Editor's notes.

- In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.

Retention of collateral is permissive remedy.

- In stating that creditor may propose to keep goods in satisfaction of debt so long as the creditor gives required notice and no one objects, the former provisions merely set forth a permissive, not a mandatory, remedy. McCullough v. Mobiland, Inc., 139 Ga. App. 260, 228 S.E.2d 146 (1976); Ricker v. First Fed., 215 Ga. App. 793, 452 S.E.2d 583 (1994) (decided under former Code Section11-9-505).

Applicability of former paragraph (1).

- Former paragraph (1) applied only where there is a security interest in consumer goods. Marshall v. Fulton Nat'l Bank, 152 Ga. App. 121, 262 S.E.2d 448 (1979), rev'd on other grounds, 245 Ga. 745, 267 S.E.2d 225 (1980) (decided under former Code Section11-9-505).

Notice requirement of former paragraph (2).

- The written notice required by former paragraph (2) must clearly state the creditor's proposal to retain the collateral in satisfaction of the debt and must notify the debtor that the debtor has 21 days in which to raise an objection to such a proposal. Chen v. Profit Sharing Plan, 216 Ga. App. 878, 456 S.E.2d 237 (1995) (decided under former Code Section11-9-505).

The purpose of requiring written notice of a creditor's proposal to retain collateral in lieu of the debt and of prohibiting waiver of such notice before default is to provide the debtor with options for reducing loss when collateral has a value greater than the debt via redemption pursuant to former § 11-9-506 or liquidation in a commercially reasonable manner as required by former § 11-9-504. Chen v. Profit Sharing Plan, 216 Ga. App. 878, 456 S.E.2d 237 (1995) (decided under former Code Section11-9-505).

Even though a debtor gave possession of a note and security deed and executed a transfer and assignment of the instruments to the creditor as collateral for a loan, the instruments never vested in the creditor and the transaction was not the creation or transfer of an interest in real estate under former § 11-9-104(h); thus, where the creditor did not comply with the notice requirement of former paragraph (2), the debtor was entitled to recover either damages for conversion of the collateral after default or damages prescribed by former § 11-9-507. Chen v. Profit Sharing Plan, 216 Ga. App. 878, 456 S.E.2d 237 (1995) (decided under former Code Section11-9-505).

Retention of collateral.

- Allowing a debtor to reject a secured creditor's proposal to retain collateral in lieu of debt (after default) not only protects the debtor's right to mitigate loss, it protects the creditor from claims of the debtor that the creditor should have disposed of the collateral. Chen v. Profit Sharing Plan, 216 Ga. App. 878, 456 S.E.2d 237 (1995) (decided under former Code Section11-9-505).

Election barring deficiency claim.

- Creditor's written notice of repossession, of intent not to sell at a commercially reasonable sale, and of intent to keep the property for creditor's own use came within the ambit of former paragraph (2) and constituted an election barring the creditor's deficiency claim. Oraka v. Jaraysi, 226 Ga. App. 310, 486 S.E.2d 69 (1997) (decided under former Code Section11-9-505).

Retention of collateral after default does not preclude suit for money judgment. McCullough v. Mobiland, Inc., 139 Ga. App. 260, 228 S.E.2d 146 (1976); Ricker v. First Fed., 215 Ga. App. 793, 452 S.E.2d 583 (1994) (decided under former Code Section11-9-505).

Rejection in writing by debtor.

- A debtor's defensive pleadings alleging that the creditor's petition failed to state a claim, the enumeration of various defenses to repossession, and a denial of all averments in the petition except jurisdiction, did not meet the requirement of this former section for a written objection to the creditor's notice of intention to retain the collateral in satisfaction of the obligation. Edward McGill, Inc. v. Wise, 181 Ga. App. 486, 352 S.E.2d 809 (1987).

Defaulting debtor cannot claim loss of profits due to failure to give notice.

- In an action by a debtor for damages caused by repossession of collateral after an alleged breach of an agreement between the debtor and the secured party, where the debtor is in default the debtor cannot allege that the failure of the secured party to give notice as to the retention and sale of collateral caused the debtor to be damaged by loss of profits. Such violations only raise the presumption that the value of the collateral equals the amount due on the debt. Barney v. Morris, 168 Ga. App. 426, 309 S.E.2d 420 (1983).

Duty of creditor with respect to seized collateral.

- Once a creditor has possession of the collateral, the creditor must act in a commercially reasonable manner and is liable for any damage sustained by the debtor as a result of breach of that duty. Thus, personalty seized by the creditor must be applied toward liquidation of the debt, and the debtor is entitled to any damage sustained as a result of any failure by the creditor to act in a commercially reasonable manner with respect to the seized personalty. Ricker v. First Fed., 215 Ga. App. 793, 452 S.E.2d 583 (1994) (decided under former Code Section11-9-505).

Question remained whether secured creditor acted in manner amounting to retention of collateral in satisfaction of the contract, such action constituting a rescission of the contract, there being evidence that the creditor offered to surrender the collateral to the debtor upon payment of the indebtedness, continually maintained that the transaction was valid, and otherwise acted in a manner consistent with the contract. ITT Terryphone Corp. v. Modems Plus, Inc., 171 Ga. App. 710, 320 S.E.2d 784 (1984) (decided under former Code Section11-9-505).

Exercise of rights under O.C.G.A.

§ 11-9-620 as affecting successor liability doctrine. - Corporate debtor that declared Chapter 11 bankruptcy was not liable to an LLC for unpaid rent that was owed by a lock and key company, even though the same individual owned both companies and the debtor had accepted collateral the lock and key company owned in full satisfaction of debt the company owed. The debtor's decision to accept collateral the lock and key company owned in full satisfaction of the company's debt was permitted under O.C.G.A. § 11-9-620 and was not a fraudulent attempt to avoid liabilities the lock and key company owed, the debtor was not a "mere continuation" of the lock and key company, and a contrary conclusion would have elevated form over substance and abridged the equitable principles that were codified in O.C.G.A. § 23-1-3. Acme Sec., Inc. v. CLN Props., LLC (In re Acme Sec., Inc.), 484 Bankr. 475 (Bankr. N.D. Ga. 2012).

Am. Jur. 2d.

- 68A Am. Jur. 2d, Secured Transactions, §§ 704-729, 758.

C.J.S.

- 72 C.J.S., Pledges, §§ 49, 50.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 9-620.

ALR.

- Construction and operation of UCC § 9-505(2) authorizing secured party in possession of collateral to retain it in satisfaction of obligation, 55 A.L.R.3d 651.

Uniform Commercial Code: failure of secured creditor to give required notice of disposition of collateral as bar to deficiency judgment, 59 A.L.R.3d 401.