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Bank of Chenoa v. Bagby

OPINION FILED AUGUST 7, 1984.

THE BANK OF CHENOA, PLAINTIFF-APPELLEE,

v.

DONALD E. BAGBY ET AL., DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of McLean County; the Hon. James A. Knecht, Judge, presiding.

PRESIDING JUSTICE MILLS DELIVERED THE OPINION OF THE COURT:

Foreclosure and deficiency judgment.

We affirm.

THE FACTS

In order to obtain funds to finance the purchase and operation of a Yamaha motorcycle dealership, Donald and Shirley Bagby, as Bagby, Inc., gave two notes to the Bank of Chenoa (the Bank). The notes were secured by two real estate mortgages, a security interest in the equipment, parts, and inventory of the dealership, and the Bagbys' personal guarantees.

The dealership fell into severe financial difficulties and the Bagbys were unable to meet their obligation to the Bank. The Bank — exercising its remedies under article 9 of the Uniform Commercial Code-Secured Transactions (Ill. Rev. Stat. 1983, ch. 26, par. 9-101 et seq.) — took possession of the equipment, parts, and inventory of the dealership. The Bank later sold it all over a period of time.

The Bank then filed a complaint seeking to foreclose on the real estate mortgage and to recover any remaining deficiency from the Bagbys. In response, the Bagbys filed an answer alleging in part that the Bank could not foreclose on the mortgage or recover any deficiency because the Bank had sold the assets of the dealership without proper notice and in a commercially unreasonable manner.

The trial court granted the Bank's motion to place itself in possession of the real estate. The property was later sold by agreement of the parties, and the proceeds of the sale were placed in an escrow account.

After a hearing, the trial court entered a judgment in the Bank's favor. The court found that the Bank was entitled to a judgment of foreclosure on both mortgages and the sum of $181,281.77. Two weeks later, the trial court entered the judgment of foreclosure, finding in part "[t]hat by virtue of the mortgages and indebtedness secured thereby there is due from the mortgagors [the Bagbys] to the plaintiff [the Bank] the sum of $181,281.77."

The Bagbys appeal.

We affirm.

THE LAW

On appeal, the Bagbys maintain that the circuit court erred in entering the judgment of foreclosure and in awarding the Bank a deficiency judgment. The Bagbys argue that the Bank failed to conform with the provisions of article 9 when it repossessed and sold the assets of the dealership. Specifically, they contend that the Bank failed to both give proper notice and to conduct the sale in a commercially reasonable manner.

The Bagbys point out that our court has ruled that failure to abide by the provisions of article 9 results in the creditor being barred from seeking a deficiency judgment against the debtor. The Bagbys argue that the Bank was attempting to recover a deficiency remaining after the sale of the dealership assets when it sought to foreclose on the mortgages and also when it sought a personal deficiency judgment in the foreclosure action. The Bagbys conclude that because the Bank is barred from seeking a deficiency from them it is therefore ...


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