Auto Credit of Nashville v. Wimmer

231 S.W.3d 896

AUTO CREDIT OF NASHVILLE v. Melissa WIMMER.

No. M2005-00978-SC-R11-CV.

Supreme Court of Tennessee, at Nashville.

June 6, 2007 Session.

August 16, 2007.

James D.R. Roberts and Janet L. Layman, Nashville, Tennessee, for the appellant, Auto Credit of Nashville.

Steven J. Christopher and James B. Hawkins, Gallatin, Tennessee, for the appellee, Melissa Wimmer.

Daniel W. Small (oral argue) and Timothy L. Amos, Nashville, Tennessee, for the Amicus Curiae, Tennessee Bankers Association.

Steven J. Eisen, Nashville, Tennessee, and Bradley E. Trammell and Adams S. Baldridge, Memphis, Tennessee, for the Amicus Curiae, Tennessee Consumer Finance Association.

David J. Tarpley (oral argue) and Sharmila L. Murthy, Nashville, Tennessee, and Webb A. Brewer, Frank S. Cantrell, and Craig P. Barnes, Memphis, Tennessee, for the Amicus Curiae, Tennessee Alliance for Legal Services.

OPINION

WILLIAM M. BARKER, C.J., delivered the opinion of the court, in which JANICE M. HOLDER, CORNELIA A. CLARK, and GARY R. WADE, JJ., joined.

This case arises out of the financing and subsequent repossession of an automobile. After retaking possession of the collateral, the creditor sent written notification to the debtor that the automobile would be sold but that she could redeem the vehicle by paying the full amount owed. Although the debtor never received this notification, the creditor was unaware of that fact until after the sale of the vehicle. Because the sale price did not cover the amount owed on the vehicle, the creditor sought a deficiency judgment against the debtor. The debtor filed a counterclaim for statutory damages under the Uniform Commercial Code (UCC), claiming that she had not received proper notification. The trial court awarded a deficiency judgment against the debtor and dismissed the debtor's counterclaim. The Court of Appeals, only addressing the dismissal of the counterclaim, reversed the trial court and held that the creditor failed to furnish reasonable notification of the sale to the debtor, in that the creditor failed to take reasonable steps to determine whether the notification had been delivered to the debtor before proceeding with the sale. We reverse the Court of Appeals and hold that the UCC's reasonable notification requirement does not require the creditor to verify receipt and that the creditor's actions in this case were sufficient to comply with the statute. Therefore, the counterclaim for statutory damages is dismissed.

Factual Background

On April 28, 2000, Melissa Wimmer ("Ms. Wimmer") purchased a 1996 Plymouth Neon from Downtown Motors in Gallatin, Tennessee. Financing for the purchase was furnished by the plaintiff, Auto Credit of Nashville ("Auto Credit"). The finance agreement between Ms. Wimmer and Auto Credit provided that Ms. Wimmer would borrow $7,199.88 at an interest rate of twenty-nine percent, to be paid in weekly payments of $69.22. Auto Credit took a security interest in the car pursuant to Article 9 of the Uniform Commercial Code ("UCC").

Over the next year and a half, Ms. Wimmer made the weekly payments to Auto Credit in accordance with the agreement. On January 15, 2002, a representative from Auto Credit telephoned Ms. Wimmer and told her that she was four weeks behind on her payments and that if she did not catch up her payments, Auto Credit would repossess the car. Ms. Wimmer disagreed that she was four weeks behind and told Auto Credit that she could not make four payments at that time. She agreed, however, to surrender the car to Auto Credit. During this telephone conversation, Ms. Wimmer was told that she would receive a letter approximately ten to fifteen days after the repossession regarding her right to redeem the vehicle.

The car was repossessed from Ms. Wimmer's home on January 17, 2002. On January 18, 2002, Auto Credit sent a letter, by certified mail, return receipt requested, to Ms. Wimmer's home address. The heading of that letter read: "NOTICE OF OUR PLAN TO SELL PROPERTY." The letter stated that Auto Credit intended to sell the car "sometime after" January 28, 2002, unless Ms. Wimmer paid the remaining debt in full. It also explained that if the sale produced less money than she owed, Auto Credit would hold her liable for the difference and could seek a deficiency judgment against her. The letter also explained how she could get the car back and how to get more information on the sale or the amount owed.

On February 12, Auto Credit's letter of notification was returned by the post office, marked "unclaimed." Notations on the returned envelope indicate that attempts were made to deliver the letter to Ms. Wimmer on January 24, February 7, and February 9, 2002. Ms. Wimmer testified that she did not receive these notifications. Ms. Wimmer admitted that she never contacted Auto Credit after the repossession, testifying that Auto Credit had instructed her not to contact them unless she received a letter from them or could pay the full amount to purchase the vehicle.

Unaware that Ms. Wimmer had not received the notification, Auto Credit sold the car at public auction on February 7, 2002, for $1,800. The proceeds from the sale were insufficient to meet the amount still owed on the car.

On February 28, 2002, Auto Credit filed suit against Ms. Wimmer in the General Sessions Court to recover the deficiency balance of $3,097.67, plus interest, fees, and costs. After a hearing, a judgment was entered on August 15, 2002, in favor of Ms. Wimmer. Auto Credit then filed an appeal and complaint in the Circuit Court of Sumner County.¹ Ms. Wimmer filed an answer and counterclaim for statutory damages under Tennessee Code Annotated section 47-9-625(c)(2) (2001) on the theory that Auto Credit failed to comply with the mandatory notification requirements of the statute.

Following a bench trial, the circuit court granted a deficiency judgment against Ms. Wimmer, finding that it was "reasonable under Tennessee law for Auto Credit of Nashville to send notification to Defendant by Certified Mail, Return Receipt Requested, and having received no response from Defendant, to sell the automobile after a period of twenty (20) days." Ms. Wimmer filed a motion for new trial, which the trial court denied.

On appeal, the Court of Appeals was not asked to address the deficiency judgment but only to review the trial court's dismissal of Ms. Wimmer's counterclaim for statutory damages. The Court of Appeals reversed the trial court's denial of statutory damages and calculated the amount due to Ms. Wimmer as $4,318.42. These damages were offset by the deficiency judgment and costs previously awarded to Auto Credit.

Auto Credit filed a timely application for permission to appeal in this Court, which we granted.

Analysis

Secured transactions, such as the auto loan at issue in this case, are governed by Article 9 of the Uniform Commercial Code, codified at Tennessee Code Annotated sections 47-9-101 through 47-9-709. A revised Article 9 was adopted by Tennessee effective July 1, 2001. 2000 Tenn. Pub. Acts 846 § 1. This revised Article 9 of the UCC has now been adopted by all fifty states, the District of Columbia, and the Virgin Islands. See 68A Am. Jur.2d Secured Transactions § 1 (2006).

Article 9 provides a comprehensive statutory framework governing the secured transaction process, from how a creditor perfects its security interest to how it forecloses on that interest. After default, a secured party may take possession of the collateral and may sell or otherwise dispose of it. Tenn.Code Ann. § 47-9-610(a) (2001). In so doing, "[e]very aspect of [the] disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable." Tenn.Code Ann. § 47-9-610(b) (2001).

A debtor may recover damages against a creditor who fails to comply with the provisions of Article 9 governing repossession and disposition of collateral. Tenn. Code Ann. § 47-9-625(c)(2) (2001). Ms. Wimmer's counterclaim against Auto Credit alleged that Auto Credit failed to comply with the notification requirements set forth in Tennessee Code Annotated section 47-9-611(b) (Supp.2006). Specifically, she argued that Auto Credit should have taken further actions to ensure that she received the notification. The Court of Appeals acknowledged that Auto Credit complied with the specific notification requirements of section 47-9-611(b) but held that this was only an initial step and that Auto Credit "should have taken reasonable steps to determine whether the notification had been delivered to Ms. Wimmer before it proceeded with the sale."

The official comment to section 47-9-611(b) provides that "[t]he notification must be reasonable as to the manner in which it is sent, its timeliness . . . and its content." Tenn.Code Ann. § 47-9-611, cmt. 2 (2001). The issue in this case is what is required in the "sending" of a notification under Tennessee Code Annotated section 47-9-611(b) in order for that sending to be reasonable.

Issues of statutory construction are questions of law that are to be reviewed de novo without any presumption of correctness. Killingsworth v. Ted Russell Ford, Inc., 205 S.W.3d 406, 408 (Tenn. 2006); Freeman v. Marco Transp. Co., 27 S.W.3d 909, 911 (Tenn.2000). Our duty in construing statutes is to ascertain and give effect to the intention and purpose of the legislature. See Lipscomb v. Doe, 32 S.W.3d 840, 844 (Tenn.2000); Freeman, 27 S.W.3d at 911.

"`Legislative intent is to be ascertained whenever possible from the natural and ordinary meaning of the language used, without forced or subtle construction that would limit or extend the meaning of the language.'" Lipscomb, 32 S.W.3d at 844 (quoting Hawks v. City of Westmoreland, 960 S.W.2d 10, 16 (Tenn.1997)). When the statutory language is clear and unambiguous, we must apply its plain meaning in its normal and accepted use, and are not at liberty to depart from the statute's words. Eastman Chem. Co. v....