the inventory and then as to the sale of the fixtures, furniture and equipment, we observe that conflicting expert testimony was presented by the parties on the reasonableness of the sale of the inventory. Justin Gambone, testifying as an expert witness on behalf of the B.J.M. parties, opined that the vehicles were not sold in a manner which was commercially reasonable inasmuch as they were sold off-site at a Chrysler-controlled, dealers-only auction at wholesale prices. According to Mr. Gambone, the best way to dispose of the dealership's inventory would have been to sell the vehicles on the dealership's premises at retail to the general public. Alternatively, the vehicles could have been sold on-site at an open auction. Either of these sales methods, in Mr. Gambone's opinion, would have resulted in a higher recovery on B.J.M.'s inventory. (N.T. 6/09/93, 6-9) Mr. Gambone, however, did not testify that the inventory (which was sold at an area auto auction) was sold in a fashion that was contrary to the usual manner of disposition in an unusual market or to parties who did not deal in the type of property sold nor did he testify as to how much more Chrysler Credit could have realized on the sale of the inventory had the vehicles been sold in the manner which he had advocated.
For its part, Chrysler Credit Corporation presented the expert testimony of Lawrence Bideau, who has been employed as one of its marketing specialists for the past seven years. Although, Mr. Bideau essentially agreed with Mr. Gambone's testimony that a better method of disposition would be to auction off-site to the general public, in his experience, Chrysler Credit has always sold repossessed vehicles at dealer-auctions and they usually get more for the vehicles when they sell at a Chrysler-dealers only auction. In this case, Mr. Bideau further testified, Chrysler Credit Corporation sold B.J.M.'s used car inventory (i.e. all of those vehicles which the factory would not buy back) for some 110% of average book value. (N.T. 6/09/93, 153-164) It was therefore Mr. Bideau's opinion that the sale of B.J.M., Jr., Inc.'s motor vehicle inventory was commercially reasonable.
In reconciling these testimonial conflicts between what are clearly two interested witnesses, we nevertheless find that the auctions of the vehicles did fall within the confines of commercial reasonableness. Indeed, while it is true that Chrysler Credit could have selected an alternative method of sale, there is simply no evidence that the dealers-only auction method utilized did not conform to reasonable commercial practices in the auto dealership industry nor is there any evidence to suggest that a more favorable result than 110% of average book value could have been attained had another method of sale been employed. See Also: Exhibit P-20. We therefore conclude that Chrysler Credit Corporation's disposition of BJM/All-Star's inventory complied with the requirements of 13 Pa.C.S.A. § 9504(c).
Turning to the disposition of the dealership's equipment, fixtures and furniture, the record evidence indicates that those items were sold as part of an open, public equipment auction on Saturday, April 11, 1992, and that that auction was advertised by the auction company through a national publication and the posting of sales flyers. There was further testimony that some 2,000 people were in attendance at that auction and that it netted a total of $ 13,050.01 after expenses which was paid directly to Chrysler Credit and applied toward B.J.M.'s debt. (N.T. 6/03/93, 39-41; 6/07/93, 25-26,, 56-59; Exhibit P-21) While both Mr. Gambone and Mr. Lashinger testified that Chrysler Credit seized from the dealership's offices a marble desk, credenza and bookshelf that in their estimation were worth $ 50,000, there was no evidence that these items had been independently appraised. Moreover, according to Jay and Luke Whitman of the Omar Landis Auction Company, these items were severely worn and battered and were unlikely worth that $ 50,000 figure. (N.T. 6/07/93, 38, 47-48; 6/09/93, 45-46) There was likewise no evidence produced with respect to the value of any of the other items auctioned (with the exception of the telephone and computer systems) nor did either party produce anything to suggest that the property could have been disposed of differently or with a more favorable result. Accordingly, we hold that the sale was on the whole commercially reasonable and that the plaintiff credit company acted with relative honesty and good faith in the sale of the collateral.
Insofar as the telephone and computer systems are concerned, the record evidence reveals that the phone system was leased from Century Equipment Company, that as of December 31, 1991, it was valued at $ 15,185.92 and that the computer equipment was leased through First People's Bank of New Jersey and that the balance due under that lease as of the same date was $ 31,914.34. The record further reflects that the phone system and the computers were sold at auction for a combined total of $ 125. In light of the foregoing evidence then, while this Court finds that the sale of B.J.M.'s furniture, fixtures and equipment other than the phone and computer systems was commercially reasonable, we cannot find that Chrysler Credit has met its burden of proof with respect to the sale of the telephone and computer systems. We therefore find that Chrysler Credit failed to comply with 13 Pa.C.S.A. § 9504(c) as to the sale of these items.
D. Remedies Available to B.J.M. Parties for Chrysler Credit Corporation's Failure to Comply with 13 Pa.C.S.A. § 9504(c)
It is firmly established that under 13 Pa.C.S.A. §§ 9506 and 9507, the debtor, too, has certain rights. Under Section 9506,
he has the right to redeem the collateral and it has been said that it is because of this right of redemption that the secured party must give him notice of any intended sale or other disposition of the collateral. See, e.g.: Skeels v. Universal C.I.T. Credit Corp., 222 F. Supp. 696, 702 (W.D.Pa. 1963), vacated on other grounds, 335 F.2d 846 (3rd Cir. 1964). Under § 9507(a), the debtor has the right of recovery against the secured party for the secured party's failure to comply with the requirements of the Uniform Commercial Code. Specifically, section 9507(a) provides:
If it is established that the secured party is not proceeding in accordance with the provisions of this chapter 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 chapter. 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 10% of the principal amount of the debt or the time price differential plus 10% of the cash price.
Notwithstanding § 9507(a)'s allowance of recovery for "any loss caused by a failure to comply . . .," there is no clear definition of "loss" or any clear measure of damages under either the Code or existing caselaw. Rather, there appear to be two major irreconciliable lines of authority on the issue, with neither the Third Circuit Court of Appeals nor the Pennsylvania Supreme Court having ever addressed the issue or adopted either line of reasoning. Not surprisingly, the B.J.M. parties urge this Court to follow the position taken by the court in Skeels v. Universal C.I.T. Credit Corp., supra and the cases that follow it. Ironically, that case is strikingly similar to the instant matter in that the plaintiff Chrysler dealer's entire inventory was summarily repossessed and sold without notice for a sold-out-of-trust condition. In disposing of the defendant credit company's post-trial motions, the district court observed that there was no case under Pennsylvania law in which a security holder had been denied recovery for a so-called loss when notice had not been given. Id. at 702, citing Atlas Credit Corporation v. Dolbow, 193 Pa. Super. 649, 165 A.2d 704 (1960) and Alliance Discount Corporation v. Shaw, 195 Pa. Super. 601, 171 A.2d 548 (1961). Nevertheless, the Skeels court held:
"It seems to this court, however, that to permit recovery by the security holder of a loss in disposing of the collateral when no notice has been given, permits a continuation of the evil which the Commercial Code sought to correct. The owner should have an opportunity to bid at the sale . . . A security holder who disposes of collateral without notice denies to the debtor his right of redemption which is provided him in Section 9-506. In my view, it must be held that a security holder who sells without notice may not look to the debtor for any loss.
See Also: United States v. Dawson, 929 F.2d 1336 (8th Cir. 1991) (construing Arkansas law); In Re Kirkland, 915 F.2d 1236 (9th Cir. 1990) (construing California law); Atlas Thrift Company v. Horan, 27 Cal.App.3d 999, 104 Cal. Rptr. 315 (1972).
In contrast, a number of other courts have held that in those situations where the creditor has failed to give the requisite notice, the appropriate remedy is to impose on the creditor the burden of proving the market value of the collateral as a pre-requisite to the recovery of any deficiency judgment. Rushton v. Shea, 423 F. Supp. 468, 470 (D.Del. 1976). Thus, where the secured party can prove that the sale resulted in the fair and reasonable value of the security being credited to the debtor's account, a deficiency judgment may be pursued. Citi-Lease Co. v. Entertainment Family Style Co., 825 F.2d 1497, 1501 (11th Cir. 1987) applying New Jersey law and citing Conti Causeway Ford v. Jarossy, 114 N.J. Super. 382, 276 A.2d 402, 404-405 (Law Div. 1971), aff'd, 118 N.J. Super. 521, 288 A.2d 872 (App. Div. 1972). See Also: Northwest Acceptance Corp. v. Lynnwood Equipment, Inc., 841 F.2d 918 (9th Cir. 1988) (applying Washington law); Matter of Excello Press, Inc., 890 F.2d 896 (7th Cir. 1989), (applying New York law).
Regardless of the absence of binding precedent, we must still resolve the issue of whether Chrysler Credit's failure to notify the debtors in this case should foreclose it from obtaining a judgment in its favor for the difference between the amount owed to it and the amount realized upon sale of the inventory. In so doing, we are guided both by Judge Willson's observation in Skeels that there has been no case in Pennsylvania wherein a security holder has been denied recovery for a loss on the collateral when notice has not been given and by the observation of the Pennsylvania Superior Court in Beneficial Consumer Discount Co. v. Savoy, 291 Pa. Super. 649, 436 A.2d 687, 689 (1981) that no Pennsylvania court has even held that a commercially unreasonable resale bars entirely any deficiency judgment. We therefore find that the better-reasoned and more equitable approach is to place upon Chrysler Credit the burden of proving the market value of the collateral and the commercial reasonableness of the sale before assessing whether or not it is entitled to a judgment in its favor for a deficiency.
So saying, we must next evaluate the sufficiency of Chrysler Credit's proofs in that regard. As was previously discussed in Section C above, it is this Court's considered opinion that Chrysler has failed to show that the sale of B.J.M.'s leased telephone and computer systems was commercially reasonable or that the value of those items differed from the amounts due under the leases. We further concluded as the result of the discussion outlined in Section C, that the sale of the motor vehicle inventory was commercially reasonable. Based upon the testimony of Mr. Gambone, Mr. Bideau and Mr. Tallant, we now additionally find that Chrysler Credit has met its burden of proving that it received fair market value for the vehicles auctioned. (N.T. 6/03/93, 33, 35-37; 6/09/93, 7-9, 153-156; Exhibit P-20)
In light of all of the foregoing then, we believe that Chrysler is entitled to a deficiency judgment in its favor calculated in the following manner:
Principal Amount of Debt
(S.O.T./Shortfall on Sale of Inventory) $ 665,578.12
Credits: Sale of Franchise $ 323,877.50
Sale of Furniture, Equipment, etc. 60,025.27
Parts Return Credit 68,552.76
Payment of IRS Lien 80,000.00
Total Due and Owing: $ 293,122.59
II. THE COUNTERCLAIMS OF THE B.J.M. PARTIES
A. Standing to Sue
For their part, Joseph Lashinger, Justin and Carol Gambone and B.J.M., Jr., Inc. have counterclaimed and seek damages from Chrysler Credit and its agents and employees for, inter alia, lender liability and bad faith, trespass, unlawful seizure and conversion of assets and fraud and misrepresentation. In response thereto, Chrysler Credit Corporation preliminarily asserts that those claims must be dismissed due to the application of the automatic stay provisions of the Bankruptcy Code, 11 U.S.C. § 362 and the fact that Mr. Lashinger and the Gambones lack the capacity or standing to pursue these claims on behalf of the bankrupt corporation.
It is axiomatic that a stockholder, director, officer or employee of a corporation has no individual right of action against third persons for damages that result indirectly to the individual because of an injury to the corporation. Temp-Way Corporation v. Continental Bank, 139 Bankr. 299, 316-317 (E.D.Pa. 1992), aff'd 981 F.2d 1248 (3rd Cir. 1992); Nagle v. Commercial Credit Business Loans, Inc., 102 F.R.D. 27, 29 (E.D.Pa. 1983). Although the Third Circuit has yet to specifically so hold, it is also generally accepted that guarantors of a corporation's debt, even if those guarantors are also stockholders, do not have standing to bring an action if the only harm suffered is derivative of the harm the corporation suffered. Temp-Way, supra, citing, inter alia, Mid-State Fertilizer v. Exchange National Bank, 877 F.2d 1333, 1335-37 (7th Cir. 1989); Sparling v. Hoffman Construction Co., Inc., 864 F.2d 635, 641 (9th Cir. 1988).
These general principles, however, are not without certain exceptions. One such exception exists where there is a special duty such as a contractual duty or fiduciary relationship between the wrongdoer and the shareholder.
Bohm v. Commerce Union Bank of Tennessee, 794 F. Supp. 158, 161 (W.D.Pa. 1992); Cole v. Ford Motor Co., 566 F. Supp. 558, 569 (W.D.Pa. 1983). Similarly, an individual shareholder or officer may bring an action directly against a third party where he has pled an injury separate and distinct from that incurred by the corporation. eds Adjusters, Inc. v. Computer Sciences, Corp., 818 F. Supp. 120, 121 (E.D.Pa. 1993).
In this case, neither B.J.M., Jr., Inc., Mr. Lashinger nor the Gambones pleaded the existence of a contractual duty or fiduciary relationship between themselves and the Chrysler parties and standing thus cannot be premised on the basis of the first enumerated exception. What's more, since the counterclaims of B.J.M., Jr., Inc., Mr. Lashinger and the Gambones essentially mirror one another, this Court is hard pressed to find that Mr. and Mrs. Gambone and Mr. Lashinger have succeeded in pleading an injury and in raising counterclaims which are separate and distinct from those of the corporation. Accordingly, we can make no other finding but that Mr. Lashinger and Mr. and Mrs. Gambone cannot in their own right pursue the claims which they have asserted in Counts I-IX of their Counterclaim.
This finding notwithstanding, this Court nevertheless sees no reason why the counterclaims for lender liability, bad faith, etc. of B.J.M., Jr., Inc. could not have been heard. In this regard, the holding of the Third Circuit Court of Appeals in Maritime Electric Co., Inc. v. United Jersey Bank, 959 F.2d 1194 (3rd Cir. 1991) is clear and unambiguous:
"Although the scope of the automatic stay is broad, the clear language of section 362(a) indicates that it stays only proceedings against a "debtor" - the term used by the statute itself. The statute does not address actions brought by the debtor which would inure to the benefit of the bankruptcy estate . . . Thus, within one case, actions against a debtor will be suspended even though closely related claims asserted by the debtor may continue. Judicial proceedings resting on counterclaims and third-party claims asserted by a defendant-debtor are not stayed, while same-case proceedings arising out [of] claims asserted by the plaintiff are stayed." 959 F.2d at 1204-1205 citing In Re Berry Estates, 812 F.2d 67, 71, (2nd Cir.), cert. denied, 484 U.S. 819, 108 S. Ct. 77, 98 L. Ed. 2d 40 (1987); Assoc. of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446, 448 (3rd Cir. 1982); First Wisconsin National Bank v. Grandlich Development Corp., 565 F.2d 879, 880 (5th Cir. 1978). (emphasis in original.)
Instantly, the record reflects that in January, 1992, B.J.M., Jr., Inc. filed for protection under Chapter 11 of the Bankruptcy Code and that on March 6, 1992, Judge Bechtle (to whom this case was then assigned) ordered that Plaintiff's motion for an expanded writ of seizure against B.J.M., Jr., Inc. only be stayed pending the outcome of the bankruptcy proceeding. Judge Bechtle's order further provided that "all other parties, claims and defenses are not stayed by this order but shall proceed." To date, that order has not been vacated or modified in any manner nor has any party requested that any alteration be made thereto. We thus now revisit Chrysler Credit's contention that Messrs. Lashinger, DeVito and Morganstern should be foreclosed from representing the corporation at trial because of an inherent conflict of interest and because they were never formally approved by the Bankruptcy Court.
It is of course indisputable that any causes of action which accrue to a debtor who has filed for relief under the Bankruptcy Act before the filing of the bankruptcy petition become the property of the bankruptcy estate and may thereafter be prosecuted only by the trustee or a duly appointed representative of the estate. Committee of Unsecured Creditors of Specialty Plastic v. Doemling, 127 Bankr. 945 (W.D.Pa. 1991); Lambert v. Fuller Company, Inc., 122 Bankr. 243 (E.D.Pa. 1990); 11 U.S.C. § 541. It is equally well-settled that "the trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers or other professional persons that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties . . ." 11 U.S.C. § 327(a). "Disinterested person," in turn, is defined at 11 U.S.C. § 101(14) as meaning a person who:
(a) is not a creditor, an equity security holder, or an insider;
(b) is not and was not an investment banker for any outstanding security of the debtor;