In re Downing - 286 B.R. 900 (Bankr. W.D. Mo. 2002)

Rule:

A notice that fails to inform the debtor that the intended method of disposition is a private sale, that the debtor has a right to an accounting, and that debtor will be liable for any deficiency following the sale is not sufficient to preserve the creditor's right to a deficiency claim under Missouri law.

Facts:

On September 25, 2000, Mr. Downing purchased a 1999 BMW 528i from BMW, and granted BMW a lien on the car. On June 11, 2001, the Downings filed a Chapter 13 bankruptcy petition. Debtors' proposed a plan for the surrender of the 1999 BMW and for the payment of 100 percent of the allowed claims. On March 27, 2002, after this Court granted BMW relief from the automatic stay, Mr. Downing surrendered the vehicle to BMW. On April 4, 2002, BMW notified Mr. Downing that it intended to sell the car, as allowed under state law, no sooner than 10 days after the date of the notice. On August 1, 2002, BMW sold the car at a commercial auction in Milwaukee, Wisconsin. After the sale, BMW filed an unsecured deficiency claim in this case in the amount of $ 18,517.24. Mr. Downing objected to the claim, on the grounds that BMW did not provide him with proper notice of the sale as required by Missouri's version of Revised Article 9 of the Uniform Commercial Code (the UCC).

Issue:

Is a notice that fails to inform the debtor that the intended method of disposition is a private sale, that the debtor has a right to an accounting, and that debtor will be liable for any deficiency following the sale sufficient to preserve the creditor's right to a deficiency claim?

Answer:

No

Conclusion:

The court held that since the car was a consumer good under Mo. Rev. Stat. § 400.9-102(23), the sufficiency of the notice was evaluated under both Mo. Ann. Stat. §§ 400.9-613, 400.9-614 (Supp. 2002). The creditor was required to inform the debtor as to whether it would sell the car at either a private sale or public sale. The creditor's notice did not inform the debtor of the type of sale contemplated, or that he would be responsible for any deficiency. It also failed to inform the debtor of his right to an accounting of the exact amount of his indebtedness, or what the creditor claimed the indebtedness was at the time of the sale. The notice did not strictly comply with the requirements of Mo. Ann. Stat. § 400.9-613 (Supp. 2002), as made applicable to consumer-goods transactions by Mo. Ann. Stat. § 400.9-614 (Supp. 2002). The creditor also argued that since the plan provided that the debtor intended to surrender the vehicle, Missouri law did not require it to advise him of his right to redeem the car. But, the court found that the right to a deficiency existed only if the creditor strictly complied with the statutory requirements, regardless of whether the debtor was harmed by the failed notice.