## Facts

- Blankenship-Melton Real Estate, Inc. borrowed $40,133 from a bank and granted a security interest in a 1999 Bryant boat, New Holland tractor, 1999 Ford F-150, and a 1994 mobile home.
- Walden Blankenship, acting for the corporation, also signed a personal guaranty for the debt and listed a Lexington, Tennessee address.
- After default, the bank began foreclosure proceedings; R & J of Tennessee, Inc. purchased the note and security interest and proceeded with foreclosure.
- R & J delayed foreclosure for several months while individuals associated with R & J used the collateral (including living in the mobile home and using the truck) without paying rent.
- R & J mailed notice of the foreclosure sale to Blankenship at the guaranty address; Blankenship had moved, and the letter was returned as undeliverable only after the sale.
- R & J also posted sale notices at its office, the courthouse, and on the collateral.
- At the foreclosure sale, only two individuals associated with R & J attended; R & J’s principal was the only bidder.
- Evidence suggested a substantial gap between purchase/estimated values (the bank estimated collateral value at least $40,000; testimony described substantial original costs) and the sale outcome.
- R & J sued Blankenship individually for a post-sale deficiency.

## Issues

1. Whether the secured party provided adequate Article 9 notice of the collateral disposition to a guarantor.
2. Whether the secured party proved that the disposition of collateral was commercially reasonable, as required to recover a deficiency.

## Decision

- The appellate court reversed the circuit court’s deficiency judgment for the secured party.
- The court held that the secured party failed to carry its burden to prove the sale was conducted in a commercially reasonable manner.
- The case was remanded for further proceedings consistent with the appellate opinion.

## Legal Principles

- Under Article 9, a secured party seeking a deficiency must show that the disposition of collateral was commercially reasonable in method, manner, time, place, and terms.
- When the debtor or guarantor challenges commercial reasonableness, the secured party bears the burden of proving compliance with Article 9 standards.
- Indicators bearing on commercial reasonableness include the adequacy of notice/marketing, the competitiveness of bidding, and whether the sale process produced a price consistent with the collateral’s value.
- A guarantor may assert Article 9 notice and commercial-reasonableness defenses in response to a deficiency claim.

## Conclusion

The deficiency award could not stand because the secured party did not prove that its foreclosure sale satisfied Article 9’s commercial-reasonableness requirements, so the judgment was reversed and the matter remanded.


R & J of Tenn., Inc. v. Blankenship-Melton Real Estate, Inc., 166 S.W.3d 195 (Tenn. Ct. App. 2004)