United States v. Conrad Publishing Company, a Corporation, the Estate of Currie Conrad, John G. Conrad and Charles Conrad, (Two Cases)

interest in public availability and the specified rates ‘just and reasonable’ at the v. supplies. South 4(a) gas of the Act.” California natural by § 527, 98 Co., at S.Ct. 436 U.S. Royalty land is af- of the Commission The decision clear Thus it is 1960, at 512. 56 L.Ed.2d firmed. interstate to the “dedicating” gas by not, by such dedica does producer market a belongs to alone, gas dispose

tion regulatory its

another, only but establishes literally apply the attempt

status. An cannot be concepts Tiffany letter

black public in inimical to

successful where Act Natural Gas protected by terests America, STATES UNITED discussed earlier. Appellant, gas to in of all dedication commerce, pursuant terstate done COMPANY, a contract, the i960 CONRAD PUBLISHING under certificate issued of Currie corporation, Estate Con- for deter fixed, well, applicable date rad, and Charles subject for the G. Conrad Con- chargeable John mining the rate cases). (Two rad, rate struc Appellees gas. “Under the Commission’s for a price maximum ture, the applicable 78-1251, 78-1290. Nos. by ... sale is determined producer’s Appeals, United States first gas at which the moment Eighth Circuit. market . . .” the interstate dedicated to 795, Basin, 88 S.Ct. at 390 U.S. Permian 14, Nov. 1978. Submitted short, 1960 contract dedi- since the 29, Decided Dec. commerce and to interstate gas cated the regulatory subjected it to the Commission’s regulatory

authority, it follows under the being sold

purposes gas contract, ruled. as the Commission is consistent interpretation Natural legislative purpose interpretation could contrary Act. A

Gas attempts a flood of

open the door to of the Com- regulatory purpose

defeat contracts. short term

mission use of every inde- clear for way would be [T]he to seek gas natural

pendent producer of period of the limited

certification with the transmission

its initial contract automatically be free and thus

company, date, future untrammelled Com-

at a regulation, to reassess whether

mission interstate serving the

desired to continue

market. v. Federal Oil Co.

Sunray Mid-Continent Commission,

Power 364 U.S. (1960). 4 L.Ed.2d 1623

S.Ct. interpretation

We think the Commission’s regulations is reasona- application of its case light of the circumstances

ble

Gibson, Judge, dissenting filed a Chief

opinion. Sec., Gerson, Div., Atty., App. Civ.

Allan (ar Justice, Washington, D. Dept. of C. Babcock, gued), Atty. Allen Asst. Barbara Britton, Gen., C., primarily Company’s R. Washington, equipment, D. James D., personal guarantees R. executed Charles Atty., Fargo, N. and Ronald U. S. Conrad, brief, John Conrad Conrad. Glancz, C., and Currie Washington, D. appellant United States. Publishing April defaulted on Conrad balance due time there was a Kelsch, Kelsch & William C. Kelsch approximately on the note of brief, Mandan, and Tudor, D., argued on N. posses- immediately took SBA the bank and Publishing for Conrad Co. assets. A Company’s sion of the all of GIBSON, Judge, LAY Before and of was Chief of all the collateral foreclosure sale HEANEY, Judges. May Circuit scheduled for 23, 1975, contacted On the SBA April HEANEY, Judge. Circuit and re- eleven Dakota auctioneers North brought this action in The United States Only two to conduct sale. quested bids on a promis- to collect the balance due order One, Fitzger- Mr. responded. auctioneers given by Publishing Com- sory note Conrad ald, refus- explained to bid. He his refused assigned Business pany and Small al as follows: (SBA). sought It to recover Administration 26th, you April Saturday, Here it is $63,816.76 guar- and the Company from the 6th. I find May have date as of the sale note, Conrad, of the John antors Charles job of a impossible right to do the kind This and Currie amount Conrad Conrad.1 time, and a of a short advertising in such remaining after represented deficiency any advertising good for poor job is no real Company’s of the assets and the sale business do just kind I can’t of a sale. bidding The Court determined on this property. District not be way that so I will the sale of that the SBA did not conduct sale. other time. Maybe some commercially rea- Company’s assets in a other, Berg Berg, a bid. The Mr. submitted required manner N.D.Cent. sonable as was hired as auctioneer 9-504(3). 41-09-50(3), It U.C.C. § Code § before the days seven April 25, only that a sale would proper found sale. $40,789.58 and de- brought an additional consist- The for the sale total A deficiency. that amount from ducted printers, mailing ed of seven letters to $26,554.28 against entered was judgment handbills, and of six hundred distribution Company guaran- and the three Conrad Bismarck both the one advertisement appeals The United from this tors. adver- Fargo No Tribune and the Forum. it is entitled to judgment, claiming that or placed journals tisements were trade Compa- deficiency. the entire recover newspapers. There were in out-of-state cross-appeal from ny and the registered bidders eighteen one hundred utilized damages the measure seventy-five approximately the auction. Of part, reverse District Court. We affirm to twen- in fifteen publishers to eighty-five proceedings. further part Dakota, and remand for North ty-five printers in job the sale. eighteen represented Publishing March Conrad On $225,000from the Bank borrowed value of Company estimated Conrads Bismarck, North Dako- sale was Burleigh County, time of the at the equipment SBA, note, West, “guessti- evidencing $165,000. of the promissory ta. The John equipment loan, assigned by subsequently was mated” the value SBA, appraisal $50,000. professional agency an United was No bank to Approximately by a mort- was made. equipment The loan States. began, a thirty before auction by the minutes property on certain real owned gage $101,- an oral bulk bid Mr. covering Malone agreement Company, security subsequent to the commencement of the action. His was sub- Currie Conrad died estate party stituted defendant. support requested government 000. West Malone argues, initially, payment applying the offer a down by guaranteeing District Court erred in the Uni- $10,000 form Commercial to the transaction. guar- of between No Code It that the District Court maintains antee and West was made concluded law of have used the “federal contracts” the offer bona fide. was not contract terms of the are control- began equipment and the auction ling. payable note stated that was sold Much piecemeal in a fashion. sell, empowered assign, [The SBA] the equipment signifi- sold at a price any part and deliver the whole cantly lower than its estimated value. private sale, public Collateral at with- Gackle, Donald independent publisher, an demand, out advertisement or notice of testified that one of the principal items for place the time or or of ad- sale—a press four-unit Fairchild —was journment thereof, which are hereby ex- $13,000 worth between Gackle pressly waived. obtaining press was interested in as guarantee The signed by Conrads stated auction, trading he stock. Prior had contacted printing equipment two dealers elect, any public or may [The SBA] they $13,- who stated that would allow him private sales, cash or on credit sale or for 000 as a trade-in value. was Gackle demand, delivery, or without for future press individual to bid on the and he of the or advertisement or notice time purchased $2,500. A photoprinting it for place adjournment of sale any thereof machine, $34,925 1967, cost in was (the undersigned hereby waiving sticher, sold for A value that had a of $106. demand, such advertisement and notice to dollars, several thousand was sold $75. * * * permitted by law) the extent . Gackle testified that cameras for ri- “went Thus, contends, government the Compa- diculously prices.” low ny and the rights waived their Part of problem was that there were to conducted a commercial- few buyers were who interested in ly Company’s reasonable manner. The equipment.2 Another problem source of the the guarantors’ sole recourse to claim was the inexperience of the auctioneer. conducting the SBA’s actions Berg was unfamiliar with the operation of sale were unconscionable. the equipment, its value or its intended use. The District determined that required bidders identify were to cer- by the governed transaction was as U.C.C. tain items Berg auctioned off since adopted by “by North either Dakota virtue unable to do so. SBA did not furnish of the fact that the is the common U.C.C. Berg any expert assistance. * * * law the of courts federal The sale Company’spersonal prop- law virtue the fact that state commercial erty $22,- gross proceeds resulted in rights parties.” controls It con- deducting $6,241.81 524.67. After ex- rights that the cluded waiver found $16,283.19. penses, the proceeds net and in the guarantees note was limited proceeds net were applied against the 41-09-47(3)(b), N.D.Cent.Code 41- §§ balance payable. due on the note aAt later 09-50(3), 9-501(3)(b), 9-504(3), U.C.C. §§ date, government foreclosed on the real requirement and that the of a “commercial- property of Company. ly foreclosure reasonable” sale of collateral could not be $27,863.51 sale netted which was also used waived. The Court further District con- to reduce the balance due on the note.3 A although 41— cluded N.D.Cent.Code § deficiency $63,816.76 09-47(3), 501(3), remained. parties U.C.C. allows § 9— right people 2. Gackle testified that: “The 3. The do not contest the reasonableness buying. just enough weren’t There weren’t of the foreclosure sale. good buyers. Those who were interested in equipment.” that kind of

953 There to substitute other reasonable standards is no evidence that the SBA’s standards, ability smoothly to statutory process a contract loan transactions will be seriously hampered. The provided waivers no SBA al purported standards ready utilizes local procedures implement Thus, the sale had to be whatsoever. exam- programs, especially its for recordation and compliance ined for its with the “commer- purposes. notification 13 C.F.R. 101.- § cially presented by reasonable” test statute. 1(d)(3). In view of the near universal adoption U.C.C.,4 We there is little dan government ger law, unreasonably will be law, SBA sub federal rather than state controls jected variety to a of conflicting wide state rights obligations the parties. procedures. applicable provisions Beardslee, United v. States 562 F.2d the North Dakota U.C.C. do not display any 1016, cert. (6th denied, 1977), 1022 Cir. aberrational features that would defeat a -, U.S. 99 58 L.Ed.2d 128 S.Ct. legitimate and that federal interest Marshall, (1978); United States v. 431 resorting to federal common necessitate our F.Supp. (N.D.Ill.1977); 890 13 C.F.R. law. Cf. Occidental Life Insurance Co. v. Hext, 101.1(d). Cf. United § EEOC, 355, 367, U.S. S.Ct. (5th 807-809 Cir. We must (1977). Thus, we L.Ed.2d 402 conclude that determine, however, still we whether applying District Court did not err in use the as adopted by North Dakota U.C.C., Dakota, adopted by North rule, as the federal or whether we should the sales transactions.5 use the federal law rule suggested common note, moreover, We that even if cir by the SBA. cumstances dictated that we resort to fed In overriding the absence of some law, eral adopt common we would decline to federal interest in the uniformity, applica proposed the “federal rule law of contracts” generally provides by ble state law the government. rule of the The has become U.C.C. Yazell, 382 the source decision. See United general v. commercial law. It represents attempt the to achieve 86 15 L.Ed.2d 404 latest U.S. S.Ct. Marshall, commercial transactions. See uniformity in supra United States v. (1966); at generally F. Whitney, Law of Modern overriding 891. We find no such federal (2d Commercial Practices 26-30 ed. §§ interest here. loans are Many negoti SBA 1965). the source The U.C.C. has become and, ated with the of local banks assistance in the area commer federal common law transactions, in most has consist SBA Hext, United States v. transactions, see cial ently operated “as a matter of convenience” supra, 809-811, and, such, it be would applicable. as if the local legally U.C.C. was inappropriate specialized for us to fashion a case, In this security SBA obtained a body of law to sales of col applicable agreement from the Conrads and filed a Thus, by lateral conducted when SBA. financing gave statement. It the Conrads developing a federal common law rule with notice of the auction. There is no evidence transactions, respect to we commercial shall has, manner, policy that this in any adverse guided by portions be the relevant ly affected federal fiscal interests. To the U.C.C. SBA, case, contrary, the in this relied on its prior perfected security interest under the government argues also that priority North Dakota maintain finding U.C.C. to that the District Court erred over Publishing. commercially other creditors of Conrad was reasonable in sale not adopted forty-nine commercially 4. The has conducted in a been sale reasonable states and the agree language District of Louisiana Columbia. manner. We also that 1, 3, adopted only has guarantee Articles and 5. 3 determine the note and did not (Supp.1978). U.L.A. Table 1 the fulfillment alternative standards parties’ rights duties could be meas- 5. We with the District ured. right could not waive the to have the finding 41-09- accordance with N.D.Cent.Code market. The District Court’s § 9-504(3).6 Whether a 50(3), U.C.C. § there was lead time for the insufficient in a commercially collateral was conducted advertising erroneous. clearly is not is essentially reasonable manner a factual advertising that was done unreasona- Nat. Bank & Tr. Co. question. Liberty bly scope. Only limited in seven letters Tool, etc., Acme City Okl. v. publishers. were sent Dakota to North 1976); California (10th Cir. 1381-1382 placed Only two were advertisements Jones, 415 F.2d Corporation Airmotive There newspapers. North Dakota 1969); Pruske v. National 554 (6th Cir. only six hundred handbills distributed. Antonio, 533 S.W.2d Bank of Com. San testimony Gackle’s demonstrates Anderson, (Tex.Civ.App.1976); R. 937—938 simple matter to contact been (2d Code 9-504:28 § Uniform Commercial to secure equipment dealers bids. such, the ed. As District Court’s printers The small auction amount of un- finding commercially that the sale explained, part, by poor can schedul- be judged should be under reasonable ing. Tuesday. was held on auction standard.7 Fed.R.Civ.P. clearly erroneous weekly newspapers Most in North Dakota 52(a). published Wednesday are and Tuesday The evidence shows SBA typically day of the week. busiest genuine no to reach the market effort best did not furnish auc SBA able equipment. to use the The time be- tioneer with technical assistance. of the auctioneer and tween the selection view of highly sophisticated nature of period the auction date was too short of a to furnish equipment, failure techni Fitz- effort. an effective cal factor showing assistance is another gerald, one the auctioneers solicited The dispari commercial unreasonableness. SBA, to submit a refused bid because ty at the prices received between the auc span permitted only poor brief time “a tion value of some the estimated job Printing equipment is advertising.” equipment, dispositive, not although is an regional marketed on a or national level. showing additional commercial un factor Time to place was needed advertisements in v. Ter reasonableness. United States publications national trade and other re- (5th 1977). rey, 554 693 Cir. We gional publications. Time was needed to conclude that the District Court not notify regional printing equip- and national clearly determining erroneous in that the potential ment These dealers. customers sale was in a commercially also not conducted time to decide needed whether to at- Liberty reasonable Nat. tend the to manner. See Bank auction and make travel ar- Tool, etc., & Tr. rangements. days City Co. of v. Acme simply Seven too Okl. short period try supra. of a to and reach this 41-09-50(3), signed has not § N.D.Cent.Code 9- after default a § statement re- 504(3), provides part: nouncing modifying right in relevant to or his notifica- * * * tion of sale. shall be [Notification Disposition may of the be collateral party any sent to other from whom public may private proceedings be or and (before party the secured has received send- by way made of one or more Sale contracts. ing his notification to the debtor or before the disposition may or other be or in as a unit rights) debtor’s renunciation of his written parcels any place any and at time and and on any notice of in the a claim of interest collat- every aspect disposition terms but in- may buy party manner, time, eral. method, The secured cluding place the public type a is of sale and if the collateral commercially terms must be reasonable. customarily recognized market is in a perishable sold Unless collateral is or threatens to type subject widely a speedily of of type which is the decline in value or is of a cus- may market, price quotations, tomarily recognized he distributed standard sold on a rea- buy private place notification the sale. sonable time and any public sale reasonable notification of argument 7. The conceded at oral that any private the time after which sale or other clearly proper the the erroneous standard was disposition intended is to be shall be test. party debtor, sent the secured if he the

955 a complied that has with the requirement The District determined Court 9-504(3) “every aspect that of the Fair- commercially reasonable of U.C.C. § collateral), machine, (of including the disposition photoprinting press, child time, method, manner, place re- be would have terms” punch Friden machines contrary finding of the amount of reasonable. The in an sulted additional brought clearly erroneous. the auction District determined that It also Court.is that fifty amount only percent disposition a of col- The test whether han- on properly have been realized could requires an examina- lateral reasonable Court calculated sale. The District dled T. tion of the entire factual situation. C. I. equip- loss the balance of the that on Pontiac, Inc., Corporation v. Lee 513 F.2d $19,504.58. argue Both parties ment 1975); (9th Zsa 210 Cir. re Zsa evidentiary for the there is no basis that Limited, (S.D.N.Y. 352 F.Supp. except in damage findings, Court’s District , mem., (2d 1972) aff’d 475 F.2d 1393 Cir. press. We have case of the Fairchild with 1973) primarily We concerned . are the record and carefully examined by the secured procedures employed parties. proceeds obtained. party rather than the Limited, F.Supp. at supra, In re Zsa Zsa We remand to the District 671; 9-507(2). party The secured U.C.C. § aby the “loss caused order to determine it is an insur- reasonably; not only need act comply provisions failure to with In re return. hypothetical expected er of a 41-09-53(1), N.D.Cent.Code § [Article 9].” Limited, F.Supp. at 672. supra, Zsa Zsa 9-507(1). The fact that U.C.C. § a commercial government made case, appar- it is Turning present pre gives rise to a ly unreasonable manner guarantors’ brief and the ma- ent from if property the value of the sumption that aspects three jority opinion properly equalled sold amount First, challenged sale are as unreasonable. of Black deficiency. Beneficial Finance Co. it is contended that insufficient Reed, County v. 212 N.W.2d Hawk Second, argued it is preceded sale. Anderson, (Iowa 1973); 4 R. Com Uniform equipment expert an (2d mercial Code 9-504:10 ed. § been assist the auctioneer. hired to Thus, remand, government has the complain Finally, sale, in a showing proper burden of on a conducted sale shouldn’t have been enough brought collateral would not have these They attempt to show that Tuesday. Fi satisfy deficiency. Beneficial by claiming a failing were unreasonable Reed, County Hawk nance Co. Black prices. and low scarcity of bidders supra. short- much of the majority makes is judgment District Court the selection of period between ness of part, re- affirmed in reversed in and part They fail to an auctioneer the auction. proceedings for consistent manded further time the auction- during this recognize opinion. with this likely most printers eer sent letters to the property. Over to be in the interested GIBSON, Judge, dissenting. Chief and advertise- were handbills distributed leading newspapers appeared ments in two majority opinion I with the in hold- short, considerably In in North Dakota. ing that the United States should follow in than advertising was done this case general provisions of the Uniform Commer- more goods. It is also Code,1 sales “commercially cial and that the rea- in most of distressed many clear that reached provision sonable” of the Code could not be However, persons. in interested my waived. view the United applying majority’s state- for as the correct In addition it is the U.C.C. rationale significant case. United States the United treated the ment of federal law in this (5th during dealings applying Terrey, Cir. most of its separate That basis defendants. a There was evidence of the to view the failure to trade-in impossible It is also Press; however, value of the Fairchild it is the auctioneer as for expert hire assistance knowledge common that trade-in values are defendants concede that unreasonable. always almost inflated. The cost of various sale, compe- is a who called Berg, Mr. purchased years machines when earlier was While he auctioneer. Dakota tent North despite the considered the District Court some of the misnamed may have buys fact that at a foreclosure sale one used machinery it is obvious equipment, little, machinery any, practi- “as is” with if bidders were potential present cal Final- recourse in case of malfunction. and what function operated it aware of how testimony ly, there was that cameras “went only certain result from served. ridiculously prices.” low Cameras are Berg Mr. expert to assist hiring an printers. publishers not limited to use expenses to be deducted have greater been fact that a witness testified proceeds. from the sale prices camera were low establishes complain that the Finally, with prices that the witness was unfamiliar on sale should not have been conducted paid dispersal sales of used complete weekly newspapers Tuesday because small equipment. papers their in North Dakota distribute sum, In in this case I believe that Thursday. If the Wednesday or sale had standards. One met reasonable commercial argu- Wednesday, the same been held on forget must not that in cases where defi- have been advanced. The sim- ment would ciency judgments can be and satis- obtained complaint that some could be ple fact is fied, paid by the costs of the sale will be They of the week. any day raised as to advertising or ex- extraordinary debtor. If pro- custom have not shown that local courts, pert required by assistance is Tuesday sales. hibited will become even more cau- The contention that the auction should tious in foreclosure situations. The ex- day have been on a different is related to including will penses of sale rise in all cases buyers did not attend likely the claim that may be those where the benefits out- that one hun- majority price between the received at the auction good faith in the of collateral foreclosure goods and the estimated value of the can my view and the facts here demonstrate majority show unreasonableness when the good faith in at- SBA did act in evidentiary concludes that there was no ba- tempting the return on this to maximize damage findings, the District sis for Court’s In these distressed collateral. situations except in the case of the Fairchild Press. securing a stake in a borrower also has Putting incongruity, majori- aside that fair the foreclosure sale return at prospective recitation of the value evidence ty’s reveals secure steps also take Ante, the weakness of the benefit. The bor- purchasers evidence. for his own at 951- the property rower contended that here

worth far in excess of the amount of the commonly

debt. These contentions are as-

serted, in such situations where the but debt, actually is in excess of the

collateral usually can make sale before debtor stage. My main

reaching the foreclosure impact is the too strin-

concern here “commercially

gent on what is a standard opera-

reasonable” will have on the future

tion of the law merchant codified in the important to note that the extremely

It is proposed sale

Conrads had notice days

fourteen before occurred. One permit notice is to purposes of such protect his interest guarantor

debtor or my buyers property. finding

view, extraordinary advertising or other if incurred,

expenses are to be it should be judgment

done at the discretion guarantor rather than debtor guarantor party. The debtor expenditures will

more to know what likely proceeds. Since sale

be offset increased debtor or price, ultimately pays

he over ought to have some control

guarantor purse strings extraordinary

costs. grant judg- A

I reverse and SB deficiency. the full amount

ment for filed a Judge, concur-

Kennedy, Circuit ring opinion. al.,

Felipe CABRAL-AVILA et

Petitioners, AND NATURALIZA-

IMMIGRATION Respondent. SERVICE,

TION

No. 77-1626. Appeals,

United States Court of

Ninth Circuit. 30,

May Aug.

Rehearing Denied 21, 1979. Denied Feb.

Certiorari 99 S.Ct. 1245. the sale. The notes expenditure additional weighed by the bidders; registered as eighteen persons dred funds. however, recognize majority fails majority The standards enunciated property of foreclosed typical opinion “commercially for a reasonable” one hundred sixteen fewer would at- sale would not be met in of the foreclo- 99% approximately Eighteen tended. one places country. sure in this This sales held job publishers printers hundred on the lender and an unrealistic burden represented at the auc- North Dakota borrowers as does a disservice to future view, that far exceeds my tion. number undoubtedly imposition of a too strin- expected minimum to be at a reason- gent standard on foreclosure sales would ably goods. run auction of distressed operate discourage lenders in the com- mercial field and further enhance the risk majority I believe the and the District factors with a resultant increase of cost to analyzing also erred the evidence the debtor. prices paid goods at the sale. It comprehend disparity is difficult to how the charged operating lender is with

Case Details

Case Name: United States v. Conrad Publishing Company, a Corporation, the Estate of Currie Conrad, John G. Conrad and Charles Conrad, (Two Cases)

Court Name: Court of Appeals for the Eighth Circuit

Date Published: Dec 29, 1978

Citation: 589 F.2d 949

Docket Number: 78-1251, 78-1290

Court Abbreviation: 8th Cir.