                 IN THE COURT OF APPEALS OF TENNESSEE
                              AT JACKSON
                              SEPTEMBER 20, 2004 Session

      R & J OF TENNESSEE, INC. v. BLANKENSHIP-MELTON REAL
      ESTATE, INC. and WALDEN BLANKENSHIP, INDIVIDUALLY

                Direct Appeal from the Circuit Court for Henderson County
                         No. 03-002    Roy B. Morgan, Jr., Judge



                 No. W2004-00185-COA-R3-CV - Filed November 17, 2004


This case involves a lawsuit filed by a secured party against a guarantor seeking a deficiency
judgment following a foreclosure sale. The guarantor argued that the secured party was not entitled
to a deficiency because he was given inadequate notice and the sale was conducted in a commercially
unreasonable manner. Following a hearing, the trial court awarded the secured party a deficiency
judgment. We reverse and remand to the trial court for further action consistent with this opinion.



   Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Reversed and
                                       Remanded

ALAN E. HIGHERS, J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and DAVID R. FARMER , J., joined.

Kevin Carter, Lexington, TN, for Appellant

Howard F. Douglass, Lexington, TN, for Appellee

                                           OPINION

                       I. Factual Background and Procedural History

       On February 23, 2000, Walden Blankenship (“Mr. Blankenship”), as acting president of
Blankenship-Melton Real Estate, Inc. (“Blankenship-Melton”), entered into a loan transaction with
the Bank of Henderson County (the “Bank”). In exchange for the Bank loaning Blankenship-Melton
$40,133.00, Blankenship-Melton executed a security agreement granting the Bank a security interest
in a 1999 Bryant boat, a New Holland tractor, a 1999 Ford F150 truck, and a 1994 mobile home.
The agreement called for Blankenship-Melton to pay off the loan by June 18, 2000.
        The collateral used to secure the loan was purchased by Blankenship-Melton prior to entering
into the loan in question. According to Mr. Blakenship, Larry Melton, a director of Blankenship-
Melton, purchased the truck new for an amount between $23,000 and $24,000, and the vehicle’s title
listed Blankenship-Melton as the owner. Mr. Blankenship purchased the tractor used as collateral,
as well as a tiller, a bush hog, and a boom pole, for an amount between $17,000 and $18,000. Mr.
Blankenship also stated that Blankenship-Melton paid approximately $15,000 for the double-wide
mobile home when they purchased it. At the time the loan agreement was entered into in February
of 2000, the Bank estimated the value of all of the collateral to be at least $40,000.

        Contemporaneously with the execution of the promissory note, Mr. Blankenship executed
a guaranty agreement promising to remain personally liable on the promissory note owed to the
Bank. The guaranty agreement identified Mr. Blankenship’s home address as “2820 Shady Hill
Road, Lexington, TN, 38351.” In addition, Larry Melton and his son, Steve Melton, the secretary
of Blankenship-Melton, also executed personal guarantees to secure the loan. The Bank renewed
the loan on two separate occasions, extending the due date for six months each time. At some point,
the loan went into default.1 During this period of time, Mr. Blankenship asserted that he
communicated with the Bank and asked the Bank to foreclose on the collateral. Stan Reynolds, a
representative of the Bank, did not recall Mr. Blankenship making such a request. Regardless of this
dispute, Mr. Blankenship never personally paid any amounts toward the outstanding loan amount.

        Johnny Melton is the majority shareholder and president of R & J of Tennessee, Inc. (“R &
J” or “Appellee”). Larry Melton and Steve Melton approached Johnny Melton explaining that this
particular note had come due and asked for help with some outstanding loans Blankenship-Melton
owed to the Bank. On November 6, 2001, Johnny Melton, acting as agent for R & J, purchased the
promissory note from the Bank for $26,455.39. At the time R & J purchased the promissory note
from the Bank, Blankenship-Melton was already in default on the loan, and the Bank had already
begun to institute foreclosure proceedings on the collateral. In addition, only the truck, tractor, and
mobile home were left as collateral to secure the note.2 When R & J purchased the note, Steve
Melton had been living in the trailer which was used as collateral, and he never paid rent to
Blankenship-Melton during his periods of occupancy. Larry Melton had possession of the Ford truck
and drove it on a daily basis. The tractor remained in Larry Melton’s possession and was stored at
his personal residence. According to Johnny Melton, at the time R & J purchased the note, the
tractor was inoperable due to mechanical problems.

       In June of 2002, Johnny Melton, acting as agent for R & J, began the foreclosure process.
On June 11, 2002, Johnny Melton sent a notice to Mr. Blankenship indicating that the collateral
would be sold at a public sale on June 21, 2002. According to Johnny Melton, Steve Melton and
Larry Melton continued to use the collateral during this period of time. R & J sent the notice of sale

        1
          Although the record does not specify why the loan was in default, we assume that the default resulted from
the non-payment of the loan indebtedness.

        2
           Prior to assigning the promissory note to R & J, the Bryant boat was sold and the proceeds applied toward
the outstanding debt. As a result, the Bank released the boat as collateral securing the loan.

                                                        -2-
by certified mail to Mr. Blankenship at the address listed in the promissory note. Mr. Blankenship,
however, had subsequently moved and conceded that he never notified the Bank of his new home
address. According to Johnny Melton, similar notices were also sent to Larry Melton and Steve
Melton. Johnny Melton also posted a copy of the notice of sale at R & J’s office, the courthouse,
and on the collateral. The envelope containing the notice to Mr. Blankenship, which was introduced
as an exhibit at trial, indicated that the postal service attempted to deliver the notice to Mr.
Blankenship at his old address on June 13 and 18, 2002. Despite having not received a return receipt
indicating successful delivery of the notice, R & J went ahead with the sale of the collateral on June
21, 2002. On June 28, 2002, the postal service returned the notice to R & J marked “not deliverable
as addressed.”

        On the date of the public sale, only Johnny Melton, on behalf of R & J, and Larry Melton
were present, and only Johnny Melton placed a bid on the collateral. R & J purchased the mobile
home for $8,000, the Ford truck for $11,000, and the tractor for $1,000. Johnny Melton stated that
he used his previous experience in the banking industry and mobile home business to assess the
value of each item of the collateral at the time of the sale. On August 26, 2002, Johnny Melton, on
behalf of R & J, filed a lawsuit3 against Mr. Blankenship in the General Sessions Court of Henderson
County, seeking a deficiency judgment in the amount of $13,388.404 pursuant to the personal
guaranty. The general sessions court found in favor of Mr. Blankenship, and R & J appealed the
decision to the Circuit Court of Henderson County.5 Following a de novo bench trial, the circuit
court entered a deficiency judgment against Mr. Blankenship in the amount of $10,847.29.

        Mr. Blankenship filed a timely notice of appeal to this Court and presents the following
issues for our review:



         3
           The civil warrant filed by R & J listed the address on the promissory note as Mr. Blankenship’s home address
for service of process purposes.

         4
           This deficiency represented the deficit left after the sale of the collateral and the outstanding interest owed
on the loan amount and attorney’s fees.

         5
             The Tennessee Code provides:

                   Trial de novo on appeal — Decision on merits.

                   No civil case, originating in a general sessions court and carried to a higher court,
                   shall be dismissed by such court for any informality whatever, but shall be tried on
                   its merits; and the court shall allow all amendments in the form of action, the parties
                   thereto, or the statement of the cause of action, necessary to reach the merits, upon
                   such terms as may be deemed just and proper. The trial shall be de novo, including
                   damages.

Tenn. Code Ann. § 16-15-729 (2003). “Cases appealed from the general sessions court to the circuit court pursuant to
Tenn. Code Ann. § 16-15-729 should be treated for all purposes as if they originated in the circuit court.” B & G Constr.,
Inc. v. Polk, 37 S.W .3d 462, 465 (Tenn. Ct. App. 2000).

                                                            -3-
I.     Whether Appellant, Walden Blankenship, was given statutorily sufficient notice regarding
       the public sale of the collateral pursuant to section 47-9-611(b) of the Tennessee Code;
II.    Whether Appellee, R & J of Tennessee, failed to dispose of the collateral in a commercially
       reasonable manner under section 47-9-610(b) of the Tennessee Code and to exercise good
       faith pursuant to section 47-1-203 of the Tennessee Code;
III.   Whether Appellee, R & J of Tennessee, exercised reasonable care pursuant to section 47-9-
       207(a) of the Tennessee Code in preserving and exercising custody of the collateral used to
       secure the loan at issue; and
IV.    Whether the trial court erred in finding that no evidence was introduced at trial regarding the
       condition and value of the tractor on the date of the foreclosure sale as it relates to Appellee’s
       bid.

In addition to the issues raised by Appellant, we are also asked to review the following issue raised
by Appellee:

V.     Whether Appellant, Walden Blankenship, waived the objections to the foreclosure sale
       which he now raises on appeal according to the terms of the personal guaranty.

For the reasons contained herein, we reverse the decision of the trial court.

                                     II. Standard of Review

       This Court will review findings of fact made by the trial court sitting without a jury “de novo
upon the record of the trial court, accompanied by a presumption of correctness of the finding, unless
the preponderance of the evidence is otherwise.” Tenn. R. App. P. 13(d) (2003); see also Decatur
County Bank v. Smith, No. 02A01-9903-CV-00074, 1999 Tenn. App. LEXIS 864, at *4 (Tenn. Ct.
App. Dec. 27, 1999). We review the lower court’s conclusions of law de novo without any
presumption of correctness. Dennis Joslin Co. v. Johnson, 138 S.W.3d 197, 200 (Tenn. Ct. App.
2003) (citing Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993)).

                                    III. Waiver of Objections

        R & J asserts on appeal that Mr. Blankenship has waived his right to contest the sufficiency
of the foreclosure sale and notice based upon the terms of the personal guaranty. The applicable
provision of Tennessee’s version of the Uniform Commercial Code provides:
               Waiver. —

               (a) WAIVER OF DISPOSITION NOTIFICATION . A debtor or secondary
               obligor may waive the right to notification of disposition of collateral
               under § 47-9-611 only by an agreement to that effect entered into and
               authenticated after default.




                                                  -4-
Tenn. Code Ann. § 47-9-624(a) (2003) (emphasis added). Accordingly, we find this issue to be
without merit. See Tropical Jewelers, Inc. v. Nationsbank, N.A., 781 So.2d 392, 396 (Fla. Dist. Ct.
App. 2000).

                                                 IV. Notice of Sale

        The loan transaction at issue in this case is governed by Tennessee’s version of Article 9 of
the Uniform Commercial Code, codified at section 47-9-101 et seq. of the Tennessee Code. See
Nationsbank v. Clegg, No. 01-A-01-9510-CH-00469, 1996 Tenn. App. LEXIS 214, at *3 (Tenn. Ct.
App. Apr. 10, 1996). The question of whether the notice given by R & J in this instance was
sufficient is a question for the trier of fact, and R & J bears the burden of proof on this issue. Id. at
*13; see also Tenn. Code Ann. § 47-9-626(2) (2003). The trial court found, and the parties do not
dispute, that Mr. Blankenship never received actual notice of the sale. After reviewing the
Appellant’s Brief, we have come to the conclusion that Mr. Blankenship is arguing, in essence, that
section 47-9-611(b) of the Tennessee Code requires that a person in Mr. Blankenship’s position must
receive actual notice of the disposition of the collateral prior to a public sale in order for the notice
to be adequate under Tennessee’s version of Revised Article 9 of the Uniform Commercial Code.

       In support of this argument, Mr. Blankenship points to the mandatory language “shall” in the
applicable statute which provides:

                   NOTIFICATION OF DISPOSITION REQUIRED . Except as otherwise
                   provided in subsection (d),6 a secured party that disposes of collateral
                   under § 47-9-610 shall send to the persons specified in subsection (c)
                   a reasonable authenticated notification of disposition.

Tenn. Code Ann. § 47-9-611(b) (2003). Section 47-9-611(c), setting forth the persons to be notified
before a secured party disposes of the collateral, provides that, in order “[t]o comply with subsection
(b), the secured party shall send an authenticated notification of disposition to . . . any secondary
obligor.”7 Tenn. Code Ann. § 47-9-611(c)(2) (2003). Alternatively, R & J asserts that it sent the


         6
           “Subsection (b) does not apply if the collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market.” Tenn. Code Ann. § 47-9-611(d) (2003). Neither is at issue in the
present case.

         7
           A “secondary obligor” is defined as “an obligor to the extent that: (A) the obligor’s obligation is secondary;
or (B) the obligor has a right of recourse with respect to an obligation secured by collateral against the debtor, another
obligor, or property of either.” Tenn. Code Ann. § 47-9-102(71) (2003). The official comment to the definition section
to Article 9 of the Code provides, in relevant part, as follows:
                    Determining whether a person was a “debtor” under former section 9-105(1)(d)
                    required a close examination of the context in which the term was used. To reduce
                    the need for this examination, this article redefines “debtor” and adds new defined
                    terms, “secondary obligor” and “obligor.” In the context of part 6 (default and
                    enforcement), these definitions distinguish among three classes of persons: (i)
                                                                                                            (continued...)

                                                            -5-
notice to Mr. Blankenship at the address he listed on the personal guaranty, and, therefore, he should
bear the responsibility for not receiving the notice since he failed to notify the Bank of his change
in address.

        The trial court held that the notice provided to Mr. Blankenship in this case was sufficient.
 In support of his position that the notice in this instance was inadequate, Mr. Blankenship directs
our attention to two facts. First, he points to the fact that R & J proceeded with the sale despite
having not received any indication that the notice had been delivered to Mr. Blankenship. Second,
Mr. Blankenship asserts that Johnny Melton had actual knowledge of Mr. Blankenship’s correct
home address and failed to send the notice to that address. Mr. Blankenship points to a copy of a
complaint8 filed in federal court on June 21, 2002, the day of the public sale. The complaint,
attached to Mr. Blankenship’s Amended Motion to Alter or Amend Judgment or for a New Trial
submitted to the circuit court below, named Mr. Blankenship as a defendant and correctly listed his
current address as 341 Box Road, Darden, Tennessee, 38328. After conducting a hearing, the trial
court issued an order denying Mr. Blankenship’s motion.

        The decision as to whether to grant a motion for new trial or to alter or amend a final
judgment based on newly discovered evidence is entirely within the discretion of the trial judge.
Collins v. Greene County Bank, 916 S.W.2d 941, 945 (Tenn. Ct. App. 1996) (citing Seay v. City of
Knoxville, 654 S.W.2d 397, 400–01 (Tenn. Ct. App. 1983)). We review a trial court’s decision in
this regard under an abuse of discretion standard. Chambliss v. Stohler, 124 S.W.3d 116, 120 (Tenn.
Ct. App. 2003) (citing Bradley v. McLeod, 984 S.W.2d 929, 933 (Tenn. Ct. App. 1998)). In applying
this standard this Court has stated:




         7
          (...continued)
                   Those persons who may have a stake in the proper enforcement of a security interest
                   by virtue of their nonlien property interest (typically, an ownership interest) in the
                   collateral; (ii) those persons who may have a stake in the proper enforcement of the
                   security interest because of their obligation to pay the secured debt; and (iii) those
                   persons who have an obligation to pay the secured debt but have no stake in the
                   proper enforcement of the security interest. Persons in the first class are debtors.
                   Persons in the second class are secondary obligors if any portion of the obligation
                   is secondary or if the obligor has a right of recourse against the debtor or another
                   obligor with respect to an obligation secured by collateral. One must consult the
                   law of suretyship to determine whether an obligation is secondary.
Tenn. Code Ann. § 47-9-102 cmt. 2 (2003). In the instant case, Mr. Blankenship qualifies as a secondary obligor. See
Hardy v. Miller, No. M 1998-00940-COA-R3-CV, 2001 Tenn. App. LEXIS 898, at *5–6 (Tenn. Ct. App. Dec. 10, 2001);
Robert M . Lloyd, The New Article 9: Its Impact on Tennessee Law (Part II), 67 Tenn. L. Rev. 329, 353 (2000)
(discussing the manner in which Revised Article 9 eliminates the controversy over whether notice of sale must be sent
to a guarantor).

        8
          In the complaint Larry Melton, Steve Melton, and R & J allege that several defendants, including Mr.
Blankenship, engaged in deceptive lending practices in violation of the federal Racketeer Influenced Corrupt
Organization Act and Truth in Lending Act, as well as various state causes of action.

                                                        -6-
                      It is clear that a finding of an abuse of discretion cannot be
               based simply upon an appellate court’s determination that it would
               have decided the question differently. Whiton v. Whiton, No. E2000-
               00467-COA-R3-CV, 2002 Tenn. App. LEXIS 512[,] at *21 (Tenn.
               Ct. App. July 18, 2002). Rather, this standard requires that we
               determine “whether the lower court’s exercise of its discretion went
               beyond the bounds of a fair exercise of discretion.” Id.

Davis v. Estate of Johnnie Rex Flynn, No. E2001-02480-COA-R3-CV, 2002 Tenn. App. LEXIS 702,
at *23 (Tenn. Ct. App. Sept. 30, 2002). The federal complaint was filed on June 21, 2002, and the
trial in this matter occurred on July 28, 2003. We presume that Mr. Blankenship received service
of the federal complaint prior to the trial of this matter in the court below. “The moving party must
demonstrate that the new evidence was not known prior to or during the trial and that it could not
have been ascertained by the exercise of reasonable diligence.” Collins, 916 S.W.2d at 945; see also
Seay, 654 S.W.2d at 399. Accordingly, we find that the trial court did not abuse its discretion in
denying Mr. Blankenship’s motion partially based on the information contained in the federal
complaint. In turn, we are constrained to reviewing only the evidence presented at trial when
determining whether the notice sent to Mr. Blankenship was sufficient under section 47-9-611(b)
of the Tennessee Code.

        The official comment to section 47-9-611(b) provides that “[t]he notification must be
reasonable as to the manner in which it is sent, its timeliness (i.e., a reasonable time before the
disposition is to take place), and its content.” Tenn. Code Ann. § 47-9-611 cmt. 2 (2003). Mr.
Blankenship does not contest that R & J failed to send the notice in a timely fashion. See Tenn.
Code Ann. § 47-9-612. Rather, he contests whether the notice was sent in a reasonable manner when
it was addressed to an address where he no longer lived. In addition to the timing of the notice, the
reasonableness of the notice also encompasses a consideration of where the notice was sent.
Commercial Credit Corp. v. Cutshall, 28 U.C.C. Rep. Serv. (Callaghan) 277 (Tenn. Ct. App. 1979).

         Section 47-9-611 of the Tennessee Code “leaves to judicial resolution, based upon the facts
of each case, the question whether the requirement of ‘reasonable notification’ requires a ‘second
try,’ i.e., whether a secured party who sends notification and learns that the debtor did not receive
it must attempt to locate the debtor and send another notification.” Tenn. Code Ann. § 47-9-612
cmt. 6 (2003). We begin by examining the definitions of the key terms contained in section 47-9-
611(b) of the Tennessee Code. The term “send” is defined as follows:

               “Send”, in connection with a record or notification, means:
               (A) to deposit in the mail, deliver for transmission, or transmit by any
               other usual means of communication, with postage or cost of
               transmission provided for, addressed to any address reasonable under
               the circumstances; or




                                                 -7-
               (B) to cause the record or notification to be received within the time
               that it would have been received if properly sent under subparagraph
               (A).

Tenn. Code Ann. § 47-9-102(74) (2003). The definition section applicable to Tennessee’s version
of Article 9 does not define “notice,” but we find guidance in the general definition section of the
Code, which provides:

               A person “notifies” or “gives” a notice or notification to another by
               taking such steps as may be reasonably required to inform the other
               in ordinary course whether or not such other actually comes to know
               of it. A person “receives” a notice or notification when:
               (A) It comes to his attention; or
               (B) It is duly delivered at the place of business through which the
               contract was made or at any other place held out by him as the place
               for receipt of such communications[.]

Tenn. Code Ann. § 47-1-201(26) (2003) (emphasis added).

       The policy justifications for providing notice to a debtor are equally applicable to a secondary
obligor, and can be stated as follows:

               We think the provision for notice in connection with a sale is
               intended to afford the debtor a reasonable opportunity (1) to avoid a
               sale altogether by discharging the debt and redeeming the collateral
               or (2) in case of sale, to see that the collateral brings a fair price. A
               notice that does not afford him this reasonable opportunity is not
               reasonable notification and a sale under it is not commercially
               reasonable.

Int’l Harvester Credit Corp. v. Ingram, 619 S.W.2d 134, 137 (Tenn. Ct. App. 1981) (citing
Mallicoat v. Volunteer Fin. & Loan Corp., 415 S.W.2d 347, 350 (Tenn. Ct. App. 1966)).

        In support of his argument that the notice given was not reasonable, Mr. Blankenship relies
on our decision in Mallicoat v. Volunteer Finance & Loan Corp., 415 S.W.2d 347 (Tenn. Ct. App.
1966). In Mallicoat, the secured party sent a notice of sale to the debtor by certified mail, but the
notice was returned to the secured party undelivered. Mallicoat, 415 S.W.2d at 349. After receiving
the returned notice, the secured party continued to conduct a sale of the collateral and sued the debtor
for a deficiency judgment. Id. In finding the notice in that case insufficient under the predecessor
statute to section 47-9-611, we stated:

                       In view of the undisputed proof in this case that the debtor did
               not receive the notice and that the secured creditor was aware that he


                                                  -8-
               had not received it, it is our opinion the creditor not only failed to
               show a compliance with the Act but that the record affirmatively
               shows a lack of compliance and a conscious disregard of the debtor’s
               right to notice. The property was not perishable. The debtor lived in
               Knoxville where the creditor had its place of business and sold the
               property. In addition, the creditor had information as to where the
               debtor was employed and where his parents lived. Yet, the sale was
               allowed to proceed without any further effort to comply with the
               notice requirement.

Id. at 350; see also First Tenn. Bank Nat’l Ass’n v. Helton, No. 03A01-9501-CV-00026, 1995 Tenn.
App. LEXIS 339, at *5–6 (Tenn. Ct. App. May 23, 1995).

        Courts throughout the country vary as to whether the secured party has the burden of proving
that the debtor or a secondary obligor received actual notice of a pending sale. See Richard C.
Tinney, Annotation, Sufficiency of Secured Party’s Notification of Sale or Other Intended
Disposition of Collateral Under UCC § 9-504(3), 11 A.L.R. 4th 241, §§ 14–16 (2003). Many of our
sister states interpret the notice provision to require only that the creditor send notice. See
Underwood v. First Ala. Bank of Huntsville, 453 So.2d 742, 745 (Ala. Civ. App. 1983); Hall v.
Owen County State Bank, 370 N.E.2d 918, 925 (Ind. Ct. App. 1977); McKee v. Miss. Bank & Trust
Co., 366 So.2d 234, 238 (Miss. 1979); Commerce Bank of St. Louis v. Dooling, 875 S.W.2d 943,
946 (Mo. Ct. App. 1994); First Nat’l Bank & Trust Co. of Lincoln v. Hermann, 286 N.W.2d 750,
752 (Neb. 1980). Our decision in Mallicoat, however, demonstrates that Tennessee requires more
than a mere “sending” in order for a secured party to be in compliance with the statute. James J.
White & Robert S. Summers, Uniform Commercial Code § 26-10, at 987 (1972).

       At the other end of the notice spectrum, we have held that the notice requirement is satisfied
when the following occurs:

                       The sending of notice, certified, return receipt requested, is
               commercially reasonable. When a plaintiff forwards notice to the
               debtor’s proper address, certified, return receipt requested, and the
               notice is received at that address and returned signed by someone at
               the address, it is reasonable for plaintiff to assume that the defendant
               received the notice.

Caterpillar Fin. Services Corp. v. Woods, No. 89-326-II, 1990 Tenn. App. LEXIS 117, at *7–8
(Tenn. Ct. App. Feb. 22, 1990). Our case law makes clear that “the creditor will not be forced to
take responsibility for lost mail or the debtor’s refusal to accept properly delivered mail.”
Nationsbank v. Clegg, No. 01-A-01-9510-CH-00469, 1996 Tenn. App. LEXIS 214, at *14 (Tenn.
Ct. App. Apr. 10, 1996). Yet, we have also made clear that:




                                                 -9-
                          While absolute proof of receipt of notice may not be required
                 in every instance, a creditor, who only makes one attempt to contact
                 the debtor, and is left uncertain of receipt of the notice, has not
                 fulfilled its obligation to the debtor when it proceeds with a
                 disposition less than two weeks from mailing its first notice.

Id. at *15–16.

        We disagree with Mr. Blankenship’s assertion that section 47-9-611(b) requires the secured
party to prove that the secondary obligor actually received the notice. See Commercial Credit Corp.
v. Cutshall, 28 U.C.C. Rep. Serv. (Callaghan) 277 (Tenn. Ct. App. 1979). Based on the facts
presented to the trial court below, however, we find the trial court’s holding that notice in this case
was sufficient under the statute to be erroneous as a matter of law. We are mindful that Mr.
Blankenship bears some responsibility for not receiving notice in this case. See The Cent. Trust Co.
of Northeastern Ohio v. Snair, No. CA-5818, 1982 Ohio App. LEXIS 15214, at *2–3 (Ohio Ct. App.
June 23, 1982); Gen. Motors Acceptance Corp. v. Horn, No. 5861, 1978 Ohio App. LEXIS 11155,
at *5 (Ohio Ct. App. July 20, 1978). However, R & J sent the notice to Mr. Blankenship on June
11, 2002, and conducted a sale ten days later on June 21, 2002, without receiving any indication as
to whether the notice actually reached Mr. Blankenship. We find, therefore, that this amounts to
unreasonable notice under the statute and reverse the trial court’s holding on this issue. See
Nationsbank v. Clegg, No. 01-A-01-9510-CH-00469, 1996 Tenn. App. LEXIS 214, at *15–16
(Tenn. Ct. App. Apr. 10, 1996)

                  V. Commercial Reasonableness of the Sale of the Collateral

        Lack of reasonable notice to a secondary obligor is one factor bearing upon whether the sale
of the collateral was commercially reasonable. See Mallicoat v. Volunteer Fin. & Loan Corp., 415
S.W.2d 347, 351 (Tenn. Ct. App. 1966); Gen. Motors Acceptance Corp. v. Middleton, No. 02A01-
9103-CH-00033, 1991 Tenn. App. LEXIS 820, at *7 (Tenn. Ct. App. Oct. 16, 1991). “However,
notice by itself is not conclusive on the question of whether a sale was commercially reasonable.”
Decatur County Bank v. Smith, No. 02A01-9903-CV-00074, 1999 Tenn. App. LEXIS 864, at *9
(Tenn. Ct. App. Dec. 27, 1999). We note that the remaining issues presented by Appellant for our
review focus upon whether Appellee conducted the sale of the collateral in a commercially
reasonable manner. Accordingly, we will discuss these issues collectively in this section of the
opinion.

        “After default, a secured party may sell, lease, license, or otherwise dispose of any or all of
the collateral in its present condition or following any commercially reasonable preparation or
processing.” Tenn. Code Ann. § 47-9-610(a) (2003). As a secured party conducting a public sale,
R & J also had the right to purchase the collateral at the sale. Tenn. Code Ann. § 47-9-610(c)(1)
(2003). In carrying out the sale of the collateral R & J was bound by two standards. “First, in
exercising his rights upon default the secured party is bound by the good faith requirement applicable
throughout the Uniform Commercial Code.” Decatur County Bank,1999 Tenn. App. LEXIS 864,


                                                 -10-
at *6 (citing Tenn. Code Ann. § 47-1-203). The second requirement that R & J was bound to follow
addresses the procedures used in selling the collateral and provides:

               COMMERCIALLY REASONABLE DISPOSITION . Every aspect of a
               disposition of collateral, including the method, manner, time, place,
               and other terms, must be commercially reasonable. If commercially
               reasonable, a secured party may dispose of the collateral by public or
               private proceedings, by one (1) or more contracts, as a unit or in
               parcels, and at any time and place and on any terms.

Tenn. Code Ann. § 47-9-610(b) (2003); see also Am. City Bank of Tullahoma v. W. Auto Supply Co.,
631 S.W.2d 410, 419 (Tenn. Ct. App. 1981). This Court has defined “commercially reasonable” as
follows:

               The requirement that the property be disposed of in a “commercially
               reasonable” manner seems to us to signify that the disposition shall
               be made in keeping with prevailing trade practices among reputable
               and responsible business and commercial enterprises engaged in the
               same or a similar business.

Mallicoat v. Volunteer Fin. & Loan Corp., 415 S.W.2d 347, 350 (Tenn. Ct. App. 1966); see also
Tenn. Code Ann. § 47-9-627(b) (2003). The trial court found that R & J conducted the sale in good
faith and in a commercially reasonable manner. We disagree.

        Like notice, review of a sale of collateral to determine whether it was conducted in good faith
and in a commercially reasonable manner is an inquiry dependent upon the facts of each case. In
reviewing the facts of this case, we are cognizant of the following:

               Rather than viewing in isolation specific details of the sale of the
               debtor’s collateral, it is the aggregate of circumstances in each case
               which should be emphasized in reviewing the sale. The elements of
               manner, method, time, place and terms cited by the Uniform
               Commercial Code are to be viewed as necessary and interrelated parts
               of the whole transaction.

In re Four Star Music Co., Inc., 2 B.R. 454, 463 (Bankr. M.D. Tenn. 1979) (citations omitted). This
court has often looked to the following factors when attempting to ascertain whether a foreclosure
sale was conducted in a commercially reasonable manner:

                       Although the statute has not attempted to define the
               parameters of the term “commercially reasonable”, case law has
               specified six factors by which the statute requirements may be
               measured:


                                                 -11-
               (1)     the type of collateral involved; and
               (2)     the condition of the collateral; and
               (3)     the number of bids solicited; and
               (4)     the time and place of sale; and
               (5)     the purchase price received or the terms of the sale; and
               (6)     any special circumstances involved.

Decatur County Bank v. Smith, No. 02A01-9903-CV-00074, 1999 Tenn. App. LEXIS 864, at *7–8
(Tenn. Ct. App. Dec. 27, 1999) (quoting In re Four Star Music Co., Inc., 2 B.R. 454, 461 (Bankr.
M.D. Tenn. 1979)). “The burden of proving that a sale of collateral is commercially reasonable
under these statutes is on the secured party seeking the deficiency judgment.” Decatur County Bank,
1999 Tenn. App. LEXIS 864, at *7.

       Mr. Blankenship argues that the timing of the sale demonstrates it was conducted in a
commercially unreasonable manner. In support of his position, he points to the fact that R & J
delayed in conducting a sale of the collateral for seven and one-half months after purchasing the
note. Mr. Blankenship notes that at the time R & J purchased the note it had already been in default
for some time.

       The official comment to section 47-9-610 of the Tennessee Code provides:
              Time of Disposition. This article does not specify a period within
              which a secured party must dispose of collateral. This is consistent
              with this article’s policy to encourage private dispositions through
              regular commercial channels. It may, for example, be prudent not to
              dispose of goods when the market has collapsed. Or, it might be
              more appropriate to sell a large inventory in parcels over a period of
              time instead of in bulk. Of course, under subsection (b) every aspect
              of a disposition of collateral must be commercially reasonable. This
              requirement explicitly includes the “method, manner, time, place, and
              other terms.” For example, if a secured party does not proceed under
              section 9-620 [§ 47-9-620] and holds collateral for a long period of
              time without disposing of it, and if there is no good reason for not
              making a prompt disposition, the secured party may be determined
              not to have acted in a “commercially reasonable” manner. See also
              section 1-203 [§ 47-1-203] (general obligation of good faith).

Tenn. Code Ann. § 47-9-610 cmt. 3 (2003) (emphasis added). Mr. Blankenship directs our attention
to this Court’s holding in Nationsbank v. Clegg, No. 01-A-01-9510-CH-00469, 1996 Tenn. App.
LEXIS 214 (Tenn. Ct. App. Apr. 10, 1996), where we stated:

                       Of concern to this Court is the fact that the secured parties in
               this instance permitted an automobile to sit idly for over 13 months
               after default. The UCC does not state particular time limits for a


                                                -12-
               secured party to take possession of the collateral, or to proceed with
               a sale following the taking of possession. The determination of
               whether delay is commercially unreasonable requires consideration
               of all surrounding circumstances, including market conditions, the
               possible physical deterioration of the collateral, its economic
               deterioration through obsolescence, and the time required to assemble
               the collateral and prepare it for sale.
                       ....
                       We have found no evidence in the record, or other authority
               which indicates that the 13 month delay in selling the automobile, a
               depreciating asset, is “in keeping with the prevailing trade practices
               among reputable firms engaged in similar business activities,” in
               Tennessee. Thus, the delay appears unreasonable to this Court. . . .
                       In exercising its rights upon default, Nationsbank is bound by
               the good faith requirement applicable throughout the Uniform
               Commercial Code. Tenn Code Ann. § 47-1-203. American City
               Bank of Tullahoma v. Western Auto Supply, 631 S.W.2d 410, 420
               (Tenn. App. 1981). The obligation of good faith required the secured
               parties in this instance to have sold the car with greater haste.

Nationsbank, 1996 Tenn. App. LEXIS 214, at *8–10 (citations omitted).

        In response, R & J contends that, unlike the facts in Nationsbank, the collateral in this case
did not sit unused during the period leading up to the sale. To the contrary, Larry Melton continued
to drive the truck, and Steve Melton continued to live in the mobile home. Only the tractor remained
unused since it was inoperable at the time of the foreclosure sale.

        “The policy of the Uniform Commercial Code, as to the disposition of collateral, is to balance
and protect the rights of both debtor and creditor, while maximizing the recovery from the
disposition of the collateral for the benefit of all parties.” Nationsbank, 1996 Tenn. App. LEXIS
214, at *8 (citations omitted). Upon reviewing the entire record, we find that the evidence clearly
preponderates against the trial court’s finding that the sale of the collateral conducted by R & J in
this case was commercially reasonable. Once a debtor or secondary obligor raises the issue of the
commercial reasonableness of a sale, the secured party, in this case R & J, bears the burden of
proving that the sale was carried out in a commercially reasonable manner. Decatur County Bank
v. Smith, No. 02A01-9903-CV-00074, 1999 Tenn. App. LEXIS 864, at *7 (Tenn. Ct. App. Dec. 27,
1999). R & J failed to carry this burden at trial.

        In addition to the failure to provide adequate notice, R & J failed to offer a reasonable
explanation as to why it waited in excess of seven months to conduct a sale of the collateral, during
which time Larry Melton and Steve Melton were allowed to continue using the collateral. See
Nationsbank, 1996 Tenn. App. LEXIS 214, at *8–10. Contrary to R & J’s position, we note that use
of the items of collateral in this case would cause them to depreciate more rapidly, not less. Mr.


                                                -13-
Blankenship also raises a related issue regarding R & J’s handling of the collateral after it purchased
the note in question. Mr. Blankenship asserts that, by allowing Steve Melton and Larry Melton to
continue to use the collateral over the seven and one-half months before the sale, R & J increased
the amount of the deficiency. According to Mr. Blankenship, in addition to constituting bad faith
on the part of R & J, this amounts to a violation of section 49-9-207(a) which provides, in relevant
part, as follows:

                Rights and duties of secured party having possession or control
                of collateral. —

                (a) DUTY OF CARE WHEN SECURED PARTY IN POSSESSION . Except as
                otherwise provided in subsection (d), a secured party shall use
                reasonable care in the custody and preservation of collateral in the
                secured party’s possession.

Tenn. Code Ann. § 47-9-207(a) (2003). We agree with Mr. Blankenship that the actions by R & J
relating to the use and custody of the collateral constitute an additional factor demonstrating that the
disposition of the collateral in this case was commercially unreasonable. See Farmers & Merchants
Bank v. Barnes, 705 S.W.2d 450, 453 (Ark. Ct. App. 1986) (holding a sale of collateral
commercially unreasonable where the collateral remained in the custody of the original owner who
was permitted to continue using it for six months prior to the sale); The Bank Josephine v. Conn, 599
S.W.2d 773, 775 (Ky. Ct. App. 1980) (finding a sale of collateral commercially unreasonable where
the secured party did not dispose of the collateral for four to five weeks after repossessing it, thereby
allowing it to deteriorate further prior to the sale).

        We also agree with Mr. Blankenship that R & J’s actions in allowing Larry Melton and Steve
Melton to continue to use the collateral prior to the sale constituted bad faith. Johnny Melton’s own
testimony, indicating that Larry Melton and Steve Melton also continued to retain possession of the
collateral after the sale, supports this conclusion:

                 Q.      Who keeps the vehicle for you, Mr. Melton?
                 A.      Larry Melton still takes care of it.
                 Q.      Yes. The tractor, where is the tractor at?
                 A.      It’s still at their place.
                 Q.      At the Melton place?
                 A.      At the Melton place.
                 ....
                 Q.      Where is the mobile home at currently?
                 A.      It’s still on the property where it was.
                 ....
                 Q.      Is Mr. Larry Melton living in that mobile home?
                 A.      Not that I’m aware of.
                 Q.      Who is living in it?


                                                  -14-
                A.      Steve is living in it.
                Q.      Okay. Steve Melton?
                A.      Uh-huh.


        Providing notice of a public sale to the general public corresponds with additional factors
related to the procedures employed by the secured party in conducting the sale. When a secured
party undertakes to dispose of the collateral by public sale, advertising of some sort should be
conducted in order to increase competitive bidding and maximize proceeds. Gezon Motors v. Gould,
18 U.C.C. Rep. Serv. (Callaghan) 1339 (Mich. Dist. 1976). Although R & J posted a notice of sale
at the courthouse and on the collateral, the record also indicates that R & J never advertised the sale
in a public newspaper or utilized an experienced auctioneer. See First Tenn. Bank Nat’l Assoc. v.
Helton, No. 03A01-9501-CV-00026, 1995 Tenn. App. LEXIS 339, at *7–8 (Tenn. Ct. App. May 23,
1995); see also U.S. v. Warwick, 695 F.2d 1063, 1073 (7th Cir. 1982); Benton v. Gen. Mobile
Homes, Inc., 678 S.W.2d 774, 776 (Ark. Ct. App. 1984). Given the nature of the collateral, this is
another factor indicating the sale was not conducted by R & J in a commercially reasonable manner.
Leasing Serv. Corp. v. Broetje, 640 F.Supp. 51, 53 (E.D. Wash. 1986) (finding a public sale
commercially reasonable, despite the fact that the secured party was the only bidder present, where
the secured party properly notified the debtor and advertised the sale in newspapers in the area of the
sale); Kobuk Eng’g & Contracting Services Inc. v. Superior Tank & Constr. Co-Alaska, Inc., 568
P.2d 1007, 1011 (Alaska 1977) (holding that a sale was not commercially reasonable where the
secured party merely gave a copy of the notice to the court clerk for posting on a bulletin board and
did not advertise in the newspaper in the area where the collateral was to be sold); The Bank
Josephine v. Conn, 599 S.W.2d 773, 775 (Ky. Ct. App. 1980) (stating that a sale was commercially
unreasonable where the secured party failed to prove where he posted notices, did not advertise in
any newspapers, and was the only bidder at the sale).

          In addition to being the only bidder at the sale, R & J also valued the collateral instead of
seeking an independent appraisal. Johnny Melton did testify that he had prior experience in the
banking and mobile home industries which he used to value the collateral. We note that an
independent appraisal may not be required in every case. When coupled with the other facts present
in this case, however, R & J’s failure to do so in this instance is an additional factor indicating that
this sale was not conducted in a commercially reasonable manner. See In re Cummings, 147 B.R.
738, 746 (D.S.D. 1992) (holding that a secured party failed to conduct a sale in a commercially
reasonable manner where he did not obtain an appraisal, exerted minimal effort to notify potential
buyers, and failed to give notice to the debtor); In re Thomas, 12 U.C.C. Rep. Serv. (Callaghan) 578
(W.D. Va. 1973) (stating that the fact that the secured party failed to obtain an independent valuation
of the collateral by a third party was a factor supporting the commercial unreasonableness of the
sale); Kobuk Eng’g & Contracting Services, Inc. v. Superior Tank & Constr. Co-Alaska, Inc., 568
P.2d 1007, 1011 (Alaska 1977) (expressing the opinion that, had the secured party conducted an
independent appraisal of the collateral, a finding of commercial reasonableness would be more
likely); Jefferson Bank & Trust Co. v. Horst, 599 S.W.2d 201, 203 (Mo. Ct. App. 1980) (finding a



                                                 -15-
public sale of a mobile home commercially reasonable where the secured party obtained an
independent appraisal).

       The aggregate of circumstances in this case demonstrates that the sale of the collateral
conducted by R & J was not conducted in good faith or in a commercially reasonable manner as
required by Article 9 of Tennessee’s Uniform Commercial Code.

 VI. Effect of Failure to Conduct a Commercially Reasonable Sale and Provide Sufficient
                                        Notice

        Because R & J failed to provide Mr. Blankenship with adequate notice under section 49-
9-611, Mr. Blankenship may be entitled to certain statutory damages. Tenn. Code Ann. § 47-9-625
(2003). We remand this case to the trial court and instruct the court to determine what damages, if
any, Mr. Blankenship is entitled to pursuant to section 47-9-625 of the Tennessee Code due to R &
J’s failure to provide adequate notice. See Mallicoat v. Volunteer Finance & Loan Corp., 415
S.W.2d 347, 351–52 (Tenn. Ct. App. 1966); see also Gen. Motors Acceptance Corp. v. Middleton,
No. 02A01-9103-CH-00033, 1991 Tenn. App. LEXIS 820, at *11–12 (Tenn. Ct. App. Oct. 16,
1991).

        On remand, the trial court must also conduct an additional inquiry. Tennessee follows the
“rebuttable presumption rule” which governs a creditor’s failure to comply with Tennessee’s version
of the Uniform Commercial Code.

               Under Tennessee law, in the event the creditors foreclose upon
               security interest in collateral and conduct a commercially
               unreasonable sale, there is a presumption that the debtor is damaged
               to the extent of the deficiency claimed. The fact of an unreasonable
               sale does not result in the extinguishment of any deficiency
               whatsoever. Federal Deposit Insurance Corp. v. Morgan, 727
               S.W.2d 500 (Tenn. Ct. App. 1986). This presumption shifts the
               burden of proving to the creditor the amount that should reasonably
               have been obtained through sale conducted according to the law. ITT
               Industrial Co. v. Rector, [34 U.C.C. Rep. Serv. (Callaghan) 379
               (Tenn. Ct. App. 1982)]. The presumption is a presumption of law,
               and is a burden shifting device, requiring the party who is in a better
               position, to go forward with the evidence. Where evidence is
               presented sufficient to rebut the presumption, creditors are entitled to
               recover the deficiency. Id.

Decatur County Bank v. Smith, No. 02A01-9903-CV-00074, 1999 Tenn. App. LEXIS 864, at *9–10
(Tenn. Ct. App. Dec. 27, 1999). “It is the burden of the secured party to rebut this presumption and
failure to rebut the presumption with evidence of fair market value in the record results in denial of
the secured party’s claims for deficiency judgment.” In re Frazier, 93 B.R. 366, 372 (Bankr. M.D.


                                                -16-
Tenn. 1988) (citations omitted); see also Fed. Deposit Ins. Corp. v. Morgan, 727 S.W.2d 500, 502
(Tenn. Ct. App. 1987) (citing United States v. Willis, 593 F.2d 247, 260 (6th Cir. 1979)); Empire S.,
Inc. v. Repp, 756 P.2d 745, 750–51 (Wash. Ct. App. 1988).

        At trial, the parties presented conflicting testimony regarding the value of the collateral on
the date of the foreclosure sale.9 In rendering a judgment below, the trial court listed the proceeds
from the foreclosure sale in its tabulation of the deficiency owed R & J, but the court failed to state
whether this amount constituted the fair market value of the collateral on the date of the sale.
Therefore, we are unable to determine what the fair market value of the collateral was on the date
of the foreclosure sale and whether R & J overcame the presumption that the amount received at the
sale equaled the debt owed. See In re Frazier, 93 B.R. at 372. On remand, the trial court is
instructed to determine whether R & J presented sufficient proof in this regard and is entitled to a
deficiency judgment. See Provident Employees Credit Union v. Austin, 31 U.C.C. Rep. Serv.
(Callaghan) 786 (Tenn. Ct. App. 1981). If the trial court determines that R & J has overcome the
presumption and is entitled to a deficiency, then the trial court is instructed to determine whether the
deficiency should be offset by any damages due Mr. Blankenship pursuant to section 47-9-625 of
the Tennessee Code. See Gen. Motors Acceptance Corp., 1991 Tenn. App. LEXIS 820, at *11–12.


                                                 VII. Conclusion

         For the foregoing reasons, we reverse the trial court’s decision. We remand this case to the
trial court with instructions to determine whether the Appellant is entitled to damages against
Appellee consistent with this opinion. We also instruct the trial court to determine whether Appellee
is entitled to a deficiency and, if so, the amount that the deficiency should be offset by Appellant’s
damages, if any, consistent with this opinion. Costs of this appeal are taxed against Appellee, R &
J of Tennessee, Inc., for which execution may issue if necessary.



                                                                 ___________________________________
                                                                 ALAN E. HIGHERS, JUDGE




         9
          W e recognize that we did not address Mr. Blankenship’s fourth issue regarding whether the trial court properly
addressed the evidence presented concerning the value of the tractor. Addressing this issue is unnecessary given our need
to remand this case to the trial court for the reasons stated herein.

                                                         -17-
