The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Commercial Discount Corporation ("CDC") and Leaseamatic, Inc.
("Leaseamatic," a CDC subsidiary) sue defendants William S.
King ("King") and Horace Rainey, Jr. ("Rainey") on their joint
and several personal guaranty of certain indebtedness of Racran
Corporation ("Racran"). Both sides have now moved for summary
judgment. For the reasons stated in this memorandum opinion and
order defendants' motion is denied and plaintiffs' motion is
not ruled on.
This Court's September 23, 1980 opinion ("Opinion I") granted
plaintiffs' motion for partial summary judgment on the issue of
liability. Thereafter plaintiffs sold much of the collateral
covered by the Racran loan agreement but failed to notify King
and Rainey of that sale.
Although the King-Rainey guaranty agreement had waived any
right to such notice, this Court's May 14, 1981 memorandum
opinion and order, 515 F. Supp. 988 (N.D.Ill. 1981) ("Opinion
II"), held a post-default waiver of notice was necessary
under Illinois Uniform Commercial Code ("UCC") §
9-504(3).*fn1 Accordingly Opinion II vacated the summary
judgment order solely to determine the effect of plaintiffs'
failure to provide notice of the sale of collateral.
On that score, in Opinion II this Court held controlling
several Illinois cases such as National Boulevard Bank of
Chicago v. Jackson, 92 Ill. App.3d 928, 48 Ill.Dec. 327,
416 N.E.2d 358 (1st Dist. 1981):
Failure to provide adequate notice does not, however,
absolutely bar a deficiency judgment, but raises a presumption
that the value of the secured collateral is equal to the amount
of the debt. In order to obtain a deficiency judgment, the
creditor has the burden of rebutting the presumption and of
proving that the amount collected from the sale was
Defendants now argue for an impermissible windfall: They
contend that the presumption entitled them to an outright
discharge if the amount realized from the sale was not
"commercially reasonable,"*fn2 even if it is demonstrated
that the collateral's value was not in fact equal to the
amount of the
debt — if the presumption is in fact rebutted.*fn3
That thesis may be both illustrated and tested by a
1. Assume a $100,000 debt, the subject of an unconditional
guaranty, is in default.
2. Assume collateral is sold by the creditor without notice
to the guarantor, realizing proceeds of $5,000.
3. Assume the sale was not commercially reasonable (so that
the $5,000 also was not, in the sense employed in National
Boulevard Bank), but the creditor proves that a commercially
reasonable sale would have brought $20,000 (or proves in some
other way that the fair market value of the collateral at the
time of sale was $20,000).
Defendants would have it that they would be relieved from any
liability as guarantors under that set of facts, even though
the maximum harm to them from the lack of commercial
reasonableness of the sale was $15,000. This Court will not
have it so, and nothing in the "remedial" view of UCC Article
IX that controls here*fn4 (as contrasted with the "punitive"
view) requires that result. In the hypothetical example this
Court would impose an $80,000 liability on the unconditional
In other words the presumption referred to in National
Boulevard Bank may be rebutted by a creditor's meeting any of
several burdens, at least including:
1. proof that the sale itself was commercially reasonable
(with nothing to show that the amount realized was less ...