Opinion ID: 1700483
Heading Depth: 1
Heading Rank: 6

Heading: Judging the Law.

Text: The above having been resolved, it becomes necessary to determine whether the district court correctly judged the law to be such that Brower's conduct constituted a § 9-504(1) disposition of the Tom-Har capital stock. Neb.U.C.C. § 9-207(4) (Reissue 1980) provided: A secured party may use or operate the collateral for the purpose of preserving the collateral or its value or pursuant to the order of a court of appropriate jurisdiction or, except in the case of consumer goods, in the manner and to the extent provided in the security agreement. Moreover, the pledge agreement in this case reads in pertinent part as follows: Immediately and without further notice, upon the failure of [Tom-Har, Schuessler, and Meginnis] to make any payment due to [Sports Courts] in accordance with the terms and provisions of the Note, whether or not the Pledged Stock shall have been registered in the name of [Sports Courts] or [its] nominee, [Brower], or his nominee, as agent for [Sports Courts], shall have with respect to the Pledged Stock, the right to exercise all voting rights as to all shares and, as to all of the Pledged Stock, all other corporate rights... as if [Brower] were the absolute owner thereof.... Sports Courts argues that, as its agent, Brower merely acted pursuant to the foregoing statute and contractual authority to preserve the collateral of the going business and that his acts thus did not amount to a § 9-504(1) disposition of the Tom-Har capital stock. Any suggestion that we have already resolved this issue adversely to Sports Courts is misplaced. It is true that in Allis-Chalmers Corp. v. Haumont, 220 Neb. 509, 371 N.W.2d 97 (1985), we ruled that a secured creditor's repossession and subsequent treatment of the collateral constituted a § 9-504(1) disposition such as to require notice to the debtors. The collateral therein consisted of new and used equipment. After taking the new equipment, the secured creditor gave the debtor credit at the invoice price, including freight; the used equipment was sold at private sales. The treatment by the Allis-Chalmers creditor of the used equipment bears no relevant similarity to the treatment of the Tom-Har stock in this case. The Allis-Chalmers used equipment was transferred to a third party for value. Here, there was no third party and no exchange of value. While it is true that just as here there was no transfer to a third party of the Allis-Chalmers new equipment, in Allis-Chalmers Corp. there was value given, in that the debtor was credited with the full invoice price of the equipment. The Allis-Chalmers creditor in effect sold the new equipment to itself for whatever later transfers to third parties the creditor might wish to make. Here, Brower merely exercised the rights in the stock given him by the pledge agreement in order to protect the going business the stock represented. A number of courts have held that retention of collateral does not in and of itself constitute a disposition under § 9-504(1). See, Lamp Fair, Inc. v. Perez-Ortiz, 888 F.2d 173 (1st Cir.1989); Appeal of Copeland, 531 F.2d 1195 (3d Cir.1976); General Elec. Capital Corp. v. Vashi, 480 N.W.2d 880 (Iowa 1992); IFG Leasing Co. v. Gordon, 776 P.2d 607 (Utah 1989). It has also been suggested that disposition under § 9-504(1) and (2) connotes an actual transfer of an interest in the collateral by sale, lease, or contract. See, General Elec. Capital Corp., supra ; IFG Leasing Co., supra . Although holding that for other reasons the creditor could not obtain a deficiency judgment, the court in Lamp Fair, Inc., 888 F.2d at 177, in applying the laws of Connecticut, observed that whatever might be the meaning of the words `otherwise dispose of,' they do not include permanent retention of the collateral for the secured party's own use. Illuminating reasoning is also found in Fletcher v. Cobuzzi, 499 F.Supp. 694 (W.D.Pa.1980). Therein, the debtor corporation defaulted, and the arrangement was restructured such that the corporation's president made himself personally liable on the debt and put up his stock in the corporation as collateral. After more defaults and unfulfilled new agreements, the secured creditor transferred the stock into its own name and later sold some of the stock without the president's knowledge. The value of the stock subsequently increased, and the president requested that some of the stock be sold, since the debt was now overcollateralized. Upon learning that some of the stock had already been sold, the president demanded the difference between the sale price and the higher value of the stock at the time he requested that it be sold. The secured creditor claimed that the earlier transfer of the stock into its name had been a foreclosure. In rejecting that claim, the Fletcher court held that the mere transfer of the name on the stock did not constitute an other disposition within the meaning of § 9-504(1) because such a disposition required some assignment for value of the secured creditor's rights in the collateral. The transfer to the secured creditor was not such an assignment. Instead, the court characterized what had taken place as a repossession or perfection of the secured creditor's rights in the collateral by means of eliminating the president's title and vesting it in the secured creditor. Thus, the secured creditor was liable to the president for the value of the stock in excess of the sums due the secured creditor. We are persuaded that under the circumstances, Brower's acts in voting the capital stock, in taking corporate action in accordance with that vote, and in canceling the registration of the stock in the names of Schuessler and Meginnis and reissuing it in his name do not constitute a § 9-504(1) disposition of the stock. We must therefore conclude that the district court erred in ruling that Sports Courts could not have been successful in the underlying case.