Opinion
No. C2-96-550.
Filed December 10, 1996.
Appeal from the District Court, Wright County, File No. C0941965.
Thomas G. Wallrich, Steven H. Silton, Fafinski Wallrich, P.A., (for Appellant)
David R. Marshall, Fredrikson Byron, P.A., (for Respondents)
Considered and decided by Willis, Presiding Judge, Lansing, Judge, and Kalitowski, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1994).
UNPUBLISHED OPINION
Appellant (1) challenges the commercial reasonableness of the sale of its inventory after its default on a security agreement and (2) alleges negligence by the auctioneer who conducted the sale. This appeal is taken from the district court's grant of summary judgment in favor of respondents. We affirm.
FACTS
Appellant Broken Aero Services (Broken Aero), a seller of used aircraft parts, secured a loan from respondent Marquette Bank (the bank) using Broken Aero's inventory as collateral. Broken Aero defaulted on the loan and the bank sued to recover and sell the collateral. Broken Aero and the bank settled that suit by entering into a loan repayment agreement, but Broken Aero was unable to comply with the agreement and filed for bankruptcy in April 1993. The bank, which was owed $167,623, successfully moved for relief from the bankruptcy stay and foreclosed on Broken Aero's inventory.
The bank retained respondent Fred Radde Sons (Radde) to conduct an auction of the inventory. The auction was attended by 143 people from 14 states and Canada and grossed $164,415. After the auction, Broken Aero brought suit in district court, alleging that the bank's sale of collateral was not conducted in a commercially reasonable manner and that Radde conducted the auction negligently. The district court granted summary judgment in favor of both respondents, concluding that the sale was conducted in good faith and in accordance with generally accepted commercial practices and that Broken Aero had not shown the existence of a genuine issue regarding commercial unreasonableness or negligence.
DECISION
On appeal from summary judgment, this court determines whether there are any genuine issues of material fact and whether the district court correctly applied the law. State by Cooper v. French , 460 N.W.2d 2, 4 (Minn. 1990). Broken Aero argues the district court erred in granting summary judgment because it wrongfully excluded proposed testimony and because genuine issues of material fact exist regarding whether the bank breached its duty to conduct the sale of collateral in a commercially reasonable manner and whether Radde conducted the auction negligently.
1. Evidentiary Ruling
On a summary judgment motion, the evidence must be viewed in the light most favorable to the non-moving party. Fabio v. Bellomo , 504 N.W.2d 758, 761 (Minn. 1993). However, evidence offered to support or defeat a summary judgment motion must be evidence that would be admissible at trial. Hopkins v. Empire Fire Marine Ins. Co. 474 N.W.2d 209, 212 (Minn.App. 1991).
Broken Aero offered an affidavit by Steven Starman, who concluded that the sale of Broken Aero's inventory was commercially unreasonable because (1) it grossed less than Broken Aero's estimate of the value of the inventory, (2) there was an error in the advertising for the sale, (3) the inventory was improperly displayed, and (4) the auction was conducted too quickly. The court found that Starman's opinion of the inventory's value would not be admissible at trial because it was hearsay, based on information from an employee report. The court found that even if Starman qualified as an expert, allowing him to base his opinion on reliable hearsay, his testimony would be irrelevant because the inventory inspected by his employee more than a year earlier was not the same inventory that was sold at the auction.
The question of whether to admit or exclude testimony lies within the discretion of the district court; its decision will not be reversed unless it is based on an erroneous view of the law or constitutes an abuse of discretion. Benson v. Northern Gopher Enters., Inc. , 455 N.W.2d 444, 445-46 (Minn. 1990). The record supports the district court's ruling regarding Starman's proposed testimony.
2. Commercial Reasonableness
Every aspect of a sale of repossessed collateral by a secured party must be commercially reasonable. Minn. Stat § 336.9-504(3) (1994). Minn. Stat. § 336.9-507(2) (1994) provides:
If the secured party either sells the collateral in the usual manner in any recognized market therefor or if the secured party sells at the price current in such market at the time of the sale or if the secured party has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold the sale has been made in a commercially reasonable manner.
Once a secured creditor shows that it disposed of the collateral in compliance with § 336.9-507(2), commercial reasonableness is presumed. Ford Motor Credit Co. v. Russell , 519 N.W.2d 460, 465 (Minn.App. 1994), review denied (Minn. Sept. 28, 1994). The debtor then must present evidence showing commercial unreasonableness and the loss incurred thereby. Ford Motor Credit Co. v. Hertzberg , 511 N.W.2d 25, 27 (Minn.App. 1994), review denied (Minn. Mar. 31, 1994).
The fact that a better price might have been obtained is not sufficient to render a sale commercially unreasonable. Minn. Stat. § 336.9-507(2) (1994). Broken Aero asserts that where the price obtained is significantly lower than the fair market value of the collateral, all other aspects of the sale must be closely examined, citing Boender v. Chicago N. Clubhouse Ass'n , 608 N.E.2d 207, 212 (Ill.App. 1992), appeal denied (Ill. June 3, 1993) (finding that where secured party itself purchased collateral at the sale at well below fair market value, circumstances of sale must be scrutinized closely). It is not clear that the price obtained for the inventory here was less than its fair market value. Although the proceeds of the auction did not meet Broken Aero's expectations, they exceeded the expectations of the bank and its appraiser. Even if the proceeds of the auction were less than fair market value, the evidence offered by Broken Aero does not raise an issue of material fact that any alleged irregularities caused a loss or amounted to commercial unreasonableness. See Karlstad State Bank v. Fritsche , 374 N.W.2d 177, 182 (Minn.App. 1985) (finding sale commercially reasonable despite respondent's objections to advertising and administration of sale where respondent did not show specific evidence of unreasonableness or damages); Hurlock Food Processors Inv. Assocs. v. Mercantile Safe Deposit Trust Co. , 633 A.2d 438, 449 (Md. App. 1993), cert. denied (Md. Mar. 23, 1994) (finding sale commercially reasonable despite problems with advertisements and inventory presentation and allegations of rushing, where respondent presented no testimony of prospective purchasers inhibited by errors).
Here the public auction was conducted by an experienced auctioneer, was advertised in an aviation industry publication, was well-attended, and grossed more than the bank expected. The fact that the auction was not conducted by a particular auctioneer or company does not make it commercially unreasonable. The bank established a prima facie case of commercial reasonableness, and Broken Aero established no genuine issues regarding commercial unreasonableness or damages. The district court did not err in granting summary judgment.
3. Negligence
Broken Aero argues that Radde is independently liable for negligence under theories of third-party beneficiary, negligence per se, and breach of the duty of professional care.
A third party is an intended beneficiary of a contract if (1) the performance will satisfy an obligation of the promisee to pay money to the beneficiary or (2) the promisee intends to give the beneficiary the benefit of the performance. Restatement (Second) of Contracts, § 302 (1981); see La Mourea v. Rhude , 209 Minn. 53, 55, 295 N.W. 304, 306 (1940) (adopting predecessor of section 302, Restatement of Contracts, § 133). The bank secured Radde's services in order to recoup money lost because of Broken Aero's default, not to satisfy an obligation to pay money to Broken Aero or to benefit Broken Aero. Broken Aero is therefore not a third-party beneficiary of the Bank's contract with Radde, and Radde owed no duty to Broken Aero.
To state a claim of negligence per se, an injured party must establish that (1) a statute was violated, (2) the injured party was a member of the class the statute was designed to protect, and (3) the injured party suffered the type of injury contemplated by the statute. Johnson v. Farmers Merchants State Bank of Balaton , 320 N.W.2d 892, 897 (Minn. 1982). Broken Aero claims Radde violated Minn. Stat. § 336.9-504(3), which requires a secured party to dispose of collateral in a commercially reasonable manner. In this case, the secured party is the bank, not Radde. Even if the bank's duty under the statute could be imputed to Radde, Broken Aero has not established the existence of a genuine issue of fact that would show Radde violated the statute.
Broken Aero also claims Radde breached the duty of ordinary professional care, but nothing in the record indicates that Radde failed to conduct the sale in conformity with the standards of the auctioneering profession. See City of Eveleth v. Ruble , 302 Minn. 249, 253, 225 N.W.2d 521, 524 (1974) (stating that person who undertakes to render professional services has duty to exercise such care, skill, and diligence as is ordinarily exercised in profession).
The district court did not err in granting summary judgment on the issue of Radde's negligence.