Siboney Corp. v. Chicago Pneumatic Tool Co., 17089

• Decision Date: 25 May 1978
• Docket Number: No. 17089,17089
• Citation: 572 S.W.2d 4
• Parties: 24 UCC Rep.Serv. 1366 SIBONEY CORPORATION, Appellant, v. CHICAGO PNEUMATIC TOOL COMPANY, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 4

572 S.W.2d 4

24 UCC Rep.Serv. 1366

SIBONEY CORPORATION, Appellant, v. CHICAGO PNEUMATIC TOOL COMPANY, Appellee.

No. 17089.

Court of Civil Appeals of Texas, Houston (1st Dist.).

May 25, 1978.

Rehearing Denied June 22, 1978.

Ellis F. Morris, Houston, for appellant.

Baker & Botts, David P. Cotellesse, Houston, for appellee.

PEDEN, Justice.

Siboney Corporation appeals from the granting of a deficiency judgment in favor of Chicago Pneumatic Tool Company, the owner and holder of a note. Chicago Pneumatic repossessed the collateral for the note, held a public sale and then brought this action for the deficiency. The jury found that Chicago Pneumatic sent reasonable notice of the sale to Siboney, declined to find that Chicago Pneumatic failed to act in a commercially reasonable manner or that the $100,000 received for the collateral was grossly inadequate but found that the fair market value of the equipment at the time of the sale was $150,000. The court entered judgment on this verdict in favor of Chicago Pneumatic for the amount of the deficiency plus interest and attorney's fees. Siboney argues on appeal that the notice was insufficient, so the sale was not commercially reasonable as a matter of law, that the sale price was grossly inadequate as a matter of law, that the findings as to commercial reasonableness and as to adequacy of the sale price were not supported by the evidence, and that a remittitur should be ordered. Appellant also claims that the appellee failed to rebut a presumption that the value of the collateral equals the debt. We affirm.

In February, 1969 MoRoCo, Inc., executed a $296,255 note and a chattel mortgage in favor of Compression Fabricators, Inc. for the purchase of 3 Chicago Pneumatic air compressors. Compression Fabricators assigned the note to Chicago Pneumatic, and Siboney assumed the liabilities of Compression Fabricators when it acquired that company in 1969. In December of that year Siboney purchased the air compressors from MoRoCo and assumed the primary obligation on the note. Siboney gave Compression possession of the equipment, and Compression continued to make the payments for a time but stopped in the spring of 1971.

Chicago Pneumatic repossessed the compressors in Las Vegas, Nevada, shipped them to Houston and stored them at the yard of Texas Commercial Industries, Inc., where it conducted a public sale on October 4, 1971. Chicago Pneumatic purchased the compressors on its bid of $100,000, credited the proceeds of the sale to the note, unsuccessfully demanded the deficit and instituted this suit.

Appellant's first point of error is that the notice of sale given by Chicago Pneumatic to Siboney did not meet the reasonable notification requirements of § 9.504(c) of the Texas Business and Commerce Code, so the sale was not commercially reasonable as a matter of law.

§ 9.504(c) of the Texas Business and Commerce Code states that ". . . 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." This is the notice sent by Chicago Pneumatic and received by Siboney Notice of Sale

"On October 4, 1971, at 1:00 p. m. at Texas Commercial Industries, Inc., 11601 North Houston-Rosslyn Road, the following described property of Compression, Inc. of Houston, Texas will be exposed to sale at public auction without reserve:

"3 High Chicago Pneumatic Air Compressors, as follows: (1) CP5FE-43 Serial Nos. 80893, 81254, 81256, 82260 and 80851, Caterpillar Engine D398B, Serial No. 75B-848. (2) CP5FE-43, Serial Nos. 80892, 81255, 81258, 82259 and 81006, Caterpillar Engine D398 B Serial No. 75B847. (3) CP-6FE-21 Serial Nos. 81715, 80309 and 81225, Caterpillar Engine D398B Serial No. 66B207. Plus miscellaneous items and equipment including controls used in connection therewith and necessary to make complete units.

"This sale is held to enforce the rights of Chicago Pneumatic Tool Company, New York, New York, as assignee arising under a Security Agreement covering the above-described property, the original parties to which were Moroco, Inc., a Nevada Corporation, debtor and Compression Fabricators, Inc., secured party.

"Terms: All Cash.

CHICAGO PNEUMATIC TOOL

COMPANY

By: /s/ Ray A. Gipson

By: Ray A. Gipson, Attorney

By: 3000 One Shell Plaza

By: Houston, Texas 77002

By: 713-229-1465"

Mr. Gipson testified that omission of the words "Houston, Texas" after the address of Texas Commercial Industries was an oversight. Siboney argues that this notice was insufficient as a matter of law because it failed to show the city in which the sale was to be held. Whether the acts of a party are reasonable is usually a question of fact. "Reasonable notification" is not defined in the article; we consider that less than a full and complete notice is required. We hold that a fact issue was raised and that the jury was entitled to conclude that the notice was sufficient to inform reasonable business persons of the place of the sale.

The notice was sent to Siboney's Dallas office. The attorney for the creditor who signed the notice gave a Houston address and phone number, the address of the place of sale was given as 11601 North Houston-Rosslyn Road, the name of the property's owner was shown to be Compression, Inc. of Houston, Texas, and Siboney did not produce any evidence that its representatives either did not understand or could not deduce the place of the sale from the notice. Siboney's testimony shows that it merely forwarded the notice to Compression, Inc., a company it had previously owned, and did nothing further. Siboney offered no showing that it was prejudiced by the omission of "Houston, Texas" after the address of Texas Commercial Industries in the notice.

Appellant urges as other points of error:

2. "The jury finding that the sale was commercially reasonable is not supported by the evidence."

4. "As a matter of law, the sale price of the collateral security was for a grossly inadequate price."

5. "The jury finding that the sale price was not grossly inadequate is not supported by the evidence and conflicts with the finding of fair market value."

Among others, the trial court submitted these issues and instructions and received these findings:

Special Issue No. 2

"Do you find from a preponderance of the evidence that Chicago Pneumatic failed to act in a commercially reasonable manner in connection with the public sale of the Equipment?

"ANSWER: 'We do' or 'We do not'.

"ANSWER: We do not.

"INSTRUCTION:

"By 'commercially reasonable' is meant a sale so conducted as would have been conducted by an ordinary and prudent businessman operating under the same or similar circumstances. A commercially reasonable sale is a sale in the usual manner for the Equipment in any recognized market therefor or at the current price in such market at the time of the sale or a sale in conformity with reasonable commercial practices among dealers. The fact that a better price could have been obtained at a different time or in a different method from that selected by Chicago Pneumatic is not of itself sufficient to establish that a public sale was not made in a commercially reasonable manner."

Special Issue No. 3

"Do you find from a preponderance of the evidence that the price of $100,000 for the three compressors at the alleged sale of October 4, 1971 was grossly inadequate consideration?

"ANSWER: 'We do' or 'We do not.'

"ANSWER:...