Plaintiff debtor and defendant secured party appealed a judgment of the Superior Court of Alameda County (California), which granted defendant’s motion for nonsuit on causes of action alleging interference with a business relationship and breach of contract, returned a verdict for $ 1 for plaintiff on a cause of action for conversion, returned judgment for plaintiff on defendant’s cross-complaint, and taxed costs to the parties.
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Overview
On appeal, the court reversed the judgment with instructions to determine the amount of plaintiff debtor’s attorneys’ fees. The court held that defendant secured party obtained a security interest in plaintiff’s inventory, its proceeds, and accounts receivable and under Cal. Com. Code § 9502(1), defendant was entitled to collect directly from plaintiff’s accounts. The court found that defendant proceeded in a commercially reasonable manner in collecting the accounts as required by Cal. Com. Code § 9502(2), but defendant was barred from a deficiency judgment by virtue of Cal. Com. Code § 9504(3) because it failed to give plaintiff notice of the second sale. The trial judge properly refused to give a jury instruction on punitive damages because the jury found in a special interrogatory that defendant collected the accounts receivable in a commercially reasonable manner. Plaintiff was entitled to attorneys’ fees on the cross-complaint that defendant filed to recover on its promissory notes because the recovery that plaintiff received exceeded that of defendant’s cross-complaint. Plaintiff was the prevailing party even if awarded the nominal amount of $ 1.
Outcome
The court reversed the judgment, but it held that there was no need for a retrial except to determine the amount of a reasonable attorneys’ fee due to plaintiff debtor on defendant secured party’s cross-complaint. Plaintiff was entitled to recover costs on the appeal.