Exercise 16

Farmer Brown purchased a tractor for his family farm from Field’s Farm & Ranch Supply, financing $12,000.00 of the purchase and giving Field’s a security interest in the tractor. Farmer Brown never made any payments and Field’s repossesses the tractor. Field’s then writes to Farmer Brown, informing him that it would sell the tractor at a private auction. Ten days later, without any further contact with Farmer Brown, and without any public advertising of the sale, Field’s sells the tractor for $8,000.00 at a public auction at its place of business. Field’s then sues Farmer Brown for the $4,000.00 deficiency plus the costs of repossession, refurbishment of the tractor, and resale.

Should Field’s be able to recover the entire deficiency plus costs?

A. Yes, because Field’s suffered that amount of damages when Farmer Brown defaulted.

ANSWER "A" IS NOT CORRECT. Please try again.

B. No, because Field’s did not conduct the sale in a commercially reasonable manner.

ANSWER "B" IS CORRECT. In order to obtain the entire deficiency plus costs, the sale of the tractor had to comply with the “commercially reasonable” requirement of the Uniform Commercial Code. Here, Field’s notified Farmer Brown that the tractor would be sold privately, but then sold the tractor at a “public” auction without advertising or telling Farmer Brown. According to Sections 55-9-613 and -614, Field’s was required to inform Farmer Brown in writing of the method of sale (that is, whether the sale would be public or private) and, if public, of the time and place of the public sale. Here, Field’s told Farmer Brown that the sale would be private—when, in fact, it was public--and did not tell him when or where the public sale would be held. Because Field’s did not comply with the statutes, the sale was not commercially reasonable and Field’s is not entitled to the entire deficiency. Farmer Brown is liable only for the deficiency that would have existed if the sale had been conducted in a commercially reasonable manner.