HEW Federal Credit Union v. Battle

Summary

The District of Columbia Court of Appeals held that a guarantor of a secured loan is a “debtor” under Article 9 of the Uniform Commercial Code even when the guarantor does not own the collateral. Because the creditor failed to provide the guarantor notice of the foreclosure sale, the creditor was barred from recovering a deficiency judgment against her.

Holdings

1. A guarantor who owes payment or other performance of a secured obligation is a debtor within the meaning of D.C. Code § 28:9-105(1)(d), even if the guarantor does not own or have rights in the collateral.
2. A secured creditor must send reasonable notification of the time and place of a public sale, or of the time after which a private sale or other disposition will occur, to a guarantor who may be liable for the deficiency.
3. Under the District of Columbia's absolute-preclusion rule, a secured creditor that fails to provide the required notice of sale forfeits the right to recover a deficiency judgment; recovery is limited to the sale proceeds.

Questions Presented

1. Whether a guarantor of a secured loan who does not own the collateral is a debtor under Article 9 of the Uniform Commercial Code.
2. Whether a creditor must provide that guarantor with reasonable notice of a foreclosure sale under D.C. Code § 28:9-504(3).
3. Whether the creditor's failure to provide the required notice precludes recovery of a deficiency judgment against the guarantor.

Disposition

affirmed