Court Opinion

ID: 8295943
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:03:24.133829+00
Date Added: 2024-06-11T16:43:58.909103
License: Public Domain

THOMAS, J.,
concurring in part, dissenting in part:
I concur with the majority’s conclusion that the statute of limitations found in section 36-2-725(1) of the South Carolina Code (2003) does not apply to Appellant’s claims. However, I respectfully dissent and would reverse because a three-year statute of limitations applies to Appellant’s claims and Appellant filed this action within three years of the date Respondent disposed of the collateral, which, I believe, is when the statute of limitations began to run.
Under section 15-3-540(2), the statute of limitations is three years for “[a]n action upon a statute for a penalty or forfeiture when the action is given to the party aggrieved or to such party and the State, except when the statute imposing it prescribes a different limitation.” By its plain language, this section’s three-year statute of limitations applies to actions seeking recovery of a statutory penalty when only the aggrieved party can bring the action for the penalty.
*223In this case, Appellant brought his action to recover the statutory penalty found in section 36-9-625(c)(2) of the South Carolina Code (2003). This section allows only the “debtor or a secondary obligor at the time a secured party failed to comply” to recover the statutory penalty. Thus, Appellant was the only person who could have brought an action to recover the statutory penalty because he was the debtor at the time Respondent allegedly failed to provide reasonable notice of disposition of the collateral. Because Appellant, as the aggrieved party, was the only person who could have brought the action, section 15-3-540(2) provided the applicable statute of limitations. Accordingly, the statute of limitations for Appellant’s action was three years.
Finding the applicable statute of limitations was three years, we must next consider when the statute began to run. I respectfully disagree with the majority’s finding that the statute of limitations began to run when Respondent sent the allegedly unreasonable notice in May 2008.
Section 36-9-625(c)(2) provides “a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this part may recover” a statutory penalty for the failure to comply. The debtor can recover this penalty only if the secured party fails to comply. Under section 36-9-611(b) of the South Carolina Code (2003), “a secured party that disposes of collateral under [sjection 36-9-610 shall send to the persons specified in subsection (c) a reasonable authenticated notification of disposition.” Appellant’s claim is that Respondent failed to comply with the notice requirement and, thus, Appellant is entitled to recover the statutory penalty found in section 36-9-625(c)(2) because of that failure to comply.
In my view, based on the plain language of section 36-9-611(b), the only way a secured party can fail to comply with section 36—9—611 (b) is by failing to give reasonable notice AND disposing of the collateral. Section 36-9-611(b) requires “a secured party that disposes of collateral” to provide reasonable notice, (emphasis added). Based on this plain language, a secured party must provide reasonable notice only if it disposes of the collateral. If the secured party never disposes of the collateral, it never has to provide notice under section 36-9-*224611(b). Thus, if a secured party sends an unreasonable notice to a debtor but subsequently fails, for whatever reason, to dispose of the collateral, it has not failed to comply with section 36-9-611(b). And the debtor who receives an unreasonable notice cannot bring an action to recover the statutory penalty if the secured party never disposed of the collateral because the statutory penalty is authorized only if the secured party failed to comply with section 36-9-611(b). As noted above, the secured party has not failed to comply with section 36—9—611(b) unless and until it disposes of the collateral.
This conclusion is supported by the official comments to section 36-9-611. Comment eight states, “Nothing in this Article prevents a secured party from electing not to conduct a disposition after sending a notification. Nor does this Article prevent a secured party from electing to send a revised notification if its plans for disposition change.” Thus, this comment contemplates that a secured party may send a revised notification in order to comply with the notice requirement in section 36-9-611(b). If a secured party sent an unreasonable notice to a debtor and subsequently, but prior to disposition, sent a reasonable second notice, the secured party would be in compliance with section 36-9-611, and the debtor would not have an action to recover the statutory penalty based on a failure to comply. Additionally, comment eight contemplates that a secured party may send a notification and later decide not to dispose of the collateral in which case the secured party would not have failed to comply with section 36-9—611(b), and the debtor could not recover the statutory penalty under section 36-9-625(c)(2).
This conclusion is further supported by examination of the purpose underlying the notice requirement, which is, in part, to allow the debtor to see that the sale is conducted in a commercially reasonable manner. See Brockbank v. Best Capital Corp., 341 S.C. 372, 384, 534 S.E.2d 688, 695 (2000) (“The purpose of the notice is to allow the debtor to discharge the debt and redeem the collateral, produce another purchaser, or see that the sale is conducted in a commercially reasonable manner.”). If the secured party initially sends an unreasonable notice and subsequently sends a reasonable second notice, the purpose of the notice requirement is accomplished because the debtor received a reasonable notice and can see the sale is *225conducted in a commercially reasonable manner. Therefore, the purpose underlying the notice requirement supports the conclusion that the secured party has not failed to comply with section 36—9—611(b) unless and until it disposes of the collateral.
Furthermore, this conclusion is supported by examination of the purpose underlying the statutory penalty. The penalty is necessary to motivate secured parties to comply with the code’s provisions. See id. at 385, 534 S.E.2d at 695 (“The statutory penalty is evidence of the legislature’s recognition that the small amount of compensatory damages that may be proven in a consumer goods repossession and sale would be insufficient to ensure creditor compliance with the [cjode’s provisions.” (brackets removed)). If the secured party initially sends an unreasonable notice and subsequently sends a reasonable second notice, imposing the statutory penalty based on the initial unreasonable notice would not serve the penalty’s purpose because the secured party would have ultimately complied with the notice requirement.
The majority contends Appellant’s cause of action “must have arisen upon his receipt” of the unreasonable notice because section 36-9-625(a) allows a party to request the circuit court to restrain disposition of the collateral, presumably through an injunction, if the “secured party is not proceeding in accordance with this chapter.” Because section 36-9-625(c)(2) is a statutory penalty, it is available only in the specific circumstances prescribed by the statute. See State ex rel. Callison v. Nat’l Linen Serv. Corp., 225 S.C. 232, 234, 81 S.E.2d 342, 343 (1954) (“The prime rule requires strict construction of a statutory provision which would work a forfeiture or inflict a penalty.”); King v. Atl. Coast Line R.R. Co., 86 S.C. 510, 513, 68 S.E. 769, 770 (1910) (noting a statutory penalty “is the creature of the statute, and comes into existence when all statutory conditions exist, and not otherwise”). As discussed above, the penalty in section 36-9-625(c)(2) is available only when a secured party fails to comply. Alternatively, the statute providing for the possibility of an injunction does not require a failure to comply; rather an injunction is available at any time a secured party is not proceeding in accordance with Article Nine. Because the legislature used different language in sections 36-9-625(a) and 36-9-625(c)(2) *226to express when each remedy is available to a debtor, we must assume the legislature intended to draw a distinction between the two remedies. See Gordon v. Phillips Utils., Inc., 362 S.C. 403, 406, 608 S.E.2d 425, 427 (2005) (“[T]he legislature intends to accomplish something by its choice of words, and would not do a futile thing.”).
Thus, the monetary penalty in section 36-9-625(c)(2) and the injunction in section 36-9-625(a) have different thresholds for applicability, and they are not necessarily available to a debtor at the same time. As a result, even if we assume, due to the possibility of an injunction, a cause of action or right arises when a secured party sends an unreasonable notice, such an assumption does not lead automatically to the conclusion, as found by the majority, that the monetary penalty is also available when a secured party sends an unreasonable notice.
Accordingly, I would find a debtor does not have a cause of action to recover the statutory penalty based on a secured party failing to provide reasonable notice as required by section 36—9—611(b) until the secured party disposes of the collateral. As a result, the statute of limitations would not begin to run until the secured party disposes of the collateral. See Walsh v. Woods, 358 S.C. 259, 264, 594 S.E.2d 548, 551 (Ct. App. 2004) (“In analyzing a limitations defense, the fundamental test for determining whether a cause of action has accrued is whether the party asserting the claim can maintain an action to enforce it. Thus, a particular cause of action accrues at the moment when the plaintiff has a legal right to sue on it.” (citations and internal quotation marks omitted) (brackets removed)).
Here, Respondent could not have failed to comply with section 36-9-611(b) until it disposed of the collateral without providing reasonable notice, and Appellant could not have brought an action to recover the statutory penalty based on a failure to comply until Respondent disposed of the collateral. Thus, the statute of limitations began to run in December 2008 when Respondent disposed of the collateral. Appellant filed this action in October 2011, which was within the applicable three-year statute of limitations, and I would find the circuit court erred by dismissing Appellant’s complaint.