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Security Savings Bank v. Tranchitella

Decided: June 25, 1991.


On appeal from Superior Court, Law Division, Special Civil Part, Burlington County.

Judges Dreier and Landau. The opinion of the court was delivered by Landau, J.A.D.


Third-party defendant, Red Lion Auto Body and Sales, Inc. (Red Lion) appeals from a Special Civil Part judgment finding it responsible for a $4,948.69 deficiency which remained after the private sale of a repossessed flatbed tow truck by plaintiff-respondent Security Savings Bank, SLA (Security).

In October, 1987, defendant/third party plaintiff-respondent George Tranchitella (Tranchitella), President of Red Lion, purchased in his own name a 1986 flatbed roll-back tow truck for the company's use. The price was $21,260. Although other principals of Red Lion objected to the purchase, they ultimately agreed that Red Lion would make the $2,000.00 down payment and pay each monthly installment in the amount of $448.76.

Upon completion of the 60 installment payments, title to the tow truck was to be transferred to Red Lion.

Red Lion and Tranchitella did not enter into a formal written agreement memorializing their understanding. However, there is no dispute among the parties that Red Lion made the down payment, and paid seven monthly installments and other expenses. Furthermore, the record reveals that when Tranchitella sought to obtain a building loan, he requested that Red Lion supply the bank with a letter verifying that he was not personally responsible for making payment on the tow truck. The letter, written by Larry Jackson, the General Manager and Treasurer of Red Lion, stated:

I have been requested by Mr. George Tranchitella to verify that the above named company [Red Lion] is responsible for making all the payments on a 1986 Chevy roll back truck. I do so verify.

Friction developed between the other Red Lion principals and Tranchitella, arising from their allegations that he was spending too much time driving around in the truck and that he was neglecting his duties at the auto body shop. Tranchitella eventually quit Red Lion in June, 1988, taking the tow truck with him.

Red Lion stopped making the installment payments to Security and cancelled the insurance carried on the truck. Tranchitella returned the vehicle approximately three weeks after he left Red Lion. However, Security repossessed the tow truck from the Red Lion premises after one payment was missed and sold it for $14,500.00 at a private sale. Prior to the private sale, a public sale was conducted under circumstances described more fully below. No bids were received in response to the public notice.

Security then filed a complaint against Tranchitella seeking a deficiency judgment on the installment sales contract note. Tranchitella answered and filed a third-party complaint against Red Lion claiming that Red Lion was solely responsible for payment of the installment loan obligation, and thus liable for any deficiency judgment entered against him. Red Lion answered

and cross-claimed against Security, claiming an interest in the tow truck and alleging that Security failed to properly notify it of the impending sale.

Prior to commencement of the trial, the court, sua sponte, barred Red Lion from participating in the deficiency judgment proceeding; dismissed Red Lion's cross-claim against Security; and determined that there was no need for a jury in the deficiency action.

Based upon the testimony and evidence presented at the deficiency proceeding, the trial judge found that Tranchitella was delinquent in making the eighth payment on the installment contract. Finding that Security appropriately seized the tow truck and made proper notice of its sale, the trial judge entered a deficiency judgment against Tranchitella in the total amount of $4,948.69. As to Tranchitella's third-party complaint against Red Lion, the jury found that an agreement did exist between Tranchitella and Red Lion; that Red Lion breached that agreement; and that Tranchitella make a timely return of the tow truck to Red Lion so as not to be in breach of their agreement. Red Lion was held liable for payment of the deficiency judgment.

Red Lion raises seven arguments on appeal: 1) that it was error to preclude Red Lion from participating in the deficiency judgment proceeding; 2) that it was error to dismiss Red Lion's cross-claim and deny a jury trial on Security's complaint; 3) that Red Lion was entitled to notice of the sale; 4) that any agreement which existed between Red Lion and Tranchitella was breached by Tranchitella; 5) that the court's instruction respecting the timeliness of return of the tow truck to Red Lion was prejudicial and tended to confuse the jury; 6) that the jury's finding of a "timely" return was against the weight of the evidence; and 7) that the judgment must be set aside because the sale was not conducted in a commercially reasonable manner.

The principal and determinative argument focuses on whether the dispositional sale was conducted in a commercially reasonable manner. Under N.J.S.A. 12A:9-504(3) every aspect of a secured party's disposition of a debtor's collateral, "including the method, manner, time, place and terms must be commercially reasonable." Although the Uniform Commercial Code does not ...

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