## Facts

- Racwell Construction, Inc. and Francesco Racanelli leased a vehicle from a dealer under a 36-month lease that named Ford Motor Credit Company, Inc. as agent to enforce the lease.
- The lease required the lessees at lease end either to purchase the vehicle or return it; it also imposed liability upon default/early termination for the difference between the lease-end purchase price and the net sale proceeds.
- At the end of the lease term, the lessees neither exercised the purchase option nor returned the vehicle.
- About four months later, Ford repossessed the vehicle and sold it at a private auto auction.
- Ford sued for a deficiency of $13,092.77 based on the contractual formula.
- Defendants counterclaimed that Ford breached the lease by repossessing without first canceling the lease.

## Issues

1. Whether Ford established entitlement to summary judgment on liability for breach of the lease based on defendants’ failure to purchase or return the vehicle.
2. Whether Ford established entitlement to summary judgment fixing the deficiency amount by proving that the repossession sale (and related notice) was commercially reasonable under UCC Article 9.

## Decision

- The appellate court affirmed summary judgment for Ford on liability.
- The appellate court denied summary judgment on damages, holding that Ford did not eliminate factual disputes about the commercial reasonableness of the disposition and the adequacy of notice.
- The order was modified to remove the damages award and entry of judgment for $13,092.77, and the matter was remitted for further proceedings on damages.

## Legal Principles

- A lessee’s failure at lease end to purchase the vehicle or return it as required constitutes a default supporting liability for breach under the lease’s enforcement terms.
- A secured party seeking a deficiency after disposing of collateral bears the burden to show that every aspect of the disposition (method, manner, time, place, and terms) was commercially reasonable under UCC Article 9.
- If commercial reasonableness is not established, a deficiency is not automatically barred; the creditor may still recover by proving what proceeds a commercially reasonable sale would have produced and that such proceeds would remain less than the debtor’s obligation plus allowable expenses.
- Where material fact questions remain about commercial reasonableness and notice, summary judgment fixing deficiency damages is improper.

## Conclusion

The court held defendants liable for breaching the lease by neither purchasing nor returning the vehicle, but required a damages hearing because the creditor did not conclusively prove a commercially reasonable repossession sale and adequate notice as prerequisites to fixing a deficiency on summary judgment.


Ford Motor Credit Co. v. Racwell Constr., Inc., 24 A.D.3d 500 (N.Y. App. Div. 2d Dep’t 2005)