Hutzenbiler v. RJC Inv., Inc. - 2019 MT 80, 395 Mont. 250, 439 P.3d 378

Rule:

Except as allowed under other Uniform Commercial Code (UCC) provisions, a party's discharge or release of obligations under a secured transaction for the sale of a mobile home cannot waive or vary the creditor's duty to account for or the debtor's right to receive any surplus proceeds from the resale of the mobile home. Mont. Code Ann. §§ 30-9A-608(1)(d) and 30-9A-615(4)(a) provide that a secured party shall account to and pay a debtor for any surplus from proceeds of the sale of collateral. Mont. Code Ann. § 30-9A-602(5) expressly forbids a debtor from waiving protections the UCC provides for payment of surplus proceeds of collateral.

Facts:

Charlene Hutzenbiler entered into an Installment Sale Contract and Security Agreement with Cherry Creek Development, Inc. to purchase a mobile home. The Contract provided that a late fee would be charged for any payment that was five days past the due date. Cherry Creek assigned the Contract to its parent company, RJC. Hutzenbiler acknowledged that she made some of her payments late but disputes that she "missed" payments or was in default. Thereafter, Hutzenbiler signed a Full Release of Contract, under which she relinquished all rights to the mobile home or refund of all money applied to the home. RJC resold the mobile home without notice to Hutzenbiler. Hutzenbiler's counsel requested an accounting of the sale from RJC, but RJC failed to provide one. RJC did not refund any surplus to Hutzenbiler and claimed none was owed. Hutzenbiler sued RJC for failing to provide for an accounting of the results of the resale of the mobile home pursuant to § 30-9A-616(2)(a)(ii), MCA; for failing to pay her the surplus proceeds of the mobile home's resale pursuant to § 30-9A-615(4)(a), MCA; and alleging that the trial court should apply all her payments to the principal, providing for a larger surplus, because RJC failed to comply with the Retail Installment Sales Act (RISA), Title 31, chapter 1, part 2, MCA. RJC moved for summary judgment, asserting that the Release terminated the underlying Contract and any further application of Uniform Commercial Code ("U.C.C.") Article 9. RJC argued that even if Article 9 still applied, the parties' execution of the Release constituted an acceptance of the mobile home in full satisfaction of Hutzenbiler's obligations. The district court granted RJC’s motion for summary judgment, holding that Hutzenbiler did not state a claim upon which relief could be granted under any reading of Montana law.

Issue:

1. Did the Release between Hutzenbiler and RJC terminate application of the Uniform Commercial Code's requirement for an accounting and surplus after RJC sold the collateral?
2. Did the District Court err in determining that the Release constituted an acceptance of the collateral in full satisfaction of Hutzenbiler's secured obligation?

Answer:

1) No. 2) Yes.

Conclusion:

The judgment of the district court was reversed. The court held that RJC was not entitled to summary judgment on Hutzenbiler’s claim to an accounting and recovery of surplus proceeds on the resale of her mobile home after she returned it RJC because the release between the parties did not extinguish the protections afforded under Mont. Code Ann. §§ 30-9A-608(1)(d) and 30-9A-615(4)(a), and the question remained as to whether Hutzenbiler had been in default and thus triggered UCC protections. The court further held that the district court erred in finding that the release constituted full satisfaction of the parties' respective obligations under Mont. Code Ann. § 30-9A-620(1) where the release did not state that the collateral was accepted in satisfaction of the obligation, that Hutzenbiler was released from all of her obligations, or that RJC relinquished its right to pursue a deficiency judgment.