Opinion ID: 1177349
Heading Depth: 1
Heading Rank: 5

Heading: commercially reasonable sale

Text: We also conclude that the district court erred in finding Wham conducted the sale of the collateral in a commercially reasonable manner. After default, a secured party may sell, lease or otherwise dispose of any or all collateral. Every aspect of the disposition, however, including the method, manner, time, place, and terms of the disposition must be commercially reasonable. See NRS 104.9504(3). Further, this court has noted that a wide discrepancy between the sale price and the value of the collateral compels close scrutiny into the commercial reasonableness of the sale. See Levers v. Rio King Land & Inv. Co., 93 Nev. 95, 98-99, 560 P.2d 917 (1977); Jones v. Bank of Nevada, 91 Nev. 368, 535 P.2d 1279 (1975). In the instant case, it is undisputed that at one point Wham offered to purchase the restaurant for $80,000, which presumably represented his considered judgment of the property's market value. Wham was subsequently able to acquire the property at the sale for $20,050, or slightly more than one-fourth the price he was prepared to pay before purchasing the Mazzuca note. We believe such a discrepancy compels close scrutiny into the commercial reasonableness of the sale. [2] If the sale is closely scrutinized, it becomes apparent that the sale was not conducted in a commercially reasonable manner. It appears Wham did attempt to conform to the norms governing such sales; the district court found that Wham gave proper notice of the sale, that the sale was conducted by the sheriff's department in accordance with normal procedures, and that bidding at the sale was spirited and competitive. Unfortunately, Wham's actions while maintaining the collateral before the sale vitiated the procedural safeguards adhered to at the sale itself. As previously noted, after taking possession of the collateral Wham leased the premises immediately adjacent and proceeded to make major alterations in the structure of the building. Wham apparently knocked out walls, changed the floor configuration, altered the lighting, and made other substantial changes in the restaurant in order to operate the two leaseholds as one business. By these actions Wham effectively destroyed the separate identity of the property, comingling the collateral with the premises next door. Finally, Wham obtained a liquor license and operated a bar at the combined location. After Wham obtained the license, a county ordinance was enacted which prohibited two liquor licensees from operating within 1500 feet of one another. The inability to obtain a liquor license for the restaurant would clearly have a substantial impact on the property's market value, yet at the sale Wham informed one prospective buyer that he intended to retain the license on the adjacent property, and that as a result any purchaser of the leasehold would be unable to obtain a liquor license. These actions clearly had a detrimental effect on the price the property could be expected to bring at any sale, and indicates that Wham did not sell the collateral in its then condition or after commercially reasonable preparation or processing. See NRS 104.9504(1). That Wham was able to acquire the property at a greatly reduced price demonstrates the adverse result of his activities. Given Wham's actions and the attendant effect on the market value of the property, we believe that the district court erred in finding the sale of the collateral was conducted in a commercially reasonable manner. Accordingly, the sale must be set aside.