Opinion ID: 1892205
Heading Depth: 1
Heading Rank: 1

Heading: re: hi-bo farms inc.

Text: You are hereby notified by and on behalf of the undersigned secured party that by virtue of the default under the terms and provisions of a security agreement executed by the captioned Debtor dated 06-28-81, the undersigned secured party, holder of the aforesaid agreement and the indebtedness represented therby [sic] will, on or after 08-18-84 make one or more private sales or other dispositions of our right, title and interest in and to the goods described in said agreement, which goods may be described as follows: ONE WHITE 9700 COMBINE S/N 97-20218 W/CORNHEAD S/N A90065, AND KWICK CUT HEAD S/N 912118 The net proceeds of sale (less expenses incurred) shall be, in accordance with said agreement, applied to the reduction of total obligation due and owing by Debtor to the undersigned secured party. Dated this 7TH day of AUGUST, 1984. Deutsche Credit Corporation Id. at 465, 398 N.W.2d at 695. Deutsche sold the equipment on October 3, 1984, and subsequently sought a deficiency judgment against the corporate officers who had personally guaranteed the Hi-Bo debt. In upholding the summary judgment dismissing Deutsche's petition, the court wrote: The guarantors contend that the notices in the present case are indistinguishable from the notice in Hughes. Plaintiff argues that, on the contrary, its notices are different from the notice in Hughes in several important respects. First of all, while in Hughes there was but a single notice, in the present case each of the guarantors was sent a separate notice. While the notice in Hughes was addressed to the president of the corporate debtor, each of the notices to the guarantors in this case was addressed to a guarantor individually, and no reference was made to the guarantor's capacity as an officer of the corporate debtor. While the notice in Hughes directed specific attention to Collateral: Financing Statement 5-9-74, which the guarantor had not signed, the notices in this case directed attention to the entire HI-BO FARMS INC. transaction. Plaintiff concludes that these distinctions are such that the guarantors had no reasonable basis to conclude that the notices were sent to them in their capacity as corporate officers rather than to them in their own individual capacities. The guarantors, on the other hand, point to the facts that, as did the notice in Hughes, the notices in this case refer only to Hi-Bo Farms as the debtor. Moreover, as the notice in Hughes failed to make any reference to the guaranties executed by the Hugheses, so in this case did the notices limit themselves to the default under the terms and provisions of a security agreement executed by the captioned Debtor.... Thus, the guarantors argue that the notices are, at best, ambiguous and, as such, constitute no notice at all insofar as they individually are concerned. We conclude that the notices are ambiguous as a matter of law with respect to the guarantors. They refer to but a single debtor, Hi-Bo Farms, and refer only to the security agreement executed by that debtor solely. That ambiguity is to be resolved against plaintiff as the drafter of the notices. Hi-Bo Farms, supra at 468, 398 N.W.2d at 696-97. In General Electric Credit Corp. v. Lewis, 230 Neb. 429, 432 N.W.2d 27 (1988), Gerald Lewis executed a guaranty in favor of General Electric Credit Corporation and covering the present and future debts of William Thompson III and Donna Ahrens. General Electric then extended a loan to Thompson and Ahrens; the loan was secured by a Mack truck tractor. After Thompson and Ahrens had defaulted on the loan and General Electric had repossessed the Mack tractor, General Electric sent the following  `NOTICE OF SALE OF COLLATERAL' to Lewis: TO: Gerald B. Lewis C/O Lewis Service Center 4101 West O Street Lincoln, NB 68528 PLEASE TAKE NOTICE that the following described collateral of which we have taken possession pursuant to Chattel Mortgage dated August 10, 1983 in which William Thompson III and Donna Ahrens is the Debtor and we are the Secured Party, will be sold by: ... Private Sale on or after November 30, 1983 at 2333 Waukegan Road, Bannockburn, Illinois 60015 DESCRIPTION OF COLLATERAL: One (1) 1981 Mack Truck Tractor.... Id. at 430-31, 432 N.W.2d at 28. In holding the notice unreasonable, this court declared: Apparently implicit in [ Hughes and Hi-Bo Farms ] is Neb.U.C.C. § 9-504 comment 5 (Reissue 1980), namely, one of the purposes of the Uniform Commercial Code notice provisions is assurance that persons entitled to receive [notice] will have sufficient time to take appropriate steps to protect their interests. Consequently, this court has concluded that, because reasonable notice of sale is designed to give a guarantor an opportunity to protect the guarantor's interest, a notice which fails to inform the guarantor concerning an interest to protect, namely, potential liability for a deficiency after sale, is not reasonable. Therefore, to satisfy the requirement of reasonable notice, as a prerequisite concerning a guarantor's liability for a deficiency, § 9-504(3) requires that the secured party-creditor inform the guarantor of a debt concerning the guarantor's potential liability for a deficiency on sale of collateral after the principal debtor's default. Deutsche Credit Corp. v. Hi-Bo Farms, Inc., supra ; First Nat. Bank & Trust Co. v. Hughes, supra . The notice sent to Lewis, as guarantor, is deficient in view of [ Hi-Bo Farms ] and Hughes, because [General Electric's] notice failed to refer to Lewis' guaranty and did not inform Lewis that he, as a guarantor of the Thompson-Ahrens debt, would be liable for any deficiency after sale of the collateral. Instead, the notice referred only to Thompson and Ahrens as debtors, and to the chattel mortgage signed by those debtors. Since [General Electric's] notice to Lewis failed to inform him that [General Electric] would seek a personal deficiency judgment against Lewis in his capacity as a guarantor, the notice was unreasonable under § 9-504(3). Lewis, supra at 433-34, 432 N.W.2d at 30. The reasonableness of the notice to a guarantor was most recently considered in American Honda Finance Corp. v. Bennett, 232 Neb. 21, 439 N.W.2d 459 (1989). Therein, Ronald and Shirley Bennett served as corporate officers of Bennett's Gun & Cycle, Inc., and personally guaranteed that corporation's obligations to American Honda Finance Corporation. The credit which American Honda had extended to Bennett's Gun & Cycle was secured by a portion of the corporation's inventory. After Bennett's Gun & Cycle had defaulted and American Honda had recovered its collateral, American Honda mailed identical notices of private sale to the Bennetts and to Bennett's Gun & Cycle. The only difference between the notices was the first line of the inside address. The notices stated: RE: Repossessed Motorcycles and Power Equipment Dear Ronald and Shirley Bennett: Pleae [sic] be advised that on or after 8:00 AM, on October 24, 1986, American Honda Finance Corporation will sell at private sale the collateral heretofore repossessed from you by American Honda Finance Corporation pursuant to the Security Agreement between you and American Honda Finance Corporation. Such collateral consist of Motorcycles and Power Equipment. Id. at 22, 439 N.W.2d at 461. The court concluded that the notice of private sale was sufficiently ambiguous as to be unreasonable and thus foreclose a deficiency judgment. In so ruling, it stated: To be reasonable, the notice must inform the guarantor of his potential liability for a deficiency on the sale of collateral after the principal debtor's default [citing Lewis, Hi-Bo Farms, and Hughes ]. Separate notices were sent to the primary debtor and the guarantors; however, the notice to the Bennetts states it was sent pursuant to the Security Agreement between you and American Honda Finance Corporation. The notice made no reference to the guaranty agreement signed by the Bennetts. The notice received by the Bennetts referred only to collateral in the form of motorcycles and power equipment repossessed from you. From the notice, it is clear the you referred to is Bennett's Gun & Cycle, not Ronald and Shirley Bennett. Nor does the notice give any indication that the Bennetts may be held liable for any deficiency which results from the sale. Therefore, this notice was deficient as a matter of law. Bennett, supra at 24-25, 439 N.W.2d at 462. The standard form notices in this case were sent to the defendant Kelleys as Roger Kelley, Rex Kelley, and Florence Kelley White, without indicating whether they were being given notice in their corporate or individual capacities. This confusion is compounded by the fact the notices declare that plaintiff would sell at private sale your [description of items to be sold] which was the collateral pledged pursuant to the security agreement described above.... (Emphasis supplied.) The use of the term your before the description of the collateral to be sold exacerbates the doubt as to whether the notices were sent to the defendant Kelleys as individuals or as corporate officers. Moreover, while the standard form notices state that [y]ou will be liable for any deficiency, the use of the term your before the description of the collateral makes it unclear whether plaintiff was giving notice it would seek to hold the defendant Kelleys as individuals or the corporation liable for any deficiency. Finally, the notices omit any reference to the guaranty the defendant Kelleys signed. It is these ambiguities which the defendant Kelleys argue entitle them to summary judgment under the Hughes line of cases. It is to be noted, however, that in that line of cases, the notices represented the creditors' only efforts to inform the guarantors of their stake in the collateral. Consequently, the ambiguities were necessarily resolved against the creditors as the drafters of the notices, rendering the notices unreasonable. Conversely, the plaintiff in this case made a concerted effort to ensure that the defendant Kelleys were fully informed of their stake in collateral which was to be sold. On numerous occasions plaintiff reminded the defendant Kelleys of the guaranty which they had signed, at one point going so far as to mail each of them a copy of the document. And via correspondence, plaintiff made it clear that each of them, as guarantor, would be personally liable for any deficiency remaining after the corporation's assets were liquidated. Plaintiff therefore urges that parol evidence should be considered in determining whether its notices contained sufficient information to apprise the defendant Kelleys that they needed to protect their interests as guarantors, and were thus reasonable; that is, the determination should be made in light of the entire conduct of the parties. In support of this position plaintiff cites us to Olds v. Jamison, 195 Neb. 388, 238 N.W.2d 459 (1976), a case involving a lease. Therein, this court said: Parol evidence is generally admissible when it is offered for the purpose of explaining and showing the true nature of the transaction between the parties. [Citation omitted.] In any event, this court has ordinarily applied the parol evidence rule only in the absence of fraud, mistake, or ambiguity. [Citation omitted]. A written instrument is open to explanation by parol evidence when its terms are susceptible to two constructions or where the language employed is vague or ambiguous. Id. at 391-92, 238 N.W.2d at 462. This rule is restated and followed in Mahoney v. May, 207 Neb. 187, 297 N.W.2d 157 (1980), and Lovelace v. Stern, 207 Neb. 174, 297 N.W.2d 160 (1980), both cases involving the construction of contracts for the sale of real estate. Like Olds, Mahoney also notes that [p]arol evidence is generally admissible where it is offered for the purpose of explaining and showing the true nature of the transaction between the parties. Mahoney at 191, 297 N.W.2d at 160. And, more recently, in Washington Heights Co. v. Frazier, 226 Neb. 127, 409 N.W.2d 612 (1987), this court noted that parol evidence is admissible to explain vague language in a written contract. We therefore hold that whether a creditor's notice under the provisions of § 9-504(3) sufficiently informs a guarantor of his or her status as such, of the default of the principal debtor, and of the guarantor's obligations, rights, and stake in the collateral, and is therefore reasonable, must be determined in light of the entire conduct of the parties. Such holding compels the conclusion that there indeed exist in this case genuine issues as to material facts. Summary judgment is appropriate where there exists no genuine issue as to any material fact or as to the ultimate inferences which may be drawn from the material facts and the moving party is entitled to judgment as a matter of law. First Security Sav. v. Aetna Cas. & Surety Co., 233 Neb. 335, 445 N.W.2d 596 (1989); Gatzemeyer v. Neligh Township, 233 Neb. 329, 445 N.W.2d 593 (1989); State Farm Fire & Cas. Co. v. Victor, 232 Neb. 942, 442 N.W.2d 880 (1989). Consequently, the summary judgment in favor of the defendant Kelleys must be reversed and the cause remanded for further proceedings. REVERSED AND REMANDED FOR FURTHER PROCEEDINGS. HASTINGS, C.J., not participating.