In WM Capital Partners, LLC. v. Thornton, 2016 WL 7477738, at *3–6 (Tenn.Ct.App., 2016), the Tennessee Court of Appeals found that a secured party’s delay in securing possession of the collateral — which resulted in a lesser price realized at disposition — was not a defense to the secured party’s collection action because the UCC’s commercially reasonable disposition requirement is triggered only after the secured party obtains possession. Defendants guaranteed their commercial trucking business’ purchase of commercial trucks. The company defaulted, and the Defendants told the bank to come and pick up the trucks. But, the bank had financial troubles of its own and, after it was seized by the FDIC and the notes sold, the note purchaser finally picked up the trucks. The trucks depreciated during the passage of time, which the Defendants said provided them with a defense to the claim. The Court of Appeals disagreed.
After taking possession of the collateral after default, the secured creditor has the option of proposing to accept the collateral in full or partial satisfaction of the debt or of disposing of the collateral. Id. §§ 47-9-620, – 610 (2013). If the secured creditor chooses to dispose of the collateral, then “[e]very aspect of [the] disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable.” Id. § 47-9-610(b). The failure to conduct a commercially reasonable disposition is significant for both the secured creditor and parties obligated on the debt. If the issue is raised in an action to recover a deficiency judgment, a presumption arises that “the amount of proceeds that would have been realized [in a commercially reasonable disposition] is equal to the sum of the secured obligation, expenses, and attorney’s fees unless the secured party proves that the amount is less than that sum.” Id. § 47-9-626(4) (2013). Under this “Rebuttable Presumption Rule,” the secured party may be denied a deficiency judgment. Id. § 47-9-626(3), (4); U.C.C. § 9-626 cmt. 3 (2014). Bowling Green Freight and the Thorntons complain that the time aspect of the disposition of the collateral securing the loans at issue was not commercially reasonable. They note that over two years lapsed between Mr. Thornton’s request that the Bank repossess its collateral and the date WMCP finally auctioned the collateral. For purposes of summary judgment, WMCP also agreed that “[the Bank’s] refusal to accept the tender was commercially unreasonable and caused the value of the collateral to plummet due to inescapable depreciation of the equipment in question.” The trial court concluded that this fact was not material to the outcome of this case. We agree that the Bank’s refusal to repossess the collateral standing alone did not render the disposition commercially unreasonable for purposes of Article 9. Bowling Green Freight and the Thorntons would have us interpret Article 9 to require a secured creditor to repossess collateral after default upon request of the debtor or an obligor. But the statutory language includes no duty on the part of a secured party to accede to such a request or right on the part of a debtor or obligor to make such a request. Default engenders rights in the secured party, but these rights are optional. As a result, a secured party must consider, not only what options to pursue, but when and how to pursue them. One consideration is whether to make use of self-help remedies or to resort to the courts. As noted above, in addition to any rights provided by the agreement of the parties, the secured party “[m]ay reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure.” Tenn. Code Ann. § 47-9-601(a)(1) (emphasis added). Although the rights may be exercised simultaneously, no particular sequence for exercise of the secured party’s rights is mandated. See id. § 47-9-601(c). Article 9 specifically contemplates that a secured party might reduce its claim to judgment before resorting to any collateral. See id. § 47-9-601(e), (f). After deciding to resort to collateral, a secured party “may take possession,” but a secured party also, “without removal, may render equipment unusable and dispose of collateral on the debtor’s premises.” Id. § 47-9-609(a) (emphasis added). The use of the word “may” in referencing each of these rights and the context confirms that the secured party has discretion in choosing which rights to exercise and when. See Colella v. Whitt, 308 S.W.2d 369, 371 (Tenn. 1957) (“„May’ ordinarily connotes discretion or permission; and it will not be treated as a word of command unless there is something in the context or subject matter of the act or statute under consideration to indicate that it was used in that sense.”). Article 9 provides no basis for either a debtor or an obligor to deprive a secured party of its rights upon default by demanding that one right be pursued over another. Cf. N.C. Nat’l Bank v. Sharpe, 241 S.E.2d 360, 361 (N.C. Ct. App. 1978) (Under North Carolina’s version of pre-revision Article 9, “the right of the secured party to take possession does not impose an obligation to take possession upon demand of the debtor.”). Article 9 does place limits on the secured party’s rights. For instance, after deciding to resort to collateral, a secured party may not repossess the collateral or render equipment unusable without judicial process if doing so would result in a “breach of the peace.” Tenn. Code Ann. § 47-9-609(b)(2). The disposition of the collateral must also be “commercially reasonable.” Id. § 47-9-610(b). . . .The duties imposed by Tennessee Code Annotated § 47-9-207 only arise when a secured party is in possession or control of collateral. Tenn. Code Ann. § 47-9-207 (2013). Consistent with our prior precedent, we conclude that the requirement for a commercially reasonable disposition applies only once the secured party has possession, either actual or constructive, of the collateral. See Regions Bank v. Trailer Source, No. M2008-01167-COA-R3-CV, 2010 WL 2074590, at *4 (Tenn. Ct. App. May 21, 2010) (“„The legal significance of constructive possession is that it triggers an obligation under the Tennessee Commercial Code to use reasonable care in the custody and preservation of collateral as well as its disposition.‘ ”). We note courts in other states, in interpreting Article 9’s commercially reasonable disposition requirement, have reached the same conclusion. See, e.g., Marks v. Powell, 162 B.R. 820, 829 (E.D. Ark. 1993) (under Arkansas’ version of pre-revision Article 9, applying the commercially reasonable standard once the secured party had “taken possession or constructive possession”); Conn. Nat. Bank v. Douglas, 606 A.2d 684, 687-88 (Conn. 1992) (under Connecticut’s version of pre-revision Article 9, calling constructive possession the “linchpin” of a failure to act in a commercially reasonable manner defense); Arlington Trust Co. v. Caimi, 610 N.E.2d 948, 952 (Mass. 1993) (Under Massachusetts’ version of pre-revision Article 9, “[a] necessary prerequisite to a commercially unreasonable disposition of collateral … is possession, for one cannot dispose of what one does not have.”); Michigan Nat. Bank v. Marston, 185 N.W.2d 47, 51 (Mich. Ct. App. 1970) (Under Michigan’s version of pre-revision Article 9, “[o]nce a creditor has possession he must act in a commercially reasonable manner toward sale, lease, proposed retention where permissible, or other disposition.”). . . Although we recognize the factual similarities between our decision in R & J of Tennessee, Inc. v. Blankenship-Melton Real Estate and this case, we conclude that declining a request to repossess collateral does not, without more, amount to constructive possession. The only evidence of the Bank exercising any control or dominion over the property after default is its direction to Bowling Green Freight to continue its use of the collateral. Under these facts, we also conclude that this direction falls short of constructive possession. However, rejecting the date that Bowling Green Freight and the Thorntons propose for the commencement of the commercial reasonableness requirement does not end our inquiry.