Title: Federal Financial Co. v. Papadopoulos

State: vermont

Issuer: Vermont Supreme Court

Document:

Federal Financial Co. v. Papadopoulos  (97-348); 168 Vt. 621; 721 A.2d 501

[Filed 27-Oct-1998]

                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 97-348

                               JUNE TERM, 1998

  Federal Financial Co.	              }	APPEALED FROM:
                                      }
                                      }
       v.	                      }	Windsor Superior Court
                                      }	
  Georgios Papadopoulos and	      }
  Angelo Pananas	              }	DOCKET NO. 161-4-96Wrcv	

       In the above-entitled cause, the Clerk will enter:

       Plaintiff Federal Financial Co. appeals from a superior court judgment
  in favor of defendants Georgios Papadopoulos and Angelo Pananas in this
  action for a deficiency judgment.  Plaintiff contends the trial court erred
  in ruling that: (1) plaintiff's sale of secured  collateral was not
  commercially reasonable; and (2) the appropriate remedy was dismissal of
  plaintiff's action.  We affirm.

       As found by the trial court, the facts underlying this dispute were as
  follows: In November 1992, defendants borrowed $20,000 from the First
  National Bank of  Vermont (FNB) to purchase restaurant equipment for a
  pizza parlor.  Defendants gave FNB a  note for $20,000 secured by the
  restaurant equipment.  The terms of the loan provided that  defendants
  would repay $400 per month with no interest for fourteen months if payments
  were  made in a timely manner.  In January 1993, the Federal Deposit
  Insurance Corporation (FDIC) seized FNB and took over its assets. 
  Defendants thereupon stopped making payments on the note, claiming that
  they did not know to whom they should make the payments. 

       In April 1994, defendant Pananas bought defendant Papadopoulos's
  interest in the  restaurant and organized it as a corporation.  Both
  defendants, however, remained liable on the original loan.  Although
  Papadopoulos no longer owned an interest in the restaurant, he continued to
  handle business operations with Pananas.

       In November 1994, plaintiff purchased defendants' debt from the FDIC. 
  In January 1995, plaintiff requested that defendants promptly repay the
  debt and interest totaling $21,984.  Defendants did not make any payments. 
  Accordingly, in March 1995, plaintiff notified defendants to assemble the
  collateral for repossession, and defendants removed the equipment from the
  restaurant and stored it in another portion of the building.  Plaintiff
  then engaged Stan & Son, a company that regularly repossesses collateral
  restaurant equipment for banks, to pick up the equipment.  Stan & Son is
  also a dealer in new and used restaurant equipment, and often purchases
  used equipment from banks after repossession to resell at auction or at
  their warehouse showroom. 

       After Stan & Son transported the equipment to its warehouse, plaintiff
  inquired if it  wished to make a bid.  Plaintiff did not solicit any other
  bids or obtain information from any other source about the value of the
  property.  Stan & Son bid $1,010 for all of the equipment.  Plaintiff then
  notified defendants of the bid, informing them that the sale would be made
  unless 

  

  defendants objected.  When defendants raised no objection, plaintiff
  accepted the bid.(FN1)

       Plaintiff then filed this deficiency action for $26,355.11,
  representing the balance due on the note plus attorney's fees and costs. 
  The court granted summary judgment in favor of plaintiff as to defendants'
  liability on the note.  However, following a hearing on the issue of
  damages, the court ruled that plaintiff's sale of the property was not
  commercially reasonable under 9A V.S.A. § 9-504(3), and, accordingly,
  dismissed the action and entered judgment in favor of defendants.  This
  appeal followed.

       Plaintiff contends the trial court erred in concluding that the sale
  of the equipment was not commercially reasonable.  Section 9-504 of Title
  9A controls the sale of secured goods after default.  Subsection (3) of §
  9-504 provides in part:

    Disposition of the collateral may be by public or private
    proceedings and may be made by way of one or more contracts.  Sale or
    disposition may be as a unit or in parcels and at any time and place 
    and on any terms but every aspect of the disposition including the 
    method, manner, time, place and terms must be commercially reasonable.

       Whether a sale is commercially reasonable must be determined on a
  case-by-case basis.  See Chittenden Trust Co. v. Maryanksi, 138 Vt. 240,
  244,