347 So. 2d 114 (Ala. Civ. 
App. 1977); (citing State v. Weber, 76 N.M. 636, 417 P.2d 444 (1966)). The 
debtor is granted the right to redeem the secured property and may exercise that 
right at any time before the secured party has disposed of it or has entered 
into a contract for its disposition. Furthermore, if the secured party should 
elect to retain the property in satisfaction of the debt, the right of 
redemption exists up until the obligation has been discharged by the creditor's 
election to retain the collateral. WYO. STAT. § 34.1-9-506 (1991 
Repl.).

[¶10]   Green Tree released its security 
interest in this mobile home and then became the titled owner. In accomplishing 
the transfer of title, Green Tree exceeded the authority the statutes afford to 
a secured creditor and, in effect, the Comers' rights and interest in the 
property were abrogated, including the right to redeem the property. A right of 
redemption cannot be exercised if ownership of the secured property already has 
been transferred. When the creditor takes title to the repossessed collateral in 
its own name, after default and repossession, but prior to any disposition 
authorized by statute, the right of redemption afforded to the debtor becomes 
illusory. Wells. See also Owens v. Auto. Recovery Bureau, Inc., 544 S.W.2d 26 
(Mo. Ct. App. 1977) (holding that unlawfully failing to permit redemption 
amounted to conversion).

[¶11]   The actions of a secured creditor 
that, in effect, defeat the right of a debtor to redeem cannot be reconciled 
with the specific grant by statute of the right to redeem. In order to harmonize 
the actions of Green Tree, in this instance, with the rights of the Comers under 
the UCC, Green Tree's decision to take title to the mobile home must be held to 
be a retention of the collateral in satisfaction of the Comers' obligation. Our 
rule, in Wyoming, is that, when the creditor takes title in its name or changes 
title to the repossessed property, the disposition of such property, for 
purposes of the UCC, has occurred. That step taken by a creditor unilaterally 
cuts off the debtor's right of redemption and, for that reason, it must be 
perceived as an election to retain the collateral in satisfaction of the 
obligation.

[¶12]   This holding is in harmony with the 
rule we previously have established that failure to strictly comply with the 
provisions of the UCC results in a forfeiture of any deficiency. Hess v. Thomas, 
851 P.2d 10 (Wyo. 1993); Coones v. Fed. Deposit Ins. Corp., 848 P.2d 783 (Wyo. 
1993); C. Bud Racicky Agency, Inc. v. Wood Gundy, Inc., 767 P.2d 601 (Wyo. 
1989); Jackson State Bank v. Beck, 577 P.2d 168 (Wyo. 1978); Aimonetto v. 
Keepes, 501 P.2d 1017 (Wyo. 1972). We have adopted this absolute bar approach 
because it establishes the most definite deterrent to noncompliance by secured 
creditors. Since taking title in the creditor's name interferes with the 
statutory right of the debtor to redeem that property, non-compliance with the 
statutory remedies is apparent. That style of non-compliance is deterred by the 
invocation of the absolute bar approach.

[¶13]   Green Tree argues, however, that, 
because it never provided the requisite notice under § 34.1-9-505(b), it cannot 
be held to have retained the collateral in satisfaction of the obligation. We 
cannot accept this position. A creditor cannot be permitted to gain an advantage 
by its failure to furnish the requisite notice. We agree with the analysis by 
the Supreme Court of Alaska, when it said:

     The requirement of 
notice to the debtor by a secured party proposing to retain the chattel in 
satisfaction of the obligation is obviously for the benefit of the debtor. * * 
*. As stated in 4 R. Anderson, Uniform Commercial Code 9-505:5, at 632 (2d ed. 
1971):

The 
creditor's failure to give notice of intention to retain the collateral in 
discharge of the debt does not prevent the debtor from showing that the 
collateral was in fact retained by the creditor and on the basis of such fact he 
may claim that he is discharged from further liability. The giving of notice 
protects the creditor from a subsequent claim that he should have sold the 
collateral.

Moran 
v. Holman, 514 P.2d 817, 820 (Alaska 1973).

The 
notice requirement serves to protect the interests of both the debtor and the 
creditor. If the debtor is satisfied the property is worth more than the balance 
owing, the debtor has the opportunity to redeem. Conversely, the creditor is 
protected from any claim for damages by the debtor. The failure to provide the 
notice exposes the creditor to liability and damages under WYO. STAT. § 
34.1-9-507(a) (1991 Repl.), but that remedy does not automatically demonstrate 
that strict foreclosure has not occurred.

[¶14]   Green Tree also argues several 
other jurisdictions have rejected the concept of strict foreclosure absent 
explicit notice of the intention of the creditor to retain the property. Our 
review of the cases cited by Green Tree results in the conclusion all are 
factually distinguishable. In those cases, the creditors were charged with 
having perfected strict foreclosure because they retained the property for an 
extended period of time following repossession. Chrysler Credit Corp. v. 
Mitchell, 94 A.D.2d 971, 464 N.Y.S.2d 96 (1983); First National Bank of 
Pennsylvania v. Cole, 291 Pa. Super. 391, 435 A.2d 1283 (1981); Haufler v. 
Ardinger, 28 UCC Rep.Serv. 893 1979 WL 30107 (Mass. App. Div. 1979); Sparkle 
Laundry & Cleaners, Inc. v. Kelton, 595 S.W.2d 88 (Tenn. Ct. App. 1979). The 
creditor did not actually obtain title to the repossessed property in the 
creditor's name in any of those cases.

[¶15]   We previously have articulated our 
willingness to recognize an implicit election of strict foreclosure by a 
creditor as the creditor's remedy. Durdahl v. Bank of Casper, 718 P.2d 23 (Wyo. 
1986) (reversing summary judgment and remanding for the trier of fact to 
determine whether the bank had by implication elected to retain the collateral). 
The rule in this state is that, while failure to provide the notice under § 
34.1-9-505(b) may expose the creditor to a claim for damages, the failure to 
furnish the notice does not invalidate a strict foreclosure if it has been 
accomplished. 

[¶16]   Green Tree suggests there is a 
problem with respect to the result if, instead of a deficiency, it had 
experienced a surplus. Green Tree may well have encountered a problem by taking 
title in its name without affording the requisite statutory notice to the 
Comers. As we have noted, the Comers then could resort to the remedy provided 
under § 34.1-9-507(a) to recover any damages they had incurred as a result of 
the creditor's retention of the property without compliance with the provisions 
of the UCC. Creditors proceeding to collect on indebtedness outside the 
provisions of the UCC should expect problems.

[¶17]   As a final argument, Green Tree 
contends it had no option other than to place the title to the mobile home in 
its name because it could not otherwise transfer the property to a buyer. This 
contention is not correct. Addressing particularly the transfer of ownership of 
a mobile home, WYO. STAT. § 31-2-504(c) (1989 Repl.) 
provides:

     If ownership of a 
mobile home passes other than by voluntary transfer, the new owner shall apply 
for a new certificate of title therefor accompanied by such instruments and 
documents of authority or certified copies thereof as may be required to 
evidence or effect the transfer of title or interest in the mobile 
home.

The 
creditor can transfer repossessed property without taking title in its own name. 
The buyer may present to the county clerk the same documentation Green Tree used 
in this instance to effect a transfer of title to the buyer. These documents may 
include, among others, copies of the security agreement; affidavits concerning 
the peaceful repossession of the property; the demonstration of proper notice; 
and the sale of the property in a commercially reasonable manner. In Wyoming, a 
similar provision is extant for motor vehicles. WYO. STAT. § 31-2-104 (1989 
Repl.).

[¶18]   We hold that, when a creditor takes 
title to repossessed collateral in its own name, a strict foreclosure is 
effected. A creditor is not entitled to a deficiency judgment once strict 
foreclosure has occurred. The failure to provide the required statutory notice 
does not prevent a conclusion of strict foreclosure; it simply exposes the 
creditor to liability under the penalty provisions of the UCC. We reiterate, in 
support of this decision, our rule that compliance with the provisions of the 
UCC is a condition precedent to recovery of any deficiency if the sale price of 
the collateral is not sufficient to satisfy the debt.

[¶19]   We reverse the decision of the 
district court and remand this case with direction to enter judgment in favor of 
the Comers, holding them not responsible for any 
deficiency.

CARDINE, 
Justice, dissenting.

[¶20]   I would affirm the decision of the 
district court judge. It is conceded that Green Tree has fully complied with 
every provision of the U.C.C. when Green Tree lawfully repossessed, lawfully 
took title in its name, did not give notice of intent to retain the collateral 
in satisfaction of the debt (because strict foreclosure was not intended), 
afforded all rights of redemption, lawfully sold the collateral, and now 
lawfully seeks to recover its loss by deficiency judgment. The sale must have 
been within a reasonable time, and it was. The U.C.C. provides for every aspect 
of this transaction. Yet the court refuses to accept the U.C.C. as enacted by 
the legislature and now proceeds to make new law. Under this new law, not found 
in the U.C.C., if the creditor, to facilitate resale, takes title in its name, 
it will always lose. If the secured property is worth more than the debt, the 
debtor can recover; and if it is worth less, the debtor pays nothing. And for 
what purpose? The court says it is for a bright line rule. I question if this 
"bright line" rule is of any value. But if it is, then surely it is the business 
of the legislature to enact the "bright line" rule and not this 
court.

[¶21]   There is a benefit to the creditor 
taking title to facilitate sale. The court suggests that the buyer, at sale 
after repossession, should be given, rather than title, a bushel basket of 
papers establishing the right of repossession, notices, expiration of redemption 
rights, fair market value, and full compliance with the law. From these, the 
buyer may then obtain title. Thus now, by this decision, required foreclosure 
will make sale difficult and adversely affect the sale 
price.

[¶22]   Finally, I disagree with what is 
the basic premise for the court's decision - that Green Tree's taking title in 
its name "interferes with" and "abrogates" appellants' right of redemption. That 
statement certainly is not correct in this case, nor do I think it is correct in 
any case. In this case, appellants were repeatedly notified in writing of the 
right of redemption, encouraged to redeem, and informed of the balance of 
indebtedness and the amount necessary for redemption. They chose not to redeem 
for obvious reasons.

[¶23]   Also, I think it clear that a right 
of redemption is not lost by transfer of title. The transferee takes title 
subject to the right of redemption.

[¶24]   So what we have here, purely and 
simply, is a court making law. Sadly it is the court making bad law, for from 
this day forward every buyer at private sale will receive a basket of papers 
which can be used to obtain title - and the title is good if the papers 
demonstrate full compliance with the law of repossession, foreclosure and 
sale.

[¶25]   A wizened old justice of the peace 
was asked, "Do judges make law?" He responded, "Of course they do. I made some 
myself today." And so today we too make law.