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§3.10 Vehicle Sales—Deficiency Judgments

Lesson 3:
Vehicle Repairs, Sales, & Leases

Most often deficiency judgments are obtained by default. Whether contested or uncontested, you must determine all of the following matters before rendering a deficiency judgment [see Liberty Loan Corp. v Petersen (1972) 24 CA3d 915, 919]:

  • Transaction: The transaction complies with the requirements of the Rees-Levering Sales Act and relevant provisions of Com C §§9101 et seq (see Com C §§9610 et seq, 9626, which set forth the requirements of a good-faith, commercially reasonable sale and disposal of collateral). You may make these determinations based on a party’s affidavit or you may require a hearing in a particular case. [CC §2983.8(b).]
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  • Notice requirements: The seller has complied with the notice requirements regarding time, service, and content. [See CC §2983.2(a); Backes v Village Corner, Inc. (1987) 197 CA3d 209, 212–213 (a secured party who fails to give notice loses his or her conditional right to obtain a deficiency judgment).] E.g., the seller notified the buyer of his or her intent to dispose of the vehicle and the buyer’s rights to reinstatement of the contract and redemption of the vehicle.
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  • Reinstatement: If the notice states that the buyer does not have the right to reinstate the contract, you must determine whether the reasons given for denying reinstatement are valid. [See CC §2983.3(b).] The seller has the burden of proving that the denial of reinstatement was reasonable and made in good faith. [CC §2983.3(e).]

  • Resale: The resale of the repossessed vehicle was conducted in a commercially reasonable manner. [See Credit Bureau Metro, Inc. v Mims (1975) 45 CA3d Supp 12, 15.] Every aspect of the sale must be commercially reasonable, including the method, manner, time, place, and other terms of sale. If commercially reasonable, the sale may be public or private. [Com C §9610(b).] The debtor is not liable if the disposition was not conducted in good faith. [Com C §9626(b)(2)(C).] The creditor has the burden of proving compliance with these requirements. [Com C §9626(b)(1).]
  • Expenses: The expenses claimed in connection with the repossession and sale are reasonable. [Com C §9615(a)(1).]
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  • Credits: All unearned finance charges and insurance premiums as of the date of repossession have been credited. [CC §1806.3.]

  • Notice of sale: A creditor must comply with the relevant provisions of both the Act and the California Uniform Commercial Code in giving a debtor proper notice of a public sale; without compliance, the creditor is precluded from obtaining a deficiency judgment. [Bank of America v Lallana (1998) 19 C4th 203, 210.]
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