Colorado § 4-9-610 - Disposition of collateral after default.

§ 4-9-610. Disposition of collateral after default.

(a) After default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.

(b) Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable. If commercially reasonable, a secured party may dispose of collateral by public or private proceedings, by one or more contracts, as a unit or in parcels, and at any time and place and on any terms.

(c) A secured party may purchase collateral:

(1) At a public disposition; or

(2) At a private disposition only if the collateral is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations.

(d) A contract for sale, lease, license, or other disposition includes the warranties relating to title, possession, quiet enjoyment, and the like which by operation of law accompany a voluntary disposition of property of the kind subject to the contract.

(e) A secured party may disclaim or modify warranties under subsection (d) of this section:

(1) In a manner that would be effective to disclaim or modify the warranties in a voluntary disposition of property of the kind subject to the contract of disposition; or

(2) By communicating to the purchaser, prior to completion of the transaction, a record evidencing the contract for disposition and including an express disclaimer or modification of the warranties.

(f) A record is sufficient to disclaim warranties under subsection (e) of this section if it indicates "There is no warranty relating to title, possession, quiet enjoyment, or the like in this disposition" or uses words of similar import.

Source: L. 2001: Entire article R&RE, p. 1403, § 1, effective July 1.

Editor's note: (1) This section is similar to former § 4-9-504 as it existed prior to 2001.

(2) Colorado legislative change: Colorado added the phrase "prior to completion of the transaction," to subsection (e)(2).

ANNOTATION

Law reviews. For comment, "Remedies for Failure to Notify Debtor of Disposition of Repossessed Collateral Under the U.C.C.", see 44 U. Colo. L. Rev. 221 (1972). For article, "Buyer-Secured Party Conflicts Under Section 9-307(1) of the Uniform Commercial Code", see 46 U. Colo. L. Rev. 333 (1974-75). For article, "Commercial Law", see 55 Den. L.J. 425 (1978). For article, "Secured Transactions — Part I: Attachment, Perfection and Priorities", see 11 Colo. Law. 2939 (1982). For article, "Secured Transactions — Part II: Default, Foreclosure and Bankruptcy", see 12 Colo. Law. 13 (1983). For article, "A Review of Agricultural Law: Hard Times and Hard Choices", see 15 Colo. Law. 629 (1986). For article, "The Colorado Farm Homestead Protection Act", see 15 Colo. Law. 1642 (1986). For article, "Agricultural Lending in a Troubled Economy", see 16 Colo. Law. 1773 (1987). For article, "The Agricultural Credit Act of 1987", see 17 Colo. Law. 611 (1988).

Annotator's note. Since § 4-9-610 is similar to § 4-9-504 as it existed prior to the 2001 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

Issuance of title certificate to repossessor involves no deprivation of due process as contemplated by the fourteenth amendment or state constitution. It may be that repossession of automobiles or any other property sold on time payment with an express agreement permitting such repossession without notice may be resulting in great abuses, and controls are needed. If so, the regulation of this abuse is a matter for the general assembly, not the courts. Sifuentes v. Weed, 186 Colo. 109, 525 P.2d 1157 (1974).

Authorization of self-help repossessions is not enough to sufficiently involve the state in the acts of repossessors for their acts to be action "under color of" state law. Kirksey v. Theilig, 351 F. Supp. 727 (D. Colo. 1972).

"Disposition" of collateral connotes receipt of "proceeds". Where collateral was released to the debtor, and the creditor did not receive "proceeds", no "disposition" of the collateral took place. Silverberg v. Colantuno, 991 P.2d 280 (Colo. App. 1998).

Presumption that proceeds from sale without notice equal balance owing. Where there is no notice prior to sale of collateral, it is rebuttably presumed that the value of the collateral sold is equal to the balance owing on any notes. To rebut the presumption, the secured party has the burden of proving, by other evidence, that the market value of the collateral and that, after application of that amount, there was a balance still owing on the notes. United Bank v. Reed, 635 P.2d 922 (Colo. App. 1981); Gapter v. Kocjancic, 703 P.2d 660 (Colo. App. 1985); Tajalli v. Gharibi, 758 P.2d 190 (Colo. App. 1988).

The reason for exempting from the notice requirement a transaction where there is a recognized market is that the price on the recognized market represents the fair market value from day to day, so if there is a recognized market, theoretically, the best price at any given time is the current market price. Cmty. Mgt. Ass'n of Colo. Springs, Inc. v. Tousley, 32 Colo. App. 33, 505 P.2d 1314 (1973).

Repossessed automobiles are not collateral of a type sold on a recognized market within the meaning of this section which excuses notification of sale in case of such collateral. Cmty. Mgt. Ass'n of Colo. Springs, Inc. v. Tousley, 32 Colo. App. 33, 505 P.2d 1314 (1973).

Since there is no recognized market for the sale of repossessed automobiles, debtors are entitled to notice of sale of the repossessed automobile. Cmty. Mgt. Ass'n of Colo. Springs, Inc. v. Tousley, 32 Colo. App. 33, 505 P.2d 1314 (1973).

Computer hardware is not collateral of a type sold on a recognized market within the meaning of this section which excuses notification of sale in case of such collateral. 1st Charter Lease Co. v. McAl, Inc., 679 P.2d 114 (Colo. App. 1984).

Immediate action against guarantors. Where by its terms a security document is an absolute guaranty, the obligation of the guarantors may be immediately enforced, without the necessity of an action against the principal obligor or collateral. First Com. Corp. v. Geter, 37 Colo. App. 391, 547 P.2d 1291 (1976).

The right of a secured party to a deficiency judgment is established, so that failure of secured party to give reasonable notice of sale does not result in a forfeiture of the right to recover a deficiency judgment. Cmty. Mgt. Ass'n of Colo. Springs, Inc. v. Tousley, 32 Colo. App. 33, 505 P.2d 1314 (1973).

Failure to give notice of the disposition of the collateral does not preclude the creditor from recovering a deficiency if it can prove the amount thereof. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980); Zimmerman v. Cook, 651 P.2d 910 (Colo. App. 1982).

Director of revenue not involved in repossession and transfer of ownership. The activity of the director of revenue in the issuance of a new title to a repossessor of a motor vehicle is strictly limited to the ministerial duty of providing prima facie evidence of what has already occurred by purely private action, namely, the transfer of title from the debtor to the creditor in a manner specifically provided for by their agreement. It does not in any meaningful way involve the director in the repossession and subsequent transfer of ownership to the repossessor. Sifuentes v. Weed, 186 Colo. 109, 525 P.2d 1157 (1974).

Sufficient evidence that notice sent. The existence of a business custom is sufficient to warrant a presumption that notice was sent. It is then up to the court to decide if that presumption is overcome by other evidence. Greeley Nat. Bank v. Sloan, 677 P.2d 409 (Colo. App. 1983).

Amount received at sale as evidence of market value of collateral. If the sale of the collateral has been conducted in accordance with the requirements of the UCC, the amount received at the sale will be competent evidence of the market value. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).

Amount received at sale is not evidence of market value if sale is not conducted in compliance with law. Where, because of lack of notice, the sale is not conducted in compliance with the law, the amount received is not evidence of the market value, and the secured party has to prove value by other evidence. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).

Debtor entitled to market value offset against balance due. The debtors are entitled to have the market value of the collateral at the time and place of sale offset against any balance due on the indebtedness. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).

Evidence of purchaser's lack of good faith. Knowledge that the holder of a subordinate security interest had not been given the notice required by this section might be evidence of a want of good faith on the part of a purchaser. Young v. Golden State Bank, 39 Colo. App. 45, 560 P.2d 855 (1977).

"Debtor" construed. Accommodation comakers and those others who will be called upon to pay deficiencies are "debtors" within the meaning of § 4-9-105 (1)(d) and subsection (3) of this section, and are entitled to notice of the disposition of the collateral. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).

Subsection (3) deals with both the collateral and the obligation and, accordingly, the term "debtor" includes both the owner of the collateral and the obligor when they are not the same person. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).

"Debtor" includes a guarantor and, as a debtor, the guarantor may not waive debtor's right to insist on a commercially reasonable disposition of collateral. May v. Women's Bank, N.A., 807 P.2d 1145 (Colo. 1991).

A guarantor is treated as a debtor for purposes of article 9 of the Colorado Uniform Commercial Code. The protections afforded by subsection (3) that collateral be disposed of in a commercially reasonable manner are also provided to a guarantor. FBS AG Credit, Inc. v. Estate of Walker, 906 F. Supp. 1427 (D. Colo. 1995).

In proving "commercial reasonableness", the burden of proof is on the creditor. In re Wells, 51 B.R. 563 (Bankr. D. Colo. 1985).

Creditor's sale of property used as collateral to themselves is not commercially reasonable when there is expert testimony that there was no recognized market for the property and it was not subject to widely distributed standard price quotation. Cooper Investments v. Conger, 775 P.2d 76 (Colo. App. 1989).

The retention of collateral by a creditor for an excessive period of time without disposition may be commercially unreasonable in violation of this section. The question of reasonableness is one of fact for the trial court. Tajalli v. Gharibi, 758 P.2d 190 (Colo. App. 1988).

Presumption of no deficiency following repossession. There is a presumption that the value of the repossessed collateral is equal to the amount of the outstanding debt and that, therefore, there is no deficiency. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).

This section provides that reasonable notification of sale must be made unless the collateral is either perishable, threatens to decline speedily in value, or is of a type customarily sold on a recognized market. Cmty. Mgt. Ass'n of Colo. Springs, Inc. v. Tousley, 32 Colo. App. 33, 505 P.2d 1314 (1973).

Article 9 does not determine location of title after default. People ex rel. VanMeveren v. District Court, 619 P.2d 494 (Colo. 1980).

This section is made inoperative by § 4-9-501 with respect to water stock foreclosed as a part of real estate security. Kinoshita v. N. Denver Bank, 181 Colo. 183, 508 P.2d 1264 (1973).

The purpose of the notice requirement in subsection (3) is to give all persons having interests in the collateral or facing possible deficiency claims an opportunity to protect their interests and to utilize all practicable means of reducing to eliminating their potential liability. W. Nat'l Bank v. VFW Post 8103, 660 P.2d 919 (Colo. App. 1983).

A post-default waiver by the defendant of the notice requirement of subsection (3) can be made only when the debtor knowingly and specifically agrees to waive right to such notice. Burdick v. Tucker, 780 P.2d 34 (Colo. App. 1989).

If a secured party fails to give proper notice under subsection (3), a presumption arises that the value of the collateral at the time of sale was equal to the amount of the outstanding debt, so that no deficiency results. Colo. Leasing Corp. v. Borquez, 738 P.2d 377 (Colo. 1986).

Notice required under subsection (3) may not be waived. United Bank v. Reed, 635 P.2d 922 (Colo. App. 1981).

Fulfillment of notice requirement for private sale. In the case of a private sale, the statutory notice requirement is fulfilled when the creditor sends reasonable notification stating the date after which the collateral will be sold. W. Nat'l Bank v. VFW Post 8103, 660 P.2d 919 (Colo. App. 1983).

Under plain language of this section, sale of wraparound promissory note transferred all debtor's rights to purchaser at foreclosure sale and discharged creditor's security interest therein; accordingly, purchaser took free of restrictions contained in security agreement. W. Group Nurseries v. Pomeranz, 867 P.2d 12 (Colo. App. 1993).

Failure of creditor to comply with the notice requirements of this section did not prevent new buyer from taking all of the debtor's rights in the repossessed car even though the certificate of title had not been transferred to the buyer prior to the automatic stay provided for by 11 U.S.C. § 362. In re Duffy, 186 B.R. 503 (Bankr. D. Colo. 1995).

Section 4-9-105 (1)(d) does not require "debtor" to be owner or have rights in the collateral. First Nat'l Bank v. Cillessen, 622 P.2d 598 (Colo. App. 1980).

Applied in W. Nat'l Bank v. ABC Drilling Co., 42 Colo. App. 407, 599 P.2d 942 (1979); First Nat'l Bank v. District Court, 653 P.2d 1123 (Colo. 1982).