TBA Law Blog


Posted by: Katharine Heriges on Oct 16, 2017

The Tennessee Supreme Court today issued guidance on the steps courts should follow when a creditor sells collateral used to obtain a loan, but does not provide the required notice of the sale. The case involved a bank loan that was used to purchase an airplane, with the plane itself and additional guarantors securing the transaction. When the debtor failed to maintain insurance, the bank, Regions Bank, placed the loan in default, and the resulting accelerated payments were not made. The bank filed suit against the guarantors. While that action was pending, Regions also repossessed the plane and spent money to make it flightworthy and marketable. Regions then ultimately sold the plane at a private sale for less than the amount owed to Regions. The Court concluded that resolution of this issue was a fact question for the trier of fact, in this case the trial court, to decide. The court expressly rejected the Court of Appeals’ evidentiary requirement regarding proof negating a debtor’s or guarantor’s ability or motivation to redeem or purchase the collateral. The court then spelled out the proper procedures for a trial court to utilize to resolve this issue.