Issue: When is a lender entitled to a deficiency judgment after failing to comply with the commercial code’s collection requirements?
Facts: Borrower defaulted on loan. Bank accelerated the loan and sued loan’s guarantor. Bank sold collateral securing the loan, then sought judgment for remaining deficiency. Bank obtained a judgment, which was reversed on appeal for failure to provide sufficient notice to guarantors prior to selling collateral. TCA 47-9-626. The appellate court held that a secured party that has not complied with the commercial code’s collection requirements can only recover a deficiency if it proves that compliance with the relevant provisions would have yielded a smaller amount than the secured obligation. On remand, the trial court entered a new deficiency judgment, from which both sides appealed.
Appellate Decision: The intermediate court reversed the trial court’s determination that the Bank was entitled to a deficiency because Bank did not present any evidence that it would have received less than the total amounts due to it had it provided proper notice. The court also held the guarantor was not entitled to any surplus.
Review Granted: October 21, 2016.
Prediction: Ben thinks the supreme court is likely to affirm the intermediate court’s ruling for the reasons stated therein.