CIT Group/Equipment Financing, Inc. v. Landreth

In 1998 Landreth School Bus Services (Bus Services) (defendant), owned by Larry Landreth (defendant), purchased three school buses with three loans from Textron Financial Corporation (Textron). Bus Services gave Textron a security interest in each bus and agreed that Textron was entitled to a deficiency judgment in case of default if the disposition of the collateral was insufficient to cover the remaining balances. Landreth served as personal guarantor of Bus Services’ loans. In 2000 Textron assigned its interests under the security agreement to CIT Group (CIT) (plaintiff). In 2003 Bus Services defaulted on the loans. CIT sent notices for each loan regarding default, acceleration, foreclosure, and pursuit of a deficiency judgment. CIT accelerated each loan, demanding full payment. Bus Services was unable to make payment and returned the buses voluntarily to CIT. CIT disposed of all three buses, selling at least two of the buses in a commercially reasonable manner after providing proper notice to Bus Services. After CIT applied the proceeds from the dispositions, there remained an outstanding balance on each loan. CIT sued Bus Services and Landreth for a deficiency judgment and moved for summary judgment. Landreth disputed CIT’s entitlement to a deficiency judgment and argued that a strict foreclosure was in effect. Landreth claimed that a CIT employee had told him via telephone that if the buses were returned, his obligation would be satisfied in full, and that CIT was accepting the buses in full satisfaction of Bus Services’ debts. CIT disputed this claim.