R & J Of Tennessee, Inc. v. Blankenship-Melton Real Estate, Inc.

166 S.W.3d 195 (2005)

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Nature of the Case

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Facts

Blankenship (D), as acting president of Blankenship-Melton Real Estate, Inc. (Real Estate), entered into a loan transaction with the Bank of Henderson County (Bank). Bank loaned Real Estate $40,133.00, and Bank was given 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 Real Estate to pay off the loan by June 18, 2000. 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. D also executed a guaranty agreement promising to remain personally liable on the promissory note owed to the Bank. Larry Melton and his son, Steve Melton, the secretary of Real Estate, also executed personal guarantees to secure the loan. The Bank renewed the loan on two separate occasions. The loan went into default. D communicated with the Bank and asked the Bank to foreclose on the collateral. D never personally paid any amounts toward the outstanding loan amount. Larry Melton and Steve Melton approached Johnny Melton asking for help with some outstanding loans Real Estate owed to the Bank. Johnny Melton, acting as agent for P, purchased the promissory note from the Bank for $26,455.39. Only the truck, tractor, and mobile home were left as collateral to secure the note. Steve Melton had been living in the trailer which was used as collateral, and he never paid rent. 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, the tractor was inoperable. In June of 2002, P began the foreclosure process. A notice was sent to D indicating that the collateral would be sold at a public sale on June 21, 2002. P sent the notice of sale by certified mail to D at the address listed in the promissory note. D had subsequently moved and conceded that he never notified the Bank of his new home address. Notices were also sent to Larry Melton and Steve Melton. A copy of the notice was posted at P's office, the courthouse, and on the collateral. Despite having not received a return receipt indicating successful delivery of the notice, P held the sale. The postal service returned the notice to P marked 'not deliverable as addressed.' P purchased the mobile home for $8,000, the Ford truck for $11,000, and the tractor for $1,000. P then sued D seeking a deficiency judgment in the amount of $13,388.40 under the personal guaranty. P purchased the mobile home for $8,000, the Ford truck for $11,000, and the tractor for $1,000. P then sued D seeking a deficiency judgment in the amount of $13,388.40 under the personal guaranty. The court found for D and P appealed. Following a de novo bench trial, the circuit court entered a deficiency judgment against D in the amount of $10,847.29. D appealed.