No. 90-262 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

BERRY W. OTTERSEN, a/k/a 

BERRY W. OTTERSON, 

Plaintiff and Respondent, 

-vsWALLACE F . RUBICK, FLORENCE RUBICK, 

LARRY F. LONG, PEGGY M. LONG, and 

LYNNE GEIER a/k/a LYNN GEIER, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone, 

The Honorable Russell K. Fillner, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

James P. Healow, Esq.; Sweeney & Healow, Billings, 

Montana 

For Respondent: 

Martin J. Elison, Esq. ; Law Off ices of Douglas Y. 

Freeman, Hardin, Montana 

Submitted on Briefs: September 20, 1990 

Filed: 

~ecided: December 18, 1990 1 
Justice Diane G. Barz delivered the Opinion of the Court. 

Defendants and appellants Wallace F. and Florence Rubick 

appeal the judgment awarded plaintiff and respondent Berry Ottersen 

following a non-jury trial in the District Court, Thirteenth 

Judicial District, Yellowstone County. We affirm. 

The issues are: 

1. Whether plaintiff creditor is barred from obtaining a 

deficiency judgment under the facts of this case when, although 

there was no notice of sale for a portion of the repossessed 

collateral, there were judicial proceedings and approval of sale 

for the balance of the collateral? 

2. Was the finding of the District Court erroneous when it 

found that no foreclosure occurred and the plaintiff could pursue 

both termination and repossession and sue for the balance under the 

Sales Agreement? 

3. Did plaintiff prevent performance of the Sales Agreement 

by defendants? 

4. Did the District Court err when it considered matters not 

raised in the pretrial order? 

On April 1, 1982, the plaintiff as seller, and defendants as 

buyers, entered into a Sales Agreement for the sale of a business 

known as ItBerryts Tall Fashions." The defendants remained liable 

under the agreement but assigned their interest to Larry and Peggy 

Long and the Longs assigned to Lynne Geier. Geier filed bankruptcy 

in June, 1987. After Geierts last payment on the contract in May, 
1987, the sum of $48,188.76 plus ten percent per annum interest 

remained outstanding. Default notices by certified mail were sent 

by plaintiff to defendants Rubicks and the other assignees on 

September 15, 1987. The default was not cured within thirty days 

of notice. Geier had an automatic stay in bankruptcy and the 

bankruptcytrustee assumed control over all assets of the business. 

Plaintiff received a key to the business premises from the trustee. 

The owner of the premises demanded that all personal property be 

removed since rental payments were not made. plaintiff removed the 

inventory and stored most of it in her garage. The display cases 

were placed in commercial storage and sold at a private sale in 

November, 1987 without notice to the defendants. The cash obtained 

was placed in an interest bearing account at the disposal of the 

bankruptcy court. 

The plaintiff asked the District Court in a February, 1988, 

complaint against defendants to: (1) establish plaintiff's security 

position in the collateral; (2) establish possession of the 

collateral; (3) order foreclosure of the collateral; and (4) grant 

judgment for the amount owed on the Sales Agreement less proceeds 

from the sale of collateral. In April, plaintiff moved the 

District Court for an order to allow sale of the inventory and 

fixtures held as collateral. A hearing on the motion was set for 

April 26, 1988. None of the defendants appeared at the hearing and 

the motion to allow the sale was granted. It appears that 

plaintiff's counsel sent a copy of the notice of sale to each of 

the defendantsf attorneys on April 26, 1988. All of the money 
obtained from the sale was placed in an interest bearing savings 

account by plaintiff. After a non-jury trial, plaintiff was 

awarded judgment, costs and attorney's fees and defendants appeal. 

The first issue raised on appeal is whether plaintiff creditor 

is barred from obtaining a deficiency judgment under the facts of 

this case when, although there was no notice of sale for a portion 

of the repossessed collateral, there were judicial proceedings and 

approval of sale for the balance of the collateral. If a creditor 

forecloses on collateral pursuant to a note of indebtedness, 

commercially reasonable notice of sale must be sent to the debtor 

prior to disposition of the collateral or the creditor cannot 

obtain a deficiency judgment. Westmont Tractor Co. v. Continental 

I, Inc. (1986), 224 Mont. 516, 731 P.2d 327; Bank of Sheridan v. 

Devers (1985), 217 Mont. 173, 702 P.2d 1388; Wippert v. Blackfeet 

~ribe (1985), 215 Mont. 85, 695 P.2d 461; and Farmers State Bank 

v. Mobile Homes Unlimited (1979), 181 Mont. 342, 593 P.2d 734. 

These cases interpreted 5 30-9-504(3), MCA. 

[Elvery aspect of the disposition . . . must 

be commercially reasonable. [Rleasonable 

notification . . . shall be sent by the 

secured party to the debtor. . . . 

The statute refers to both duties in separate sentences and in 

mandatory language. Different interests are protected by the two 

requirements. 

In an Ohio State Law Journal article, the author stated: 

[Tlhe purpose of commercial 

reasonableness .is to set standards of 

propriety at the time of disposition of the 

collateral. Notice on the other hand was 
included to insure that the debtor (and other 

secured parties) could protect his interest in 

the collateral itself after default and before 

disposition. 

Note, Denial of Deficiency: A Problem of Reasonable Notice Under 

UCC 5 9-504(3), 34 Ohio St. L.J. 657, 666 (1973). 

However, 5 30-9-507 (2) , MCA, provides that a disposition which 

has been approved in any judicial proceeding shall conclusively be 

deemed to be commercially reasonable. Therefore, in this case the 

plaintiff should be able to avoid all controversy over the 

reasonableness ofthe disposition and the notice provided since she 

went to court prior to the disposition. Any objections about the 

manner of notice were met by complying with the provisions of the 

Montana Rules of Civil Procedure. There is also no question that 

defendants received a notice of default and notice of acceleration 

of the Sales Agreement. 

The defendants introduced no evidence that the price obtained 

at court-approved sale was unreasonable. In Dulan v. Montana Nat. 

Bank of Roundup (1983), 203 Mont. 177, 661 P.2d 28, this Court 

stated: 

This Court interpreted these two sections of the UCC 

[ 30-9-504(3) and 30-9-507(2), MCA] in the Talcott 

case, supra. We held that the reasonableness of the sale 

is not determined by price but the manner in which the 

sale was conducted. In other words, if the sale is 

considered commercially reasonable then the price is 

reasonable. 

Thus, in light of the above authority and the fact 

that "reasonable pricett is the objective of a 

commercially reasonable disposition, we hold that a large 
discrepancy in price can be considered within the 

parameters of section 30-9-504(3), MCA. We also conclude 

that the complaining party has the burden of proving the 

price received was less than the fair market value of the 

collateral. (Emphasis in original.) 

Dulan, 661 P.2d at 32. 

The disposition and sale of some display cases in November of 

1987 prior to the initiation of court proceedings was clearly 

without notice required in 5 30-9-504 (3), MCA. Defendants contend 

that sale alone should bar the plaintiff from recovering a 

deficiency judgment. The fair market value of these display cases 

does not appear in evidence and the defendants introduced no 

evidence that the price obtained at the private sale was 

unreasonable. Defendant Rubick testified that he saw the display 

cases in the empty store but took no action. 

clear this case that the plaintiff did mitigate 

damages by terminating storage expenses and placing all proceeds 

in an interest bearing account. The defendants only suffered 

damages, if at all, in an amount equal to the difference between 

what the cases were worth and what they sold for. Section 30-9- 

507(1), MCA, provides an adequate remedy for sale of a minor 

portion of the collateral: 

If the disposition has occurred the debtor or 

any person entitled to notification or whose 

security interest has been made known to the 

secured party prior to the disposition has a 

right to recover from the secured party any 

loss caused by failure to comply with the 

provisions of this part. If the collateral is 

consumer goods, the debtor has a right to 

recover in any event an amount not less than 

the credit service charge plus 10% of the 

principal amount of the debt or the time price 
differential plus 10% of the cash price. 

Farmers State Bank v. Mobile Homes Unlimited (1979), 181 Mont. 

342, 347, 593 P.2d 734, 737, states: 

It is also generally held that a secured 

creditor's failure to give the notice required 

under U.C.C. 1 9-504 (3) ( . . section 30-9- 

504(3), MCA) prior to disposition of 

collateral precludes or limits the creditor's 

right to recover a deficiency judgment. 

(Emphasis added.) 

This case indicates that this Court has recognized that a total bar 

of a deficiency judgment is not warranted in some cases. 

The Montana cases: Westmont Tractor Co.; Bank of sheridan; 

Wi~~ert; and Farmers State Bank; supra, all indicate that notice 

requirements are mandatory for reasons which vary from case to 

case, but it is important to enable the debtor to protect his 

interest in the property by paying the debt or by being present at 

the sale to the end it not be sacrificed by a sale less than its 

true value. When a deficiency judgment is barred, it sometimes 

suggests that the creditor is proceeding with unclean hands or 

without good faith. This is completely absent in this case. Here 

the defendant Rubick, a sophisticated businessman who already had 

another court deny him a deficiency judgment, obviously thought he 

would do the same to a 71-year-old retired lady. In this case the 

fair market value of the display cases, even if different from the 

price obtained at the private sale, falls far short of the $48,000 

due under the Sales Agreement and amounts to less than one-fifth 

of the total proceeds from sold collateral turned over to the 

District Court. 
Defendants next contend that under the Sales Agreement 

plaintiff must elect to terminate and repossess, or sue for the 

balance due, but may not have both remedies. They argue that all 

of the plaintiff's actions were foreclosure actions barring 

recovery of the balance due on the contract. The District Court's 

finding of fact number 22 states: 

22. The Court finds that the plaintiff did not 

intend to foreclose her security interest in the 

property, but rather elected to terminate the contract 

and demand payment in full on the unpaid balance, an 

option that she was entitled to under the terms of the 

Sales Agreement as well as under the terms of Section 30- 

9-501(1). While some terminology in some of the default 

notices as well as the pleadings seem to indicate a 

foreclosure of the security interest, the actions taken 

by the plaintiff are consistent with her election to 

reduce her claim to judgment. Furthermore, action, if 

any, to foreclose her. security interest was not pursued 

to a conclusion. 

In this case the contract between the parties does not limit 

or restrict the remedies of plaintiff upon default. Section 30- 

9-501(1) and (2) make it clear that the statement of rights and 

remedies of the Uniform commercial Code do not exclude other 

remedies provided by agreement. 

We hold that finding of fact number 22 is not clearly 

erroneous. There is substantial evidence in the record which 

supports the finding that no foreclosure occurred. "In the absence 

of a contractual provision expressly limiting the remedy or 

remedies available, a party may pursue any remedy which law or 

equity affords, as well as the remedies specified in the contract. 

Glacier Campground v. Wild Rivers, Inc. (1978) , 182 Mont. 389, 403, 
The third issue on appeal is whether Ottersen prevented 

performance of the Sales Agreement by Rubicks. Rubicks argue that 

by Ottersen allowing Geier to run the store into default and 

removing the merchandise from the store before the Rubicks had a 

chance to run the business, she removed the Rubicksf chance to 

perform. Defendant Rubick has failed to meet that requisite burden 

of proof in the District Court. The burden of proving it was not 

possible to perform falls upon the Rubicks. Ehly v. Cady (1984), 

212 Mont. 82, 687 P.2d 687. 

The last issue raised by appellants is whether the District 

Court erred when it considered matters not raised in the pretrial 

order. 

Rule 16, M.R.Civ.P. relating to pretrial procedures is a 

permissive not mandatory rule. Bell v. Richards (1987), 228 Mont. 

215, 217, 741 P.2d 788, 790. "A pretrial order . . . should be 

liberally construed to permit any issues at trial that are 

embraced within its language. (Citation omitted. ) Bell at 2 17, 

741 P.2d at 790. Furthermore, all of the legal issues considered 

by the District Court, if not set forth specifically in the 

pretrial order, were argued in the briefs presented to the court. 

We hold that there was no error. 

Affirmed . 
We concur: 
. , 

Justice R. C. McDonough dissenting. 

I dissent. This case involves the Disposition of Collateral 

after default under the U.C.C. Such disposition is governed by 

statute, 30-9-504(3) (a), MCA, which clearly provides: If. . . 

reasonable notification of the time and place of any public sale 

or reasonable notification of the time after which any private sale 

or other intended disposition is to be made shall be sent by the 

secured party to the debtor . . . This section provides that 

disposition of collateral must be commercially reasonable. The 

burden of proof as to whether or not a disposition is commercially 

reasonable is on the secured party. It is generally held that a 

''secured creditor's failure to give the notice required [now under 

§ 30-9-504 (3), MCA] prior to disposition of collateral precludes 

or limits the creditor's right to recover a deficiency judgment. 

Annot. 59 ALR 3rd 401." See Farmers State Bank v. Mobil Homes 

Unlimited (1979), 181 Mont. 342, 374, 593 P.2d 734, 737. 

In the case of Wippert v. Blackfeet Tr. of Blackfeet Ind. Res. 

(1985), 215 Mont. 85, 695 P.2d 461, the secured party, after 

default of the debtor, sent a letter informing the debtor of its 

intent to foreclose and apply the proceeds to the loan. The 

secured party failed to state the time or place of the proposed 

sale. The collateral (cattle) was later sold at public auction for 

less than the indebtedness. The Court stated: 

This letter failsto satisfy the notice requirements 

of either the U.C.C. or the security agreement. There 

is no mention of either the time or place of sale, and 

without that information a debtor is precluded from 

taking action to assure that a competitive price is 

obtained for his collateral at a public sale. 
We hold that failure to provide the notice required 

by section 30-9-504 (3) , MCA, precludes a creditor s right 

to obtain a deficiency judgment. 

In Bank of Sheridan v. Devers, 217 Mont. 173, 702 P.2d 1288, 

the secured party sent notice of the sale of the collateral to the 

debtor, but the date of sale therein was wrong. This Court held 

that the secured party failed to give the debtor commercially 

reasonable notice of the sale of the collateral and therefore the 

bank was precluded from recovery of any deficiency judgment. 

In Westmont Tractor v. Continental I, Inc. (1986), 224 Mont. 

516, 731 P.2d 327, one of two debtors agreed with secured party as 

to how collateral would be sold. The collateral was sold 

accordingly and no notice of agreement or sale was ever given to 

the other debtor. The Court held that failure of the secured party 

to provide notice of sale bars a deficiency judgment against the 

other debtor. Westmont Tractor, 731 P.2d 331. 

In this case the collateral was fixtures and inventory of a 

store. The secured creditor sold the display cases without any 

notice whatsoever to the appellant debtor. The judicial 

proceedings cannot be relied upon as to the other property because 

the motion to sell the balance of the collateral noted that the 

sale would occur upon notice to the defendants and the court's 

order allowing sale stated that sales are to be conducted by the 

respondent upon notice being given. The notice allegedly given is 

not part of the record and did not comply with the parties1 

agreement nor did it comply with the statutory law and the District 
Court did not find in its findings that proper notice of sale was 

given. 

As set forth above every aspect of the disposition must be 

commercially reasonable. Here there was a failure of any proper 

notice. Whether or not a notification is reasonable as to time and 

place as set forth by the statute is one thing, but where no proper 

notice is given at all, the question of reasonableness is not even 

reached. This case has been essentially decided on equitable ad 

hoc grounds by the District Court and this Court. One wonders what 

the decision would be under these same facts if the creditor was 

a large financial institution and the debtor was a little grey 

haired grandmother who co-signed her grandchild's or child's note 

and security agreement and the institution was seeking a deficiency 

judgment against her. 

Ch 

concur 

ief Justice 

in the foreg 

J.A. 

,oing 

Turnage and Justice Wm. E. Hunt, Sr., 

dissent. -07 

Chief Justice (rl