DeLay First National Bank & Trust Co. v. Jacobson Appliance Co.

Clinton, J.,

dissenting.

I dissent for several reasons. First, I cannot agree that where collateral is disposed of in a series of sales, failure to give notice of one such sale deprives the holder of the security interest of all right to a deficiency judgment and the right to rely upon a guaranty, even though all sales are conducted in a commercially reasonable manner and the lack of notice caused no loss whatever. Such a result is patently unjust and is not mandated either by the provisions of the Uniform Commercial Code or by our holding in Bank of Gering v. Glover, 192 Neb. 575 , 223 N. W. 2d 56 . Secondly, I find the majority opinion vague and confusing in its discussion of the differences between private and public sales. Thirdly, the opinion seems to imply that if collateral is to be sold in a series of private sales, separate notice must be given for each sale rather than the one notice which, it seems to me, the statute contemplates. Fourthly, by defining *412 “reasonable notification” in terms of a flat time period the court in effect amends the statute. Fifthly, the record in this case contains evidence sufficient to support a finding that all sales here involved were conducted in a commercially reasonable manner. The issue of commercial reasonableness was submitted to the jury and it found in favor of the secured party. That finding should stand.

I will briefly discuss the above objections in the order listed. The opinion imposes the ultimate in penalties against the creditor for failure to give notice of one sale, where collateral is being disposed of in a series of transactions as permitted by the code and even though notice may have been given of all other sales and all sales were held in a commercially reasonable manner. Assume, for example, that if there were a hundred large items to be sold and it was best that they be sold in a series of public sales, say in 10 lots, and notice is given of the 10 sales and all sales are commercially reasonable, however, it is then discovered that a few insignificant items are overlooked and these are sold at private sale without notice, but in a commercially reasonable manner and full value is obtained. Under the proposed rule which this case promulgates, the creditor is denied his right to a deficiency even though the debt- or has not been harmed.

Lending institutions sometimes loan on insufficient collateral and in reliance on a guaranty by a responsible party. In the circumstances given in the example above, it would be unjust and ridiculous to deprive the lender of his reliance on his guaranty. The proposed rule will have a tendency to unduly restrict credit and is clearly unjust. Our holding in the Gering case does not mandate the result in this case. In the Gering case there was one sale and no notice at all.

As a reason for adopting the severe penalty the opinion says: “To adopt any other rule would place upon the court the sometimes impossible and time-consuming *413 task of attempting to determine the amount of recoverable deficiency as well as the amount of unrecoverable deficiency.” Convenience may be a good reason for rules of procedure. The convenience of the courts is no reason at all for rules which determine the substantive rights of parties. The majority bring discredit on the court when the rule of decision is so founded.

The opinion does not clearly differentiate between public sale and private sale. Under ordinary law and under the code, public sale means sale at public auction and perhaps by sealed bids, both, of course, after the required public notice. The distinguishing characteristic of public sale is bona fide competitive bidding. White & Summers, Uniform Commercial Code, Hornbook Series, § 26-11, p. 993, Ex Parte Keller, 185 S. C. 283, 194 S. E. 15 ; In re Newbrough, 254 Mich. 170 , 236 N. W. 233 ; Offredi v. Huhla, 135 Conn. 20 , 60 A. 2d 779 , 4 A. L. R. 2d 472; Union & Merchantile Trust Co. v. Harnwell, 158 Ark. 295 , 250 S. W. 321 ; Katleman v. Katleman, 70 Nev. 330 , 269 P. 2d 257 .

There were no public sales in this case. All sales were private. The fact that Brehmer Music sold on an open lot after advertising but not by auction did not make that a public sale within the usual meaning of that term. The reference in the opinion to notice of private sale being given for a sale in fact public is mistaken.

The opinion seems to imply that if property is to be sold at private sale, then one notice before such sale to the effect that after a certain time the collateral "will be sold at private sale is not sufficient. It seems to hold that there must be a special .notice for each private sale. Clearly the code does not contemplate that and the opinion cites no authority for the position. The code says: “Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. . . . Unless collateral is perishable or threatens to decline speedily in value or is the type cus *414 tomarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor . . ..” § 9-504(3), U. C. C. The statement in the opinion, “We believe the intent of the Uniform Commercial Code will appear to mandate that the entire disposition of collateral by the secured party be viewed as one transaction,” just does not stand up in face of the code language.

Collateral may consist of dozens or hundreds of items. It may be best that these be sold in a group, or it may be best that they be sold individually, or in a combination. What is commercially reasonable will depend on circumstances. If a thousand items are to be sold at numerous private sales, it would be ridiculous to require some sort of notice of each sale. Ultimately the cost of sale comes out of the debtor’s pocket under the provisions of the code because he is responsible for the costs of sale. Such costs should not be unnecessarily accumulated.

What the statute contemplates in private sales is one notice after which property may be sold privately with the creditor being held to the standard of commercial reasonableness in all such sales, including price.

The opinion would hold as a flat rule that three business days notice of private sale is reasonable. That period of time may or may not be reasonable, depending upon circumstances. In any event, such a flat rule is simply an amendment of the statute which provides, “reasonable notification of the time after which any private sale or other intended disposition is to be made.” The Uniform Commercial Code in some states does specify a time period. Ours does not. We have no authority to amend the statute.

One of the things that is overlooked in this case is that we have a jury verdict under proper instructions. *415 The issue of “commercial reasonableness” was submitted to the jury. The evidence on the various sales was sufficient to-submit the question. For example, on the buy-back by General Electric of crated items, this was pursuant to a prior arrangement between General Electric, Jacobson, and the bank. The evidence shows that the best price would be obtained by exercising the option under the agreement. The creditor was not damaged by this sale even though no notice was given. Lori Grosbeck, who was in charge of the business, did have notice and testified that this was the best way to do it and the method which would obtain the best price.

The record shows that the sale of five new uncrated Admiral TV sets was at full invoice price. Exhibit C, invoice No. 34989; 48:20-24; 135:22-25. The date of this sale is not shown by the record but payment of the sale was made in October. This was long after the August notice of sale. The creditor was not hurt by the absence of special notice on this sale.

There is further evidence in the record which supports the conclusion that all the other sales were in a commercially reasonable manner.

The notice of sale dated September 11, 1973, as to the items there specified was at least the equivalent of a notice that the items would be sold privately after 11:59 o’clock a.m., September 15, 1973, and was clearly sufficient as to those items.

The notice of August 10, 1973, was clearly sufficient as a notice of private sale for all merchandise sold thereafter and was the equivalent of a notice that such merchandise would be sold at private sale after 11:59 a.m., August 20,1973.

The law under the Uniform Commercial Code is just developing in this state. This court has a unique opportunity to see that it develops in a reasonable, just, and logical fashion. I believe we have passed up such an opportunity in this case.

McCown, J., joins in this dissent.