Title: Chittenden Trust Co. v. Andre Noel Sports

State: vermont

Issuer: Vermont Supreme Court

Document:

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 91-449


 Chittenden Trust Company                     Supreme Court

                                              On Appeal from
      v.                                      Chittenden Superior Court

 Andre Noel Sports, et al.                    June Term, 1992



 Matthew I. Katz, J.

 Thomas F. Heilmann and Todd D. Schlossberg of Heilmann, Ekman & Associates,
    Inc., Burlington, for plaintiff-appellant

 Geoffrey M. FitzGerald and John P. Maley of Sylvester & Maley, Inc.,
    Burlington, for defendants-appellees Andre Noel Sports, Andre Noel and
    Le Chamois Blanc

 Jesse D. Bugbee of Kissane, Yarnell & Cronin, St. Albans, for defendants-
    appellees Rosemary Noel, Romy's Ltd. and Romy's Alpen Haus

 PRESENT:  Gibson, Dooley, Morse and Johnson, JJ.


      JOHNSON, J.  This is an interlocutory appeal from two superior court
 orders, one granting summary judgment in favor of defendant debtors and
 guarantors as to whether plaintiff Chittenden Trust Company (CTC) has the
 right to obtain a deficiency judgment following its failure to provide
 notice of the sale of repossessed collateral, and the other dismissing
 remaining claims that sought damages based on, among other things, allega-
 tions that defendants fraudulently transferred some of the collateral after
 they had defaulted on their loan.  We affirm the court's refusal to allow
 CTC a deficiency judgment, but reverse its decision to dismiss all the
 remaining claims.
         Defendants, various individual and corporate debtors and guarantors
 who import, distribute and retail exclusive alpine ski clothing and
 accessories, executed two promissory notes in June of 1984 evidencing two
 loans from CTC totaling approximately $800,000.  Defendants defaulted on the
 loans, and in January of 1987, CTC filed suit and secured a writ of attach-
 ment on defendants' inventory, accounts receivable, fixtures, and equipment.
 CTC repossessed some ski apparel pursuant to the writ, but after months of
 intermittent discussion, the parties failed to agree on how to liquidate the
 merchandise.
      On November 4, 1987, CTC informed defendants that it would pursue the
 sale of the goods beginning the week of November 2, 1987, and that notifi-
 cation of the specific sale times and places would follow as soon as they
 were available.  On December 23, 1987, the bank informed defendants that a
 sale of the collateral had been advertised and was being conducted at a
 certain location.  The sale had begun approximately one month earlier, and
 an enclosed advertisement indicated that the sale would continue through
 Christmas.  CTC netted about $35,000 from the sale of the merchandise.
      Eventually, defendants moved for summary judgment, claiming that
 plaintiff had failed to provide them with proper notice of the sale.  The
 trial court granted the motion, concluding that the notice was improper,
 and, that therefore, CTC was absolutely barred from obtaining a deficiency
 judgment.  Following a hearing, the court also granted defendants' motions
 to dismiss the case on the ground that CTC's remaining claims were
 derivative of, and ancillary to, the deficiency action.  The court then
 stayed further proceedings concerning pending counterclaims, and certified
 the following questions for this appeal:
         1. Did the trial Court err in ruling that on the state
         of the record hereby presented plaintiff, Chittenden
         Trust Company, as a secured party, was barred from
         pursuing its claim for a deficiency judgment against
         defendant debtors on the grounds that it failed to give
         defendants prior notification of the time and place of
         the sale of repossessed collateral in accordance with 9A
         V.S.A. { 9-504(3)?

         2. Did the Court err in its March 21, 1991 Order
         granting defendants' Motions to Dismiss plaintiff's
         remaining claims on the grounds that such claims derive
         from and are part of the claim for a deficiency judgment
         disposed of by the Court's Orders entered October 30,
         1990 and October 31, 1990 where plaintiff failed to
         make any showing of damages separate and apart from the
         deficiency on the underlying note?
      On appeal, CTC argues (1) that the court erred by granting summary
 judgment because there are disputed facts concerning whether notice was
 required in this instance; (2) that even if notice was required, this Court
 should abandon or narrow the absolute-bar rule it adopted in a prior
 decision; and (3) that even if it is precluded from obtaining a deficiency
 judgment, it should be allowed to pursue its other claims against
 defendants.
                                     I.
      CTC's first argument is without merit.  A secured party must give
 "reasonable notification of the time and place of any public sale" of
 repossessed collateral unless the collateral (1) "is perishable or threatens
 to decline speedily in value" or (2) "is of a type customarily sold on a
 recognized market."  9A V.S.A. { 9-504(3).  The first exception is
 applicable where a "quick resale of the collateral would better serve the
 debtor's interests" and "the time consumed in giving notice might have
 disastrous consequences" due to the possibility of a sharp price decline.
 J. White & R. Summers, Uniform Commercial Code { 25-12, at 1222 (3d ed.
 1988).  This exception rarely applies to chattels.  Rock Rapids State Bank
 v. Gray,