Ford & Vlahos v. ITT Commercial Finance Corp.
Decision Date | 15 December 1994 |
Docket Number | No. S035748,S035748 |
Citation | 8 Cal.4th 1220,885 P.2d 877,36 Cal.Rptr.2d 464 |
Court | California Supreme Court |
Parties | , 885 P.2d 877, 25 UCC Rep.Serv.2d 630 FORD & VLAHOS, Plaintiff, Cross-defendant and Appellant, v. ITT COMMERCIAL FINANCE CORP., Defendant, Cross-complainant and Appellant. |
Kline & Joseph, Stephen L. Joseph, Washington, DC, Richard Collier Sears, Nossaman, Guthner, Knox & Elliott, William T. Bagley and Douglas J. Maloney, San Francisco, for plaintiff, cross-defendant and appellant.
Christopher M. Micheli and Nancy N. McDonough, Sacramento, as amici curiae on behalf of plaintiff, cross-defendant and appellant.
Howard, Rice, Nemerovski, Canady, Robertson & Falk, Howard, Rice, Nemerovski, Canady, Robertson, Falk & Rabkin, Jerome B. Falk, Jr., Bernard A. Burk and Matthew F. Weil, San Francisco, for defendant, cross-complainant and appellant.
Christopher E. Chenoweth, San Francisco, as amicus curiae on behalf of defendant, cross-complainant and appellant.
This case presents a narrow question of law: whether the California version of Uniform Commercial Code section 9-504, subdivision (3), definitively limits a secured party's duty to advertise the sale of collateral merely to placing a legal notice in a newspaper. We conclude it does not, and therefore reverse the Court of Appeal's judgment and remand the case for consideration of the secured party's other claims of error.
Defendant secured party lent plaintiff debtor money to buy a Lockheed Hercules C-130A aircraft and acquired a purchase-money security interest in it. The parties agreed that California law would govern the security agreement.
Plaintiff defaulted on the loan and was notified by defendant that it would repossess the aircraft. On August 26, 1987, defendant informed plaintiff it would hold a public sale of the C-130A on September 3 at Chandler, Arizona.
On August 28, 1987, defendant advertised the sale's time and place in the Arizona Republic, a newspaper of general circulation in Maricopa County, Arizona, where Chandler is located. The advertisement stated that the United States Department of State would have to approve "the purchaser and the secured party's right to bid [on] and purchase" the aircraft. But the advertisement apparently inadvertently omitted the information about whom to contact to qualify as a bidder. That error caused defendant to place a corrected advertisement in the Phoenix (Arizona) Gazette on September 2.
Defendant, the sole bidder at the auction, bought the C-130A the next day for $1 million. After the sale defendant's agent advertised the aircraft in Trade-A-Plane. The agent testified that Trade-A-Plane is "the Bible of aircraft sales in this country." In March 1988 defendant agreed to sell the C-130A to African Air Trans, Inc., for $1,525,000, eventually, according to defendant, receiving $1,487,000 from that company.
Plaintiff sued for improper disposition of the collateral and defendant cross-complained for a deficiency plaintiff allegedly owed after credit for the $1 million foreclosure-sale bid.
The trial court found the aircraft's sale commercially unreasonable because accompanied by insufficient publicity and hence the subject of too few bids. The court also found the notices of sale "legally insufficient" for various reasons. The court's statement of decision recited:
With regard to the collateral's value, the court ruled, "based on ... expert opinion testimony ..., that the fair market value of the Aircraft on the date of sale, September 3, 1987, was $3.8 million."
On the basis of that valuation, the court set plaintiff's damages at $3.8 million, but granted defendant an offset of $996,050, a figure representing the sum of plaintiff's debt to defendant and defendant's expenses in repossessing, refurbishing and selling the aircraft. The ensuing judgment netted plaintiff $2,803,950.
The Court of Appeal reversed the judgment in part. As relevant here, the majority decided the Legislature had created a "safe harbor" in California Uniform Commercial Code section 9504, subdivision (3)--unlabeled statutory references are to this code--whereby satisfying the statute's notice requirement precluded any challenge to the sale's commercial reasonableness on the basis of inadequate publicity. The majority wrote, Thus, the majority reasoned, "Compliance with the letter of section 9504(3) creates a safe harbor against claims that the publicity for a public sale was inadequate." Acknowledging that "there may be situations ... where such a limited notice would seem less than fair," the majority stated in essence that any complaints should be addressed to the Legislature. The majority thus rejected the reasoning of American Business Credit Corp. v. Kirby (1981) 122 Cal.App.3d 217, 221, 175 Cal.Rptr. 720, and Clark Equipment Co. v. Mastelotto, Inc. (1978) 87 Cal.App.3d 88, 96-97, 150 Cal.Rptr. 797, "cases that have suggested, contrary to our conclusion, that a single, timely newspaper notice might not be sufficient," because those cases "did not consider section 9504(3)'s legislative history, or address whether the statute's notice provisions were meant to conclusively establish what is required to publicize an auction of collateral."
The dissent declared that the majority's bright-line rule was unfounded. Citing the cases mentioned above, the dissent observed that, The dissent continued,
Because the Court of Appeal majority concluded that the Legislature had conclusively defined the publicity required for a sale of foreclosed collateral, it did not address defendant's other claims of error, including contentions regarding the court's calculation of the aircraft's value, its valuation of defendant's expenses attendant to repossessing and selling the aircraft, and its asserted refusal to find that plaintiff was not the real party in interest.
We granted plaintiff debtor's petition for review. For its part, defendant secured party requests that we take judicial notice of certain materials bearing on legislative intent. That request, which is unopposed, is also granted. (Evid.Code, §§ 452, subds. (c), (h), 459, subd. (a).)
Defendant contends that the references to notice in subdivision (3) of section 9504 conclusively define the publicity required for a public sale of foreclosed collateral. Defendant reasons that because it met the statute's notice requirements, the court could not properly find the sale commercially unreasonable for want of sufficient publicity. In sum, it contends the Court of Appeal majority correctly understood the meaning of section 9504, subdivision (3).
We interpret the California Uniform Commercial Code otherwise. As we will describe, notice on the one hand, and publicity or advertising on the other, are separate but related concepts under the California Uniform Commercial Code. (We define advertising broadly as all...
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