Court Opinion

ID: 9736164
Source: CourtListenerOpinion
Date Created: 2023-08-26 18:45:33.416429+00
Date Added: 2024-06-11T18:27:04.753907
License: Public Domain

Boslaugh, J.,
dissenting.
In my opinion this case goes too far. What began as a rule to insure that the debtor received full credit for the value of the collateral seized by the creditor has become a means to forfeit the rights of the creditor without regard to prejudice to the debtor or the value of the collateral as compared to the amount of the debt.
Since the debtors received credit for the full invoice price plus freight for the new merchandise and parts which the plaintiff took back, it is difficult to see how there could be any “deficiency” attributable to that part of the transaction. As for the used merchandise, the notice sent by the plaintiff advised the debtors that the items listed would be sold at private sale after the date specified. Such a notice, if properly sent, should be sufficient to comply with the statute as to the items listed.
While there are a number of jurisdictions which impose an *515absolute bar to recovery by a secured creditor who fails to give notice pursuant to U.C.C. § 9-504(3) (1984), a much larger number of jurisdictions do not do so. Compare J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code 1134 n.191 with nn. 192-93 (2d ed. 1980). Rather, these states allow the creditor a deficiency judgment subject to a setoff for whatever loss the debtor suffered as a result of the improper sale or, upon a showing that the creditor did not give proper notice, grant the debtor a rebuttable presumption that the collateral was worth the amount of the debt. Id. at 1134. These alternatives seem preferable to the rule followed in this case.
Recently, in First Galesburg Nat’l Bank v. Joannides, 103 Ill. 2d 294, 469 N.E.2d 180 (1984), the Illinois Supreme Court resolved a conflict within that state’s appellate court regarding whether the failure of a secured creditor to give notice to the debtor of the sale of collateral bars the creditor from recovering a deficiency from the debtor. In so doing, the court adopted the “rebuttable-presumption standard,” which it found to be “consistent with the conclusion reached in most jurisdictions where the question has been examined.” (Citations omitted.) 103 Ill. 2d at 301, 469 N.E.2d at 183. The court reasoned:
Nowhere in the sections of the Code concerning debtor defaults (Ill. Rev. Stat. 1981, ch. 26, par. 9-501 et seq.) (part 5), is it provided that a lack of notice bars a deficiency judgment. Nor is it provided that proper notice is a condition to the bringing of a deficiency action. Too, section 9-507 explicitly states consequences which are to follow a failure to comply with the provisions of part 5 of the Code. In what is relevant here it provides: “(1) 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 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 a failure to comply with the *516provisions of this Part.” (Ill. Rev. Stat. 1981, ch. 26, par. 9-507.) Section 9-507 thus creates a remedy for “any loss” caused by a “failure to comply with the provisions of [part 5],” which includes, of course, the notice requirement in section 9-504(3). Any loss arising from a lack of notice will give rise to a right to recover for the loss. Section 9-507 does not provide that a failure to comply with part 5 bars the creditor from bringing an action to recover any deficiency. No basis for an “absolute-bar” principle is found anywhere in article 9.
The absolute-bar rule is also contrary to the intendment of article 9 that penal damages or results be avoided and that the aggrieved party be placed in “as good a position as if the other party had fully performed.” (III. Rev. Stat. 1981, ch. 26, par. 1-106.) The absolute-bar rule, by barring a deficiency action regardless of whether the debtor has suffered damage from the lack of notice, provides a windfall for the debtor and arbitrarily penalizes the creditor.
103 Ill. 2d at 299-300, 469 N.E.2d at 182-83.