Opinion
Case No. 01-20576
August 23, 2001
ORDER ON DEBTOR'S OBJECTION TO CLAIM
This case came before the court on the objection of the debtor to proof of claim number 15 (sic), filed by General Electric Capital Corporation (GECC). The GECC claim is actually claim no. 21. On August 17, 2001, the court held a hearing and took the matter under submission on the facts agreed by the parties at the hearing.
Undisputed Facts
GECC entered into a lease agreement of two pieces of heavy equipment with N.A. Corp. The lease was secured by an interest in the equipment. The debtor in this chapter 13 case, Brenda Nygaard, signed an Individual Guaranty of the contract
N.A. Corp. defaulted under the contract and on December 12, 2000, GECC sent a "Notice of Private Sale at Collateral Under Section 9-504 of the Uniform Commercial Code" to N.A. Corp. GECC subsequently liquidated the collateral and filed a proof of claim in the debtor's case seeking a deficiency of $206,736.24.
Conclusions of Law
The debtor/guarantor contends that the deficiency claim against her is barred due to GECC's failure to specifically provide her with notice of the sale as required by Article 9 of the Uniform Commercial Code. Resolution of the issue is governed by former Wyo. Stat. Ann. § 34.1-9-504(c) (Lexis 1999). See Wyo. Stat. Ann. § 34.1-9-702(c) (Lexis 2001).
Article 9, under § 34.1-9-504(c), requires that "reasonable notification of the time after which any private sale . . . is to be made shall be sent by the secured party to the debtor." In Wyoming, the secured party's compliance with the notice obligation of § 9-504(c) is "a condition precedent to recovery of a deficiency." Coones v. F.D.I.C., 848 P.2d 783, 802 (Wyo. 1993).
There appears to be no Wyoming case on the issue before the court, i.e., whether a guarantor is a "debtor" for purposes of the § 9-504(c) notice requirement. The cases cited by the debtor are not on point. For example, in the case of Jackson State Bank v. Beck, 577 P.2d 168 (Wyo. 1978). the Becks were "endorsers" of the notes and apparently were parties to the security agreements.
The Uniform Commercial Code defines a debtor as "the person who owes payment or other performance of the obligation secured . . ." Wyo. Stat. Ann. § 34.1-9-105(a)(iv) (Lexis 1999). By far the majority of reported decisions holds that a guarantor is a debtor within the definition of § 9-105(a)(iv). May v. The Women's Bank N.A., 807 P.2d 1145, 1150 (Colo. 1991); United States v. Kelley, 890 F.2d 220 (10th Cir. 1989) (applying Kansas law); Haggis Management, Inc. v. Turtle Management, Inc., 745 P.2d 442 (Utah 1985). Exceptions to the rule are few and involve actions brought by the Small Business Administration in federal court. May v. The Women's Bank, N.A., 807 P.2d at 1149; United States v. Kukowski, 735 F.2d 1057 (8th Cir. 1984).
The reasoning of the majority rule is sound. A guarantor is a person who owes performance on the obligation, and is entitled to notice in order to protect its rights. The court is convinced that the Wyoming courts would adopt the majority rule. A creditor must provide the guarantor with notice of a sale of collateral prior to the sale, failing which a claim of deficiency is barred.
Accordingly, IT IS ORDERED that the debtor's objection to claim no. 21 of General Electric Capital Corp. is sustained; and the claim is disallowed.