RACHEL C. WILLIAMS
AMERICAN HONDA FINANCE CORPORATION
Heard: December 7, 2017.
Vehicle Instalment Sales, Repossession, Notice. Uniform
Commercial Code, Notice. Words, "Fair market
of questions of law to the Supreme Judicial Court by the
United States Court of Appeals for the First Circuit.
J. Roddy (Elizabeth A. Ryan also present) for the plaintiff.
S. Mattson, of Illinois (Tracy McDevitt Waugh also present)
for the defendant.
Fredrick S. Levin, John C. Redding, & Ali M. Abugheida,
for American Financial Services Association, amicus curiae,
submitted a brief.
T. Rossman, for National Consumer Law Center, amicus curiae,
submitted a brief.
Present: Gants, C.J., Gaziano, Lowy, Cypher, & Kafker,
primary issue presented in this case is how to establish the
fair market value of a repossessed automobile pursuant to G.
L. c. 255B, § 20B. Under § 20B, a creditor who
repossesses and sells a vehicle is entitled to recover from
the debtor the deficiency, if any, that remains after
deducting the "fair market value" of the vehicle
from the debtor's unpaid balance. The plaintiff in this
case, Rachel Williams, defaulted on her automobile loan,
causing the defendant, American Honda Finance Corporation
(Honda), to repossess and sell the vehicle that served as
collateral for the loan. The price for the repossessed
vehicle was determined at an auction open to licensed
dealers. Honda then used that amount to establish the fair
market value of the repossessed automobile and likewise
referenced the auction sale amount in presale and postsale
notices to the debtor. Williams then sued Honda, alleging
that the fair market value of her repossessed automobile was
the fair market retail value of the automobile and
Honda's notices to her were insufficient under
Massachusetts law because of the manner in which Honda
described and calculated her deficiency. The United States
District Court for the District of Massachusetts granted
summary judgment to Honda, and the plaintiff appealed.
of the meaning of the statute, the United States Court of
Appeals for the First Circuit certified to this court three
questions related to the calculation of "fair market
value" under § 20B, and the notices that are
required with respect to this calculation. The court first
asks whether the fair market value of the collateral under
§ 20B is the fair market retail value of the collateral.
The second and third questions then relate to the contents of
the presale and postsale notices that must be sent to the
conclude that the Legislature required that deficiency
calculations for repossessed vehicles be determined based on
the fair market value of the vehicle, but did not dictate the
creditor's market choice in the first instance and left
the ultimate determination of fair market value to the courts
in contested cases, taking into account both creditor and
debtor interests, and the means, methods, and markets used to
sell the vehicle. As will be explained infra,
estimated retail value as provided in periodically published
trade journals has a very limited role in the statute,
essentially establishing a rebuttable evidentiary presumption
that allows a debtor to put the fair market value as
originally determined by the creditor to the test in
contested cases. The approach to determining fair market
value and deficiencies that we delineate respects the plain
language of the statute, the legislative history, and the
practical realities of the automobile repossession market.
Had the Legislature intended to impose a fair market retail
value standard, it would have simply said so in the statute
or the legislative history, and it did not.
in response to the second and third questions, concerning the
notice that is required, we answer that the presale and
postsale notices provided to the debtor must expressly
describe the deficiency as the difference between the amount
owed on the loan and the fair market value of the vehicle,
not the difference between the amount owed and the sale
proceeds or the amount owed and the fair market retail value
of the vehicle.
relevant facts and procedural history are as follows.
resells tens of thousands of used motor vehicles every year
-- some after a repossession, but most after they have been
returned to Honda at the end of a lease. To sell all of these
vehicles, Honda uses a process that the plaintiff has
admitted is "designed to obtain the highest possible
price." The first step in this process involves an
independent auction company rating the vehicle's
condition on a scale from zero to five, with zero
representing the "very worst" and five the
"very best." With the vehicle's grade in mind,
a Honda employee consults the Black Book to help establish a
baseline value for vehicles it resells. The Black Book is a
guidebook used in the collections, customer service, and
credit industry. Honda determines a "floor price"
-- the minimum it intends to accept when it sells the vehicle
-- based in part on the Black Book's estimated values for
a vehicle of the same make, model, year, mileage, and
condition. After a floor price is set, the vehicle is sold,
along with vehicles from other manufacturers, at a biweekly
auction that is open to licensed dealers.
uses auctions rather than a retail channel to sell these
vehicles for a variety of reasons. Honda is not licensed to
sell at retail, and selling at retail may interfere with the
legal rights of independent Honda dealers. It also would take
Honda a longer time to sell these vehicles at retail than
selling at the dealer auctions. This is significant because
automobiles depreciate rapidly and the longer a creditor
retains possession of a vehicle, the less it will be worth
when it is eventually sold.
financed the purchase of the plaintiff's vehicle in 2007.
Four years later, after the plaintiff defaulted on her loan,
Honda repossessed the vehicle. Honda then provided the plaintiff
with the following notice:
"We have [your vehicle] because you broke promises in
our agreement, and we will sell it at a private sale sometime
after October 11, 2011.
"The money received from the sale (after paying our
costs) will reduce the amount you owe. If the auction
proceeds are less than what you owe, you will still owe us
the difference. If we receive more money than you owe, you
will receive a refund, unless we must pay it to someone else.
If you would like a written explanation on how the amount you
owe was determined, or need additional information about the
sale, please send your request to the address below.
"You can get the property back at any time before we
sell it by paying the full payoff amount, including our
expenses. As of today, the payoff amount is $13, 366.78,
which is subject to change due to the addition of applicable
fees and/or finance charges."
plaintiff's repossessed vehicle was sold according to the
auction process. The independent auction company determined
that the plaintiff's vehicle was in below average
condition. For Honda, this meant that the vehicle was in
"rough" condition for purposes of the Black Book.
According to the Black Book, the estimated wholesale value
for this vehicle in "rough" condition was $7, 750
and the estimated retail value was $9, 800. With these values
in mind, Honda set the floor price for the plaintiff's
vehicle at $8, 700 and ultimately sold the vehicle for $8,
900. The plaintiff's outstanding balance was $12, 858.70,
and Honda incurred repossession and auction expenses of
$754.62, leaving the plaintiff with a postsale deficiency of
$4, 713.32. After the auction, Honda notified the plaintiff
that her vehicle was sold for $8, 900 and provided her with a
calculation of the deficiency that she owed. There is no
indication that Honda, once it sold the vehicle and
calculated the deficiency, intended to file a lawsuit to
collect the deficiency. Indeed, Honda has brought only five
or fewer such lawsuits in the past few years despite selling
thousands of repossessed automobiles.
plaintiff commenced a putative class action in the Superior
Court against Honda, claiming that the notices it sent to her
and other debtors violated the Uniform Commercial Code and
constituted an unfair and deceptive act or practice in
violation of G. L. c. 93A. The plaintiff challenges
Honda's presale notice because it did not use the term
"fair market value" in describing her deficiency.
The plaintiff also challenges the postsale notice, arguing
that it is insufficient because it calculated her deficiency
as the difference between her unpaid balance and the auction
removed the case to the United States District Court for the
District of Massachusetts. Following discovery, both parties
moved for summary judgment. A magistrate judge recommended
granting summary judgment in favor of Honda, concluding that
under G. L. c. 255B, § 20B, the plaintiff's
deficiency must be calculated using the fair market value of
the collateral and that Honda's notices complied with the
Uniform Commercial Code because there was no evidence that
Honda sold the vehicle for less than its fair market value.
The district court judge adopted this recommendation and
entered judgment in favor of Honda.
plaintiff appealed to the United States Court of Appeals for
the First Circuit. Having determined that the outcome of the
case depended on unsettled questions of Massachusetts law,
the First Circuit on its own motion certified three questions
to this court. We address each question in turn.
first certified question asks:
"1. Whether the 'fair market value' of
collateral under [G. L. c. 255B, § 20B, ] is the fair
market retail value of that collateral"
(emphasis in original)?
reasons detailed infra, we answer this question,
primary source of insight into the intent of the Legislature
is the language of the statute." International Fid.
Ins. Co. v. Wilson, 387 Mass. 841, 853
(1983). "Where the language is clear and unambiguous, it
is to be given its 'ordinary meaning, '" as long
as "this meaning . . . [is] reasonable and supported by
the purpose and history of the statute" (citations
omitted). Commonwealth v.
Mogelinski, 466 Mass. 627, 633 (2013).
plain language, G. L. c. 255B, § 20B, calculates the
deficiency that the creditor can obtain from a defaulting
debtor based on the fair market value of the
collateral. Once the creditor repossesses and sells
the collateral, the creditor "shall be entitled to
recover from the debtor the deficiency, if any, resulting
from deducting the fair market value of the collateral from
the unpaid balance due" in ...