Missouri creditors can breathe a sigh of relief, as the Missouri Supreme Court finds creditors do not need to ensure a defaulting customer received the post-sale explanation to preserve their rights to seek a deficiency judgment after repossession of goods. The Court also provided clarification as to what constitutes a private versus public sale under RSMO §400.9.

In The Central Trust Bank v. Barbara Branch, the Missouri Supreme Court reversed a circuit court’s judgment in favor Barbara and Alexis Branch (“the Branches”) on the bank’s petition for a deficiency judgment after the repossession and sale of a vehicle the Branches defaulted on.  The Supreme Court found the circuit court misapplied the law in determining that (1) the Branches did not receive pre-sale notice; (2) the Bank failed to send a post-sale notice; and (3) a dealer’s only auction constituted a public sale.

In the underlying litigation the bank sought a deficiency judgment on a retail installment contract and security agreement relating to the Branches’ purchase of a vehicle in 2014.  The Branches defaulted on their loan three times, curing the default twice; after the third default the bank repossessed the vehicle.  The bank sent notice to the Branches, via certified mail, confirming the repossession and advising of the intent to obtain a repossessed title and re-sell the vehicle (“the pre-sale notice”).  The pre-sale notice advised the Branches, inter alia, that the vehicle would be sold by private sale, the amount owed, how the proceeds would be distributed, the possibility of a deficiency, and their rights to regain possession; the notice included all information required under RSMO §400.9.614.  The bank then sold the vehicle, for less than the amount owed, at a dealer only auction conducted by a third-party.  The bank sent a written explanation of the sales process, and advised the Branches of a deficiency (“the post-sale explanation”).  The post-sale explanation was also sent by certified mail, but it was never received by the Branches.

Despite the Branches affirming their receipt of the pre-sale notice, one basis for the circuit court’s judgment in favor of the Branches was a determination that the bank did not notify the Branches of the repossession.  The Supreme Court rejected the circuit court’s determination as it was contradicted by its own findings.

The circuit court also found that the bank failed to comply with the statutory requirements governing the post-sale explanation of deficiency, specifically, the circuit court found that the bank had a duty to make reasonable efforts to ensure receipt of the post-sale explanation which was breached when the certified mail was returned without further efforts.  The circuit court applied the same notice requirements to the post-sale explanation as the statute requires for the pre-sale notice, and found there was a reasonable duty to ensure receipt of the same.  The Supreme Court rejected the circuit courts finding detailing that the statutory scheme required “notice” pre-sale, but that it only required the post-sale information to be sent.  The Supreme Court found the bank complied with the statutory requirements to “send” the explanation through its certified mailing, even though the same was returned to sender.  The Supreme Court also rejected a contention from the Branches that sending certified mail did not comply with the statutory requirement “to deposit in the mail.”

The Branches also took the position that the bank failed to comply with the pre-sale notice requirement of detailing “the method of intended disposition” because the bank noticed a private sale, and selling the vehicle at a dealer’s auction constituted a public sale.  Prior to the Supreme Court’s opinion, neither the UCC nor Missouri jurisprudence defined “public sale” or “public disposition.”  The Supreme Court held that a public sale is “one at which the price is determined after the public has had a meaningful opportunity for competitive bidding.”  The court also found that meaningful opportunity implies some form of advertisement or public notice and requires that the general public must have unrestricted access to the sale.   

The Central Trust Bank decision provides creditors with guidance in satisfying the pre- and post-sale statutory requirements to preserving rights to recoup a borrower’s deficiency.  However, creditors beware — preserving your rights to seek a deficiency judgment requires strict statutory compliance in the pre- and post-sale process.