## Facts

- Steven L. Downing purchased a 1999 BMW 528i and granted BMW Financial Services, N.A., LLC a lien on the vehicle.
- Downing filed a Chapter 13 petition; the proposed plan provided for surrender of the vehicle and payment of allowed claims.
- The court granted BMW relief from the automatic stay, and Downing surrendered the vehicle.
- BMW sent a written pre-sale notice stating it intended to sell the vehicle no sooner than 10 days from the notice date; the notice identified the debtor, the secured party, the collateral, and provided a phone number.
- The notice did not state whether the sale would be public or private, did not address possible deficiency liability, and did not state the debtor’s right to an accounting of the unpaid indebtedness (or any charge for it).
- BMW sold the vehicle at a commercial auction and filed an unsecured proof of claim for a deficiency of $18,517.24.
- Downing objected to the deficiency claim, asserting BMW’s notice failed to satisfy Missouri’s Revised Article 9 requirements (Mo. Rev. Stat. §§ 400.9-613 and 400.9-614).

## Issues

1. Whether BMW’s pre-sale notification satisfied Missouri Revised Article 9’s statutory content requirements so as to preserve BMW’s right to an unsecured deficiency claim after disposition of the collateral.
2. Whether Missouri law requires strict compliance with Article 9 notice requirements as a prerequisite to recovering a deficiency.
3. Whether the notice’s omissions as to (a) method of disposition, (b) potential deficiency liability, and (c) the right to an accounting barred any deficiency recovery.

## Decision

- The court sustained the debtor’s objection and disallowed BMW’s unsecured deficiency claim.
- The court held Missouri requires strict compliance with Article 9’s notice provisions as a prerequisite to any deficiency recovery, and the secured creditor bears the burden of proving sufficiency.
- The court found BMW’s notice deficient because it failed to state the method of intended disposition and omitted required disclosures concerning deficiency liability and the debtor’s right to an accounting.
- The court rejected arguments that labeling the disposition “private” excused these omissions and declined to apply a prejudice or harmless-error standard.

## Legal Principles

- Under Missouri law, a secured creditor may recover a deficiency after repossession and sale of collateral only upon strict compliance with the governing statutory notice requirements.
- The creditor bears the burden of proving its pre-sale notice contained all information required by Mo. Rev. Stat. §§ 400.9-613 and 400.9-614, and doubts regarding compliance are resolved in favor of the debtor.
- A compliant notice must include, among other required items, the method of intended disposition and a statement that the debtor is entitled to an accounting of the unpaid indebtedness (including any charge), along with other statutorily mandated disclosures.
- Failure to strictly comply with the statutory notice regime forfeits the right to a deficiency claim, without requiring a showing of actual prejudice.

## Conclusion

The court disallowed the creditor’s deficiency claim because the creditor failed to strictly comply with Missouri Revised Article 9’s pre-sale notice requirements, and strict compliance is a prerequisite to any deficiency recovery following disposition of repossessed collateral.


In re Downing, 286 B.R. 900 (Bankr. W.D. Mo. 2002)