GA Code § 11-9-626 (2021)
2021 Georgia Code|Title 11 - Commercial Code|Article 9 - Secured Transactions|Part 6 - Default|§ 11-9-626. Action in Which Deficiency or Surplus Is in Issue

  Applicable rules if amount of deficiency or surplus in issue. In an action arising from a transaction, other than a consumer transaction, in which the amount of a deficiency or surplus is in issue, the following rules apply:   A secured party need not prove compliance with the provisions of this part relating to collection, enforcement, disposition, or acceptance unless the debtor or a secondary obligor places the secured party's compliance in issue;   If the secured party's compliance is placed in issue, the secured party has the burden of establishing that the collection, enforcement, disposition, or acceptance was conducted in accordance with this part;   Except as otherwise provided in Code Section 11-9-628, if a secured party fails to prove that the collection, enforcement, disposition, or acceptance was conducted in accordance with the provisions of this part relating to collection, enforcement, disposition, or acceptance, the liability of a debtor or a secondary obligor for a deficiency is limited to an amount by which the sum of the secured obligation, expenses, and attorney's fees exceeds the greater of:   The proceeds of the collection, enforcement, disposition, or acceptance; or   The amount of proceeds that would have been realized had the noncomplying secured party proceeded in accordance with the provisions of this part relating to collection, enforcement, disposition, or acceptance;     For purposes of subparagraph (B) of paragraph (3) of this subsection, the amount of proceeds that would have been realized is equal to the sum of the secured obligation, expenses, and attorney's fees unless the secured party proves that the amount is less than that sum;   If a deficiency or surplus is calculated under subsection (f) of Code Section 11-9-615, the debtor or obligor has the burden of establishing that the amount of proceeds of the disposition is significantly below the range of prices that a complying disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor would have brought.     Nonconsumer transactions; no inference. The limitation of the rules in subsection (a) of this Code section to transactions other than consumer transactions is intended to leave to the court the determination of the proper rules in consumer transactions. The court may not infer from that limitation the nature of the proper rule in consumer transactions and may continue to apply established approaches.     (Code 1981, §11-9-626, enacted by Ga. L. 2001, p. 362, § 1.)   Cross references.   - Additional provisions regarding disposition of goods repossessed after default, § 10-1-10.   Law reviews.   - For article, "The Revisions to Article IX of the Uniform Commercial Code," see 15 Ga. St. B.J. 120 (1977). For article surveying developments in Georgia commercial law from mid-1980 through mid-1981, see 33 Mercer L. Rev. 33 (1981). For article, "Nonjudicial Foreclosures in Georgia: Fresh Doubts, Issues and Strategies," see 23 Ga. St. B.J. 123 (1987). For annual survey of commercial law, see 43 Mercer L. Rev. 119 (1991). For article, "Georgia Foreclosure Confirmation Proceedings in Today's Recessionary Real Estate World: Back to the Future," see 16 (No. 4) Ga. St. B.J. 11 (2010). For note discussing repossession and foreclosure as creditor's remedies under the Uniform Commercial Code, see 3 Ga. L. Rev. 198 (1968). For comment on a secured party's burden of proof in seeking a deficiency judgment after resale of collateral, see 33 Mercer L. Rev. 397 (1981).   JUDICIAL DECISIONS   Editor's notes.   - In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.   Where only fraction of value of repossessed collateral recoverable.    - A secured creditor did not act in a commercially unreasonable manner when it repossessed the collateral and, without ever disposing of it, filed suit against the debtor, there being evidence that the collateral was the type of equipment which in the past the creditor had been able to dispose of at only a fraction of its original sale value. However, if it was later established that the creditor did not act in a commercially reasonable manner, the balance of the indebtedness owed on the contracts would be reduced by the value of the equipment at the time it was repossessed, plus the amount of any damage sustained as a result of the creditor's inaction in returning or disposing of the goods. ITT Terryphone Corp. v. Modems Plus, Inc., 171 Ga. App. 710, 320 S.E.2d 784 (1984).   Strict compliance required.   - Strict compliance with all requirements of these former provisions was condition precedent to recovery of deficiency between sale price of collateral and debt owed. Comfort Trane Air Conditioning Co. v. Trane Co., 592 F.2d 1373 (5th Cir. 1979) (decided under former Code Section 11-9-504).    Compliance with this former section was condition precedent to recovery of any deficiency between sale price of collateral and amount of unpaid balance. Citizens State Bank v. Hewitt, 158 Ga. App. 238, 279 S.E.2d 531 (1981); Vickers v. Chrysler Credit Corp., 158 Ga. App. 434, 280 S.E.2d 842 (1981); Citizens & S. Nat'l Bank v. Dorsey, 159 Ga. App. 784, 285 S.E.2d 242 (1981); Litton Indus. Credit Corp. v. Lunceford, 175 Ga. App. 445, 333 S.E.2d 373 (1985) (decided under former Code Section11-9-504).    Compliance with former subsection (3) is condition precedent to recovery of any deficiency between sale price of collateral and amount of unpaid balance. Gurwitch v. Luxurest Furn. Mfg. Co., 233 Ga. 934, 214 S.E.2d 373 (1975) (decided under former Code Section11-9-504).   Rights and remedies under O.C.G.A.    § 10-1-36 as prerequisite. - O.C.G.A. § 10-1-36 is cumulative of former Code Sections11-9-501 through11-9-507 and provides cumulative additional rights and remedies which must be fulfilled before any deficiency claim will lie against a buyer. Georgia Cent. Credit Union v. Coleman, 155 Ga. App. 547, 271 S.E.2d 681 (1980) (decided under former Code Section11-9-504).   Commercially reasonable disposition as prerequisite for deficiency judgment.    - If the secured party does not dispose of the collateral in a commercially reasonable manner, there can be no recovery of any deficiency between the sale price and the unpaid balance. Granite Equip. Leasing Corp. v. Marine Dev. Corp., 139 Ga. App. 778, 230 S.E.2d 43 (1976) (decided under former Code Section11-9-504).    Fact that every aspect of foreclosure sale (method, manner, time, place and terms) must be commercially reasonable is a condition precedent to recovery of any deficiency between sale price and balance remaining due on contract price, and if sale is not commercially reasonable plaintiff can recover nothing, because it is then presumed that price on foreclosure sale in fact does represent full value of article at time of repossession. Brown v. C.I.T. Corp., 150 Ga. App. 361, 258 S.E.2d 44 (1979) (decided under former Code Section11-9-504).   In Georgia, a secured party is absolutely prohibited from recovering deficiency judgment where notice is not given or sale is commercially unreasonable. Comfort Trane Air Conditioning Co. v. Trane Co., 592 F.2d 1373 (5th Cir. 1979) (decided under former Code Section 11-9-504).    Even though defendant debtor failed to introduce any testimony while denying claim in its entirety, burden of proof was upon secured party to prove sale was done in a commercially reasonable manner in order to recover on deficiency. Georgia Cent. Credit Union v. Coleman, 155 Ga. App. 547, 271 S.E.2d 681 (1980) (decided under former Code Section11-9-504).    In the case of a loan secured by both real and personal property, the provision of this former section for liquidation of the guarantor's personal property "in a commercially reasonable manner" did not apply where the lender chose to exercise its "rights and remedies in respect of the real property" as permitted under former § 11-9-501(4). Senske v. Harris Trust & Sav. Bank, 233 Ga. App. 407, 504 S.E.2d 272 (1998).    Assuming that the sale of collateral was a public sale within the meaning of O.C.G.A. § 11-1-201(31.1), the sale occurred in a commercially reasonable manner, under O.C.G.A. § 11-9-627, because the sale was consistent with the reasonable commercial practices of dealers in similar equipment. Moreover, the sale qualified as a valid private sale under O.C.G.A. § 11-9-613 and the creditor did not have to comply with the statute's public-sale provisions regarding time and advertising. Colonial Pac. Leasing Corp. v. N & N Partners, LLC, 981 F. Supp. 2d 1345 (N.D. Ga. 2013).   Absolute bar rule.    - These code provisions do not require the imposition of an absolute-bar rule and the absolute-bar rule is contrary to the intent of O.C.G.A. § 11-1-106 which expressly prohibits penal damages. Emmons v. Burkett, 256 Ga. 855, 353 S.E.2d 908 (1987) (decided under former Code Section11-9-504).   Presumption that value of collateral equals debt.    - Failure on part of secured party to establish that fair and reasonable value of collateral does not equal debt results in presumption that value of collateral disposed of is at least equal to debt, from which it follows that no deficiency judgment can be obtained. Hubbard v. Farmers Bank, 155 Ga. App. 720, 272 S.E.2d 510 (1980) (decided under former Code Section11-9-504).    Secured party must prove value of collateral at time of repossession and that value of goods does not equal value of debt. Richard v. Fulton Nat'l Bank, 158 Ga. App. 595, 281 S.E.2d 338 (1981) (decided under former Code Section11-9-504).    Failure to introduce any evidence of the fair and reasonable value of the collateral, in order to overcome the presumption that the value of the collateral equaled the amount of the debt, will operate as a failure to establish that the disposition of the collateral was commercially reasonable; and therefore no deficiency judgment can be obtained. Giddens v. Bo Lovein Ford, Inc., 167 Ga. App. 699, 307 S.E.2d 271 (1983) (decided under former Code Section11-9-504).   Overcoming presumption concerning collateral.    - The presumption that the value of collateral equals the debt on it is overcome by proving the fair and reasonable value of the collateral. First Nat'l Bank v. Rivercliff Hdwe., Inc., 161 Ga. App. 259, 287 S.E.2d 701 (1982) (decided under former Code Section11-9-504).   Value presumed equal to debt owed.    - Absent evidence of the value of collateral at the time of repossession, the value of the goods is presumed to be equal to the debt owed. Borden v. Pope Jeep-Eagle, Inc., 200 Ga. App. 176, 407 S.E.2d 128 (1991) (decided under former Code Section11-9-504).   Sole defect in sale was adequacy of price.    - Creditor who fails to prove that notice of sale was given debtor (where required) or fails to prove that disposition, including its method, manner, time, place and terms, was commercially reasonable, is barred from obtaining a deficiency judgment, except where sole defect is adequacy of sale price, in which event creditor is not barred from recovery but must overcome presumption that value of collateral equals debt. Richard v. Fulton Nat'l Bank, 158 Ga. App. 595, 281 S.E.2d 338 (1981); First Nat'l Bank v. Rivercliff Hdwe., Inc., 161 Ga. App. 259, 287 S.E.2d 701 (1982) (decided under former Code Section11-9-504).    Where sole defect in sale of collateral is adequacy of sale price, creditor is not barred from obtaining deficiency judgment; however, creditor must overcome presumption that value of collateral equals debt on it, proving its fair and reasonable value. Zohbe v. First Nat'l Bank, 162 Ga. App. 604, 292 S.E.2d 444 (1982) (decided under former Code Section11-9-504).   Collection of deficiency balance dependent on reasonable notice.   - Former section permitted secured creditor to dispose of collateral if debtor defaults, but before creditor can pursue deficiency balance it must reasonably notify debtor of time and place of any public sale or of time after which any private sale or other intended disposition is to be made. Lacy v. General Fin. Corp., 651 F.2d 1026 (5th Cir. 1981) (decided under former Code Section 11-9-504).   Proceeding against real property prevented.    - Where a sale of collateral occurs without notice, in violation of former subsection (3), the bar against collection of a deficiency prevents a creditor holding a claim against a guarantor secured by real property from proceeding against the real estate to collect the balance remaining after a commercially unreasonable sale of the personalty. United States ex rel. FHA v. Kennedy, 256 Ga. 345, 348 S.E.2d 636 (1986) (decided under former Code Section11-9-504).   Satisfaction sought through personal judgment, out of collateral or pursuant to guaranty.    - The rule precluding recovery of a deficiency where the secured party has failed to dispose of the collateral in a commercially reasonable manner or provide the debtor with reasonable notification of the disposition is applicable where a secured creditor seeks to satisfy the deficiency either through a personal judgment or out of collateral or pursuant to a guaranty. Reeves v. Habersham Bank, 254 Ga. 615, 331 S.E.2d 589 (1985) (decided under former Code Section11-9-504).   Rebuttable presumption rule.    - The rebuttable presumption rule, by placing the burden on the creditor to show the propriety of the sale and making the creditor liable for any injury to the debtor, provides an adequate deterrent to an improper sale on the part of a creditor and adequately protects the debtor's interest, without arbitrarily penalizing the creditor. Emmons v. Burkett, 256 Ga. 855, 353 S.E.2d 908 (1987) (decided under former Code Section11-9-504).    Under the rebuttable presumption rule, if a creditor fails to give notice or conducts an unreasonable sale, the presumption is raised that the value of the collateral is equal to the indebtedness. To overcome this presumption, the creditor must present evidence of the fair and reasonable value of the collateral, and the evidence must show that such value was less than the debt. If the creditor rebuts the presumption, the creditor may maintain an action against the debtor or guarantor for any deficiency. Any loss suffered by the debtor as a consequence of the failure to give notice or to conduct a commercially reasonable sale is recoverable and may be set off against the deficiency. Emmons v. Burkett, 256 Ga. 855, 353 S.E.2d 908 (1987) (decided under former Code Section11-9-504).    A more complete statement of the rule set forth in Emmons v. Burkette, 256 Ga. 855, 353 S.E.2d 908 (1987), is: If the creditor conducts a commercially unreasonable sale and does not rebut the presumption that the value of the collateral is equal to the indebtedness, the creditor loses the right to recover the deficiency against the debtor and the guarantor. If the presumption is rebutted, the first to recover the deficiency remains as held in Emmons. Business Dev. Corp. v. Contestabile, 261 Ga. 886, 413 S.E.2d 447 (1992).   Creditor showing of reasonableness as prerequisite to deficiency judgment.    - If condition precedent of commercial reasonableness is not met in foreclosure sale, no recovery is possible, and burden is on creditor to prove such. Brown v. C.I.T. Corp., 150 Ga. App. 361, 258 S.E.2d 44 (1979).   Showing required to recover deficiency.    - Burden is on secured party to prove value of collateral at time of repossession and that such value does not equal debt; failure to do so results in presumption that value was at least amount of debt. BVA Credit Corp. v. May, 152 Ga. App. 733, 264 S.E.2d 32 (1979); Comfort Trane Air Conditioning Co. v. Trane Co., 592 F.2d 1373 (5th Cir. 1979); Georgia Cent. Credit Union v. Coleman, 155 Ga. App. 547, 271 S.E.2d 681 (1980).    Appellee secured creditor had burden of overcoming presumption that value of trucks equaled the debts on them by evidence of their fair and reasonable values, and evidence of resale prices was not sufficient to do this, nor were appellee's affiant's conclusory statements that they were sold in a commercially reasonable manner, thus, grant of summary judgment for appellee on claim for deficiency was error. Davis v. Ford Motor Credit Co., 164 Ga. App. 137, 296 S.E.2d 431 (1982).   Debtor's burden after creditor proves commercial reasonableness.    - Where creditor shows prima facie that sale of collateral was reasonable, to prevent summary judgment for deficiency, debtor must support debtor's challenge to the sale by asserting specific facts showing there is a genuine issue for trial. Slaughter v. Ford Motor Credit Co., 164 Ga. App. 428, 296 S.E.2d 428 (1982).   Debtor's burden after creditor files a deficiency claim.   - A proof of claim constitutes prima facie evidence of the validity and amount of the claim, shifting the burden of proof to the debtor to show that the deficiency claim should not be allowed; the mere recitation of National Automobile Dealers Association mobile home values is insufficient for this purpose without some evidentiary connection to the actual home at issue. In re Brown, 221 Bankr. 46 (Bankr. M.D. Ga. 1998).   RESEARCH REFERENCES   Am. Jur. 2d.   - 68A Am. Jur. 2d, Secured Transactions, §§ 556-572, 606, 624 et seq., 642-680, 685-703.   C.J.S.   - 72 C.J.S., Pledges, §§ 49, 50.   U.L.A.   - Uniform Commercial Code (U.L.A.) § 9-626.   ALR.    - Seller's rights in respect of the property, or its proceeds, upon dishonor of draft or check for purchase price, on a cash sale, 31 A.L.R. 578, 54 A.L.R. 526.    Rights and remedies as between parties to conditional sale after seller has repossessed himself of the property, 99 A.L.R. 1288.    Right of creditor or mortgagee to redeem from his own sale, 108 A.L.R. 993.   Purchase by pledgee of subject of pledge, 37 A.L.R.2d 1381.   Rights and duties of parties to conditional sales contract as to resale of repossessed property, 49 A.L.R.2d 15.   Uniform Commercial Code: Burden of proof as to commercially reasonable disposition of collateral, 59 A.L.R.3d 369.   Uniform Commercial Code: failure of secured creditor to give required notice of disposition of collateral as bar to deficiency judgment, 59 A.L.R.3d 401.   Construction of term "debtor" as used in UCC § 9-504(3), requiring secured party to give notice to debtor of sale of collateral securing obligation, 5 A.L.R.4th 1291.   What is "commercially reasonable" disposition of collateral required by UCC § 9-504(3), 7 A.L.R.4th 308.   Loss or modification of right to notification of sale of repossessed collateral under Uniform Commercial Code § 9-504, 9 A.L.R.4th 552.   Failure of secured party to make "commercially reasonable" disposition of collateral under UCC § 9-504(3) as bar to deficiency judgment, 10 A.L.R.4th 413.   Sufficiency of secured party's notification of sale or other intended disposition of collateral under UCC § 9-504(3), 11 A.L.R.4th 241.   Nature of collateral which secured party may sell or otherwise dispose of without giving notice to defaulting debtor under UCC § 9-504(3), 11 A.L.R.4th 1060.   Secured transactions: what is "public" or "private" sale under UCC § 9-504(3), 60 A.L.R.4th 1012.   UCC: value of trade-in taken on sale of collateral for purposes of computing surplus or deficiency, 72 A.L.R.4th 1128.   Causes of action governed by limitations period in UCC § 2-725, 49 A.L.R.5th 1.