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THE STATE OF SOUTH CAROLINA

In The Supreme Court

Edward P. Brockbank, Respondent,

v.

Best Capital Corp., Petitioner.

ON WRIT OF CERTIORARI TO THE COURT OF

APPEALS

Appeal From Richland County

Joseph M. Strickland, Special Circuit Court Judge

Opinion No. 25162

Heard June 7, 2000 - Filed June 29, 2000

AFFIRMED AS MODIFIED

James R. Allen and Andrea C. Pope of Barnes, Alford,

Stork & Johnson, LLP, of Columbia, for petitioner.

Thomas W. Bunch, II of Robinson, McFadden &

Moore, of Columbia, for respondent.

JUSTICE WALLER: Edward P. Brockbank (Debtor) sued Best

Capital Corp. (Creditor) after the repossession and sale of his mobile home,

alleging, among other things, violation of the notice provision contained in

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Article 9 of the Uniform Commercial Code (UCC). 1 The trial judge granted

Creditor's motion for summary judgment. The Court of Appeals reversed and

remanded. Brockbank v. Best Capital Corp., Op. No. 99-UP-098 (S.C. Ct. App.

filed February 18, 1999). We granted Creditor's petition for a writ of certiorari

following the denial by the Court of Appeals of Creditor's petition for rehearing.

We affirm the Court of Appeals' opinion as modified.

FACTS

Brockbank and his wife, Sharon K. Brockbank, purchased a double

wide mobile home from Kahn Development Company in February 1995. Kahn

assigned the contract to Creditor. 2

The Agreement for Sale of Manufactured Home (Agreement) states

that Debtor "may take possession of the property, live in it, and continue in

possession while this Agreement remains in effect." Debtor agreed to pay taxes

and maintain fire insurance coverage, with Creditor named as the loss payee on

the insurance policy. Debtor agreed not to transfer or assign his rights under

the Agreement without Creditor's prior written permission. Debtor agreed not

to move the mobile home from the location specified in the Agreement until the

loan was paid in full. Debtor agreed to maintain the home in good repair, and

Creditor retained the right to inspect it at any reasonable time upon reasonable

notice to Debtor.

The Agreement further provides that

[i]f you fail to make payment when due, if you break

any promise under this Agreement, or if the prospect of

payment is impaired, the seller ("we") may declare this

Agreement in default and demand that the entire

balance be paid in full. If we institute suit against you

to enforce our rights and obtain a valid judgment

2 To purchase the eight-year-old mobile home, the Brockbanks financed

$20,607.70 and agreed to pay $35,170.70 in interest, at a rate of 16.5 percent,

during the fifteen-year loan. The total sales price, including the $2,200

downpayment, was $57,978.40. Monthly payments were $309.88.

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against you, you shall pay all of our expenses of suit

and reasonable attorney's fees, not to exceed 15% of the

balance owing under this Agreement.

Under a section titled "Seller's remedies," the Agreement states:

Except as provided by law, if you default in making any

payment or in performing any other obligation

hereunder, we may either bring an action against you

for specific performance, or enforce a forfeiture of your

interest in the manufactured home. If a forfeiture is

enforced, you will forfeit all rights and interests in and

to the property and appurtenances, and shall

immediately surrender to us peaceable possession of the

property and forfeit to us, as liquidated damages, all

payments made hereunder together with all

improvements placed on or in the property. In no event

shall the provisions of this paragraph affect our other

lawful rights or remedies against you.

Finally, the Agreement states that "[u] pon your performance of all requirements

under this Agreement, including payment of all sums due, we will convey to you

good and marketable title free of all liens to this manufactured home."

Debtor left the marital home in August 1995, but continued to make

the payments until January 1996. The next month, Debtor sued his wife for

divorce and stopped making payments on the marital home. Mrs. Brockbank

could not afford to make the payments on the home and moved out in March

1996. Debtor stated in an affidavit that

[s] ometime in January 1996, I received [Creditor's]

demand letter dated January 18, 1996, wherein

[Creditor] demanded payment of the entire outstanding

balance under the sales agreement. I telephoned

[Creditor] about the payments on the mobile home. I

told [Creditor] that I would not make monthly

payments if I did not have use of the home. I was told

that [Creditor] and my wife were discussing payment

arrangements.

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I did not receive any other information or have any

other contact with [Creditor] until after April 28, 1996.

On April 28, 1996, I returned to the mobile home to

visit my family and a stranger appeared at the door.

The stranger told me that she had purchased this

mobile home approximately two weeks earlier.

Creditor had resold the home for $19,500.

Debtor alleged that Creditor was required, pursuant to Article 9 of

the UCC, to provide him with notice of the sale of the mobile home. See S.C.

Code Ann. § 36-9-504(3) (Supp. 1999). Debtor moved for partial summary

judgment on the issue of liability, asserting a hearing was necessary only to

determine damages under the formula established in S.C. Code Ann. § 36-9

507(1) (Supp. 1999).

Creditor counterclaimed, requesting a deficiency judgment and

sanctions under the South Carolina Frivolous Civil Proceedings Sanctions Act.

Creditor admitted it had not sent Debtor or his estranged wife notice of the sale,

but argued that Article 9 applies only to secured transactions and there was no

security interest created by the Agreement. Creditor also contended that Debtor

was not entitled to notice because he had abandoned the home and his estranged

wife voluntarily had surrendered it to Creditor.

The trial judge granted summary judgment to Creditor. The judge

ruled the Agreement constituted an unsecured loan and so the default and

penalty provisions of Article 9 did not apply to the transaction. The Court of

Appeals reversed, finding that the transaction between Debtor and Creditor falls

squarely within the statutory definition of a secured transaction. Based on that

determination, the Court of Appeals remanded the case for the trial judge to

determine whether Brockbank's alleged abandonment of the home divested him

of his rights under Article 9, including the right to notice of the sale.

ISSUES

1. Did the Court of Appeals err in finding that the

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Agreement created a security interest in the

mobile home?

2. Did the Court of Appeals err in remanding to the

lower court the issue of whether Debtor's

departure from the home divested him of his

rights under Article 9?

3. Did the trial judge err in finding that Debtor's

departure from the home divested him of his

rights under Article 9?

STANDARD OF REVIEW

A trial court may properly grant a motion for summary judgment

when "the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as

to any material fact and that the moving party is entitled to a judgment as a

matter of law." Rule 56(c), SCRCP. Summary judgment is not appropriate when

further inquiry into the facts of the case is desirable to clarify the application of

the law. Tupper v. Dorchester County, 326 S.C. 318, 487 S.E.2d 187 (1997).

Summary judgment should not be granted even when there is no dispute as to

evidentiary facts if there is dispute as to the conclusion to be drawn from those

facts. Id. In determining whether any triable issues of fact-exist, the court must

view the evidence and all reasonable inferences that may be drawn from the

evidence in the light most favorable to the non-moving party. Manning v.

Quinn, 294 S.C. 383, 365 S.E.2d 24 (1988). An appellate court reviews the

granting of summary judgment under the same standard applied by the trial

court pursuant to Rule 56, SCRCP. Williams v. Chesterfield Lumber Co., 267

S.C. 607, 230 S.E.2d 447 (1976); Wells v. City of Lynchburg, 331 S.C. 296, 501

S.E.2d 746 (Ct. App. 1998).

DISCUSSION

p.355

1. CREATION OF SECURITY INTEREST 3

A mobile home usually is classified as personal property. See City

of North Charleston v. Claxton, 315 S.C. 56, 431 S.E.2d 610 (Ct. App. 1993)

(finding that mobile homes were personal property because they had no

significant attachments to the property such as permanent foundations or

additions). A security interest in a mobile home is perfected by listing the

interest on the certificate of title. See S.C. Code Ann. § 36-9-302(3)(b) (Supp.

1999) and Note 1 of South Carolina Reporter's Notes; S.C. Code Ann. §§ 56-19-

210, 56-19-290(3), and 56-19-340 (1991 & Supp.1999). However, the "certificate

of title statutes only govern the issue of whether or not the security interest in

the collateral in question has been duly perfected. All other aspects of such

transactions are governed by the Article 9 rules." Note 1 of South Carolina

Reporter's Notes to S.C. Code Ann. § 36-9-302 (Supp. 1999).

Article 9 of the UCC applies to "any transaction (regardless of its

form) which is intended to create a security interest in personal property or

fixtures including goods, documents, instruments, general intangibles, chattel

paper, or accounts." S.C. Code Ann. § 36-9-102(1)(a) (Supp. 1999). The

"fundamental objective of Article 9 of the Uniform Code [is to] provid[e] uniform

and simplified rules governing chattel security which meet modern commercial

needs .... Article 9 rejects any distinction based on form or designation of the

device employed." In re Berry, 189 B.R. 82, 86 (Bankr. D.S.C. 1995) (quoting

S.C. Code Ann. Title 36, Commercial Code, Background and Introduction, p.14)

(internal quotes omitted).

No magic words or precise form are necessary to create a security

interest so long as the minimum formal requirements regarding perfection,

attachment and enforceability are met. In re CFLC, Inc., 166 F.3d 1012, 1016

(9th Cir. 1999) (citing In re Amex-Protein Dev. Corp,, 504 F.2d 1056, 1058-59

(9th Cir. 1974)); accord United Virginia Bank/Seaboard Natl. v. B.F. Saul Real

Estate Inv. Trust, 641 F.2d 185, 189 (4th Cir. 1981); Mitchell v. Shepherd Mall

correctly decided in its unpublished opinion that Agreement created a security

interest in the mobile home. Nevertheless, we find it necessary to explain the

nature of this secured transaction because the notice provision of Article 9 would

not apply in the absence of a security interest.

p.356

State Bank, 458 F.2d 700, 703 (10th Cir. 1972). "The court must find both

language in a written agreement that objectively indicates the parties' intent to

create a security interest and the presence of a subjective intent by the parties

to create a security interest." In re CFLC, 166 F.3d at 1016.

The UCC defines a "security interest" as "an interest in personal

property or fixtures which secures payment or performance of an obligation. The

retention or reservation of title by a seller of goods notwithstanding shipment

or delivery to the buyer . . . is limited in effect to a reservation of a security

interest." S.C. Code Ann. §36-1-201(37) (Supp. 1999); accord S.C. Code Ann. §

36-2-401(1) (1976). Furthermore, Article 9 explicitly "applies to security

interests created by contract including . . . [a] conditional sale." S.C. Code Ann.

§ 36-9-102(2) (Supp. 1999); see also S.C. Code Ann. § 36-9-107 (Supp. 1999)

(defining purchase money security interest, which reporter noted is the rough

equivalent of a conditional sales device).

The Court of Appeals correctly concluded that the Agreement in this

case is a conditional sales contract. The Agreement expressly provides for title

to remain in the seller until payment of the purchase price. Because such a

contract "actually is a security device, the interest in the parties are governed

by Article 9 from the time the buyer takes possession ...." Reporter's Comments

to S.C. Code Ann. § Section 36-2-401; see also Black's Law Dictionary 295 (1990)

(defining conditional sales contract).

The Agreement required that Debtor surrender the mobile home to

Creditor in the event of default, that Debtor name Creditor as the loss payee in

the fire insurance policy, that Debtor could not assign his rights in the home

without Creditor's prior written permission, that Debtor could not move the

home until repaying the loan in full, that Debtor maintain the home, and that

Creditor could inspect it at any reasonable time. These provisions indicate, both

objectively and subjectively, the parties' intent to create a security interest in the

mobile home.

2. NECESSITY OF REMAND

The trial judge ruled that even if the Agreement created a security

interest, thereby triggering Article 9, Debtor was divested of the Article 9 rights

and remedies when he purportedly abandoned the home.

p.357

We agree with the parties that the issue of whether Debtor's alleged

abandonment of the home divested him of his Article 9 rights was raised to and

ruled on by the trial judge. The Court of Appeals erred in remanding the case

for lower court to decide the issue. See Hudson v. Hudson, 290 S.C. 215, 349

S.E.2d 341 (1986) (remand is unnecessary where trial court properly found it

had jurisdiction and already had ruled on post-trial motions). Consequently, we

directed the parties to brief the final issue.

3. NECESSITY OF NOTICE AFTER DEBTOR'S DEPARTURE

As just explained, the trial judge ruled that even if the Agreement

created a security interest, thereby triggering Article 9, Debtor was divested of

the Article 9 rights and remedies when he "abandoned" the mobile home. The

judge further ruled that the sale of the home was a consequence of Debtor's

"abandonment" of the home, and was not pursuant to Debtor's default.

It is undisputed that Creditor, after taking possession of the mobile

home, did not notify Debtor or his estranged wife before selling the home to

another person. Creditor, however, contends the home was not sold pursuant

to Debtor's default because Creditor never exercised its option under the

Agreement to declare Debtor to be in default. Article 9's default and damage

provision's were not triggered because the home "was abandoned by Debtor to

Mrs. Brockbank, and Mrs. Brockbank voluntarily turned the home over to

[Creditor]." Creditor further asserts notice is not required because Debtor had

no equitable financial interest (equity) in the home. We disagree.

Article 9 provides that

[w]hen a debtor is in default under a security

agreement, a secured party has the rights and remedies

provided in this part and except as limited by

subsection (3) those provided in the security agreement.

He may reduce his claim to judgment, foreclosure or

otherwise enforce the security interest by any available

judicial procedure.

S.C. Code Ann. § 36-9-501(1) (Supp. 1999). A secured party "has on default the

right to take possession of the collateral," either by judicial action or without

judicial process if it can be done without breaching the peace. S.C. Code Ann.

p.358

§ 36-9-503 (Supp. 1999). A secured party "may sell, lease, or otherwise dispose

of any or all of the collateral in its then condition or following any commercially

reasonable preparation or processing." S.C. Code Ann. § 36-9-504(1) (Supp.

1999).

These provisions make no distinction between abandonment and

default. They make no distinction between whether the creditor acquired

possession of the collateral before or after default, or by the debtor's voluntary

return of the collateral, or by a declaration of default and repossession, or by

abandonment, or otherwise. Similarly, the provisions make no distinction

between situations in which a debtor has equity in the collateral and when he

or she does not.

The UCC does not define "default." In a typical secured transaction

such as this one, "default" is a state of being as defined under the terms of the

parties' agreement. Debtor, in failing to make the payments when due, was in

default under the plain terms of the Agreement. Creditor at that point could

exercise the rights and remedies available to it under Article 9, absent a

contrary provision in the parties' agreement. It was not necessary for Creditor

to expressly "declare" Debtor to be in default in order to bring the Article 9 rights

and remedies into play. See McGrady v. Nissan Motor Acceptance Corp., 40 F.

Supp. 2d 1323,1331(M.D. Ala. 1998) (plaintiff was in default on automobile loan

where plaintiff had failed to make monthly payment and contract stated that a

default occurs when a party fails to make payment when due); Chrysler Credit

Corp. v. B.J.M., Jr., Inc., 834 F. Supp. 813, 831-32 (E.D. Pa. 1993) (noting that

UCC is silent on what constitutes default; generally speaking, upon default of

the debtor, Article 9 allows the secured party who acts in good faith to obtain a

judgment on the debt, repossess and sell the collateral, or repossess and retain

the collateral in satisfaction of the debt). We decline to interpret Article 9 in a

manner that would allow a creditor to sidestep the applicability of the notice

provision by asserting it has the unilateral power to declare a state of default.

In exercising its rights, Creditor was required to scrupulously

adhere to procedures contained in Article 9. See, e.g., C.F. Garcia Enterprises

v. Enterprise Ford Tractor, 480 S.E.2d 497, 500 (Va. 1997) ("when a default

occurs, a secured creditor is required to comply with Article 9 of the UCC in

taking possession and selling the secured property"); Comer v. Green Tree

Acceptance, Inc., 858 P.2d 560, 563 (Wyo. 1993) ("[u]nder the UCC, default does

not divest a debtor of all right and interest in the secured property, nor is the

p.359

secured party, the creditor, vested with the unlimited power to deal with the

property as it wishes").

South Carolina Code Ann. § 36-9-504(3) (Supp. 1999) provides, in

pertinent part:

Sale or other disposition may be as a unit or in parcels

and at any time and place and on any terms but every

aspect of the disposition including the method, manner,

time, place, and terms must be commercially

reasonable. Unless collateral is perishable or threatens

to decline speedily in value or is of a type customarily

sold on a recognized market, reasonable notification of

the time and place of any public sale or reasonable

notification of the time after which any private sale or

other intended disposition is to be made must be sent

by the secured party to the debtor, if he has not signed

after default a statement renouncing or modifying his

right to notification of sale. (Emphasis added.)

The 1988 amendment to this subsection "makes it explicitly clear

that the right of a debtor to renounce or modify his right to notice can only be

made after, but not before, default." Note 1 of South Carolina Reporter's Notes

to section 36-9-504; Act No. 494, Part 5, 1988 S.C. Acts 4449. This Article 9

provision allows a debtor to waive his right to notice only by executing a written

statement after default which is signed by the debtor. It "has been strictly

construed to require a specific, knowing waiver of the right to notice, in writing

and actually bearing the signature of the debtor." All-Valley Acceptance Co. v.

Durfey, 800 S.W.2d 672, 674-75 (Tex. Ct. App. 1990).

We conclude the outcome in this case is largely dictated by Crane v.

Citicorp Nat'l Servs., Inc., 313 S.C. 70, 437 S.E.2d 50 (1993). In Crane, we held

that co-obligators or guarantors in an installment sales contract for a mobile

home are entitled to notice. "The purpose of the notice is to allow the debtor to

discharge the debt and redeem the collateral, produce another purchaser, or see

that the sale is conducted in a commercially reasonable manner." Id. at 73, 43 7

S.E.2d at 52. Accord SMS Fin., Ltd. Liability Co. v.ABCO Homes, Inc., 167 F.3d

235, 242 (5th Cir. 1999); Friendly Fin. Corp. v. Bovee, 702 A.2d 1225,1227 (Del.

1997); Thong v. My River Home Harbour, Inc., 3 S.W.3d 373, 377 (Mo. Ct. App.

p.360

1999); Bank One, Texas, N.A. v. Stewart, 967 S.W.2d 419, 450 (Tex. Ct. App.

1998); James J. White & Robert S. Summers, Uniform Commercial Code, § 34-13

(1995).

Even if we assume, without deciding, that Debtor abandoned the

mobile home, notice is still required. Abandonment or voluntary surrender of

the collateral by the debtor to the creditor does not waive the debtor's right to

notice of resale of the collateral, and the statutory notice provision may not be

waived or varied except in writing after default. Executive Fin. Servs.. Inc. v.

Garrison, 722 F.2d 417, 419-20 (8th Cir. 1983) (applying Missouri statute);

Gavin v Washington Post Employees Federal Credit Union, 397 A.2d 968, 971

72 (D.C. 1979); Rock Rapids State Bank v. Gray, 366 N.W.2d 570, 574 (Iowa

1985); Citizens State Bank v. Sparks, 276 N.W.2d 661, 663-64 (Neb. 1979);

Lindberg v. Williston Indus. Supply Co., 411 N.W.2d 368, 373-74 (N.D. 1987);

Western Nat'l Bank of Casper v. Harrison, 577 P.2d 635, 638 (Wyo. 1978); RWR,

Inc. v. DFT Trucking,Inc., 899 S.W.2d 875, 878 (Mo. Ct. App. 1995); All-Valley

Acceptance Co., 800 S.W.2d at 674-75.

If a secured party fails to give the required notice, a debtor may seek

to recover the statutory penalty under Article 9. 4 "[T]he statutory penalty is

evidence of the legislature's recognition that the small amount of compensatory

damages that may be proven in a consumer goods repossession and sale would

be insufficient to ensure creditor compliance with the Code's provisions." Crane,

If it is established that the secured party is not proceeding in

accordance with the provisions of this part disposition may be

ordered or restrained on appropriate terms and conditions. If the

disposition has occurred the debtor or any person entitled to

notification or whose security interest has been made known to the

secured party prior to the disposition has a right to recover from the

secured party any loss caused by a failure to comply with the

provisions of this part. If the collateral is consumer goods, the

debtor has a right to recover in any event an amount not less than

the credit service charge plus ten percent of the principal amount of

the debt or the time price differential plus ten percent of the cash

price.

p.361

313 S.C. at 74-75, 437 S.E.2d at 53.

In sum, we hold that Debtor was in default under the Agreement

when he failed to make the payments when due. Both parties at that point could

exercise the rights and remedies contained in Article 9, regardless of whether

Creditor expressly had declared Debtor to be in default.

CONCLUSION

We affirm as modified the opinion of the Court of Appeals and hold

that (1) the parties created a security interest in the mobile home under Article

9; (2) remand for consideration of the abandonment issue was not necessary

because the trial judge already had ruled on it; and (3) a creditor must give a

debtor the notice required by Article 9 even when the creditor believes the debtor

has abandoned or voluntarily surrendered the collateral. In light of the

undisputed fact that Creditor failed to give the required notice to Debtor, the

trial judge erred in denying Debtor's motion for partial summary judgment on

liability in the Article 9 cause of action. We remand this case to the circuit court

for a determination of the statutory damages and for further proceedings

regarding Debtor's remaining causes of action.

AFFIRMED AS MODIFIED.

TOAL, C.J., MOORE, BURNETT, and PLEICONES, JJ., concur.

p.362