Opinion ID: 1999311
Heading Depth: 1
Heading Rank: 2

Heading: Was the Secured Party Liable for Wrongful Disposition of the Repossessed Collateral and for the Loss of the Contents of the Mobile Home?

Text: Regarding Norris' claim against the Van Bibber defendants for conversion of the mobile home and for loss of its contents, we remand the case for a new trial. We cannot determine from the trial court's findings to what extent the damages assessed against the Van Bibber defendants were based on the wrongful repossession as opposed to the claimed wrongful disposition of the collateral. As to the claim of wrongful disposition of the repossessed collateral and of loss of the contents of the mobile home, the Van Bibber defendants are in a different posture from AFNB. The Van Bibber defendants argue on appeal that they have no liability arising from the resale of the mobile home. They claim that they are actually three separate entities: the Van Bibber partnership which sold the trailer to Norris; the Corporation, which purchased the mobile home from the bank after repossession; and the natural person, Virgil Van Bibber. According to this theory, if the repossession was wrongful none of the Van Bibber entities could be liable since whichever one was involved was merely an agent of the bank. Since we hold that the repossession was not wrongful, we need not consider this claim. Under this theory, however, the Van Bibber corporation claims to have been a stranger to the initial sale and to the repossession, and to have entered the picture only as a purchaser in an outright sale by the bank of the repossessed collateral. Van Bibber, Inc., argues that it was never under any obligation to Norris, citing, Ind. Code § 26-1-9-504(4): When collateral is disposed of by a secured party after default, the disposition transfers to a purchaser for value all of the debtor's rights therein, discharges the security interest under which it is made and any security interest or lien subordinate thereto. The purchaser takes free of all such rights and interests even though the secured party fails to comply with the requirements of this part or of any judicial proceedings. (a) in the case of a public sale, if the purchaser has no knowledge of any defects in the sale and if he does not buy in collusion with the secured party, other bidders or the person conducting the sale; or (b) in any other case, if the purchaser acts in good faith. Van Bibber, Inc., argues that the trial court's finding of fact that defendant Van Bibber did not dispose of the mobile home in a commercially reasonable manner is based on error as to the nature of the transaction between the bank and Van Bibber, Inc., and as to the status of Van Bibber, Inc., in the transaction. The Van Bibber defendants did not disclose this theory in their answer or during the trial, but raised it for the first time in the motion to correct errors. Their answer and trial strategy focused solely on the propriety of the repossession and the propriety of their possession of the collateral. They are barred from raising this claim this late in the proceedings. Even if we were to entertain this claim, we find the evidence to be quite clear that the same Van Bibber entity sold the mobile initially, repurchased the collateral from the bank. Van Bibber, Inc.'s position in its pleadings was that the repossession was proper and that its possession of the mobile home was pursuant to the bank's right of full recourse against it under the terms of the assignment of the security agreement. In his trial testimony Virgil Van Bibber repeatedly referred to the transaction between himself and the bank as a repurchase pursuant to the terms of the assignment. The amount paid by Van Bibber, Inc., for the mobile home was for the exact amount of the balance due from Norris, and the check for the payment contained the notation, Payoff on Wm. C. Norris Repo. The transaction was a repurchase. Indiana Code § 26-1-9-504(5) provides that a person who is liable to a secured party under a... repurchase agreement ... and who receives a transfer of the collateral from the secured party ... has thereafter the rights and duties of the secured party. Indiana Code § 26-1-9-504(3) provides that [u]nless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, 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... . Since the parties in their stipulations agreed that the debtor had paid 60% of the cash price, an additional duty was on the secured party pursuant to Ind. Code § 26-1-9-505: [A] secured party who has taken possession of collateral [on which the debtor has paid 60% of the cash price] must dispose of it under section [26-1-] 9-504 and if he fails to do so within ninety [90] days after he takes possession the debtor at his option may recover in conversion or under section [26-1-] 9-507(1) or the secured party's liability. Indiana Code § 26-1-9-507, provides in pertinent part: If it is established that the secured party is not proceeding in accordance with the provisions of this part disposition may be ordered or restrained on appropriate terms and conditions. If the disposition has occurred the debtor ... has a right to recover from the secured party any loss caused by a 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 ten per cent of the principal amount of the debt or the time-price differential plus ten per cent of the cash price. We remand this cause for a new trial on the sole issue of whether the Van Bibber defendants complied with the provisions of Ind. Code § 26-1-9-504 and § 26-1-9-505, and whether they are liable for the loss of the contents, noting that the record reveals that the bank, prior to the repurchase by Van Bibber, Inc., sent a notice of resale to Norris by certified mail to his Imperial Estates address. Reversed in part and remanded for new trial in accordance with this opinion. GIVAN, C.J., and HUNTER, PRENTICE and PIVARNIK, JJ., concur.