In this case, a credit union member obtained two loans from L.C.E. Federal Credit Union secured by his Jeep Comanche and Mazda RX-7. The loans went into default and both vehicles were repossessed by the credit union.

Thereafter, the credit union sent a notice to the debtor advising him that the vehicles would be sold at a public auction on November 22nd.

In fact, the vehicles were not sold on that date. Following the proposed sale date, the credit union sent another notice to the debtor advising him that the vehicles would be sold at a later date.

This second notice did not advise the debtor of any specific date for the sale, nor did the notice contain information as to the place and time of the next sale date. The vehicles were then sold and the net proceeds were applied to debtor’s account balances.

The credit union filed suit for the deficiency owing on the accounts and obtained a trial court judgment for $7,145 against the debtor.

Debtor appealed the trial court ruling. The appellate court found that in order for the credit union to obtain a deficiency judgment, it must first comply with the statute of providing proper notice of sale.

The Ohio law, which is similar to most State statutes concerning deficiency judgments, provides, in pertinent part:

Disposition of the collateral may be by public or private proceedings and may be by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place, and terms must be commercially reasonable. Unless 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 the sale. In the case of consumer goods no other notification need be sent.

In the immediate case, the credit union failed to send a second notice to the debtor identifying the time, date and place for the next proposed sale of collateral. If proper notice of the sale is not provided to the debtor, the creditor is absolutely barred from collecting any deficiency owing after the sale.

Here, the appellate court reversed the trial court’s deficiency judgment in favor of the credit union and held that the credit union’s failure to provide proper notice to the debtor would prevent the credit union from collecting any deficiency owing on debtor’s loans after the sale.

The appellate court stressed the importance of providing proper notice of sale date, time and place to the debtor in order for the creditor to collect any deficiency owing after sale. L.C.E. Federal Credit Union v. John Schiemann (Court of Appeals of Ohio, Lake County, No. 92-l-093).

Author: Charles R. Harroun, Attorney at Law