Court Opinion

ID: 5835022
Source: CourtListenerOpinion
Date Created: 2022-01-12 22:35:59.296761+00
Date Added: 2024-06-11T08:43:34.630446
License: Public Domain

Moule, J. (dissenting).
On August 30, 1976 S. M. Flickinger Co., Inc. (Flickinger) loaned 18 Genesee Corporation (Genesee) $230,000 evidenced by a promissory note. In conjunction with the loan, the parties executed: (1) a security agreement covering all the equipment, fixtures and merchandise in a supermarket; (2) an unconditional guarantee of payment by the sole shareholders, the Doxtators and Hammonds; and (3) an agreement setting forth the rights and duties of the parties with regard to Genesee’s operation of a Super Duper supermarket franchise.
When Genesee defaulted on the note, Flickinger notified it by letter dated March 28, 1978 that Flickinger was "prepared to mitigate against further losses by immediately taking possession of the inventory, fixtures and premises”. Flickinger requested that Genesee and the individual guarantors assent to this plan by signing and returning a copy of the letter, which they did.
Pursuant to the letter plaintiff took possession of the collateral, apparently intending to purchase it from the defendant corporation. Section 9-504 sets forth the requirements for a *387party to buy the collateral in which he has a security interest. He may do so where the collateral is being offered at a public sale or at a private sale if the collateral is of a type sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations (Uniform Commercial Code, § 9-504, subd [3]). Since there has been no public sale, and since the conditions necessary for conducting a private sale were not established, the acquisition by plaintiff of the collateral in the present case is not a sale or other disposition of collateral within the meaning of section 9-504.
The provisions of part 5 of article 9 should be construed strictly to protect the debtor’s rights in collateral after default (see Official Comment 4, Uniform Commercial Code, § 9-501). The secured party’s purchase of collateral presents a prime opportunity to take unfair advantage of the debtor’s position upon default. The provisions of section 9-504 governing sale to the secured party should, therefore, be read to exclude such sales under circumstances not set forth therein.
Plaintiff’s retention of the collateral subjected it to the provisions of section 9-505 (National Equip. Rental v Priority Electronics Corp., 435 F Supp 236). This section allows the secured party to retain the collateral in full satisfaction of the obligation providing the debtor does not object to such retention (Uniform Commercial Code, § 9-505, subd [2]; see 1 Coogan-Hogan-Vagts, Secured Transactions under the Uniform Commercial Code, § 3A.04). The debtor may, however, waive or modify his right to have the obligation fully satisfied by the secured party’s retention of the collateral, providing such waiver is by signed statement executed after default (Uniform Commercial Code, § 9-505, subd [2], as amd by L 1977, ch 866, § 35; see Coogan, The New UCC Article 9, 86 Harv L Rev 477, pp 520-524). If the debtor waives his right to full satisfaction, the secured party may then recover a deficiency judgment based upon the amount of the debt less the value of the collateral. If the debtor refuses to waive full satisfaction, the secured party has the choice of retaining the collateral in full satisfaction of the debt or selling it to a third party under the provisions of section 9-504.
Here, it is not clear that Genesee, by the letter of March 28, 1978, intended to waive its right under section 9-505 to have the debt fully satisfied by Flickinger’s retention of the collateral. The letter is ambiguous. It speaks in terms of mitigation against losses, but does not specify how that is to be done; nor *388does it include any provision with regard to the disposition of the store’s fixtures.
Since whether the corporate debtor waived its rights under section 9-505 remains an issue of fact, we would reverse the order granting summary judgment as to that debtor.
Hancock, Jr., and Schnepp, JJ., concur with Simons, J. P.; Doerr and Moule, JJ., dissent in part and vote to deny plaintiff’s motion for summary judgment as to corporate defendant in an opinion by Moule, J.
Order, insofar as it granted plaintiff summary judgment affirmed, with costs, and matter remitted to Supreme Court, Onondaga County, for assessment of damages, in accordance with opinion by Simons, J. P.