## Facts

- Anthony and Elizabeth Thornton obtained a series of loans from Tennessee Commerce Bank to support their trucking business.
- The loans were secured by a security interest in the business’s assets, including trucking equipment, and the Thorntons personally guaranteed repayment.
- The Thorntons defaulted on the loans.
- In June 2011, the Thorntons asked the bank to repossess and sell the collateral and apply the proceeds to the outstanding debt; at that time, the collateral’s value would have exceeded the amount owed.
- The bank refused to repossess and sell the collateral at the Thorntons’ request.
- After Tennessee Commerce Bank failed, WM Capital Partners, LLC (WMCP) acquired the loans and related rights through the FDIC.
- WMCP later repossessed the collateral, but the record did not clearly establish when repossession occurred.
- WMCP sold the collateral at an auction in July 2013.
- During the roughly two years between the Thorntons’ repossession request and the auction sale, the equipment depreciated significantly, and the sale proceeds did not satisfy the debt.
- WMCP sued the Thorntons (as guarantors) and the business for a deficiency judgment. The defendants contended that the disposition was not commercially reasonable due to the delay and resulting depreciation.
- The chancery court granted WMCP summary judgment. The defendants appealed.

## Issues

1. Does Tenn. Code Ann. § 47-9-610’s requirement that collateral be disposed of in a commercially reasonable manner apply before the secured party has actual or constructive possession—such that a creditor’s refusal to repossess at the debtor’s request can violate § 47-9-610?
2. After the defendants raised a time-based commercial-reasonableness objection, did WMCP carry its summary-judgment burden to show a commercially reasonable disposition and to establish the amount of any deficiency?

## Decision

- The court held that the commercial-reasonableness requirement in Tenn. Code Ann. § 47-9-610 applies only once the secured party has actual or constructive possession of the collateral.
- The bank’s refusal to repossess the collateral when requested did not constitute actual or constructive possession and therefore did not trigger § 47-9-610.
- Even so, because the defendants specifically challenged the time aspect of the disposition, WMCP was required on summary judgment to produce evidence showing that the disposition (including timing after possession) was commercially reasonable and to prove the deficiency amount.
- WMCP failed to meet that burden of production; among other problems, the record did not clearly establish when WMCP obtained possession, leaving unresolved factual questions tied to the timing and reasonableness of the sale.
- The court reversed the summary judgment and remanded for further proceedings.

## Legal Principles

- Under Tenn. Code Ann. § 47-9-610, the duty to conduct a commercially reasonable disposition arises only after the secured party has actual or constructive possession of the collateral.
- A secured party’s refusal to repossess collateral upon a debtor’s request, without more, does not amount to actual or constructive possession and does not trigger § 47-9-610.
- In a deficiency action following disposition of collateral, a secured creditor seeking summary judgment must produce evidence sufficient to establish both (a) compliance with Article 9’s disposition standards once they apply and (b) the amount of the claimed deficiency.
- When the debtor contests the time component of commercial reasonableness, the creditor must come forward with evidence addressing timing and surrounding circumstances; conclusory assertions are not enough to obtain summary judgment.

## Conclusion

The Court of Appeals held that Article 9’s commercial-reasonableness requirement for disposing of collateral begins only after the secured party has possession, so the bank’s earlier refusal to repossess at the debtor’s request did not violate § 47-9-610; however, because the defendants raised a timing-based objection and the record left key facts (including the date of repossession) unresolved, WMCP did not produce enough evidence to justify summary judgment on commercial reasonableness or the deficiency amount, requiring reversal and remand.


WM Capital Partners, LLC v. Thornton, 525 S.W.3d 265 (2016)