BANK OF AMERICA, Plaintiff, Cross-defendant and Respondent, v. FELISA V. LALLANA, Defendant, Cross-complainant and Appellant.
No. S062489
Supreme Court of California
Aug. 31, 1998.
203
Andrew J. Ogilvie, Chimicles, Jacobsen & Tikellis, Kramer, Kaslow & Grannan, Kraslow, Grannan & Lipson and Patrick J. Grannan for Defendant, Cross-complainant and Appellant.
Lillick & Charles, Stephen Oroza, Walter T. Johnson and James S. Monroe for Plaintiff, Cross-defendant and Respondent.
OPINION
KENNARD, J.—Under California law, a secured creditor who sells the collateral after the debtor‘s default may be entitled to a judgment for the difference between the amount owed and the proceeds of the sale. To obtain such a deficiency judgment, however, the creditor must satisfy certain statutory requirements. For secured debts subject to its provisions, the Rees-Levering Motor Vehicle Sales and Finance Act (
Here, a creditor notified a defaulting debtor that it would sell the debtor‘s repossessed car, giving the kind of notice required under the California Uniform Commercial Code for a private sale. It then advertised in local newspapers that at a certain time and place it would conduct a public auto auction. There, it sold the debtor‘s car to the highest bidder without ever telling the debtor when or where the auction would occur, information that the California Uniform Commercial Code requires in a notice of a public sale. The creditor contends that it did not have to tell the debtor when or where the auction would be held because it need comply only with the provisions of the Rees-Levering Act, not those of the California Uniform Commercial Code. The creditor also contends that in any event it complied with the requirements of the California Uniform Commercial Code because it gave the debtor a private sale notice, which according to the creditor makes the subsequent sale a private sale irrespective of the characteristics of the sale.
Rejecting these contentions, we conclude, first, that the creditor was required to comply with the relevant provisions of both the Rees-Levering Act and the California Uniform Commercial Code, and, second, that the
I.
In February 1991, defendant Felisa V. Lallana (hereafter Lallana) bought a car on credit from a dealer, who assigned the contract and the security agreement to plaintiff Bank of America (hereafter Bank). When Lallana failed to make several payments, Bank repossessed the car. In November 1991, Bank notified Lallana that if she did not redeem the car or reinstate the contract within 15 days, it would sell the car. This met the notice requirements for a private sale but not a public sale.
Forrest Faulknor & Sons (hereafter Faulknor) was Bank‘s vendor. Faulknor advertised its weekly sales of repossessed cars in local newspapers of general circulation and in specialized newspapers as “public auto auction[s]” and as “open to the public sealed bid auto auction[s].” Owner Michael Faulknor testified that the firm‘s practice was to conduct sealed bid auctions, open to the public, instead of live auctions, because of its experience that sealed bid auctions, at which the bidders do not know the amount others are bidding, resulted in higher prices. The firm would collect sealed bids for two days, after which it would open the bids and sell the cars to the highest bidder. If the highest bid was below Bank‘s minimum price, the process would be repeated until either Bank‘s minimum price was met or exceeded or Bank authorized a sale below the minimum price.
On December 5, 1991, Faulknor advertised that it would conduct an “open to the public sealed bid auto auction.” It then showed Lallana‘s car, with others, at a two-day auction conducted on December 16 and 17, 1991, and at three subsequent auctions. Bank did not bid at any of the auctions. On January 6, 1992, the car was sold at a sealed bid auction for $5,000. This was less than the Kelly Blue Book‘s estimated wholesale value of $12,050 and estimated retail value of $14,820 and less than the minimum price set by Bank, which approved the sale.
On November 24, 1992, Bank sought a deficiency judgment against Lallana for $11,249.84, representing the difference between what she still owed on the car and the $5,000 resale price. Lallana cross-complained for an injunction and restitution. She asserted that Bank‘s practice of giving notice of a private sale but then, without complying with the notice requirements
II.
We first determine whether a secured creditor wishing to sell a repossessed car need comply only with the notice requirements of the Rees-Levering Act (
The pertinent statutory provisions are these:
Turning to
Bank asserts that in providing that a creditor is not entitled to a deficiency judgment from the debtor unless it complies with both the Rees-Levering Act and division 9 of the California Uniform Commercial Code, “including Section 9504,” the Legislature intended to incorporate only the “commercial reasonableness” requirements of
Equally misplaced is Bank‘s reliance on Creditors Bureau v. De La Torre (1971) 16 Cal.App.3d 558 [94 Cal.Rptr. 145]. There the Court of Appeal held that a secured creditor need comply only with the notice requirements of the Rees-Levering Act, and not with “the general provisions of the [California Uniform] Commercial Code.” (Id. at p. 562.) But that case was decided in 1971, well before the Legislature in 1984 amended
Bank also asserts that the Rees-Levering Act, which creates a broad range of consumer protections for those who buy cars on credit, is a specific statute
It is not necessary here, however, to resort to this rule of statutory construction because the Legislature has expressly described how the Rees-Levering Act and the California Uniform Commercial Code interrelate. (See Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 992 [73 Cal.Rptr.2d 682, 953 P.2d 858] [rule inapplicable when statutes are not inconsistent].) After providing in
Accordingly, we hold that to obtain a deficiency judgment, a secured creditor who sells a defaulting debtor‘s repossessed car must do so in a manner that complies not only with all the provisions of the Rees-Levering Act but also with any relevant provisions in division 9 of the California Uniform Commercial Code. We now address whether Bank‘s sale of Lallana‘s car complied with the notice requirements in division 9 of the California Uniform Commercial Code, specifically those in subdivision (3) of section 9504.
III.
Bank contends that the Court of Appeal erred in holding that Bank violated
The sentence on which Bank relies fails to describe the characteristics of a public sale. The quoted sentence states that a sale conducted “as herein provided” is a public sale, but there is no description of a public sale in the subdivision in which this sentence appears. Nor is there such a description elsewhere in the statute. The statute sets forth in detail when and how notice is to be given the debtor, the requirements for publication of public sales in newspapers, where public sales are to be held, and how a public sale may be postponed, but it says nothing about the characteristics of a public sale. The sentence certainly does not imply that any sale for which defective notice of public sale has been given qualifies as a private sale, no matter how public the character of the sale.
In enacting
perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the secured party must give to the debtor, if he or she has not signed after default a statement renouncing or modifying his or her right to notification of sale, and to any other person who has a security interest in the collateral and who has filed with the secured party a written request for notice giving his or her address (before that secured party sends his or her notification to the debtor or before debtor‘s renunciation of his or her rights), a notice in writing of the time and place of any public sale or of the time on or after which any private sale or other intended disposition is to be made. Such notice must be delivered personally or be deposited in the United States mail at least five days before the date fixed for any public sale or before the day on or after which any private sale or other disposition is to be made. Notice of the time and place of a public sale shall also be given at least five days before the date of sale by publication once in a newspaper of general circulation published in the county in which the sale is to be held or in case no newspaper of general circulation is published in the county in which the sale is to be held, in a newspaper of general circulation published in the county in this state that (1) is contiguous to the county in which the sale is to be held and (2) has, by comparison with all similarly contiguous counties, the highest population based upon total county population as determined by the most recent federal decennial census published by the Bureau of the Census. Any public sale shall be held in the county or place specified in the security agreement, or if no county or place is specified in the security agreement, in the county in which the collateral or any part thereof is located or in the county in which the debtor has his or her residence or chief place of business, or in the county in which the secured party has his or her residence or a place of business if the debtor does not have a residence or chief place of business within this state. If the collateral is located outside of this state or has been removed from this state, a public sale may be held in the locality in which the collateral is located. Any public sale may be postponed from time to time by public announcement at the time and place last scheduled for the sale. The secured party may buy at any public sale and if the collateral is customarily sold in a recognized market or is the subject of widely or regularly distributed standard price quotations he or she may buy at private sale. Any sale of which notice is delivered or mailed and published as herein provided and that is held as herein provided is a public sale.”
IV.
We now determine whether Bank sold Lallana‘s repossessed car at a public sale or a private sale. As discussed above,
“Public sale” has been described as follows: ” ‘A sale of collateral is “public” when it is publicly advertised, the sale is open to the public, and the sale is made, after competitive bidding, to the highest genuine bidder; as at an auction. [¶] The opportunity of the public to bid at the sale is the essential criterion that determines that the sale is a public sale. . . .’ ” (Beard v. Ford Motor Credit Co. (1993) 41 Ark.App. 174 [850 S.W.2d 23, 27-28], quoting 9 Anderson, Uniform Commercial Code (3d ed. 1985) § 9-504:32, p. 733; see, e.g., Bank of Houston v. Milam (Mo.Ct.App. 1992) 839 S.W.2d 705, 708; Chrysler Dodge Country v. Curley (Utah Ct.App. 1989) 782 P.2d 536, 539; 2 White & Summers, Uniform Commercial Code (3d ed. 1988) § 27-10, p. 594, quoting Lloyd‘s Plan, Inc. v. Brown (Iowa 1978) 268 N.W.2d 192, 196.) Courts have “stressed that a public sale is one open to the general public or a major segment thereof, and thus contemplates advertising of the notice, time, and place of sale.” (2 White & Summers, supra, at p. 594.)
Contrary to Bank‘s assertion, the use of sealed bids at an auction open to the public does not turn an otherwise public sale into a private sale. Boatmen‘s Nat. Bank v. Eidson (Mo.Ct.App. 1990) 796 S.W.2d 920, a decision on which Bank relies, erred in stating that competitive bidding requires “knowledge of the highest bid with an opportunity to bid higher.” (Id. at p. 923.) The use of sealed bids, which are those submitted without knowledge of what others have bid, is a competitive process, as discussed below.
At trial, Lallana‘s expert explained the competitive nature of sealed bid auctions as follows: “[A] bidder in a sealed bid auction takes into account the kinds of factors that are involved in any kind of auction, makes some evaluation of what the item that is being bid for is worth to that bidder . . . [and] tries to make some assessment of what others are likely to be bidding so that he can place a bid, that this—is sufficient to win. The thing that identifies it as a competitive [auction] to me is the response that the bidder makes, for example, to the increase in the number of bidders or other factors affecting value. If there is an increase in the number of bidders, a competitor in the sealed bid auction will bid more, clearly recognizing the presence of other bidders and the likelihood that a higher bid is needed to be successful in the auction. Those sorts of factors suggest the presence of the competition in that auction.” Likewise, Michael Faulknor, an owner of the firm that conducted the auction here, testified that bidders at sealed bid auctions are competing against others.
In addition, our law permits public sales by means of sealed bids. (See, e.g.,
To summarize, applying the above stated definition of a public sale—collateral sold to the highest bidder after competitive bidding at an auction advertised to and open to the public—we conclude that Bank‘s public auction of Lallana‘s car was a public sale. Bank advertised the sale as a public sale; Bank invited the public to attend the sale and bid; the public did attend the sale and bid; and the car was sold to the highest bidder.
When, as here, the creditor gives the debtor a notice of private sale but then holds a public sale, the creditor has not complied with the law. (First Nat. Bank of Belen v. Jiron (1987) 106 N.M. 261 [741 P.2d 1382, 1384] [“A notice of a private sale is insufficient to comply with Section 55-9-504(3) if the type of sale actually held is public. . . .“]; Associates Financial Services Co., Inc. v. DiMarco (Del.Super.Ct. 1978) 383 A.2d 296, 299 [creditor “could not give notice of private sale as a preliminary step culminating in a public sale“]; 2 White & Summers, Uniform Commercial Code, supra, § 27-12, p. 601 [courts generally hold that a “notice that leads the debtor to believe the creditor plans one type of sale (private or public), but the creditor subsequently holds the other type . . . does not satisfy 9-504(3)“]; see also Annot., Sufficiency of Secured Party‘s Notification of Sale or Other Intended Disposition of Collateral Under UCC § 9-504(3) (1982) 11 A.L.R.4th 241, 297-300.)
CONCLUSION
The Legislature has given a creditor the choice of selling repossessed collateral at either a public sale or a private sale. When the creditor holds a private sale, it must comply with the private sale notice requirements (notice of the date after which collateral will be sold). When it holds a public sale, it must comply with the public sale notice requirements (notice of both the
The judgment of the Court of Appeal is affirmed.
George, C. J., Mosk, J., Werdegar, J., and Elia, J.,* concurred.
BROWN, J.—I dissent.
This is a statutory construction case. By its terms, California Uniform Commercial Code1
The majority, however, finds itself neither bound by the statute‘s language nor guided by its legislative history. Rather, it relies solely on out-of-state authority construing a different statute not contained in the California Uniform Commercial Code to reach its result. Moreover, the majority‘s result fails to assist debtors in any meaningful way. The majority does not conclude that private sales are disallowed by the California Uniform Commercial Code, or that a debtor has any right under the code to attend such a sale. Rather, it concludes that advertising and inviting the public to a sale automatically renders the sale “public” regardless of the form of notice or whether the criteria for a private sale are satisfied. By so holding, the majority does little but encourage clandestine private sales. While a secured creditor might benefit from such a result if the debtor has the resources to pay a deficiency judgment, the debtor, who has an intrinsic interest in the creditor being repaid from the resale of the collateral, not through collection
*Associate Justice of the Court of Appeal, Sixth District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Plaintiff Bank of America (Bank) repossessed defendant Felisa V. Lallana‘s Mitsubishi Eclipse. It gave notice to her that the vehicle would be sold at a private sale. The amount subsequently received at the sale failed to satisfy Lallana‘s debt, and the Bank filed suit against her seeking a deficiency judgment. Lallana cross-complained for an injunction and restitution for herself and on behalf of the general public, alleging the Bank engaged in unlawful, unfair, and fraudulent business practices in violation of
The Court of Appeal concluded that the Bank‘s notice of intent to sell must comply with not only the Automobile Sales Finance Act (
While I agree with the majority that both the Act and
I. FACTS AND PROCEDURAL BACKGROUND
Lallana and her son-in-law Sherden Williams2 purchased a 1991 Mitsubishi Eclipse on credit pursuant to a conditional sales contract with the car dealer. The dealer assigned the contract and security agreement to the Bank. After Lallana defaulted on several car payments, the Bank repossessed the vehicle. On or about November 1, 1991, the Bank sent Lallana a “Notice of Intent to Sell Repossessed or Surrendered Vehicle” informing her of her right to redeem the vehicle or reinstate the contract within 15 days from the date of the notice. The notice also informed her that if she did not redeem the vehicle or reinstate the contract within that time or any extension thereof, the Bank would sell the vehicle after that period. The Bank concedes its notice did not inform Lallana of the time and place of the sale.
Faulknor generally held the two-day sales weekly. Under this system, the sale did not take place at a single time and place; rather, bids on the vehicles were collected over the two-day period. If a bid that exceeded the Bank‘s minimum price, or a bid that was below the minimum price but which the Bank authorized Faulknor to accept, was not received during that time, the vehicle was placed in another sale and the process repeated. While the sales were attended by car dealers, they were also open to any member of the public who was over 18 years old, possessed a valid California driver‘s license, paid the $5 entrance fee, completed a membership application, and agreed to abide by Faulknor‘s rules and regulations. Faulknor advertised the sales in newspapers. Some but not all of the advertisements run during the period bids were received for Lallana‘s car stated the sales were “open to the public“; one characterized the sale as “public.”
Lallana‘s car was featured in four 2-day sealed auctions over a period of several weeks from December 17, 1991, through January 7, 1992. The Bank did not bid at any sale. The car was eventually sold to a January 6 bidder for $5,000 with the Bank‘s approval because it was below the Bank‘s minimum price.
On November 24, 1992, the Bank sued Lallana for the amount of the deficiency, $11,249.84, plus interest, costs, and attorney fees. It alleged in its complaint that the vehicle was sold at a private sale. The Bank‘s claim for a deficiency has since been settled, and is not before us.
Lallana cross-complained for an injunction and restitution for herself and on behalf of the general public, alleging the Bank engaged in several unlawful, unfair, and fraudulent business practices in violation of
The trial court entered judgment in favor of the Bank. On appeal, Lallana argued only that this sale was a public sale and the Bank failed to comply
We granted the Bank‘s petition for review.
II. DISCUSSION
A. Whether the Notice Must Comply With Section 9504(3)
The first issue is whether the notice of the sale must comply not only with the Act, but also with
The Bank asserts, however, that in adding
The Bank relies on Creditors Bureau v. De La Torre (1971) 16 Cal.App.3d 558, 562 [94 Cal.Rptr. 145] (Creditors Bureau), which concluded that a secured creditor need only comply with the notice requirements of the Act, and not those of the more “general” Commercial Code. Creditors Bureau, however, was decided prior to the 1984 amendment adding subdivision (b) to
The Bank also invokes the principle of statutory construction that when a general statute standing alone would include the same matter as a special act, and thus conflict with it, the special act will be considered as an exception to the general statute whether it was passed before or after such general enactment. Here, however, resort to this rule of statutory construction is unnecessary because the relevant provisions expressly describe how the two statutes interrelate.
In sum, as the majority concludes, both the Act‘s and section 9504(3)‘s notice provisions applied to this sale.
B. Whether the Sale Was Public or Private
The next issue is whether the sale held in this case was a public or private sale within the meaning of section 9504(3). Lallana contends that although the Bank gave notice of a private sale, it held a public sale, and was therefore not entitled to seek a deficiency judgment against her. The Bank contends that the sale held was in fact private. The majority agrees with Lallana.
Actually, as a comparison of the language of section 9504(3) and the national Uniform Commercial Code section 9-504(3) reveals, California has chosen to define the terms “public” and “private” sale to provide predictability to secured creditors regarding how to conduct their sales. Indeed, the legislative history of section 9504(3) reflects this purpose. Accordingly, the majority‘s reliance on out-of-state definitions is inapt. Rather, section 9504(3) itself provides the answer of how to define private and public sales in California.
1. Background
At all relevant times, section 9504(3) provided in pertinent part: “A sale or lease of collateral may be as a unit or in parcels, at wholesale or retail and at any time and place and on any terms, provided the secured party acts in good faith and in a commercially reasonable manner. . . . [T]he secured party must give to the debtor . . . a notice in writing of the time and place of any public sale or of the time on or after which any private sale or other intended disposition is to be made. Such notice must be delivered personally or be deposited in the United States mail . . . at least five days before the date fixed for any public sale or before the day on or after which any private sale or other disposition is to be made. Notice of the time and place of a public sale shall also be given at least five days before the date of sale by
A secured creditor that is required to comply with the notice provisions of section 9504(3), and fails to do so, loses its right to recover a deficiency judgment. (
In general, for both private and public sales, the purpose of the notice requirement is to alert the debtor that his or her interests may be extinguished in the near future, so that the debtor can take steps to protect his or her interests, either through discharging the debt and redeeming the collateral or possibly locating another purchaser for the collateral. (Ford & Vlahos v. ITT Commercial Finance Corp. (1994) 8 Cal.4th 1220, 1232-1233 [36 Cal.Rptr.2d 464, 885 P.2d 877] (Ford & Vlahos); see Buran Equipment Co. v. H & C Investment Co. (1983) 142 Cal.App.3d 338, 341 [190 Cal.Rptr. 878]; see 2 White & Summers, Uniform Commercial Code (3d ed. 1988) § 27-9, p. 590 [“The notice requirement is easy to understand and to apply; it is inspired by the usually forlorn hope that the debtor if he is notified, will either acquire enough money to redeem the collateral or send his friends to bid for it.“].) In addition, for public sales, the requirement that the debtor be informed of the time and place of the sale permits the debtor to attend and ensure the sale is performed in a commercially reasonable manner. (See Ford & Vlahos, supra, 8 Cal.4th at p. 1232.)
Section 9504(3) does not contain an exhaustive description of either a public or private sale. The statute does, however, delineate several distinctions between the two types of sales. Most significantly, a secured creditor
As can be seen, while the requirements for a private sale are few, the requirements for a public sale are more elaborate. Indeed, California is unique in the manner in which its Uniform Commercial Code requirements for public and private sales differ from those of the national Uniform Commercial Code. The legislative history of section 9504(3) states, “The Official Text requires that ‘reasonable notification of the time and place of any public sale must be given’ and ‘reasonable notification’ of the time on or after which a private sale will be made, but does not specify either the manner in which notice must be given or the time within which it must be given. We think both the time and manner of giving notice should be specified, otherwise every sale is open to attack. A public sale should be defined. We believe that the requirement that every aspect of the sale be done in ‘a reasonably commercial’ manner is too vague a requirement to be of any value and would only be an invitation to litigation.” (Sen. Fact Finding Com. on Judiciary, Sixth Progress Rep. to Leg., pt. 1 (1959-1961) Cal. U. Com. Code, p. 426, italics added.) Referring to the above recommendations, the report on proposed amendments to the California Uniform Commercial Code stated, “The California Bankers Committee believe that a secured party, when his debtor is in default, is entitled to more specific instructions as to how he may conduct a valid foreclosure sale, otherwise every sale would be subject to subsequent challenge. We think so too . . . .” (Id. at p. 587.)
It is interesting that while the Legislature focused on further defining both public and private sales, it created greater requirements for a public sale. Presumably this is because a public sale is generally the only opportunity for the secured creditor to bid on the collateral. Absent the notice and publicity requirements for a public sale, an unscrupulous creditor could conceivably bid a low amount for the collateral, obtain a large deficiency from the
A secured party is required to act in good faith and in a commercially reasonable manner for both private and public sales. (§ 9504(3).) “Whether a sale is conducted in a commercially reasonable manner is a question of fact and the answer depends on all of the circumstances existing at the time of the sale.” (Clark Equipment Co. v. Mastelotto, Inc. (1978) 87 Cal.App.3d 88, 96 [150 Cal.Rptr. 797].) Satisfying this requirement may under some circumstances require a secured creditor to go beyond the express requirements of section 9504(3).
Thus, in Ford & Vlahos, the secured creditor was the sole bidder at a public sale for the collateral, a Lockheed Hercules C-130A aircraft. (Ford & Vlahos, supra, 8 Cal.4th at pp. 1223-1224.) It subsequently resold the aircraft for at least $487,000 more than it paid at the sale. (Id. at p. 1224.) We concluded that although the secured creditor‘s publication complied with the notice requirements of section 9504(3) for a public sale, substantial evidence supported the conclusion that “the Phoenix newspapers, with their limited circulation, did not provide a forum likely to bring bidders and a fair price for the foreclosed aircraft, and the sale hence was commercially unreasonable.” (Id. at pp. 1227, 1235; American Business Credit Corp. v. Kirby (1981) 122 Cal.App.3d 217, 220-221 [175 Cal.Rptr. 720] [public sale of “reefer vans” not commercially reasonable in part because while publication in the Los Angeles Daily Journal satisfied requirement of publication in a ” ‘newspaper of general circulation,’ ” “there is no showing that [the Journal] is circulated among, or read by, dealers in ‘reefer vans’ “]; id. at p. 221 [secured creditor must prove it “exposed the potential sale to at least a substantial number of potential buyers“]; see Westgate State Bank v. Clark (1982) 231 Kan. 81 [642 P.2d 961, 963, 972] [private sale of two recreational vehicles not commercially reasonable in part “because only five or six bids were solicited by telephone and there was no advertising directed toward the general public“]; 2 White & Summers, Uniform Commercial Code, supra, § 27-14, p. 610 [“many cases have found private sales commercially unreasonable on the ground that the creditor failed to exercise due diligence,” including by not contacting enough purchasers or not advertising the availability of the goods].)
2. Analysis
Section 9504(3) provides, “Any sale of which notice is delivered or mailed and published as herein provided and that is held as herein provided is a public sale.” Thus, a sale is not public merely because it is open to the public. Rather, the notice and characteristics of the sale must conform to section 9504(3)‘s requirements. As already observed, the requirements for a public sale are more elaborate under section 9504(3) than those for a private sale. A public sale requires five days’ notice to the debtor of the time and place of the sale, advertising the sale once in a newspaper that meets certain conditions at least five days before the date of the sale, holding the sale in a particular location, and an announcement at a particular time and place if the public sale is postponed. For a private sale, the secured creditor must simply give five days’ notice to the debtor of the date on or after which the collateral will be sold, and then sell the collateral on or after that date in good faith and in a commercially reasonable manner. If it does so, it has complied with all of section 9504(3)‘s private sale requirements.
In determining whether a secured creditor has complied with section 9504(3)‘s requirements, and is entitled to a deficiency, the court should first determine the type of sale that was noticed. Here, the Bank gave Lallana at least 15 days’ notice of a private sale, or that her repossessed vehicle would be sold after a particular date. The court should then consider whether the secured creditor complied with section 9504(3)‘s requirements for the type of sale noticed. Here, the Bank sold the vehicle in good faith and a commercially reasonable manner well after the date stated in the notice. I would conclude that these actions satisfied the private sale requirements of section 9504(3).
In addition, the Bank, through its vendor, advertised the sale of the vehicle, and invited the public to attend and submit sealed bids. In my view, nothing in section 9504(3) precludes such actions. In addition to providing adequate notice, the Bank is obligated to conduct the sale in good faith and in a commercially reasonable manner. As stated earlier, this may under some circumstances require a secured creditor to go beyond the express requirements of section 9504(3). (Ford & Vlahos, supra, 8 Cal.4th at pp. 1227, 1235; American Business Credit Corp. v. Kirby, supra, 122 Cal.App.3d at pp. 220-221; see Westgate State Bank v. Clark, supra, 642 P.2d at p. 972; 2 White & Summers, Uniform Commercial Code, supra, § 27-14, pp. 610-611.) Indeed, inviting the general public to submit sealed bids for Lallana‘s
Moreover, the sale here was not held as a “public” sale. It was not held at a specific time or place, as required for a public sale, but for two days a week, from 8 a.m. to at least 5 p.m., over a four-week period. The majority‘s conclusion that this qualifies as a “public” sale is not a reasonable interpretation of the language of section 9504(3), which refers to a “date” for a public sale, not “dates.” (See J. T. Jenkins Co. v. Kennedy, supra, 45 Cal.App.3d at p. 481 [Letter which “merely stated that the collateral would be sold at the end of seven days from the date of the letter . . . failed to specify the exact time and date when the public sale would be conducted.“].) Moreover, under such a broad interpretation of the terms “date” and “time and place,” how will such a public sale be “postponed“? (§ 9504(3).) What portion of each two-day period will be the “time and place last scheduled for the sale“? (Ibid.)
By contrast, section 9504(3) requires notice to the debtor of “the time on or after which any private sale or other intended disposition is to be made.” Thus, section 9504(3) anticipates that a private sale, as opposed to a public sale, will take place over a period of time after a particular date. (Buran Equipment Co. v. H & C Investment Co., supra, 142 Cal.App.3d at p. 342 [The private sale provision of section 9504(3) “contemplates continuing efforts to obtain the best price for collateral through private sale. . . . Where sales are best conducted over a period of time, the uncertainty of when they might occur (as contrasted with the certainty of the date of a public sale) could make it difficult, if not commercially impracticable, to give notice of each anticipated private sale.“]; Backes v. Village Corner, Inc., supra, 197 Cal.App.3d 209, 215 [242 Cal.Rptr. 716] [“When a secured party intends to proceed by private sale, . . . the code permits a flexible form of notice which allows the secured party to hold the property on the market for
Concepts of fairness and efficiency are immanent in the Commercial Code. (See Ford & Vlahos, supra, 8 Cal.4th at p. 1234.) “Clearly, fairness and efficiency would both suffer from a rule that” inviting the public to submit sealed bids at a private sale defeated a secured creditor‘s right to a deficiency. (Id. at p. 1235.) Such a rule would in most cases appear to serve the interests of no one. The secured creditor precluded from such advertising or bidders would most likely not recover its unpaid debt. As the evidence at trial indicated, during the period in question the Bank was only successful in collecting approximately 10 percent of its deficiency claims for repossessed vehicles. Hence, it is to its advantage to get the highest resale price possible for the vehicle. Similarly, the debtor has a strong interest in the creditor getting the debt repaid from the resale of the collateral, not through collection of a deficiency.
Indeed, by holding that advertising and inviting the public to the sale in this case automatically rendered the sale “public” regardless of the form of notice or whether the criteria for a private sale were satisfied, the majority does little but encourage clandestine private sales. While a creditor might benefit from such a result if the debtor had the resources to pay a deficiency judgment, the debtor never will. Consider the aircraft sold in Ford & Vlahos, supra, 8 Cal.4th 1220. In that case we held that while the creditor‘s publication complied with the notice requirements of section 9504(3) for a public sale, the sale was not commercially reasonable because it was not advertised in a forum likely to bring bidders and a fair price for the aircraft. (Id. at pp. 1227, 1235.) Here, the majority concludes that the Bank loses its right to seek a deficiency because it advertised and invited the public. Assume also a different secured creditor then sells a similar aircraft to the one in Ford & Vlahos in a private sale, without advertising and telling only a few potential buyers. It then seeks a deficiency. This court will be constrained to hold that such a private sale was commercially reasonable. After all, the commercial reasonableness of such a private sale will essentially depend on how well the secured creditor marketed the collateral without telling too many people about it. That is because the creditor is precluded from advertising or inviting the public, or it runs the risk its private sale will suddenly be deemed a “public” sale. Little purpose is served by such a rule.5
Lallana asserts that “[u]nless the debtor can attend, there is no one to police the sale.” However, section 9504(3) does not require the debtor to
CONCLUSION
I would reverse the judgment of the Court of Appeal.
Davis, J.,* concurred.
*Associate Justice of the Court of Appeal, Third District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.