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Ford v. Jarossy

Decided: April 5, 1971.

CONTI CAUSEWAY FORD, PLAINTIFF,
v.
NORMA JAROSSY AND STEPHEN JAROSSY, DEFENDANTS AND THIRD-PARTY PLAINTIFFS, V. THE FIRST NATIONAL BANK OF TOMS RIVER, N.J., THIRD-PARTY DEFENDANT



Doherty, J.c.c. (Temporarily assigned).

Doherty

This is an action brought by an automobile dealer, Conti Causeway Ford (Conti), to recover a deficiency due after the sale of a repossessed automobile previously sold by Conti to defendants Norma and Stephen Jarossy. Defendants have counterclaimed for the loss of personal property allegedly in the automobile when it was repossessed, and for damages pursuant to N.J.S.A. 12A:9-507 (1) and brought a third-party claim against The First National Bank of Toms River, N.J. (bank) pursuant to the same statute.

The Jarossys signed a retail installment security agreement with Conti on August 13, 1968 for the purchase of an automobile for a cash price of $3,321.08 with a time price differential of $539.89. After the agreement was entered into, Conti assigned the same to the bank. The Jarossys defaulted under the agreement by failing to pay the installments due in April and May 1970. On May 28, 1970 the bank caused the automobile to be repossessed in Florida. The automobile was returned to New Jersey and a public sale was scheduled for June 8, 1970. The bank sent notice of the sale to the Jarossys on June 6, two days before the proposed sale. The notice was not received by the Jarossys until June 10, two days after the sale.

The bank was the only bidder at the June 8 sale and purchased the vehicle for $1,300. All of the parties to this action have stipulated that this amount represents the fair and reasonable value of the vehicle as of the date of the sale. A deficiency resulted in the amount of $258.12 including counsel fees. The bank assigned the deficiency to Conti, who brought this action.

N.J.S.A. 12A:9-504 (3) requires that the buyer be given reasonable notification of an impending sale of repossessed collateral. The court finds that the bank failed to show that the debtor received reasonable notice prior to the sale. The court must decide, therefore, whether that failure bars plaintiff from recovery of any deficiency resulting from

the sale. There does not appear to be any decision on this question by a New Jersey court.

If a deficiency results from an otherwise valid sale, N.J.S.A. 12A:9-504 (2) allows the secured party to collect the deficiency. There is, however, no provision of the Uniform Commercial Code which explicitly denies recovery of the deficiency when there is defective notice.

Prior to the adoption of the Uniform Commercial Code, conditional sales were governed by the Uniform Conditional Sales Act. Under the latter the seller was required to give at least ten days' written notice of the sale (N.J.S.A. 46:32-25, repealed L. 1961 c. 120). If a seller failed to comply with this notice provision, he was barred from recovery of the deficiency by the court's interpretation of N.J.S.A. 46:32-31 (repealed L. 1961 c. 120) as decided in Frantz Equipment Co. v. Anderson , 37 N.J. 420 (1962), and Bergen Auto Co. v. Mattarochio , 58 N.J. Super. 161 (App. Div. 1959).

By contrast, the Uniform Commercial Code does not require a specific time period in which notice must be given. While the Uniform Conditional Sales Act required ten days' notice, the Code only requires that the notice and the sale be "commercially reasonable." N.J.S.A. 12A:9-504 (3). It therefore must be decided whether the sale was so commercially unreasonable as to bar recovery of the deficiency.

The court finds a brief survey of the cases in this and other states to be most useful:

T & W Ice Cream Inc. v. Carriage Barn, Inc. , 107 N.J. Super. 328, 329 (Law Div. 1969), holds that when the debtor seeks damages for lack of proper notice of resale, the burden of proving the reasonableness of the sale is on the seller. However, the court did not decide whether a deficiency judgment could be recovered by the seller.

Norton v. National Bank of Commerce of Pine Bluff , 240 Ark. 143, 398 S.W. 2d 538 (Sup. Ct. 1966), holds that the secured party, upon showing ...


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