## Facts

- Brunswick Acceptance Company, LLC (BAC) financed MEJ, LLC’s boat-dealership inventory under an inventory security agreement executed December 12, 2003; Mitchell E. Jones, MEJ’s sole owner, signed an unconditional guaranty of MEJ’s obligations.
- The agreement required MEJ to pay BAC immediately upon sale of financed inventory and to hold sale proceeds in trust for BAC until BAC was paid.
- After an April 25, 2005 inventory check, BAC determined MEJ was “out of trust” because MEJ had sold four financed boats and had not remitted the amounts owed on those boats.
- By letter dated June 30, 2005, MEJ surrendered seven boats from its inventory to BAC; BAC sent a default and acceleration notice on July 15, 2005.
- MEJ, BAC, and their attorneys met to discuss how the surrendered collateral would be sold; the parties agreed that the attorneys would communicate directly about sales of the boats.
- BAC purchased three of the surrendered boats, leaving four boats to be disposed of by BAC and at issue on appeal: (1) a 30-foot Bayliner, (2) a 27-foot Maxum, (3) a 31-foot Maxum, and (4) a 42-foot Maxum.
- For boats 1 and 2, BAC’s counsel emailed MEJ’s counsel on August 15, 2005 with a proposed private sale, including the contemplated price; MEJ’s counsel responded on August 18, 2005 that MEJ agreed the boats were being sold for a good price.
- The August 2005 buyer for boats 1 and 2 did not close; on September 4, 2005, BAC’s counsel emailed MEJ’s counsel stating the buyer fell through and BAC would seek another buyer.
- Boats 1 and 2 were ultimately sold on June 26, 2006 for less than their invoice amounts.
- For boat 3, BAC’s counsel emailed MEJ’s counsel on November 10, 2005 with the proposed private sale and price; boat 3 was sold later that month, also for less than invoice.
- For boat 4, BAC’s counsel emailed MEJ’s counsel on February 1, 2006 with the proposed private sale and price; boat 4 was sold in April 2006, also for less than invoice.
- BAC’s email communications identified the boats and the proposed terms of the private sales and included information showing that the sales would leave deficiencies.
- BAC sued MEJ and Jones in circuit court for the total deficiency remaining after disposition of the four boats and sought attorney’s fees under the contract documents.
- After a bench trial, the trial court found BAC’s notice and dispositions sufficient under Tennessee’s UCC Article 9, entered a deficiency judgment for $160,879 plus post-judgment interest, and awarded BAC $30,000 in attorney’s fees.
- MEJ and Jones appealed.

## Issues

1. Whether BAC’s email notifications to MEJ’s counsel provided reasonable notification of the intended private dispositions of collateral as required by Tennessee’s UCC Article 9.
2. Whether BAC proved that every aspect of the private sales (method, manner, time, and terms) was commercially reasonable, permitting recovery of a deficiency.
3. Whether the trial court properly awarded BAC $30,000 in attorney’s fees under the security agreement and guaranty.

## Decision

- The Tennessee Court of Appeals affirmed the trial court’s judgment.
- The court held the evidence did not preponderate against the trial court’s finding that BAC’s email notices, given the parties’ agreement to communicate through counsel and the actual communications exchanged, were sufficient and reasonable under Article 9.
- The court held the evidence did not preponderate against the finding that BAC’s private sales were commercially reasonable, even though the boats sold for less than invoice amounts and resulted in deficiencies.
- The court affirmed the deficiency judgment of $160,879 plus post-judgment interest.
- The court affirmed the $30,000 attorney’s fee award as authorized by the parties’ agreements and supported by the proof.

## Legal Principles

- After default, a secured party that disposes of collateral must send the debtor reasonable notification of the disposition; the standard is reasonableness under the circumstances, not technical perfection.
- For a private disposition, reasonable notification generally must give the debtor meaningful information about the intended sale and time for the debtor to protect its interests (including seeking buyers or redeeming), and the sufficiency of notice may be evaluated in light of the parties’ prior dealings and agreed communication methods.
- Email communications can constitute written notification when they actually inform the debtor (or the debtor’s counsel) of the planned private sale and its key terms and allow a fair chance to respond.
- Article 9 requires that every aspect of the disposition—method, manner, time, place, and other terms—be commercially reasonable; a price below invoice or a resulting deficiency, standing alone, does not establish that a sale was commercially unreasonable.
- In a bench trial appeal, factual findings are reviewed de novo with a presumption of correctness and will be upheld unless the evidence preponderates against them; legal conclusions are reviewed de novo.
- Contract provisions in a security agreement and guaranty allowing recovery of reasonable attorney’s fees incurred to enforce the debt are generally enforceable, subject to a reasonableness determination by the trial court.

## Conclusion

The court affirmed a deficiency judgment and attorney’s fees where the debtor surrendered boats after default, the parties agreed that counsel would communicate about private sales, BAC provided multiple email notices identifying the boats and proposed sale terms (with MEJ’s counsel responding to some and approving pricing), and the proof supported the trial court’s findings that the notices were reasonable, the dispositions were commercially reasonable, and the fee award was contractually authorized and reasonable.


Brunswick Acceptance Company, LLC v. MEJ, LLC, 292 S.W.3d 638 (2008)