Court Opinion

ID: 9479739
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:27:49.624396+00
Date Added: 2024-06-11T17:47:14.898060
License: Public Domain

RIPPLE, Circuit Judge,
dissenting.
This case is indeed a difficult one and the majority’s opinion reflects the careful attention that my brothers have given to this multifaceted problem. My own study and reflection has brought me to the conclusion that our colleague in the district court correctly decided the issues necessarily before him and, consequently, that the judgment ought to be affirmed.
A.
With respect to the adequacy of notice of the sale of the collateral, there is, as my brothers note, a conflict of authority as to whether U.C.C. § 9-504(3) requires written notification to the debtor or whether oral notification is sufficient. However, this issue need not be decided in this case. Even assuming that New York does not require written notification under section 9-504(3), the district court determined that Metlife did not provide adequate oral notification. In re Excello Press, Inc., 90 B.R. 335, 338 (N.D.Ill.1988). This determination of a mixed question of law and fact is subject to our review under a deferential standard. See Shacket v. Philko Aviation, Inc., 841 F.2d 166, 170 (7th Cir.1988) (trial court’s determination that defendant had actual notice of prior interest in goods was not clearly erroneous); see also Yockey v. Horn, 880 F.2d 945, 949 n. 6 (7th Cir.1989) (clearly erroneous standard of review is employed for mixed questions of law and fact). The purpose of the notice requirement is not in serious dispute; it is designed “to give the debtor an opportunity to protect his interest in the collateral by exercising any right of redemption or by bidding at the sale, to challenge any aspect of the disposition before it is made, or to interest potential purchasers in the sale, all to the end that the merchandise not be sacrificed by sale at less than its true value” (citations omitted). First Bank & Trust Co. of Ithaca v. Mitchell, 123 Misc.2d 386, 473 N.Y.S.2d 697, 702 (Sup.Ct.1984). The district court’s assessment of the record in light of that purpose certainly is not clearly erroneous.1 Metlife acquired legal authority to sell the presses on April 4, 1986. Between that date and April 23rd, the date the first press was sold, Excello knew little more than that Metlife planned to sell the presses in a private sale and that the presses “should” be sold by April 30, 1986. Excello had to vacate its premises on that date, and there were tremendous costs involved with moving the presses if they had not yet been sold. According to Metlife, deinstallation of the presses “would cause a decline in value of at least $100,000 per unit.” R.72 at 296. However, the April 30, 1986 deadline, while important, was apparently not essential. One of the presses was sold on April 23 for $550,000; the other was not sold until June and was also purchased for $550,000. R.71 at 79; R.72 325-26.
B.
Having determined that Metlife did not give Excello adequate notice of the sale of the presses, our focus must shift to the *908effect of that failure.2 There is some authority in New York for the proposition that inadequate notice bars any deficiency judgment. However, most courts, including many in New York, have taken the view that inadequate notice simply creates “a presumption that the security was equal to the debt and that the secured party has the burden of proof to overcome such pre-sumption_” Security Trust Co. v. Thomas, 59 A.D.2d 242, 399 N.Y.S.2d 511, 513 (1977). While I agree with the majority that it appears that New York would follow the latter line of cases if its Court of Appeals were confronted directly with the issue, I do not believe that we need to resolve definitively the issue in this litigation. If inadequate notice is deemed an absolute bar to a default judgment, Met-life’s deficiency claim must fail. If New York rejects the absolute bar rule, on the other hand, Metlife must overcome the presumption that the value of the presses eq-ualled the amount of Excello’s debt ($2.7 million). Assuming the rebuttable presumption rule is the rule in the State of New York, I agree with the bankruptcy and district courts that the presumption was not overcome. See 83 B.R. at 543; 90 B.R. at 339-40.
Metlife argues that it was error for the bankruptcy court to determine, in the absence of contradictory evidence from Excel-lo, that Metlife failed to rebut the presumption. However, the bankruptcy court sat as the trier of fact, and was entitled to disregard incredible or incompetent testimony. It was also entitled to assign different weight to the various submissions before it. It is clear that the bankruptcy court had legitimate reasons as the fact-finder for rejecting Metlife’s evidence. See 83 B.R. at 543; 90 B.R. at 340. For example, Metlife failed to produce any evidence of the fair market value of the presses at the time of sale. 83 B.R. at 543 (emphasis supplied). All of Metlife’s evidence on this issue pertained to evaluation of the presses at some time other than the time of sale (most of the evidence was at least a year old). Id. The bankruptcy judge, as fact-finder, merely weighed the credibility and probative value of Metlife’s evidence. This court must defer to the trial court, particularly with respect to findings based on the bankruptcy court’s assessment of witnesses’ credibility. Torres v. Wis. Dept. of Health and Soc. Servs., 838 F.2d 944, 946 (7th Cir.1988). Because I do not believe it was clearly erroneous for that court to find that Metlife failed to sustain its burden of proof, I would affirm the district court’s decision.
C.
In sum, I believe it is unnecessary to resolve the issues of New York law. We need not determine whether New York requires written, instead of oral, notice under section 9-504(3) because neither was given. Similarly, we need not determine whether inadequate notice absolutely bars a deficiency judgment or, alternatively, gives rise to a rebuttable presumption that the *909value of the collateral equals the amount of the debt. Our only necessary task is to assess the determinations that Metlife failed to produce sufficient evidence of either adequate oral notification or of the collateral’s market value in April and June, 1986. In my view, the structural relationship between trial and appellate courts— and the consequent deferential standard of review of the issues necessarily before us — requires that the judgment of the district court be affirmed.
Accordingly, I respectfully dissent.

. Contrary to the majority’s determination that the district court’s decision flowed "not from the facts but from its assumption that New York would follow Spillers," majority op. at 903, it is clear that the court considered the evidence of record in making its determination, and did not rely solely on the Spillers case. See 90 B.R. at 338-39.

. Contrary to the majority's position, whether the sale was commercially reasonable is not always "the main question in a deficiency action.” Majority op. at 907. As the court noted in Security Trust Co. v. Thomas, 59 A.D.2d 242, 399 N.Y.S.2d 511 (1977), the issue of commercial reasonableness is moot once the creditor fails to establish due notice. To succeed in a deficiency claim, a secured creditor must prove due notice of sale and commercial reasonableness. Having failed to prove one, the other becomes irrelevant and the creditor moves on to the next step — proof of the amount of the debt, the fair value of the collateral, and the resulting deficiency. Id. 399 N.Y.S.2d at 514. In this second part of the analysis, I cannot agree with the majority's position that “[t]he price obtained in a commercially reasonable sale is not evidence of the market value ... [i]t is the market value.” Majority op. at 904-05 (emphasis in original). The majority offers no authority to support this position, and Metlife’s own witnesses testified that the manner in which collateral is sold affects the price it will bring. R.70 at 62; R.73 at 34. For example, the price obtained at auction is usually diminished or liquidated. Id. The sales price does not necessarily reflect the market value, therefore, even though the sale is conducted in a commercially reasonable manner. Indeed, the majority's view is a clear invitation to a creditor to ignore the notice requirements of section 9-504(3). Under the majority's view, a secured creditor could hold a sale without appropriate notice, dispose of secured collateral, and still be able to recover a deficiency judgment so long as the creditor could prove the fair market value of the equipment sold.