Session November 18, 2015
from the Chancery Court for Davidson County No. 1493I Claudia
secured creditor filed suit against a trucking company and
two guarantors seeking a deficiency judgment after
disposition of the collateral securing payment of the debt.
The trial court granted the secured creditor summary judgment
in the amount of the deficiency. On appeal, the trucking
company and the guarantors argue that (1) the delay in
repossessing the collateral rendered its disposition
commercially unreasonable and (2) the secured creditor failed
to present sufficient evidence of the amount of its damages.
We conclude that the requirement of a commercially reasonable
disposition found in Tennessee Code Annotated § 47-9-610
only applies once the secured party has actual or
constructive possession of the collateral. The secured
creditor's refusal to repossess the collateral at the
trucking company's request did not amount to actual or
constructive possession. Nonetheless, in light of the
challenge to the time aspect of the disposition, the secured
creditor failed to meet its burden of production on summary
judgment. Therefore, we reverse the grant of summary
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
N. Bulso, Jr., Steven A. Nieters, and Paul J. Krog,
Nashville, Tennessee, for the appellants, Anthony W.
Thornton, Elizabeth Thornton, and Bowling Green Freight, Inc.
P. Funk and W. Scott Sims, Nashville, Tennessee, for the
appellee, WM Capital Partners, LLC.
Neal McBrayer, J., delivered the opinion of the Court, in
which Andy D. Bennett and Richard H. Dinkins, JJ., joined.
NEAL McBRAYER, JUDGE
facts are largely undisputed. Anthony and Elizabeth Thornton
owned and operated Bowling Green Freight, Inc., a trucking
company that derived significant income from transporting
parts to General Motors Corporation's Corvette plant in
Bowling Green, Kentucky. See F.D.I.C. v. Thornton,
595 F.App'x 513, 515 (6th Cir. 2014). Over time,
Tennessee Commerce Bank (the "Bank") made several
loans to Bowling Green Freight. In connection with these
loans, Bowling Green Freight granted the Bank a security
interest in, among other things, equipment. Mr. and Mrs.
Thornton also unconditionally guaranteed payment of the loans
to the Bank.
Motors' financial difficulties during the last decade put
corresponding financial pressure on Bowling Green Freight.
Id. After defaulting on its loans to the Bank,
Bowling Green Freight and the Bank entered into a forbearance
agreement, in which Bowling Green Freight acknowledged that
it was in default and that it had no claims or defenses to
the Bank's right to pursue its legal and contractual
remedies. In return, the Bank agreed not to exercise its
rights if Bowling Green Freight cured its default by February
28, 2011. When Bowling Green Freight was unable to do so, the
Bank and Bowling Green Freight entered into amended
forbearance agreements, which ultimately extended the
forbearance period to July 5, 2011.
Bowling Green Freight had lost the General Motors business
and Mr. Thornton realized that Bowling Green Freight could no
longer make payments on the loans, he asked the Bank to
repossess Bowling Green Freight's collateral, sell it,
and apply the proceeds to the outstanding loans. When this
request was made on June 23, 2011, the value of the
collateral exceeded the outstanding balance of the loans.
Despite this fact, the Bank declined the offer and instead
directed Bowling Green Freight to continue to use the
collateral, including the equipment. Subsequent requests to
repossess the collateral were made, but in each instance, the
August 17, 2011, the Bank demanded payment in full of the
loans, and in January 2012, the Bank filed suit against
Bowling Green Freight and the Thorntons. Id. at 516.
But, the same day it filed suit, the Bank, facing financial
difficulties of its own, was placed into a receivership with
the Federal Deposit Insurance Corporation ("FDIC").
the suit was pending, on August 9, 2012, the FDIC, as
receiver for the Bank, sold three of the loans involved,
identified as Notes 184900, 18107, and 18224, to WM Capital
Partners, LLC ("WMCP"). WMCP moved and received
leave to intervene in the suit originally filed by the Bank.
Id. at 517. By this point, the case had been removed
to federal district court, and the FDIC had been substituted
as plaintiff for the Bank. Id.
for WMCP, the suit originally filed by the Bank did not
include a claim against the Thorntons for breach of their
guaranty relative to Note 184900, the loan with the largest
outstanding balance. Id. WMCP moved to add the claim
to the suit, but the district court denied the motion.
Id. The district court did permit WMCP to dismiss
its other claims without prejudice, which led to the present
point, WMCP finally repossessed the collateral securing all
three of the loans. WMCP sold the collateral at auction on
July 11, 2013. WMCP applied the net proceeds of the sale to
the principal owed on Note 184900.
following year in the Chancery Court for Davidson County,
Tennessee, WMCP filed suit against the Thorntons seeking a
deficiency judgment based on their personal guarantees. WMCP
later amended its complaint to add a breach of contract claim
against Bowling Green Freight.
moved for summary judgment. In support of its motion, WMCP
submitted a statement of undisputed material facts and the
affidavit of Jim Barr Coleman. Mr. Coleman recounted the
history of the loans, the purchase of the loans from the
FDIC, and WMCP's repossession and sale of the collateral
securing the loans. He explained the application of the net
proceeds from the sale to the debt ...