The California Article 9 No-Deficiency Rule: Undermining the Secured Party\u27s Security

In 1972, a California appellate court inAhdas Thrift Co. v. Horan held that a secured party was barred from recovering a deficiency judgment against the defaulting debtor if the secured party did not comply with section 9-504(3) of the Uniform Commercial Code, requiring notice of sale to the debtor and commercially reasonable conduct of the sale. This court-made rule has been followed by other California appellate courts but has not been reviewed by the California Supreme Court. This Comment first reviews the response of courts in other states to the UCC system of debtor remedies for secured party misbehavior. It then analyzes Atlas Thrift in light of UCC policy and California precedent and argues that neither supports the case\u27s holding. The Comment concludes that barring the noncomplying secured party from obtaining a deficiency judgment is a punitive remedy contrary to the UCC\u27s policy of providing only compensatory damages