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1. Fact
In October of 1975, Brace, Inc, entered into a 62-month lease contract for computer equipment with Chemlease. Under the term of the lease contract, Brace, Inc, had an option to buy equipment for 1$ at the end of the lease. Contemporaneously with the execution of the lease, Charles and Clayton Brace became personal guarantors of lessee’s payment obligation. In June of 1977, Brace, Inc. went out of business, but a business called Brace company assumed and paid the monthly computer lease obligation. The Brace Company in turn went out of business in the fall of 1977. The lease payments were made until October of 1978. When Brace, Inc. was in default on the lease, Chemlease had an agreement to accept the equipment with Chicago Cash Register Company. Chicago Cash Register Company was requested to pick up the equipment on February 2, 1979. On or about February 1, 1979, Chemlease sent all of the appellants a final demand for payment and a notice of private sale. Notices sent to Brace, Inc. and Clayton Brace were returned without forwarding address. But Charles Brace received and signed a receipt for both documents on February 7and 8, 1979 respectively. After the sale contract between Chemlease and Chicago Cash Register, Chemlease commenced an action against Brace, Inc and Clayton and Charles Brace as guarantors seeking a deficiency judgement. the trial court issued an order for directed verdict in favor of Chemlease for $10,406.95. the stipulated amount of deficiency. Appellants appeal from the order and the judgement.
2. Issue
① whether the notification was commercially reasonable
② whether the method of sale (private sale) is reasonable
③ the remedy which those entitled to notification have since Chemlease's notification was unreasonable
3. Rule
① UCC Section 9-504(3) “notification requirement”
Unless collateral 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.
② UCC Section 2-401 “actual sale”
(2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite reservation of a security interest and even though a document of title is to be delivered at a different time or place; (shipment contract)
(3) Unless otherwise explicitly agreed where delivery is to be made without moving the goods,
(a) if the seller is to deliver a document of title, title passes at the time when and the place where he delivers such documents;
③ Article 9 of the Uniform Commercial Code adopts a definition of "sale" as found in U.C.C. § 2-106(1). U.C.C. § 9-105(3). Section 2-106(1) provides that a sale "consists in the passing of title from the seller to the buyer for a price."
4. Application
1) The appellants contend that they were not provided commercially reasonable notice of the private sale. Chemlease argument is that by the terms of the guaranty, the guarantors waived their rights to the collateral and therefore to notice of sale. However, the supreme court found that the interest Charles and Clayton Brace have in the best sale price is their interest in their potential liability on the guaranty. Chemlease’s another argument is that the appellants’ contention should not be accepted because of their activities. Brace, Inc. assigned the lease of the equipment to Brace Company without consent of Chemlease which violated the lease provisions, and the equipment was abandoned on the property when Brace company went out of business. The court found that a violation of provisions in the lease contract would not waive Brace, Inc’s interest in the property, but just would entitle Chemlease to any damages incurred by the violation.
2) Appellants argue that the notification provided by Chemlease was unreasonable on face and in effect, quoting the requirements of U.C.C. § 9-504(3) notification. In determining further whether the notice was commercially reasonable, the court had to decide when the actual sale of the equipment occurred. The court’s judgement is that the title passed at the time and place at which the seller completes his performance with reference to the physical delivery of the goods. Thus, the notification was unreasonable to all appellants because the appellants didn’t have enough time to protect themselves.
3) According to Fedders Corp. v. Taylor, 473 F.Supp. at 972, the party who stands to benefit from the establishment of the affirmative of a proposition of fact essential to a claim bears the burden of proof as to that proposition. Thus, the court required the Chemlease to prove that the debtor suffered less or no loss by the disposition and, remanded the case because the reasonableness of the sale price was a close factual question.
5. Conclusion
reversed and remanded to the trial court for a new trial on the question of damages, if any, sustained by appellants under U.C.C. § 9-507(1).
6. Classnote
en banc: (on bonk) French for "in the bench," it signifies a decision by the full court of all the appeals judges in jurisdictions where there is more than one three- or four-judge panel. The larger number sit in judgment when the court feels there is a particularly significant issue at stake or when requested by one or both parties to the case and agreed to by the court.
deficiency judgment: 미상환잔액판결
insolvency= bankruptcy
default = breach of contract
breach of contract ① cancel – only major breach (계약을 최대한 유지시켜야 하기 때문)
② damages
Lease contract → sales contract.
Lessor → seller
Lessee → buyer nominal 1$ for consideration
왜 lease contract 에서 UCC sec9 이 적용되는가?
Sales contract 에서 consideration 있어야만 성립.
Contributory negligence: 앞차의 급정거로 인한 사고 유발 앞차
Issue: notification 받을 수 있는 자격, 제대로 된 기간 내, damages에 대한 계산 방법
directed verdict: fast track, 재판은 열리고 입증실패한 자를 “졌다라고 해라” 라고 하는 것
summary judgement: trial이 열리기 전에 판사가 dismiss 시킴. 한쪽으로 기울어짐
a jury issue exists: fact finding 1심에서 다시 할 필요가 있다.
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