93 Nev. 95 560 P.2d 917

STANLEY W. LEVERS and THORNTON G. COLBY, Appellants, v. RIO KING LAND AND INVESTMENT COMPANY, a Partnership Comprised of B. T. ROCCA and C. M. ROCCA, Individually and as Partners, Respondents.

No. 8262

March 9, 1977

560 P.2d 917

Hale & Belford, and J. Stephen Peek, Reno, for Appellants.

John J. McCune, Virgil D. Dutt, and Paul J. Williams, Reno, for Respondents.

*96OPINION

By the Court,

Batjer, C. J.:

Appellants gave respondents a $35,000 promissory note as consideration for ranch supplies purchased from respondents. *97Respondents properly perfected a security interest in the supplies, and, upon default by appellants, respondents disposed of the supplies at a nori-judicial sale pursuant to NRS 104.-9504(1)1 At the sale, respondents purchased the collateral for $100 and subsequently resold it for $10,000. In a consolidated action, the district court set aside the sale but awarded respondents $25,000, which was the difference between the amount due on the note and the amount obtained by respondents on resale. We must now determine (1) whether respondents gave appellants reasonable notification of the sale, (2) whether respondents held the sale in a commercially reasonable manner, and if not, (3) whether respondents are entitled to a deficiency judgment. Even though we conclude the sale was conducted in a commercially unreasonable manner, and without sufficient notice to appellants, we affirm the judgment of the district court, except that portion setting aside the sale.

1. With certain exceptions not here applicable, a secured party must give the debtor “. . . reasonable notification of the time and place of any public sale . . .” before disposing of the debtor’s property to satisfy a perfected security interest. NRS 104.9504(3). Although our uniform commercial code is silent regarding the length of time such notification should precede the date of sale, it should at least “. . . be sent in such time that persons entitled to receive it will have sufficient time to take appropriate steps to protect their interests . . .” in the collateral. U.C.C. § 9-504, Comment 5; see also Mallicoat v. Volunteer Finance & Loan Corp., 415 S.W.2d 347 (Tenn.App. 1966).

*98The secured party has the burden of establishing compliance with the “reasonable notification” requirement. Leasing Associates, Inc. v. Slaughter & Son, Inc., 450 F.2d 174 (8th Cir. 1971); Tauber v. Johnson, 291 N.E.2d 180 (Ill.App. 1972). Here, this burden has not been met. Respondents sent notice only to appellant Levers by letter, on May 25, 1972, informing him that the sale would be held on June 2, 1972.2 Before the sale date, appellants moved to temporarily restrain the sale to protect their interest in the collateral, but respondents had conducted the sale before the court’s order could be served. In light of these facts, respondents failed to satisfy the reasonable notification requirement of NRS 104.9504(3).3

2. In addition to giving reasonable notice, a secured party must, after default, proceed in a commercially reasonable manner to dispose of collateral. NRS 104.9504(3); Jones v. Bank of Nevada, 91 Nev. 368, 535 P.2d 1279 (1975). Every aspect of the disposition, including the method, manner, time, place, and terms, must be commercially reasonable. NRS 104.-9504(3). Although the price obtained at the sale is not the sole determinative factor, nevertheless, it is one of the relevant factors in determining whether the sale was commercially reasonable. First National Bank of Bellevue v. Rose, 196 N.W.2d 507 (Neb. 1972). A wide discrepancy between the sale price and the value of the collateral compels close scrutiny *99into the commercial reasonableness of the sale. In Re Zsa Zsa Limited, 352 F.Supp. 665 (S.D. N.Y. 1972); Mercantile Financial Corp. v. Miller, 292 F.Supp. 797 (E.D. Penn. 1968). This is especially true where, as here, the secured party purchases the collateral and subsequently resells it for a vastly greater amount than was credited to the debtor.

Respondent C. M. Rocca and one Maness, a former employee of Rocca, were the only people who attended the sale. There is no evidence that respondents publicized the sale in any manner or otherwise tooks steps to insure the best price possible would be obtained for the benefit of the debtor. See: Foster v. Knutson, 527 P.2d 1108 (Wash. 1974). C. M. Rocca placed the only bid at the sale and purchased the collateral for $100. Subsequently, respondents sold the collateral to a third party for $10,000. Under these circumstances, we conclude the sale was not commercially reasonable.

3. Despite the failure to conduct a commercially reasonable sale with reasonable notification to appellants, respondents contend they are entitled to a deficiency judgment based on the difference between the amount owing on the debt and the purchase price of the collateral at the statutory sale. Jurisdictions are split on whether a creditor who fails to comply with the uniform commercial code is precluded from recovering a deficiency judgment. See: White & Summers, Uniform Commercial Code § 26-15 (1972). Creditor misconduct should not be an absolute bar to a deficiency. Instead, when a creditor is derelict in complying with the code’s provisions, it will be presumed the collateral had a fair market value equal to the amount of the debt, and no deficiency will be permitted unless the creditor produces evidence to establish the reasonable amount that the collateral would have sold for at a proper sale. Clark Leasing Corp. v. White Sands Forest Prod., Inc., 535 P.2d 1077 (N.M. 1975); Universal C.I.T. Credit Co. v. Rone, 453 S.W.2d 37 (Ark. 1970). See also: Notes, A Creditor’s Right to a Deficiency Judgment Under Article 9 of the Uniform Commercial Code, 42 Brooklyn L.Rev. 56 (1975).

Here, there is substantial evidence that the collateral had a fair market value of $10,000. Therefore, the district court correctly awarded respondents $25,000, the difference between the balance owed on the promissory note, and the fair market *100value of the collateral. However, because appellants have received complete relief, respondents’ misconduct will not vitiate the statutory sale so as to defeat the third party’s title in the collateral subsequently purchased from respondents. That portion of the judgment setting aside the sale is therefore reversed.

We need not consider appellants’ other contentions challenging various findings by the district court because they are supported by substantial evidence. Alves v. Bumguardner, 91 Nev. 799, 544 P.2d 436 (1975).

Zenoff, Mowbray, Thompson, and Gunderson, JJ., concur.

Levers v. Rio King Land & Investment Co.
93 Nev. 95 560 P.2d 917

Case Details

Name
Levers v. Rio King Land & Investment Co.
Decision Date
Mar 9, 1977
Citations

93 Nev. 95

560 P.2d 917

Jurisdiction
Nevada

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