ITT Commercial Finance Corp. v. Riehn

Decision Date13 August 1990
Docket NumberNo. 05-88-01314-CV,05-88-01314-CV
Citation796 S.W.2d 248
CourtTexas Court of Appeals
Parties13 UCC Rep.Serv.2d 637 ITT COMMERCIAL FINANCE CORPORATION f/k/a ITT Diversified Credit Corporation, Appellant, v. Richard RIEHN, Christina Riehn, and Vicki Leigh Yowell, Appellees.

John J. Edwards, Dallas, for appellant.

Donna R. Morris, Fort Worth, for appellees.



HOWELL, Justice.

This is a suit for deficiency judgment following the repossession and sale of five mobile homes. ITT Commercial Finance Corporation (Lender) sued Richard Riehn, Christina Riehn, and Vicki Leigh Yowell (Debtors) under a financing agreement executed by Ricwell, Inc. (Corporation). The Corporation had secured "dealer floor plan" financing from Lender; by separate instruments, Debtors had personally guaranteed this debt. After the Corporation had defaulted, Lender had taken possession and sold all the collateral at a private sale.

Lender then filed this lawsuit to recover the balance of its note. Debtors filed a pleading denominated as a counterclaim alleging the failure to conduct the foreclosure sale in a commercially reasonable manner. Following pre-trial rulings, the trial court conducted a jury trial upon the issues of commercial reasonableness and Lender's alleged breach of contract.

Following a verdict in which the jury found, inter alia, that Lender had failed to dispose of the collateral in a commercially reasonable manner, the court gave judgment that Lender take nothing and that Debtors recover $30,000 in attorney's fees plus additional fees in case of an appeal. Lender asserts six points of error.

We sustain the attack upon the attorney's fee judgment. That award is reversed and rendered. In all other respects, we affirm.


Lender complains that the trial court erred in allowing Debtors' expert, Michael Rosen, to testify that the sale of the collateral was not commercially reasonable. A party who offers an expert's opinion has the burden to show that the witness is qualified--specifically meaning, he must show that the proffered expert possesses a higher degree of knowledge than an ordinary person or the trier of fact. Rogers v. Gonzales, 654 S.W.2d 509, 513 (Tex.App.-Corpus Christi 1983, writ ref'd n.r.e.). However, whether a witness qualifies as an expert is initially within the court's discretion. Milkie v. Metni, 658 S.W.2d 678, 679 (Tex.App.-Dallas 1983, no writ). The court's determination will not be disturbed unless a clear abuse of discretion is shown. Hilsher v. Merrill Lynch, Pierce, Fenner & Smith, 717 S.W.2d 435, 441 (Tex.App.--Houston [14th Dist.] 1986, no writ); Milkie, 658 S.W.2d at 679; Rogers, 654 S.W.2d at 513.

Witness Rosen presented numerous credentials to establish himself as an expert. He was employed at Rosen Systems, Inc., an industrial auction and appraisal business that has been operating since 1917. He had been a licensed auctioneer since 1970, was a certified member of the Association of Machinery and Equipment Appraisers, and is a member of the Machinery Dealers National Association.

Rosen's company appraises, liquidates, and auctions many types of new, used, and repossessed merchandise, including mobile homes. Although Rosen admitted on direct examination a lack of expertise in the sale of mobile homes at wholesale, he did state that he was an expert in liquidating repossessed collateral and bankruptcy estate assets. He also said that he frequently worked with secured creditors, such as Lender, in preparing various equipment for sale in a commercially reasonable manner. He said that he was familiar with the procedures for advertising sales and publicizing offerings to potential buyers to increase the sale price.

On cross-examination, Lender elicited testimony that Rosen was not a licensed mobile home dealer and that only one percent of Rosen's business related to mobile home sales.

Lender argued below that Rosen's testimony should be excluded because he lacked experience in the wholesale market or in the private sale of mobile homes. The trial court overruled. We conclude that it did not abuse its discretion. Debtors showed that Rosen possessed a higher degree of knowledge than the ordinary person, and, therefore, Debtors satisfied the threshold requirement for the presentation of a supposed expert's opinion. From that point, weight and credibility determinations fell within the province of the jury.


Lender complains that the jury's finding of lack of commercial reasonableness is against the great weight and preponderance of the evidence. In reviewing such a factual insufficiency claim, we must consider all evidence in the record relevant to the fact being challenged; we may set aside the verdict only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986) (per curiam). Credibility determinations are within the province of the jury. First City Bank v. Guex, 659 S.W.2d 734, 739 (Tex.App.--Dallas 1983), aff'd, 677 S.W.2d 25 (Tex.1984). The appellate court is not authorized to substitute its findings for those of the jury. Herbert v. Herbert, 754 S.W.2d 141, 144 (Tex.1988). This remains true even if the evidence conflicts such that we could reach a different conclusion. Clancy v. Zale Corp., 705 S.W.2d 820, 826 (Tex.App.--Dallas 1986, writ ref'd n.r.e.).

Lender, as the plaintiff in its suit for a deficiency, had the burden to establish that the foreclosure sale was conducted in a commercially reasonable manner. Sunjet, Inc. v. Ford Motor Credit Co., 703 S.W.2d 285, 287 (Tex.App.--Dallas 1985, no writ). In general, expert testimony is required to establish the commercial reasonableness of a sale. Id. at 289. Lender presented the testimony of Lynn Turney, a mobile home salesman, and Steve Waller, an account officer of Lender.

Turney testified on direct examination that he had been in the mobile home business--sales, service, transportation, and installation--for nineteen years. He stated that, in the past, he had purchased repossessed mobile homes from Lender for fifty percent of the manufacturer's invoice, a price he considered reasonable. Turney said that, in his opinion, the price that Lender received for the five mobile homes at issue in this case, sixty percent of invoice, was also reasonable. Turney also testified that he did not think advertising the sale would have increased the price obtained at the sale.

On cross-examination, Turney admitted that he was not familiar with the homes involved in this case, nor with the procedure used to sell them. He stated that he had not been asked to render an opinion whether the sale itself was commercially reasonable. His testimony was relevant only as to the reasonableness of the price obtained.

Waller testified that he had been employed by Lender for almost four years and had sold approximately 200 mobile homes to dealers in the wholesale market. He said that he received three written bids for the sale of the five repossessed mobile homes in question, ranging from forty percent to sixty percent of the original invoice price. Waller testified that, based on his experience, the method in which he sold the five mobile homes was "very reasonable."

On cross-examination, Waller admitted that Lender did not advertise the sale, did not send out letters to dealers, and did not follow up on two of the three written bids. Waller said that all he did to "market" the collateral was to transport it to Morgan Driveways (Drive Away?) in Fort Worth, a large transporter and storage facility for mobile homes. He said that potential buyers could have gone by and could have viewed the homes at that location, although it was conceded that the on-site employees had little or no information about the ownership of the homes, their resale status, asking price, etc.

In opposition to this evidence, Debtors called Michael Rosen, an auctioneer, whose testimony as an expert we have held admissible. He testified as to the manner in which he would have conducted the sale of these mobile homes, including posting a sign on the property, placing newspaper advertisements, mailing notices to dealers in a five-state area, and telephoning dealers in the local area. He said that this type of marketing increases the competitive bidding and, thus, increases the sale price. Considering these factors, Rosen said he did not believe the sale was commercially reasonable. We have already discussed his testimony, including his concessions on cross-examination that he had never sold mobile homes at wholesale and that he had never conducted private sales.

Viewing all of the evidence and leaving credibility determinations to the jury, we cannot conclude that the jury's verdict was against the great weight and preponderance of the evidence. The point is overruled.


The statutes require that a lender taking possession of collateral after default shall give notice of his intent to sell and that he shall effect a commercially reasonable sale. TEX.BUS. & COM.CODE ANN. §§ 9.504, 9.505 (Vernon Supp.1990). As we understand the argument under point three, Lender contends that it is entitled to its deficiency in spite of the fact that the jury refused to find a commercially reasonable sale, grounding its argument on the proposition that it was uncontroverted that Lender had given proper notice of intent to sell at private sale. In essence, Lender's point reduces to the claim that the lack of commercial reasonableness portion of the verdict was an immaterial finding in view of the undisputed fact that the notice of sale given to Debtors was proper. We reject the contention. It has long been held that a secured creditor who deals with the collateral in an unlawful manner commits an act of conversion. We hold that the code requires that a creditor who elects to sell the collateral must both give notice...

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