Ruden v. Citizens Bank & Trust Co.

MOYLAN, Judge. The primary question confronting us on this appeal was succinctly posed by Note, Creditor’s Deficiency Judgment under Article 9 of the Uniform Commercial Code: Effect of ⁶⁰⁸ Lack of Notice and a Commercially Reasonable Sale, 33 Md.L.Rev. 327 (1973): Upon default by a debtor in a security agreement, a secured creditor may, pursuant to Part 5 of Article 9 of the Uniform Commercial Code, repossess and dispose of the collateral in order to minimize the existing indebtedness. A problem, however, exists because, while the Code requires the secured creditor to notify the debtor of the disposition and to conduct the disposition in a commercially reasonable manner, it fails to chart explicitly the consequences that befall the secured creditor should he not do so. (footnotes omitted) (emphasis supplied).

Before addressing "that question, let us set it in context. Citizens Bank and Trust Company of Maryland, appellee, filed a Complaint in the Circuit Court for Anne Arundel County against Alexander F. Ruden and Ann V. Ruden, appellants. The complaint alleged that the Rudens defaulted on their Consumer Loan Note and Security Agreement by failing to make monthly payments as promised and that they were liable for the deficiency remaining after the collateral was sold. The Rudens’ answer and counterclaim alleged, in part, that the appellee’s sale of the collateral was commercially unreasonable.

The case was tried before a jury, presided over by Judge Martin A. Wolff. The jury rendered a verdict in favor of the appellee in the amount of $75,753.00. On this appeal, the Rudens raise the following four issues: I. Did the circuit court err in failing to instruct the jury that the appellee was barred from recovering a deficiency judgment if the boat was not sold in a commercially reasonable manner?

II

Did the circuit court err in failing to instruct the jury that the appellee was not entitled to a deficiency judgment if it purchased the boat at a private sale?

III

Did the circuit court err in failing to instruct the jury that the appellee was not entitled to a deficiency judgment if it sold the boat at a private sale? ⁶⁰⁹ IV. Did the circuit court abuse its discretion in failing to admit an appraisal of the boat as evidence of its value? We find no error or abuse of discretion on the part of the circuit court, and, thus, we affirm. Facts The Rudens purchased a 35-foot Cheoy Lee sailboat in 1980 for $85,000.

They financed $67,000 of the purchase price with People’s Security Bank. In 1982, they leased the boat to James Morris. Morris kept the boat in a marina located on Hilton Head Island, South Carolina. In 1984, the Rudens refinanced the boat with Citizens Bank and Trust Company of Maryland (Bank).

The Rudens executed a Consumer Loan Note and Security Agreement in which they promised to pay to the order of the Bank the principal sum of $58,883.50 plus interest by making monthly payments. Morris was still leasing the boat from the Rudens at that time. In February, 1985, Morris was two months behind in his payments. Additionally, the Rudens discovered that the boat was no longer located on Hilton Head Island, South Carolina.

They became concerned. Subsequently, the boat was found in Miami, Florida. Morris’s lease was terminated and the boat was seized by the U.S. Marshal in connection with a civil maritime action instituted by the Rudens in the United States District Court for the Southern District of Florida. Allied Marina, a marina located in Miami, Florida, acted as the substitute custodian for the boat.

The Rudens continued to make monthly payments to the Bank until August, 1986, when they could no longer do so. By a certified letter dated October 10, 1986, the Rudens were notified by the Bank that, because they had failed to make the required monthly payments, the boat would be repossessed on or after October 20, 1986 unless all defaults were cured by that date. In November, 1986, the Bank had the boat appraised, and it was valued at $45,000 by an appraiser. Subsequently, the Rudens were informed by letter that the boat was repossessed on December 9, 1986 and that it contin ⁶¹⁰ ued to be stored at Allied Marina in Miami, Florida.

The letter explained that they may redeem and retake possession of the boat during a 15-day period prior to its sale at public auction. At that time, however, the boat, apparently unbeknown by the Bank, was still in federal custody. The Rudens were notified of the time, date, and locátion of the public sale and received copies of advertisements placed in The Washington Post and The Miami Herald. A public sale was held on January 27,1987.

The bidding opened at $35,000, but no bids were made. The Bank “bought” the boat for $35,000, but the sale was never consummated. Because the boat had been in federal custody when the Bank attempted to sell it at a public auction, the repossession and subsequent public sale were invalid. After learning that the boat had been and was no longer in federal custody, the Bank officially notified the Rudens that the boat was being repossessed and that it intended to dispose of the boat.

On March 16,1987, the Rudens were informed by letter that the boat was being sold at private sale on or after April 1, 1987. The boat was sold to a third party for $12,-500.00 and the sale was consummated on July 8, 1987. By a letter dated July 16, 1987, the Bank notified the Rudens that their boat was sold on July 8, 1987 and that they were responsible for the deficiency balance. The sale price, however, was stated as being $35,000.

The Bank filed its Complaint in November, 1987 in the Circuit Court for Anne Arundel County. The case was tried before a jury on September 1, 2, and 3, 1992. The Bank requested that judgment in its favor be entered in the amount of $100,888.01, which included the deficiency, interest, and attorney’s fees. The jury returned a verdict in favor of the Bank in the amount of $75,753.00.

This appeal resulted. Creditor’s Entitlement to a Deficiency Judgment A. Compliance With § 9-504(3): Deficiency Award Automatic When the sale is conducted with full compliance with the requirements of § 9-504(3), the sale price will be considered ⁶¹¹ to be the true value of the collateral and any deficiency will be awarded automatically to the creditor. 1 Md.Code Ann., Com. Law § 9-504 (1992). In terms of compliance with § 9-504(3), there was no issue in this case with respect to the giving of adequate notice.

The issue in dispute was the commercial reasonableness of the sale. The circuit court instructed the jury, with regard to commercial reasonableness: In determining whether the sale was held in a commercially reasonable manner, for the purposes of a deficiency judgment, the burden of proof is on the Plaintiff, on the bank, who has brought suit. The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the secured party is not, of itself, sufficient to establish that the sale was not made in a commercially reasonable manner. If the secured party either sells the collateral in the usual manner in any recognized market or if he sells at the price current in such market at the time of the sale, or if he has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold, he has sold in a commercially reasonable manner.

If you find the sale was held in a commercially reasonable manner and you have found that there is reasonable notification given to the Defendant, then you must return a verdict in favor of the Plaintiff against the Defendant. Thus far, the judge’s instruction was absolutely correct. B. Noncompliance: What Is the Sanction? At that point, the trial judge went on to instruct the jury as to what it should have done in case it found the sale to have been commercially unreasonable.

As to any damages that might have resulted from the failure of the Bank to conduct ⁶¹² the sale of the boat in a commercially reasonable manner, the judge advised: If you find that the sale was not held in a commercially reasonable manner, your job is not finished because you must determine to what extent the Defendant has been damaged by the failure to hold the sale in a commercially reasonable manner. To determine the effect of a sale which was not held in a commercially reasonable manner, you must determine from the evidence presented what sale price would have resulted from a commercially reasonable sale.... If the price which would have been obtained at a commercially reasonable sale is higher than that which was actually obtained, you must subtract the difference from the Plaintiffs demand and return a verdict in favor of the Plaintiff in the reduced amount, (emphasis added). Initially, a word is in order as to why the Rudens’ contention with respect to this second jury instruction is not moot.

No special issues were submitted to the jury for resolution and it is impossible to deduce just how it arrived at its verdict for the Bank in the amount of $75,753. Arithmetically, there is no way to manipulate the figures to come up with that sum (or remainder or product or quotient, as the case may have been). Recognizing that the final verdict may have been the result of compromise, compounded perhaps by a few arithmetic miscalculations, we can only base our possible deductions on rough and rounded figures. One possibility, of course, is that the jury found as a fact that the Bank’s sale of the boat was commercially reasonable but also concluded, by way of some compromise or some generous impulse toward the Rudens, not to “stick” the Ru-dens with the Bank’s attorney’s fees.

If the jury, indeed, found that the sale was commercially reasonable, then the present contention about appropriate sanctions for a commercially unreasonable sale is mooted. That enigmatic jury verdict, however, is also vulnerable to another interpretation. The verdict may just as plausibly ⁶¹³ have been that the sale was commercially unreasonable and that the Bank was not, therefore, entitled to the full difference between the actual sale price of $12,500 and the total debt of $100,888 (a deficiency of just over $88,000) but was only entitled to the difference between the fair market value of the boat and the total debt. In terms of what that possibly larger subtrahend (fair market value) might be, the Bank, of course, was arguing that the fair market value was, indeed, the actual sale price of $12,500. and no more.

There was evidence, on the other hand, more favorable to the Rudens, of an appraisal and a fair market value in the neighborhood of $35,000. There is always the possibility that the jury essentially split the difference between the lesser figure and the greater figure and found a fair market value of approximately $25,000. That would explain how a debt of just over $100,000 minus a fair market value of $25,000 would have yielded a deficiency verdict of just over $75,000. It is because this latter possibility is very real and plausible as an explanation for what the jury did that the instruction on the subject of sanctions may have been critical to the outcome of this case and is, therefore, properly before us.

The Rudens contend that the circuit court’s instruction as to damages that may result from the Bank’s failure to conduct the sale in a commercially reasonable manner was in error. They argue that failure to meet the requirement of a commercially reasonable sale under § 9-504(3) totally bars the recovery of a deficiency judgment in any amount and, therefore, the circuit court’s instruction was in error. We disagree. Section 9-504(3) states that: Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts.

Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market reasonable notification of the time after ⁶¹⁴ which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor, and except in the case of consumer goods to any other person who has a security interest in the collateral and who has duly filed a financing statement indexed in the name of the debtor in this State or who is known by the secured party to have a security interest in the collateral. The secured party may buy at any public sale and if the collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely .distributed standard price quotations he may buy at private sale, (emphasis supplied). It is clear that § 9-504(3) requires both 1) that the sale of the collateral be conducted in a commercially reasonable manner and 2) that reasonable notice be given to the debtor.

Section 9-504 does not, however, explicitly address the consequences of a secured party’s failure to meet either of those requirements. C. Sanction # 1: Deficiency Judgment Absolutely Barred Courts across the country have approached the problem in essentially three different ways. Some jurisdictions absolutely bar a secured party’s recovery of any deficiency judgment for failure to comply with the requirements of § 9-504. They do so regardless of whether the noncompliance was the failure to give notice or the failure to conduct the sale in a commercially reasonable manner.

The rationale invigorating that position was well articulated by Leasco Data Processing Equip. Corp. v. Atlas Shirt Co., 66 Misc.2d 1089 , 323 N.Y.S.2d 13, 16 (N.Y.City Civ.Ct.1971): It surely has meaning that the very section [9-504] that affirms the right to a deficiency judgment after sale of a repossessed article also describes in simple and practical terms the rules governing dispositions as well as the pertinent notice requirements. If a secured creditor’s right to a deficiency judgment were intended to be independent of compliance with those rules, one would surely expect that unusual concept to be delineated with clarity. The natural inference that the right depends upon compliance is force ⁶¹⁵ fully underlined by the joining of the two provisions in one section.

See also Atlas Thrift Co. v. Horan, 27 Cal.App.3d 999 , 104 Cal.Rptr. 315, 321 (1972). D. Sanction # 2: Burden on Debtor to Qualify for Set-Off A second approach traditionally allowed the secured creditor to recover a deficiency judgment notwithstanding noncompliance with § 9-504(3), subject only to a reduction or set-off for damages suffered by the debtor. That approach has been described by 2 James J. White & Robert S. Summers, Uniform Commercial Code, § 27-19, at 630-631 (3d ed. 1988): [Another] line of cases allows the secured creditor to recover the deficiency subject only to reduction for any damages suffered by the debtor. For example, in Abbott Motors, Inc. v. Ralston, [28 Mass.App.Dec. 35, 5 UCC 788 (1964) ], the court said that violation of the provisions of Part Five did not excuse the debtor from paying a deficiency, but that he was entitled to a set-off for any loss suffered as a result of it.

(Presumably, the damages would be the difference between the fair market value of the collateral established by the debtor and the actual resale price.) In a later Pennsylvania case, Mercantile Financial Corp. v. Miller, [ 292 F.Supp. 797 (E.D.Pa.1968) ], another federal district court in that state (ignoring the Skeels [v. Universal C.I.T. Credit Corp., 222 F.Supp. 696 (D.C.Pa.1963) ] case) determined that, because the secured party made a commercially unreasonable sale, the debtor was entitled to have a default judgment reopened. But the court did not deny recovery of the deficiency. It said that the sole purpose for reopening the judgment was to establish the fair market value of the collateral. The Court further stated that the burden of proving the fair market value fell upon the debtor: Moreover, in order to have the judgment altered in his favor, Miller [debtor] still must establish by a preponderance of the evidence what the fair market value of these assets was on the date of sale.

By granting Miller’s ⁶¹⁶ motion we do not suggest that he in fact is entitled to any greater credit arising from the disposition of this collateral than he had already received. [ 292 F.Supp. at 801 ] Under that second approach, the creditor did not automatically suffer any sanction at all for his noncompliance. The full burden was placed on the debtor to establish the fair market value of the collateral. Only when he had done so was he then entitled to a set-off for the difference between the sale price actually realized and the fair market value , of the collateral, to wit, the price it should have brought if it had been sold in a commercially reasonable way. That difference would be used, as a set-off, to reduce the amount of the deficiency.

In fashioning an appropriate sanction, courts were initially faced with that starkly bipolar choice between two extremes. On the one hand, noncompliance would absolutely bar a creditor from any deficiency judgment, no matter how relatively minor the impact of the noncompliance and no matter how unduly harsh the total bar to a deficiency might be. On the other hand, the only apparent alternative inflicted virtually no penalty whatever on the creditor for noncompliance but, rather, allocated to the debtor the burden of establishing the prejudice that he may have suffered from such noncompliance. 2 James J. White & Robert S. Summers, Uniform Commercial Code, § 27-19, at 631 (3d ed. 1988) described this dichotomy: On one end of the scale, Skeels in Pennsylvania and now [First State Bank of Morrilton v.] Hallett [ 291 Ark. 37 , 722 S.W.2d 555 (1987) ] in Arkansas stand clearly and unequivocally for the proposition that a creditor who violates the provisions of Part Five of Article Nine loses his right to a deficiency. At the other extreme, some states expressly allow the creditor a deficiency judgment, subject to set-off for whatever loss the debtor can prove as a result of the improper sale.

In rejecting both extremes, the Supreme Court of Appeals of West Virginia, in Bank of Chapmanville v. Workman, 185 W.Va. 161 , 406 S.E.2d 58 (1991), focused its critical gaze ⁶¹⁷ initially on the “absolute bar” approach, observing, 406 S.E.2d at 64 : Under the “absolute bar” rule, any secured creditor who is found to have disposed of the collateral in a commercially unreasonable manner is absolutely barred from seeking a deficiency judgment. There are several problems with this rule. First, it is a judge-made punitive provision.... Second, there is absolutely no support in the wording of the UCC for the “absolute bar” rule.

Third, the “absolute bar” rule involves a forfeiture, and the law generally disfavors forfeitures. Fourth, the amount of the penalty bears no relation to the degree of commercial unreasonableness of the secured creditor’s conduct, but depends solely upon the amount of the deficiency. That is, a creditor who is owed a deficiency of one million dollars can be penalized more for slightly commercially unreasonable conduct than a thoroughly abusive creditor who is left with a deficiency of one hundred dollars, (emphasis in original). It then turned its analytic scrutiny on the opposite extreme, the “set-off’ rule, observing, 406 S.E.2d at 64 -65: At the other extreme, under the “set-off’ rule, the creditor collects a deficiency judgment, subject only to whatever statutory damages are awarded to the debtor on a counterclaim under UCC 9-507(1) ...

The main problem with this rule is that the debtor has the burden of proving his losses under UCC 9-507, and will usually have a hard time proving that the fair market value was higher than what the collateral actually sold for at the repossession sale. In many cases, the secured creditor’s commercially unreasonable behavior (e.g., lack of adequate notice to the debtor) will have greatly hindered the debtor’s ability to prove his damages, (citation omitted). E. Sanction #3: The Middle Position More recently, a middle position has emerged which has softened the harsh bipolarity of the earlier choice. In Bank of Chapmanville v. Workman, it is not surprising that West ⁶¹⁸ Virginia, after roundly criticizing the two extremes, as noted above, opted for the third, newer, and middle position: Courts around the country have chosen from among the following three rules: (1) the “absolute bar” rule; (2) the “set-off’ rule; and (3) the “rebuttable presumption” rule.

The “rebuttable presumption” rule appears to have become the majority rule, and is the soundest of the three, (footnote omitted). 406 S.E.2d at 64 . This tripartite breakdown of the possible results that might follow a creditor’s noncompliance with the requirements of § 9-504(3) has also been well summarized by Robert S. Minetz, May a “Wrongdoer” Recover a Deficiency Judgment, or Is Section 9-507(1) a Debtor’s Exclusive Remedy?, 6 UCC L.J. 344 , 345-346 (1974): The cases which have considered whether a secured party who has failed to comply with the UCC repossession and resale provisions has forfeited his right to deficiency judgment have taken three routes. One line of cases has held that the wrongdoing by the secured party precludes his right to a deficiency. Another group of courts has simply referred to the damaged debtor to 9-507(1) for a remedy.

The third line of authorities has allowed the action for the deficiency but has imposed a presumption that the actual value of the collateral at the time of the wrongful sale is equal to the balance due to the secured party. Thus, no deficiency is owned to the creditor unless the presumption is rebutted. The three groups of cases will be considered in turn. After twenty years of adherence to the “absolute bar” position, the Supreme Court of Georgia, in Emmons v. Burkett, 256 Ga. 855 , 353 S.E.2d 908 (1987), abandoned the “absolute bar” rule in favor of what has come to be called the “rebuttable presumption” rule.

As 2 James J. White & Robert S. Summers, Uniform Commercial Code § 27-19, at 627 (3d ed. 1988) has explained, “According to this rale, the creditor who fails to give notice or conducts a commercially unreasonable sale can still recover a deficiency if he rebuts the ⁶¹⁹ presumption that the value of the collateral was equal to the debt.” Emmons v. Burkett, 353 S.E.2d at 911 , held that: ... the rebuttable-presumption rale, by placing the burden on the creditor to show the propriety of the sale and making him liable under [9-507] for any injury to the debtor, provides an adequate deterrent to an improper sale on the part of a creditor, and adequately protects the debtor’s interest, without arbitrarily penalizing the creditor. The decided trend, nationwide, is toward the “rebuttable presumption” rule as state after state has rallied under that banner. In Kobuk Eng. v. Superior Tank & Constr. Co., 568 P.2d 1007 (Alaska 1977), the Supreme Court of Alaska held that the sale of a collateral by a creditor in that case “was not commercially reasonable.” 568 P.2d at 1013.

Turning then to the question of what consequences should flow from that commercially unreasonable sale, Alaska rejected the “absolute bar” approach as “repugnant to the spirit of the UCC.” Id. It opted, instead, for the “rebuttable presumption” rale: We hold that the commercially unreasonable sale made by Superior acts to decrease the amount of the deficiency judgment which Superior is entitled to recover from Kobuk. The fair and reasonable value of the collateral at the time of repossession should be offset against the balance due on the security agreement. Where the collateral has been sold in a sale that does not comply with the provisions of the UCC, there is a rebuttable presumption that the fair and reasonable value of the collateral is at least equal to the amount of the outstanding debt.

In order to overcome that presumption, the secured party has the burden of either (1) obtaining a fair and reasonable appraisal at or near the time of repossession, or (2) producing convincing evidence of the value of the collateral. In order to meet the latter burden, the secured creditor is required to bring forward proof of the condition of the collateral and the usual price of items of like condition, (footnotes omitted). 568 P.2d at 1013-1014. A similar policy choice was faced by the Supreme Court of New Mexico in Clark Leasing Corp. v. White Sands Forest ⁶²⁰ Prod., 87 N.M. 451 , 535 P.2d 1077 (1975). The court there acknowledged that the case before it “squarely raises, for the first time in New Mexico, the question whether or not a secured creditor is absolutely precluded from recovering a deficiency judgment under the UCC if he fails to dispose of repossessed collateral as required under § 9-504(3).” 87 N.M. at 455 , 535 P.2d at 1081 .

In rejecting the “absolute bar” approach and opting, instead, for the “rebuttable presumption” rule, the New Mexico Supreme Court held, 87 N.M. at 455-456 , 535 P.2d at 1081 -1082: We consider this rule [the “absolute bar” rule] repugnant to the spirit of the UCC. The complete denial of a deficiency smacks of the punitive and is directly contrary to Article Nine’s underlying theme of commercial reasonableness. “If the secured party has reimbursed the debtor for any losses incurred by improper sale, he has approximated the commercially reasonable sale. Thus, he should be allowed to receive the money which would have been due if the sale had been commercially reasonable.” Minetz, “May a Wrongdoer’ Recover a Deficiency Judgment, or is Section 9-507(1) a Debtors Exclusive Remedy?”, 6 UCC L.J. 344 at 363 (1974). We agree with those courts that hold a secured party’s failure to comply with § 9-504(3) does not result in a forfeiture of the right to a deficiency.

It further stated its belief that “simple considerations of fair play mandate the adoption of this rule for New Mexico.” 87 N.M. at 456 , 535 P.2d at 1082 . See Carter v. Ryburn Ford Sales, Inc., 248 Ark. 236 , 451 S.W.2d 199 (1970); Assoc. Fin. Serv.

Co. v. DiMarco, 383 A.2d 296 (Del.Super.Ct.1978); Bank of Oklahoma, N.A. v. Little Judy Indus., 387 So.2d 1002 (Fla.Dist.Ct.App.1980); Mack Fin. Corp. v. Scott, 100 Idaho 889 , 606 P.2d 993 (1980); Wirth v. Heavey, 508 S.W.2d 263 (Mo.Ct.App.1974); Levers v. Rio King Land & Inv. Co., 93 Nev. 95 , 560 P.2d 917 (1977); Franklin State Bank v. Parker, 136 N.J.Super. 476 , 346 A.2d 632 (Union County Ct.1975); Security Trust Co. of Rochester v. Thomas, 59 A.D.2d 242 , 399 N.Y.S.2d 511 (1977); Hodges v. Norton, 29 N.C.App. 193 , 223 ⁶²¹ S.E.2d 848 (1976); State Bank of Towner v. Hansen, 302 N.W.2d 760 (N.D.1981); Assoc. Capital Serv.

Corp. v. Riccardi, 122 R.I. 434 , 408 A.2d 930 (1979); Investors Acceptance Co. of Livingston v. James Talcott, Inc., 61 Tenn.App. 307 , 454 S.W.2d 130 (1969); Aetna Fin. Co. v. Ables, 559 S.W.2d 139 (Tex.Civ.App.1977). See also Richard C. Tinney, Annotation, Failure of Secured Party to Make “Commercially Reasonable” Disposition of Collateral Under UCC § 9-504(3) as Bar to Deficiency, 10 A.L.R. 4th 413 , 422-430 (1981). The operation of the “rebuttable presumption” rule was well explained in Note, Creditors Deficiency Judgment under Article 9 of the Uniform Commercial Code: Effect of Lack of Notice and A Commercially Reasonable Sale, 33 Md.L.Rev. 327, 342-343 (1973): [I]f the creditor has failed either to give notice or to conduct a commercially reasonable sale, he should have the burden of proof to show that he did not prejudice the debtor’s rights and that the sale resulted in a fair and reasonable price for the collateral, because the proof incident to notice and resale are peculiarly within the creditor’s knowledge.

If the secured creditor cannot prove that the sale reflected the fair and reasonable value of the collateral, most courts will presume that the value of the collateral sold without notice and without a commercially reasonable resale is equal to the amount of the debt. Often though, the secured creditor will be able to rebut this presumption and prove a reasonable value that will accord him a deficiency, (footnotes omitted). West Virginia has similarly explained the manner in which the middle approach operates: For the victim of a commercially unreasonable disposition of collateral, the “rebuttable presumption” rule comes to the rescue. Under this rule, the fair market value of the collateral is rebuttably presumed to equal the amount of the remaining debt.

To recover a deficiency, the secured creditor who is found to have disposed improperly of the debtor’s ⁶²² collateral must prove that the debt exceeded the fair market value of the collateral. Bank of Chapmanville v. Workman, 406 S.E.2d at 65 . The New Mexico Supreme Court handles the “rebuttable presumption” rule in precisely the same way: Under these decisions, where the value of the collateral is at issue, there is a presumption that the value of the repossessed collateral at resale is equal to the value of the outstanding debt. Where the sale is conducted in accordance with § 9-504(3) the sum received at sale is evidence of the market value.

But if the sale is not conducted according to the Code, the amount received is not evidence of the market value of the collateral. The secured party has the burden of proving the market value by other evidence, (citations omitted). Clark Leasing Corp. v. White Sands Forest Prod., 87 N.M. at 456 , 535 P.2d at 1082 . F. The Maryland Case Law: Failure of Notice Before we may proceed to make a policy choice, of course, we must determine what freedom of movement is permitted us by stare decisis.

On two occasions, the Court of Appeals has squarely held that the failure of a creditor to comply "with the provisions of § 9-504(3) will operate as an absolute bar to the creditor’s recovery of a deficiency judgment. First Nat’l Bank v. DiDomenico, 302 Md. 290 , 487 A.2d 646 (1985); Maryland Nat’l Bank v. Wathen, 288 Md. 119 , 414 A.2d 1261 (1980). At first glance, that appears to be dispositive. On closer examination, however, the two Maryland decisions involve a creditor’s failure to notify the debtor of the impending sale of the collateral after default and repossession.

The rationale for both of the holdings, moreover, is based primarily on the preclusion of the debtor’s right of redemption under § 9-506. As the analysis of this provision of the Uniform Commercial Code has become more sophisticated, however, there is a growing awareness of the qualitative difference between 1) the ⁶²³ failure to give the debtor any notice of the sale and 2) other instances of operating in a commercially unreasonable fashion. Illustrative of this emerging sophistication is the decision of the Supreme Court of Kentucky of Holt v. Peoples Bank of Mt. Washington, 814 S.W.2d 568 (Ky.1991).

Even more so than in Maryland, a significant body of Kentucky precedent had indicated that failure of compliance with the verbatim Kentucky counterpart of § 9-504(3) would result in an absolute bar to a deficiency judgment. In the Holt case, however, the Supreme Court of Kentucky noted, as we note here, that all of the earlier failures of compliance had been of the failure-to-give-notice variety. It then recognized, as do we, the distinction: At the outset, a distinction should be made between the failure to give presale notice of the intended disposition of collateral and other acts of commercially unreasonable behavior. Notice to the debtor that the collateral is about to be disposed of is so fundamental that no remedy less severe than forfeiture of the deficiency amount would be adequate and this remedy is by no means exclusive.

In a proper case, criminal and tort liability may be imposed.... 814 S.W.2d at 570 . The Kentucky Supreme Court explained why the failure of a creditor to give notice to the debtor logically incurred the heavy sanction of foreclosing any deficiency judgment: A secured party who fails to give the notice ... denies the debtor an opportunity to assert defenses, contest the amount claimed or pay the indebtedness prior to sale of the collateral. The greatest protection available to debtors from unscrupulous conduct by secured parties who have repossessed collateral is notice of disposition of the collateral. When notice is omitted, the principle of estoppel heretofore recognized by the courts of this Commonwealth prevents recovery of any deficiency judgment.

Skeels v. Universal C.I.T. Credit Corporation, 222 F.Supp. 696 (W.D.Pa. 1963). ⁶²⁴ 814 S.W.2d at 571 . In its analysis of the gravity of the failure to give notice, Kentucky relied upon the same landmark case of Skeels v. Universal C.I.T. Credit Corp., 222 F.Supp. 696 (W.D.Pa.1968), that the two Maryland decisions also relied heavily upon. Even a quick perusal of Maryland Nat’l Bank v. Wathen, 288 Md. 119 , 414 A.2d 1261 (1980), reveals unmistakably that its exclusive concentration was on the failure to give notice specifically and not on noncompliance with § 9-504(3) generally. At the very outset of the opinion, Judge Cole stated the issue: In this case we are