CopyCited 38 times | Published | Supreme Court of Georgia | Mar 19, 1987 | 256 Ga. 855, 3 U.C.C. Rep. Serv. 2d (West) 897
...Kauffman, amici curiae. BELL, Justice. We granted certiorari in this case to determine whether the Court of Appeals correctly concluded that the appellee creditor, who had sold a small portion of the debtor's collateral without the notice required by OCGA §
11-9-504 (3), was not barred from obtaining an in personam judgment against or selling the other collateral of the debtor....
...at 838-840, and will be reiterated here only when necessary to a discussion of the issues presented. 1. In Gurwitch v. Luxurest Furniture Mfg. Co.,
233 Ga. 934 (214 SE2d 373) (1975), this court adopted the rule that, if a creditor sells collateral of a debtor without the notice required by OCGA §
11-9-504 (3), the creditor is barred from proceeding to obtain a personal judgment against the debtor to recover the difference between the amount obtained from the sale of the collateral and the amount the court determines is due on the note....
...he sale of the collateral. The Court of Appeals concluded that, because Burkett filed a suit for recovery on the note before selling the collateral in question, [1] this was not a deficiency action and the effect of Burkett's noncompliance with OCGA §
11-9-504 (3) was not the same as if he had first sold the collateral and then sued to recover a deficiency....
...sale of the collateral and the amount determined to be due on the note. Moreover, the fact that a creditor may have proceeded to judgment on a note before selling collateral without notice does not in any manner satisfy the ultimate purposes of OCGA §
11-9-504 (3), which are to enable the debtor to exercise his right of redemption under OCGA §
11-9-506, if he or she so chooses, and, if not, to minimize any possible deficiencies remaining after the sale....
...As is readily apparent, the debtor has the same interest in the disposition of the collateral whether the creditor first obtains a judgment on the note and then sells the collateral or first sells the collateral and then obtains a judgment on the note. Since OCGA §
11-9-504 (3) is designed to protect the debtor, the effect of the creditor's noncompliance with that code section should be the same in either instance, and we now so hold. For a case reaching the same result, see Spillers v. First Nat. Bank, 400 NE2d 1057 (Ill. App. 1980). [2] 2. Having determined that the effect of a creditor's noncompliance with the notice provision of OCGA §
11-9-504 (3) should be the *857 same whether the creditor first obtains a judgment on the note or first sells the collateral, we must now examine the effect of the creditor's noncompliance. As previously noted, in Gurwitch v. Luxurest Furniture Mfg. Co., supra, 233 Ga., this court adopted the "absolute-bar" rule, holding that the failure of the creditor to comply with the notice requirements of OCGA §
11-9-504 (3) when selling collateral operates as an absolute bar to the recovery of a deficiency....
...Hubbard,
247 Ga. 431 (276 SE2d 622) (1981), we carved out an exception to the absolute-bar rule of Gurwitch, and adopted the rebuttable-presumption rule for cases in which the only issue is whether, concerning the commercial reasonableness of the sale, see OCGA §
11-9-504 (3), the sale price of the collateral was adequate....
...In examining the merits of the absolute-bar rule of Gurwitch and of the rebuttable-presumption rule outlined above, we conclude that the fairer rule and the rule most consistent with the intent of the Uniform Commercial Code is the rebuttable-presumption rule. First, we note that OCGA §
11-9-504 (2) expressly states that the creditor has a right to recover any deficiency from the debtor....
...t a lack of notice bars a deficiency judgment or that proper notice is a condition precedent to the bringing of a deficiency action. Moreover, OCGA §
11-9-507 explicitly provides a remedy for a creditor's noncompliance with the requirements of OCGA §
11-9-504 (3)....
...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 provisions of this part." OCGA §
11-9-507 does not provide that a failure to comply with §
11-9-504 bars the creditor from bringing an action to recover any deficiency....
CopyCited 26 times | Published | Supreme Court of Georgia | Jul 3, 1985 | 254 Ga. 615, 41 U.C.C. Rep. Serv. (West) 289
...r the Reeves' *618 guaranty to recover a deficiency as to the debts remaining on either the $200,000 or $35,000 note. a. After default by a debtor, "[a] secured party . . . may sell, lease, or otherwise dispose of any or all the collateral...." OCGA §
11-9-504 (1). However, in order for a secured party to recover any deficiency between the sale price of the collateral and the debt owed, the secured party must have strictly complied with the requirements of OCGA §
11-9-504 (3), which, stated briefly, are that the secured party dispose of the collateral in a commercially reasonable manner generally and provide the debtor with reasonable notification of the disposition....
...o satisfy the deficiency out of collateral or pursuant to a guaranty. We disagree. The Georgia rule concerning the recovery of a deficiency after a foreclosure sale of collateral is that, if the creditor does not comply with the requirements of OCGA §
11-9-504 (3), he loses his right to recover a deficiency, not merely his right to recover a personal judgment against the debtor....
...652 (1) (278 SE2d 431) (1981), for a case in which this issue was raised, but did not have to be resolved. Although we can discover no case on point, we see no reason to distinguish, for purposes of the rule that a secured party who fails to comply with the requirements of OCGA §
11-9-504 (3) loses his right to any deficiency from the foreclosure sale, between a creditor who does invoke a future advances clause and proceeds to attempt to satisfy several debts, as opposed to a secured party who attempts to satisfy only one debt pursuant to the sale. If the latter cannot recover a deficiency if he does not comply with OCGA §
11-9-504 (3), neither should the former. Both should be required to comply with §
11-9-504 (3), the requirements of which serve the ultimate purpose of minimizing any possible deficiencies remaining after the sale, see Barbree v....
...531 (268 SE2d 796) (1980); Comfort Trane Air Conditioning Co. v. Trane Co., supra. 4. Second, we consider the Reeves' contentions regarding their defense that they were entitled to notice of the liquidation sale of the assets of Reeves Hardware under OCGA §
11-9-504 (3), and that they did not receive the required notice. Generally, if a "debtor" is entitled to notice under OCGA §
11-9-504 (3), and the notice requirements thereof are not satisfied, the secured party is precluded from proceeding against the debtor to satisfy *621 the deficiency remaining on the debt....
...E.g., Barbree v. Allis-Chalmers Corp., supra,
250 Ga. 409; Gurwitch v. Luxurest Furniture Mfg. Co., supra,
233 Ga. at 934; Citizens State Bank v. Hewitt, supra,
158 Ga. App. at 241; GEMC Credit Union v. Shoemake,
151 Ga. App. 705, 706 (261 SE2d 443) (1979). OCGA §
11-9-504 (3) provides that, "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....
...dealing with the collateral, the obligor in any provision of the article dealing with the obligation, and may include both where the context so requires." In the instant case, the issue is whether the Reeves were "debtors" within the meaning of OCGA §
11-9-504 (3) and therefore entitled to notice....
...2d 78 (401 NYS2d 404) (1977). Courts in many jurisdictions have recognized that, in addition to the debtor who is the primary obligor, there are many persons who may be liable for a deficiency judgment and should be considered "debtors" within the meaning of OCGA §
11-9-504 (3)....
...inue to owe "other performance of the obligation secured," OCGA §
11-9-105 (1) (d), and have an interest in seeing that the collateral is sold for the best possible price. Accordingly, they have been held to be debtors entitled to notice under OCGA §
11-9-504 (3) See Barbree v....
...at 412, in which we overruled Brinson v. Commercial Bank,
138 Ga. App. 177 (225 SE2d 701) (1976) (in which the Court of Appeals had held that a guarantor was not a debtor), we now hold, as do a majority of jurisdictions, that a guarantor is a debtor within the meaning of OCGA §
11-9-504 (3)....
...Accordingly, we conclude that if, as the Reeves contend, the deficiency remaining after the sale of the assets of Reeves Hardware includes the debt remaining on the $35,000 note, see Divisions 2 (c) and (d), supra, the Reeves, as guarantors of the $35,000 note, were entitled to notice of the sale under OCGA §
11-9-504 (3)....
...Shea, supra, 423 FSupp. at 470. Based on the foregoing, we hold that the Reeves, who were *623 obliged to surrender their stock if the sale of the Reeves Hardware assets produced a deficiency on the $200,000 note, were entitled to notice under OCGA §
11-9-504 (3)....
...reason, as their stock could also be used to satisfy any deficiency thereunder. 6. Having determined that the bank was required to give notice to the Reeves, we now address the Reeves' contention that they did not receive the notice required by OCGA §
11-9-504 (3)....
...nding sale of the assets of Reeves Hardware. The Reeves, however, contend that this letter was not reasonable notice, as it was specifically sent to them because of their status as secondary lienholders on the assets of Reeves Hardware, [1] see OCGA §
11-9-504 (3), and not because of their status as debtors under OCGA §
11-9-504 (3)....
CopyCited 18 times | Published | Supreme Court of Georgia | May 7, 1986 | 255 Ga. 718
...efficacy of the appellant's waiver of notice. The "Uniform Commercial Code Secured Transactions" is found at Chapter 9 of OCGA Title 11. OCGA §
11-9-101 et seq. The provisions concerning default are found in Part 5. OCGA §
11-9-501 et seq. OCGA §
11-9-504 (1) provides that after default a secured party may sell, lease, or otherwise dispose of the collateral. OCGA §
11-9-504 (3) generally requires that the collateral be disposed of in a "commercially reasonable manner" and that "reasonable notification" of the disposition be given to the "debtor." "Compliance with [OCGA §
11-9-504 (3)] is a condition precedent to recovery of any deficiency between the sale price of the collateral and the amount of the unpaid balance." Gurwitch v....
...ness. Likewise in each case, Barbree, for *719 value received, assigned the contract `with full recourse' to Allis-Chalmers. In each case the purchaser defaulted on the contract and the equipment was repossessed by Allis-Chalmers. "Pursuant to [OCGA §
11-9-504 (3)], Allis-Chalmers gave notice to the defaulting purchasers that the repossessed equipment would be sold....
...Consequently, Allis-Chalmers instituted an action against Barbree and the defaulting purchasers of the equipment to recover the deficiency." 250 Ga. at p. 409. The question for decision in Barbree was whether Barbree was a "debtor" within the meaning of §
11-9-504 (3), thereby being entitled to notice of the sale of the repossessed collateral as a condition precedent to Allis-Chalmers' holding him liable for the deficiency....
...l, the obliger in any provision dealing with the obligation, and may include both where the context so requires." In Barbree, the Court of Appeals held that even though Barbree did "owe payment" of the obligation secured, he was not a "debtor" under §
11-9-504 (3), because that section deals with disposition of collateral after default and the term "debtor" within the meaning of that section is limited to the owner of the collateral. On certiorari, we reversed. In so holding, we observed that the "ultimate goal" of the notification requirement of §
11-9-504 (3) is to allow the debtor to maximize the sale price of the collateral and, thus, minimize any deficiency for which he will be liable....
...Since persons situated such as Barbree are liable for any deficiency, we reasoned that, as a matter of policy, they should be entitled to the same notice protection as the owner of the collateral. Accordingly, we held that Barbree was a "debtor" within the meaning of §
11-9-504 (3), since that section incorporates both owners of collateral and other obligors within the definition of debtor "where the context requires," and since the context there so required....
...Therefore, we held in Barbree "that one who is a seller of chattel paper, whether or not he is the owner of the underlying collateral, *720 with full recourse against him in the event of a deficiency is a debtor entitled to notice of the post-default proceedings disposing of the collateral pursuant to [OCGA §
11-9-504 (3)]....
...177 [(225 SE2d 701) (1976)], are hereby overruled to the extent that they are inconsistent with this opinion." 250 Ga. at p. 412. 2. OCGA §
11-9-501 (3) (b) was not dealt with in Barbree, and this section provides that rights of the debtor and duties of the creditor stated in §
11-9-504 (3) generally may not be waived....
...In Bank of Forest Park v. Gray, supra, the Court of Appeals, citing its earlier decision in Brinson v. Commercial Bank, supra, and McNulty v. Codd, supra, had held that an endorser of a note is not a "debtor" entitled to notice under the provisions of §
11-9-504 (3)....
...In Gray, the Court of Appeals held that although it could construe an endorser as a debtor under §
11-9-105 (d) because the endorser "owes payment" of the notice, it would instead follow the view "supported in certain of our sister states" that the meaning of "debtor" under §
11-9-504 (3) is limited to the owner of the collateral....
...nt of a note, which evidenced an indebtedness for payment of stock which had been purchased by a corporation wholly owned by Codd. In Division 1 of the Codd opinion, the Court of Appeals held that a guarantor is not a debtor entitled to notice under §
11-9-504 (3)....
...ing such notice to be given to a guarantor." 138 Ga. App. at p. 178 (1). 3. In Clay v. Presidential Financial Corp.,
175 Ga. App. 226 (2) (332 SE2d 924) (1985), the Court of Appeals followed the Bennett holding that a guarantor is not a debtor under §
11-9-504 (3) and, thus, may waive notice of the sale liquidating the collateral. In Pollard v. Trust Co. Bank,
175 Ga. App. 510 (3) (333 SE2d 642) (1985), in which this court denied certiorari, the Court of Appeals, in reliance on Bennett's interpretation of Barbree, held that since a guarantor is not a debtor under §
11-9-504 (3), he may waive the defense of commercial unreasonableness in the disposition of the collateral securing the indebtedness....
...y may not be waived, this section goes on to provide that "the parties may by agreement determine the standards by which the fulfillment of these rights and duties is to be measured if such standards are not manifestly unreasonable." Similarly, OCGA §
11-9-504 (3) provides that after default the debtor may sign "a statement renouncing or modifying his right to notification of [the liquidation] sale." GEMC Federal Credit Union v....
...eed. The maker of the note defaulted thereon, and collateral securing payment of the indebtedness was liquidated and sold. In a suit by the obligee against the guarantors, they complained that they were not given notice of the liquidation sale under §
11-9-504 (3)....
...In Reeves, a plurality of this court, looking to the purpose of requiring notice to *722 the debtor as enunciated in the Barbree decision as well as similar decisions of other courts, held "as do a majority of jurisdictions, that a guarantor is a debtor within the meaning of OCGA §
11-9-504 (3)....
...s from this court upon the following question: "1) Under Reeves, supra, is the mere status of one as the `guarantor' of an indebtedness determinative as to the legally non-binding effect of his asserted pre-default waiver of the requirements of OCGA §
11-9-504 (3)? Cf. Kellos v. Parker-Sharpe, Inc.,
245 Ga. 130, 133 (263 SE2d 138) (1980). "2) Or, are the terms of a guarantor's pre-default agreement fully enforceable against him, even to the extent of waiving the requirements of OCGA §
11-9-504 (3)? Bennett, supra; Clay, supra; Pollard, supra." 6. As held in Division 4 of the Reeves opinion, the Barbree rationable logically compels the holding that a guarantor, under a separate contract there, is a debtor under §
11-9-504 (3)....
...Accordingly, the certified question is answered as follows: Under the holding in Division 4 of Reeves (as well as Barbree, its progenitor), the status of one as the "guarantor" of an indebtedness is determinative as to the legally non-binding effect of his pre-default waiver of the requirements of §
11-9-504 (3)....
CopyCited 17 times | Published | Supreme Court of Georgia | Oct 8, 1986 | 256 Ga. 345, 2 U.C.C. Rep. Serv. 2d (West) 750
...The bankruptcy court ruled that FmHA could not recover any deficiency on Daniel's notes and voided the Kennedys' second security deed because FmHA did not give notice to Daniel and the Kennedys of the sale of Daniel's personalty as required by OCGA §
11-9-504 (3). The district court affirmed the bankruptcy court's rulings. "FmHA appealed, contending that Daniel and the Kennedys were not entitled to notice for three reasons: OCGA §
11-9-504 (3) does not apply to real estate liens, Daniel and the Kennedys had waived notice and, in any case, federal law preempts Georgia notice requirements." After determining that federal law does not preempt Georgia notice requirements and that the Kennedys did not waive their right to notice under OCGA §
11-9-504 (3), the court addressed the applicability of OCGA §
11-9-504 (3) to this case, as follows: "The primary focus of FmHA's argument is that Georgia real property law, not OCGA §
11-9-504 (3), should control this case because it is not seeking a personal judgment against the Kennedys but is instead proceeding under the deed to secure debt. The Georgia Supreme Court recently held that section
11-9-504 (3) draws no distinction between a deficiency judgment and recovery against other collateral: `The Georgia rule concerning the recovery of a deficiency after a foreclosure sale of collateral is that, if the creditor does not comply with the requirements of OCGA §
11-9-504 (3), he loses his right to recover a deficiency, not merely his right to recover a personal judgment against the debtor....
...In Reeves, however, the creditor sought to proceed against a guarantor's personal property collateral after a commercially unreasonable disposition of the principal debtor's collateral. Id. at 592-93. FmHA argues a different result is required here because the guarantor's collateral is real property not governed by OCGA §
11-9-504 (3). The Georgia courts have not addressed this issue." The court then certified the following question to this court: "Whether the bar against collection of any deficiency if a sale of collateral occurs without notice, in violation of OCGA §
11-9-504 (3), prevents a creditor holding a claim secured by both personal property and real property from proceeding against the real estate to collect the balance remaining after a commercially unreasonable sale of the personalty." 1. In Reeves v. Habersham Bank, supra,
254 Ga. 615, 621 (1985), we recognized the reasons that underlie the requirements of OCGA § *347
11-9-504 (3) that a debtor be given reasonable notification of the time and place of the sale of collateral....
...OCGA §
11-9-501 (1) provides that: "When a debtor is in default under a security agreement, a secured party has the rights and remedies provided in this part and except as limited by subsection (3) of this Code section those provided in the security agreement." Subsection (3) (b) incorporates the restrictions of OCGA §
11-9-504 (3) relating to the disposition of collateral....
...apply" is itself applicable only where the creditor proceeds "as to both the real and the personal property in accordance with his rights and remedies in respect of the real property . . . ." That, of course, is not the case here. Turning to OCGA §
11-9-504 (3), we discern no indication on the face of that subsection that it does not apply on the facts of this case. As we held in Reeves v. Habersham Bank, supra,
254 Ga. at 618, where the creditor fails to comply with OCGA §
11-9-504 (3), he loses the right to recover a deficiency. We conclude that where a sale of collateral occurs without notice, in violation of OCGA §
11-9-504 (3), the bar against collection of a deficiency upon the debt secured by *348 such collateral prevents a creditor holding a claim against a guarantor secured by real property from proceeding against the real estate to collect the balance remaining after a commercially unreasonable sale of the personalty....
