Alert March 19, 2013

First Circuit Holds Bank Not Required to Comply with State UCC Provision

The United States Court of Appeals for the First circuit affirmed a district court ruling that proper notice of sale was given under the Florida Uniform Commercial Code. Plaintiff brought an action against a lender challenging the repossession and sale of his property under the Florida UCC. In particular, plaintiff claimed that because the notice of sale was deficient, the lender was prohibited from collecting a deficiency judgment. Plaintiff’s challenge was based on the fact that the notice of sale provided by the lender did not provide the time and date of the sale as required under the terms of the mortgage. The district court granted summary judgment in favor of the lender and plaintiff appealed.

In affirming the lower court’s ruling, the First Circuit considered 2 different provisions of the mortgage instrument. The first provision, on which plaintiff relied, required 10 days’ advance notice of the time and place of sale. The second provision, cited by the lender, allowed the lender to exercise any "rights, privileges and remedies granted by applicable law"—in this instance the Florida UCC, which did not contain a 10-day notice requirement of the time and place of sale. The First Circuit recognized that this second provision was not related to or overlapping with the first, and constituted a separate remedy that was not constrained by the requirements of the first provision. The First Circuit noted that the mortgage’s plain terms favored the lender. In particular, the mortgage stated in the section on rights and remedies that if any default occurred, "the mortgagee may, at its option, do any one or more of the [seven rights and remedies, including the provision relied upon by the lender]." The lender had "seven distinct options and could elect to employ a single one…or a combination." As a result, the First Circuit upheld the district court’s granting of summary judgment in favor of the lender.