A DEFICIENCY judgment cannot be issued against Rona L.V. Doca and Maria I. Magpoc to pay the balance, Superior Court Associate Judge Joseph N. Camacho said in an issued order, because they were not given reasonable notification of the resale of the repossessed vehicle in accordance with 5 CMC § 9504(3).
Deficiency judgment, according to an online legal dictionary, is a ruling made by a court against a debtor in default on a secured loan, indicating that the sale of a property to pay back the loan did not cover the outstanding debt in full. It is mostly a lien placed on the debtor for further money.
Judge Camacho, in his order, noted that in the CNMI, a secured party who seeks to sell collateral after default must send to the debtor reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition (of the collateral) is to be made.
Background
On July 6, 2017, Triple J and Doca and Magpoc entered into a credit sale contract for a motor vehicle wherein defendants purchased from plaintiff a used 2014 Hyundai Accent for a total financed amount of $13,182.
The contract obligated Doca and Magpoc to pay a monthly amortization of $334.
On July 6, 2017, Triple J assigned the contract with recourse to First Hawaiian Bank.
An assignment with recourse means that if defendants failed to comply with their obligations under the contract, FHB could reassign the contract to Triple J, and demand that Triple J pay everything due from defendants under the contract.
During the course of the loan term, defendants defaulted on the loan by failing to make monthly payments.
In May 2018, FHB repossessed the vehicle, reassigned the contract to Triple J, and demanded that Triple J pay $12,051.88, the balance due under the contract.
Triple J paid FHB the sum of $12,051.88.
The payoff amount included the following:
• The balance due on the loan at the time of repossession, which was $11,602.07.
• Repossession costs incurred by FHB totaling $350.
• $41.32 in accrued interest.
• $58.49 in late charges.
The vehicle was resold on Aug. 9, 2018 for the sum of $10,995.
Triple J received a refund of $922 for buyer purchased insurance that was cancelled upon repossession.
Triple J credited this amount to Doca and Magpoc.
Triple J incurred costs totaling $2,235.18 during the resale of the vehicle.
FHB claims that on May 25, 2018, it sent letters to Doca and Magpoc, informing them of the default, that the vehicle had been repossessed and that the vehicle would be resold at a private sale by Triple J Motors at any time after June 4, 2018 unless the total amount due was paid by defendants prior to that date.
At a bench trial held on May 4, 2021, Triple J was represented by attorney Michael White, while Doca and Magpoc were represented by attorney Christopher A. Heeb.
According to Judge Camacho’s ruling, the parties brought two issues before the court at trial.
The first issue was whether Doca and Magpoc received proper notice from Triple J concerning the resale of the vehicle.
The second issue was whether prejudgment interest is authorized pursuant to the credit sale contract.
As to the notice issue, Judge Camacho said both parties agree that the vehicle was repossessed once payments ceased to be made.
He found that this repossession gave Doca notice that action was being taken in response to the failure to repay the loan.
However, the repossession itself did not provide “reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made” as required by 5 CMC § 9504(3), Judge Camacho said.
For this, he added, Triple J had the burden to present persuasive evidence that showed that reasonable notification of the sale was sent to Doca and Magpoc or else a deficiency judgment against defendants would be barred.
According to the judge, Triple J did not produce any physical evidence such as either a certified mail receipt or a return receipt showing that defendants were sent the notification letters.
Plaintiff’s witness, an FHB executive, conceded that he requested the return receipts associated with the letters sent to Doca and Magpoc from the Guam Dealer Center and was advised that there were no return receipts, the judge said.
“This lack of persuasive testimonial evidence regarding the notification letter in addition [to] FHB executive’s admission that Guam Dealer Center lacked any physical evidence to support its claims, is fatal to plaintiff’s argument that defendants were sent reasonable notification. Thus, Triple J failed to show that it is more probable than not that Doca and Magpoc were sent reasonable notification,” the judge said.
