422 S.W.3d 550
Tenn. Ct. App.2013Background
- Regions Bank pursued a loan on an aircraft collateralized by LGT Aviation, Inc.; LGT failed to maintain required insurance, triggering default.
- Regions accelerated the loan after multiple notices of non-insurance and non-response by Thomas; Regions sued, obtained possession of the aircraft, and repaired/sold it.
- Aircraft was repossessed in Feb. 2008 and sold in Dec. 2008 for $875,000 after extensive repairs.
- Trial court found material breach (non-insurance) and that Regions acted properly in repossession and sale; it awarded Regions a deficiency.
- On appeal, court held breach was material and Regions did not act in bad faith or waive rights, but reversed on notice compliance under Article 9 and remanded for deficiency amount determination.
- Costs were allocated split between Regions and the Thomas/Appellants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the breach of maintaining insurance was material. | Thomas; LGT argues breach was not material under Restatement standards. | Regions contends breach was material and default justified acceleration. | Material breach established; default valid. |
| Whether Regions acted in good faith in accelerating and repossessing. | Thomas asserts lack of good faith under UCC and Tenn. law. | Regions contends actions were in good faith and justified. | Borrower failed to prove lack of good faith; Regions acted in good faith. |
| Whether Regions waived or cured the breach by accepting payments. | Thomas asserts waiver by conduct through accepting payments. | Regions did not waive; no cure occurred by insurance procurement. | No waiver or cure; no reliance on payments to cure default. |
| Whether Regions provided proper notice of disposition under Article 9. | Thomas argues notices were insufficient to disposition of collateral. | Regions asserts notices satisfied reasonable notification requirements. | Notice was not reasonably sufficient; disposition not commercially reasonable; remand on deficiency amount. |
| Whether Regions' deficiency award was proper given notice failure and disposition. | Regions seeks deficiency after sale; Appellants challenge notice and sufficiency. | Due to defective notice, deficiency should be limited or eliminated. | Deficiency award vacated; remanded for proceedings consistent with holding on notice. |
Key Cases Cited
- Lane v. John Deere Co., 767 S.W.2d 138 (Tenn. 1989) (good-faith obligation for acceleration under insecurity clause; factors to consider)
- Glazer v. First Am. Nat'l Bank, 930 S.W.2d 546 (Tenn. 1996) (bad faith defined as knowing or reckless disregard; not all failures implicate bad faith)
- Auto Credit v. Wimmer, 231 S.W.3d 896 (Tenn. 2007) (notice and disposition requirements under Article 9; reasonable notification)
- Brunswick Acceptance Co. v. MEJ, LLC, 292 S.W.3d 638 (Tenn. Ct. App. 2008) (sufficiency of notice for disposition under 47-9-611; consideration of actual notice and opportunity to bid)
- Mallicoat v. Volunteer Fin. & Loan Corp., 415 S.W.2d 347 (Tenn. Ct. App. 1966) (notice must be reasonably informative to protect debtor’s interests)