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The Provident Bank v. Charles Bonnici


June 19, 2012


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-3136-09.

Per curiam.


Argued May 22, 2012

Before Judges Fisher, Nugent and Carchman.

In this appeal, defendant Charles Bonnici argues that the trial judge erred in granting summary judgment on plaintiff The Provident Bank's claim for a deficiency judgment resulting from defendant's default on a $165,000 loan used to purchase a boat for $206,250 in March 2007. Specifically, defendant argues that the trial judge should not have summarily decided that plaintiff disposed of the collateral in a commercially reasonable manner by selling it for $57,500 in August 2009. We find no merit in this argument and affirm in most respects, remanding only with respect to the attorney's fee component of the judgment under review.

The record on appeal demonstrates that, on March 5, 2007, defendant entered into a loan agreement with First Commercial Corporation of America (First Commercial) for $165,000; defendant agreed to repay the loan by making monthly payments of $1344.40, for the following twenty years, secured by a mortgage on the boat. The loan agreement provided that, in the event of a default: the entire unpaid balance, including principal and interest, would become due; the lender would have the right to take possession and sell the boat; and the lender would be entitled to recover costs, including reasonable attorney's fees, associated with an action to enforce the agreement.

First Commercial assigned the promissory note and its other rights to plaintiff. In November 2007, plaintiff advised defendant he was in default on his payments. Defendant claims that he attempted to sell the boat during the summer of 2008 but eventually turned it over to plaintiff, which ultimately sold it to a third party for $57,500, reducing the outstanding balance on the loan.

On December 14, 2009, plaintiff filed a complaint, seeking a deficiency judgment, together with fees and other consequential relief. Defendant filed a counterclaim, which alleged a violation of the Consumer Fraud Act, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment and misrepresentation. After a period of discovery, plaintiff successfully moved for summary judgment. The trial judge entered judgment in favor of plaintiff and against defendant in the amount of $193,806.07, which consisted of the principal amount due on the loan of $154,402.01, together with attorney's fees in the amount of $38,600.50, and costs of $803.56.

Defendant appeals, arguing:




We reject the first two points but agree, in considering the third, that the claim for attorney's fees should be further examined by the trial judge.


In arguing that summary judgment was improvidently granted, defendant claims that plaintiff (a) did not dispose of the boat in a commercially reasonable fashion and (b) did not give proper notice. We reject these contentions.


We start with the premise that, upon default, a secured party may sell collateral pursuant to the terms and conditions of N.J.S.A. 12A:9-610(a). The disposition may be public or private. N.J.S.A. 12A:9-610(b). "Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable." Ibid. Commercial reasonableness is a flexible concept, based on consideration of all relevant factors in the particular case, Security Sav. Bank v. Tranchitella, 249 N.J. Super. 234, 239 (App. Div. 1991), and is determined by reference to the provisions of N.J.S.A. 12A:9-627(b).

After taking possession, plaintiff retained Northeast Marine Liquidation, Inc. (Northeast) and turned the boat over to it on October 10, 2008. Northeast determined, by reference to the National Automobile Dealers Association (NADA) guide, that the boat's book value was between $71,000 and $82,680. Northeast advertised it for sale on its website for $95,000.

In early February 2009, Northeast received an offer of $35,000, which was viewed as inadequate and rejected. Northeast received another offer in April 2009 for $60,000; plaintiff made a counteroffer of $70,000 which was rejected. In June 2009, Northeast received a $62,000 offer, which plaintiff declined but responded with a $70,000 counteroffer, which was rejected. Finally, in August 2009, plaintiff agreed to sell the boat to a third party for $57,500.

To support the commercial reasonableness of its disposition of the collateral, plaintiff refers to its retention of Northeast, an entity in the business of selling boats, and the steps taken by Northeast to seek and eventually obtain a buyer, which we briefly outlined above. In addition, the history of offers received and rejected prior to plaintiff's acceptance of $57,500 -- approximately nine months after the efforts to sell the collateral commenced -- further suggests the reasonableness of the steps taken by plaintiff and that plaintiff was not, to use defendant's word, "dumping" the boat.

In response, defendant argued that plaintiff and Northeast should not have relied on NADA in determining the boat's value because NADA information would not take into account upgrades and improvements he made to the boat. Defendant also asserted that the boat was sold for less than its fair market value, relying upon the original purchase price, the alleged value of the improvements made, and the opinion of an expert.*fn2

Giving defendant, as the opponent of the motion, the benefit of the assumption of the truth of his sworn allegations and the inferences that may be drawn therefrom, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 535-36 (1995), plaintiff was still entitled to summary judgment. As N.J.S.A. 12A:9-627 makes abundantly clear, it is a mistake for a debtor to assume that because collateral has sold for less than its purchase price, even significantly so, the creditor did not dispose of it in a commercially reasonable manner. See 4 James J. White & Robert S. Summers, Uniform Commercial Code § 34-11 at 469 (6th ed. 2002); N.J.S.A. 12A:9-627, Comment 2.

The focus is not on the original purchase price as compared to the disposition price, although that factor has relevance, but on the manner in which the collateral was disposed. Security Sav. Bank, supra, 249 N.J. Super. at 243-45. Indeed, as expressed in N.J.S.A. 12A:9-627(a), "[t]he fact that a greater amount could have been obtained . . . at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude" a determination that the secured party acted in a commercially reasonable manner. Instead, what may be perceived as a low price suggests only "that a court should scrutinize carefully all aspects of a disposition to ensure that each aspect was commercially reasonable." N.J.S.A. 12A:9-627, Comment 2. Because of the matter's disposition by way of summary judgment, we will assume the truth of defendant's assertion through his own certification, as supported by his expert's report, that a "low price" was obtained; this does not mean that summary judgment was inappropriate but only that the court must carefully scrutinize whether there existed a genuine factual dispute about the commercial reasonableness of the boat's disposition.

N.J.S.A. 12A:9-627(b) declares that a disposition is commercially reasonable if made:

(1) in the usual manner on any recognized market;

(2) at the price current in any recognized market at the time of the disposition; or

(3) otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.

Here, plaintiff resorted to a resale of the boat by enlisting the services of Northeast, a business dedicated to that purpose. Northeast valued the boat by consulting an authoritative guide and by considering what a survey revealed about the boat's existing condition. Having listed the boat at an appropriate price, Northeast then received offers and passed those offers along to plaintiff, which attempted to increase the third parties' offers by making appropriate counteroffers. The rejection of those counteroffers, and the fact that the handful of offers received approximated the price eventually obtained, demonstrates that the price for which the boat was sold was generated in a commercially reasonable manner. Contrary to defendant's argument that plaintiff "dumped" the boat, the record abundantly demonstrates that plaintiff showed great patience in engaging in the process of selling the boat for approximately nine months before eventually selling it for $57,500.

We would lastly observe, in rejecting defendant's argument regarding the commercial reasonableness of the disposition, that his expert's report does not create a genuine issue of fact on this point. As we have already mentioned, price alone is not the key to whether a disposition is commercially reasonable. Yet, the expert, who claims a particular expertise in this type of boat and this boat in particular, has only opined that the sale price was "far below fair market value." The expert report neither opines on the methods utilized by plaintiff in disposing of the collateral nor even hints at how such a valuable boat could have generated so few offers over so long a period of time if listed at such a bargain price. In short, the expert report suffers from the same disability as much of defendant's own assertions: that commercial reasonableness does not turn on the ultimate sale price but is gauged by the method utilized in its disposition. Because the expert report is silent on plaintiff's methodology and only addresses the boat's value, the report failed to create a genuine dispute of fact that would defeat summary judgment.*fn3


In attempting to defeat summary judgment, defendant also asserts that he was not given notice of the time and place of the proposed sale. Specifically, defendant asserted that "[a]t no time was [he] provided with proper notice of the sale of the [y]acht by [p]laintiff." That contention poses two questions: was a notice actually served, and, if so, was its content sufficient to advise defendant of plaintiff's intentions.

A secured party must give reasonable notice to the debtor of the time and place of a proposed sale. N.J.S.A. 12A:9-611(b); see also N.J.S.A. 12A:9-613; Security Sav. Bank, supra, 249 N.J. Super. at 240. The primary purpose of this obligation "is to allow the debtor sufficient time to take appropriate steps to protect his or her interests before the final disposition" and to prevent a sale of the collateral "at less than its true value." Caterpillar Fin. Servs. Corp. v. Wells, 278 N.J. Super. 481, 506 (Law Div. 1994). While the secured party need not prove the debtor actually received the notice, the secured party must establish that it was sent. Commercial Disc. Corp. v. Bayer, 372 N.E.2d 926, 930 (Ill. App. Ct. 1978).

Despite defendant's broad claim in his opposing certification that he was not provided with notice of the collateral's disposition, a copy of plaintiff's October 21, 2008 letter, which stated that plaintiff planned to sell the boat at a private sale at some point after November 4, 2008, was produced by defendant during discovery. Although it is true that plaintiff never certified in its moving papers that it sent this letter to defendant, defendant's ability to provide the letter from his records in responding to plaintiff's discovery demands eviscerates defendant's attempt to create a genuine issue of material fact on the notice issue.

There is also no doubt about whether the October 21, 2008 letter gave sufficient notice. The letter tracks the language of the form notification contained in N.J.S.A. 12A:9-614(3).


Defendant also argues that the trial judge erred in holding that his claim that plaintiff's representative told him that surrender of the boat would satisfy defendant's loan obligation was barred by N.J.S.A. 25:1-5(g). We find no merit in this argument.

In the absence of a writing containing the material terms signed by the party to be charged, N.J.S.A. 25:1-5(g) bars an action brought upon:

An agreement by a creditor to forebear from exercising remedies pursuant to a contract, promise, undertaking or commitment which is subject to the provisions of subsection f. of this section.*fn4

Defendant asserted in his opposition to summary judgment that during the course of his own attempts to sell the boat, plaintiff's representatives convinced him to let the bank try to sell the boat. Defendant claimed in his deposition that, in the summer of 2008, a bank official he identified as "Joe" told him more than once that his surrender of possession of the boat to plaintiff would satisfy his loan obligation. Specifically, defendant claimed that Joe said, "why are you taking so much stress on, just give us the boat and we'll take care of it." Defendant now argues that this statement constitutes plaintiff's forgiveness of defendant's indebtedness.

Although plaintiff denies the assertion as to what was allegedly represented to defendant, summary judgment principles require that we assume the truth of defendant's factual assertions. Notwithstanding, we agree with the trial judge's determination that this alleged oral statement is unenforceable because there is no writing evidencing it. This alleged oral agreement is undoubtedly of a type that the Legislature intended to bar by way of N.J.S.A. 25:1-5(g). See also National Cmty. Bank of N.J. v. G.L.T. Indus., Inc., 276 N.J. Super. 1, 4-5 (App. Div. 1994). Defendant has failed to produce a writing memorializing that Joe told him that the repossession and sale of the boat would satisfy defendant's obligation on the loan or, under the language of the statute of frauds, that plaintiff would "forbear from exercising remedies pursuant to a contract." N.J.S.A. 25:1-5(g).*fn5


Defendant lastly argues that the trial court erred in awarding counsel fees to plaintiff in the amount of $38,600.50. Although defendant did not specifically oppose in the trial court plaintiff's request for this element of relief, the trial judge was obligated to examine the reasonableness of plaintiff's request. There is nothing in the record to suggest that the reasonableness of the fee sought was examined. We remand for further consideration of the reasonableness of plaintiff's counsel fees.

Affirmed in part; reversed and remanded in part. We do not retain jurisdiction.*fn6

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