{ "id": 1872679, "name": "FIRST STATE BANK OF MORRILTON, ARKANSAS v. Edith HALLETT", "name_abbreviation": "First State Bank v. Hallett", "decision_date": "1987-01-20", "docket_number": "86-119", "first_page": "37", "last_page": "43", "citations": [ { "type": "official", "cite": "291 Ark. 37" }, { "type": "parallel", "cite": "722 S.W.2d 555" } ], "court": { "name_abbreviation": "Ark.", "id": 8808, "name": "Arkansas Supreme Court" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "290 Ark. 399", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1873713 ], "weight": 2, "year": 1986, "opinion_index": 0, "case_paths": [ "/ark/290/0399-01" ] }, { "cite": "59 A.L.R.3d 401", "category": "reporters:specialty", "reporter": "A.L.R. 3d", "year": 1986, "pin_cites": [ { "page": "\u00a7 3" } ], "opinion_index": 0 }, { "cite": "323 N.Y.S. 2d 13", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1971, "opinion_index": 0 }, { "cite": "66 Misc. 2d 1089", "category": "reporters:state", "reporter": "Misc. 2d", "case_ids": [ 1230985 ], "year": 1971, "opinion_index": 0, "case_paths": [ "/misc2d/66/1089-01" ] }, { "cite": "104 Cal. Rptr. 315", "category": "reporters:state", "reporter": "Cal. Rptr.", "year": 1972, "opinion_index": 0 }, { "cite": "27 Cal. App. 3d 999", "category": "reporters:state", "reporter": "Cal. App. 3d", "case_ids": [ 4407105 ], "year": 1972, "opinion_index": 0, "case_paths": [ "/cal-app-3d/27/0999-01" ] }, { "cite": "496 P.2d 966", "category": "reporters:state_regional", "reporter": "P.2d", "year": 1972, "opinion_index": 0 }, { "cite": "6 Wash. App. 866", "category": "reporters:state", "reporter": "Wash. App.", "case_ids": [ 1864264 ], "year": 1972, "opinion_index": 0, "case_paths": [ "/wash-app/6/0866-01" ] }, { "cite": "245 Ark. 315", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1606937 ], "weight": 2, "year": 1968, "opinion_index": 0, "case_paths": [ "/ark/245/0315-01" ] }, { "cite": "248 Ark. 236", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1597534 ], "weight": 2, "year": 1970, "opinion_index": 0, "case_paths": [ "/ark/248/0236-01" ] }, { "cite": "248 Ark. 665", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1597745 ], "weight": 2, "year": 1970, "opinion_index": 0, "case_paths": [ "/ark/248/0665-01" ] }, { "cite": "240 Ark. 143", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1727450 ], "weight": 3, "year": 1966, "opinion_index": 0, "case_paths": [ "/ark/240/0143-01" ] }, { "cite": "279 Ark. 51", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1746980 ], "weight": 2, "year": 1983, "opinion_index": 0, "case_paths": [ "/ark/279/0051-01" ] }, { "cite": "399 N.Y.S.2d 511", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1977, "pin_cites": [ { "parenthetical": "citing Universal C.I.T. Credit Co. v. Rone, 248 Ark. 665, 453 S.W.2d 37 (1970)" } ], "opinion_index": 1 }, { "cite": "59 A.D.2d 242", "category": "reporters:state", "reporter": "A.D.2d", "case_ids": [ 3065539 ], "year": 1977, "pin_cites": [ { "parenthetical": "citing Universal C.I.T. Credit Co. v. Rone, 248 Ark. 665, 453 S.W.2d 37 (1970)" } ], "opinion_index": 1, "case_paths": [ "/ad2d/59/0242-01" ] }, { "cite": "371 N.Y.S.2d 531", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1975, "opinion_index": 1 }, { "cite": "82 Misc.2d 897", "category": "reporters:state", "reporter": "Misc. 2d", "case_ids": [ 1290953 ], "year": 1975, "opinion_index": 1, "case_paths": [ "/misc2d/82/0897-01" ] }, { "cite": "323 N.Y.S.2d 13", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1971, "opinion_index": 1 }, { "cite": "66 Misc. 2d 1089", "category": "reporters:state", "reporter": "Misc. 2d", "case_ids": [ 1230985 ], "year": 1971, "opinion_index": 1, "case_paths": [ "/misc2d/66/1089-01" ] }, { "cite": "104 Cal. Rptr. 315", "category": "reporters:state", "reporter": "Cal. Rptr.", "year": 1972, "opinion_index": 1 }, { "cite": "27 Cal. App. 3d 999", "category": "reporters:state", "reporter": "Cal. App. 3d", "case_ids": [ 4407105 ], "year": 1972, "opinion_index": 1, "case_paths": [ "/cal-app-3d/27/0999-01" ] }, { "cite": "248 Ark. 665", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1597745 ], "weight": 2, "year": 1970, "opinion_index": 1, "case_paths": [ "/ark/248/0665-01" ] }, { "cite": "240 Ark. 143", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1727450 ], "weight": 3, "year": 1966, "pin_cites": [ { "page": "150" } ], "opinion_index": 1, "case_paths": [ "/ark/240/0143-01" ] } ], "analysis": { "cardinality": 626, "char_count": 10581, "ocr_confidence": 0.934, "pagerank": { "raw": 6.796303267348937e-07, "percentile": 0.9637924836544525 }, "sha256": "48efc819b4a8bdc5345892ed9a15d928747e227feead92bf47d1046ab2afc583", "simhash": "1:e61efc87356293e4", "word_count": 1782 }, "last_updated": "2023-07-14T18:26:32.108459+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Hays, Newbern, and Glaze, JJ., dissent.", "Hays and Newbern, JJ., join in this dissent." ], "parties": [ "FIRST STATE BANK OF MORRILTON, ARKANSAS v. Edith HALLETT" ], "opinions": [ { "text": "Jack Holt, Jr., Chief Justice.\nThe appellant, First State Bank (FSB), concedes it failed to give the appellee, Edith Hallett, proper notice before it sold her collateral which it repossessed when she defaulted on a promissory note. FSB nevertheless sought a deficiency judgment against Hallett for the balance owed on the note. The trial court granted Hallett\u2019s motion for summary judgment, dismissing the FSB claim. The issue on appeal is whether the failure of FSB as a secured party, to give proper notice to debtor Hallett of the time and place of the sale of repossessed collateral, as required by Ark. Stat. Ann. \u00a7 85-9-504(3) (Supp. 1985), absolutely bars FSB\u2019s right to a deficiency judgment. We hold that it does and affirm the trial court. Jurisdiction in this court is pursuant to Sup. Ct. R. 29(1 )(c).\nHallett gave FSB a promissory note in the amount of $ 11,342.90, secured in part by a security interest in a 1983 pickup truck. Hallett defaulted. FSB repossessed the truck and sold it without written notice to Hallett of the sale date. A deficiency of $4,057.40 remained on the note. The trial court granted Hallett\u2019s motion for summary judgment because FSB had not complied with \u00a7 85-9-504(3)\u2019s guidelines for the disposition of repossessed collateral. That section states in pertinent part:\nUnless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, 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, if he has not signed after default a statement renouncing or modifying his right to notification of sale.\nThe trial court\u2019s ruling complies with our most recent decision, Rhodes v. Oaklawn Bank, 279 Ark. 51, 648 S.W.2d 470 (1983). In Rhodes, we reversed a deficiency judgment in favor of the secured party, and held:\nWhen a creditor repossesses chattels and sells them without sending the debtor notice as to the time and date of sale, or as to a date after which the collateral will be sold, he is not entitled to a deficiency judgment, unless the debtor has specifically waived his rights to such notice.\nFSB does not attempt to distinguish Rhodes, but rather argues that it should be overruled in favor of an earlier line of cases which took a different approach to this issue. Those cases did not bar a deficiency judgment altogether, but instead \u201cindulged] the presumption in the first instance that the collateral was worth at least the amount of the debt, thereby shifting to the creditor the burden of proving the amount that should reasonably have been obtained through a sale conducted according to law.\u201d Norton v. Nat\u2019l Bank of Commerce, 240 Ark. 143, 398 S.W.2d 538 (1966). See also, Universal C.I.T. Credit Co. v. Rone, 248 Ark. 665, 453 S.W.2d 37 (1970); Carter v. Ryburn Ford Sales, Inc., 248 Ark. 236, 451 S.W.2d 199 (1970) and Barker v. Horn, 245 Ark. 315, 432 S.W.2d 21 (1968). We think Rhodes represents the right approach and, although it did not expressly overrule these cases, its effect was to change our law.\nCreditors are given the right to a deficiency judgment by Ark. Stat. Ann..\u00a7 85-9-502(2) (Supp. 1985): \u201cIf the security agreement secures an indebtedness, the secured party must account to the debtor for any surplus, and unless otherwise agreed, the debtor is liable for any deficiency.\u201d As stated, \u00a7 85-9-504(3) requires the creditor to send reasonable notification to the debtor before he disposes of this type of collateral. If the creditor does not dispose of the collateral in accordance with the code provisions, Ark. Stat. Ann. \u00a7 85-9-507 (Supp. 1985) gives the debtor \u201ca right to recover from the secured party any loss caused by a failure to comply with the provisions of this Part [\u00a7\u00a7 85-9-501 \u2014 507].\u201d\nThere is a split of authority nationwide on the correlation of these provisions of the code. A group of cases follows the position that \u00a7 85-9-507 gives the debtor a defense to a deficiency judgment when the creditor has failed to give proper notice, and that the deficiency judgment is reduced by the damages the debtor can prove. See Grant County Tractor Co. v. Nuss, 6 Wash. App. 866, 496 P.2d 966 (1972). Our previous cases, as represented by Norton, supra, followed this approach with the presumption in favor of the debtor that the collateral and the debt were equal and the burden placed on the creditor to prove a deficiency. The apparent majority position, however, with which we concur, is that \u00a7 85-9-507 is not applicable to the creditor\u2019s action to recover a deficiency judgment, but is a separate affirmative action by the debtor to recover damages. The creditor\u2019s right to a deficiency judgment is not merely subject to whether the debtor has a right to damages under \u00a7 85-9-507, but instead depends on whether he has complied with the statutory requirements concerning disposition and notice.\nThis view was explained in Atlas Thrift Co. v. Horan, 27 Cal. App. 3d 999, 104 Cal. Rptr. 315 (1972), quoting Leasco Data Processing Equip. Corp. v. Atlas Shirt Co., 66 Misc. 2d 1089, 323 N.Y.S. 2d 13 (1971):\n\u201cThe plaintiff\u2019s contention that a secured creditor\u2019s right to a deficiency judgment under the described circumstances is limited only by the remedies set forth in 9-507 seems to me a tenuous one indeed, apart from the fact that no such effect was ever accorded the corresponding section in the Uniform Conditional Sales Act. . . .\n\u201cPreliminarily, it may be noted that Section 9-507 makes no direct allusion to the circumstances under which a right to a deficiency judgment may arise.\n\u201cMore significant is the special nature of the language used: \u2018the debtor or any person entitled to notification. . . has a right to recover from the secured party any loss caused by a failure to comply with the provisions of this Part.\u2019 If this were intended to authorize a defense to action for a deficiency judgment, it is hard to envisage language less apt to that purpose. The words used plainly contemplate an affirmative action to recover for a loss that has already been sustained \u2014 not a defense to an action for a deficiency. The distinction between an affirmative action and a defense is a familiar one, phrases that articulate the different concepts are familiar in the law, and it is unlikely that the experienced authors of the [Uniform Commercial Code] intended by the above language to provide a limited defense to an action for a deficiency judgment based on a sale that had violated the simple and flexible statutory procedure.\n\u201cIt seems far more probable that this latter section has nothing whatever to do with defenses to an action for a deficiency, since it was never contemplated that a secured party could recover such a judgment after violating the statutory command as to notice.\u201d\nThe Horan court concluded: \u201cThe rule and requirement are simple. If the secured creditor wishes a deficiency judgment he must obey the law. If he does not obey the law, he may not have his deficiency judgment.\u201d Accord, see cases listed in \u201cDisposition of Collateral \u2014 Required Notice,\u201d 59 A.L.R.3d 401, \u00a7 3 (1974 and Supp. 1986).\nWhen the code provisions have delineated the guidelines and procedures governing statutorily created liability, then those requirements must be consistently adhered to when that liability is determined. First State Bank v. Twin City Bank, 290 Ark. 399, 720 S.W.2d 295 (1986). Here, FSB failed to comply with the code\u2019s procedures for disposition of collateral, and is therefore not entitled to a deficiency judgment under the code.\nAffirmed.\nHays, Newbern, and Glaze, JJ., dissent.", "type": "majority", "author": "Jack Holt, Jr., Chief Justice." }, { "text": "Tom Glaze, Justice,\ndissenting. The majority court decision overrules Norton v. National Bank of Commerce, 240 Ark. 143, 398 S.W.2d 538 (1966) and its progeny as those cases have interpreted and applied Arkansas\u2019s Uniform Commercial Code \u00a7\u00a7 85-9-504 and 9-507 during the past twenty years. Because I believe the rule established in Norton to be a fair one and the one adopted in this cause to be punitive, I am obliged to dissent.\nUnlike the court\u2019s holding here, the Norton court rejected the debtor\u2019s contention that the bank\u2019s failure to give him notice of the intended sale completely discharged his obligation. Instead, that court, Justice George Rose Smith writing, held that, because the bank disposed of the debtor\u2019s car without notice, the just solution is:\nto indulge the presumption in the first instance that the collateral was worth at least the amount of the debt, thereby shifting to the creditor the burden of proving the amount that should reasonably have been obtained through a sale conducted according to law.\nId. at 150.\nAs one can readily see, our court in Norton wrestled with the same situation as presented in the instant case, and it derived a most workable and equitable solution which was designed to treat both debtors and creditors fairly. Frankly, I am unaware of any serious problems or criticisms that have arisen in the application of the Norton rule, especially that would demand or warrant this court\u2019s changing the \u201crules-of-the-game\u201d at this late date. The rule this court adopts today is a drastic and punitive one, and no public policy argument has been offered to support it.\nFinally, I note the majority court seems to premise its holding, in part, on the California case of Atlas Thrift Co. v. Horan, 27 Cal. App. 3d 999, 104 Cal. Rptr. 315 (1972) which, in turn, quotes from Leasco Data Processing Equip. Corp. v. Atlas Shirt Co., 66 Misc.2d 1089, 323 N.Y.S.2d 13 (1971). While California may have adopted the same \u201cno notice-no deficiency\u201d rule now embraced by this court, the New York courts have since overruled the Atlas Shirt Co. case, thereby rejecting that punitive rule. The New York courts, I might add, have adopted Arkansas\u2019s rule as set out in Norton. See Leasco Computer v. Sheridan Industries, 82 Misc.2d 897, 371 N.Y.S.2d 531 (1975) and Security Trust Co. of Rochester v. Thomas, 59 A.D.2d 242, 399 N.Y.S.2d 511 (1977) (citing Universal C.I.T. Credit Co. v. Rone, 248 Ark. 665, 453 S.W.2d 37 (1970)).\nI would reverse.\nHays and Newbern, JJ., join in this dissent.", "type": "dissent", "author": "Tom Glaze, Justice," } ], "attorneys": [ "Loh, Massey & Yates, Ltd., by: Howard C. Yates, for appellant.", "Gordon & Gordon, P.A., by: Ben Caruth, for appellee." ], "corrections": "", "head_matter": "FIRST STATE BANK OF MORRILTON, ARKANSAS v. Edith HALLETT\n86-119\n722 S.W.2d 555\nSupreme Court of Arkansas\nOpinion delivered January 20, 1987\n[Rehearing denied February 16, 1987.]\nLoh, Massey & Yates, Ltd., by: Howard C. Yates, for appellant.\nGordon & Gordon, P.A., by: Ben Caruth, for appellee.\nHays and Glaze, J J., dissent." }, "file_name": "0037-01", "first_page_order": 61, "last_page_order": 67 }