Opinion
CIVIL ACTION No. 00-2026-CM
August 15, 2001
MEMORANDUM AND ORDER
This is an action brought by a creditor to recover a deficiency judgment against two debtors after the repossession and sale of collateral securing the loan at issue. Plaintiff General Electric Capital Corporation ("GECC") is the creditor in this action and defendants Stelmach Construction Company and Christopher S. Stelmach are the debtors. Pending before the court is plaintiff's motion in limine (Doc. 51). Plaintiff seeks the court to exclude the testimony of defendants' proferred expert. As set forth below, plaintiff's motion in limine is denied.
Also pending before the court is plaintiff GECC's motion for summary judgment on damages (Doc. 52). Plaintiff seeks to recover the full amount of its deficiency, including interest, attorneys' fees, and costs against defendant Stelmach Construction Company on a promissory note and against defendant Christopher S. Stelmach on his personal guaranty. As set forth in detail below, plaintiff's motion for summary judgment is granted.
In accordance with the applicable summary judgment standard, the facts are uncontroverted or related in the light most favorable to defendants, as the non-moving party. Fed.R.Civ.P. 56.
Breach of Agreements
Plaintiff and defendant Stelmach Construction entered into a promissory note, a master security agreement, and several related agreements (the "Agreements") on or about June 30, 1998. Defendant Stelmach Construction signed the Agreements. Pursuant to the Agreements, defendant Stelmach Construction agreed to repay to plaintiff the principal sum of $400,000.00, plus interest at 9.32% in forty-two consecutive monthly installments to begin August 25, 1998. The Agreements also provide for interest at the rate of 18% per annum upon default and a 5% late payment charge on delinquent payments. Also, on or about June 30, 1998, defendant Christopher Stelmach executed an individual guaranty of the amount loaned to defendant Stelmach Construction.
As the term of the note progressed, Stelmach Construction failed to make the required principal and interest payments due under the Agreements. Accordingly, plaintiff and defendant Stelmach Construction entered into a modification agreement, thereby modifying the terms of payment. Defendant Stelmach Construction executed the modification agreement. Although defendants waived notice, presentment, and other defenses in the Agreements and the guaranty, on April 7 and June 9, 1999, plaintiff sent both defendants notices of default with respect to payments due by defendant Stelmach Construction.
Subsequently, on or about June 24, 1999, plaintiff and defendants entered into a voluntary surrender agreement, wherein defendant Stelmach Construction retained all of its rights as a debtor, including but not limited to the right to challenge the commercial reasonableness of the sale of the collateral.
Following plaintiff's motion for summary judgment on liability, on August 31, 2000 the court entered an order finding defendants breached the Agreements entered into between the parties and that amounts are due and owing by defendants to plaintiff as a result of such breach.
Sale of Collateral
Pursuant to a voluntary surrender agreement, defendants voluntarily surrendered the collateral with the understanding that plaintiff would sell it. Plaintiff notified defendants that the sale of the collateral would occur on or after August 6, 1999.
Plaintiff hired Elcor, Inc. to repossess, appraise and sell the collateral. Elcor inspected and evaluated the condition of each piece, and prepared a condition report and approximate value for each piece of equipment. When analyzing the collateral piece by piece, Elcor's approximate values totaled $258,200.00. In contrast, defendants present the report of Kenneth Fowler — their designated expert in the area of construction appraisal — who opines that the value of the collateral as of August 6, 1999 was $457,400.
In response to plaintiff's assertion regarding the value of the collateral at the time of sale, defendants assert "Defendants do not agree with the purported appraisal prepared by Plaintiff's agent." This assertion does not comply with the requirements necessary to controvert plaintiff's asserted fact. Specifically, with this assertion alone defendants fail to set forth facts admissible in evidence upon which a rational trier of fact could find in their favor, as defendants do not support their assertion "by affidavit, declaration under penalty of perjury, and/or relevant portions of pleadings, depositions, answers to interrogatories and responses to requests for admissions." D. Kan. Rule 56.1(d). Despite this failure, when examining the defendants' response as a whole, and construing the facts in the light most favorable to defendants as the non-moving party, the court finds defendants have controverted plaintiff's valuation of the collateral by their presentation of expert testimony. See discussion infra.
Defendants have not specifically listed the findings of Mr. Fowler in their response to plaintiff's uncontroverted facts. However, because the court has found Mr Fowler's testimony to be admissible, see § II, infra, the court has considered the report and Mr. Fowler's valuation of the collateral in deciding the plaintiff's motion for summary judgment.
Plaintiff advertised the sale through publications in two nationally recognized trade magazines, and on two internet sites known by the trade. The advertisements gave a complete description of the make, model, and year of each piece of collateral, and identified where the collateral could be viewed. None of the advertisement specified whether the collateral would be sold by the lot or individually. GECC also advertised the sale of collateral through mass mailing, targeting potential purchasers.
Defendants attempt to controvert plaintiff's asserted fact that the advertising, as described by plaintiff, took place. However, defendants fail to set forth specific facts admissible in evidence to controvert plaintiff's assertion. Instead, defendants assert the legal argument that the sale of the collateral was not conducted in a commercially reasonable manner. Because defendants' bald assertion does not comply with the summary judgment requirements set forth in Federal Rule of Civil Procedure 56, District of Kansas Local Rule 56.1, and relevant case law, the court accepts plaintiff's assertion as true for purposes of this motion.
The collateral was stored in the Lee's Summit, Missouri area during the advertisement period and was available for inspection by interested bidders. Plaintiff received six (6) bids for the collateral from third party bidders. All of the bids were made for the entire lot. The bids ranged in price from $225,000.00 to $311,000.00.
Plaintiff accepted the highest bid, selling the collateral for $311,000.00, with costs to plaintiff of $6,800.00 for obtaining possession of the collateral, evaluating the collateral and properly preparing the collateral for sale, and costs of $31,100.00 for commission expenses with respect to the sale. When the collateral was sold on August 24, 1999, the principal amount due by defendants was $389,710.68. Interest and delinquency charges at that time totaled $31,355.56. Additional interest accrued after August 24, 1999 at the contract rate of $54.91 per diem. Pursuant to the terms of the Agreements, defendants agreed to pay plaintiff's attorneys fees and costs incurred in collecting under the Agreements.
Defendants attempt to controvert plaintiff's assertion regarding the costs associated with the sale of the collateral. However, defendants fail to set forth specific facts admissible in evidence to controvert plaintiff's assertion. Instead, defendants again assert the legal argument that the sale of the collateral was not conducted in a commercially reasonable manner. Because defendants' bald assertion does not comply with the summary judgment requirements set forth in Federal Rule of Civil Procedure 56, District of Kansas Local Rule 56.1, and relevant case law, the court accepts plaintiff's assertion as true for purposes of this motion.
As of August 24, 1999 (the sale date of the collateral), the amount due and owing to plaintiff, after crediting all payments made and the proceeds from the sale of collateral, totaled:
Remaining principal balance after sale of collateral ($389,710.68 (principal) less $311,000.00 (proceeds from sale of collateral)) $78,710.68
Interest and delinquency charges (Additional interest accrued after August 24, 1999 at the contract rate of $54.91 per diem.) $31,355.56
Costs to repossess/recondition collateral $6,800.00
Commission expenses on sale $31,100.00
Amount due and owing by defendants (attorneys' fees obligations not included) $147,966.24
Defendants do not set forth specific facts admissible in evidence to controvert plaintiff's asserted amounts due and owing. Instead, defendants assert the legal argument that the sale and the proceeds returned from the sale were not commercially reasonable. Although defendants have introduced evidence regarding a higher valuation of the property at the time of the sale, they have not controverted plaintiff's assertions regarding the proceeds from the sale, the interest and delinquency charges due, the costs to repossess and recondition the collateral, and the commission expenses on the sale. Accordingly, defendants' assertion does not comply with the summary judgment requirements set forth in Federal Rule of Civil Procedure 56, District of Kansas Local Rule 56.1, and relevant case law, the court accepts plaintiff's calculation of $147,966.24 as the amount allegedly due and owing by defendants as of August 24, 1999 as true for purposes of this motion.
The parties dispute the total amount due by defendants to plaintiff as a result of the breach. Plaintiff asserts the sale of the collateral was conducted in accordance with the Agreements between the parties and in accordance with Article 9 of the Uniform Commercial Code. Defendants, however, argue that the sale of collateral conducted by plaintiff was not commercially reasonable.
Plaintiff asserts that defendants did not raise the lack of a commercially reasonable sale as a defense, and therefore, plaintiff's motion should be granted. The court notes that in the pretrial order entered in this case on September 11, 2000, defendants assert that they preserved their rights and defenses throughout their dealings with plaintiff, "including, but not limited to, matters involving a commercially reasonable sale." (Pretrial Order, ¶ 4.1). Accordingly, the court finds defendants have not waived their right to assert that the sale of the collateral was not conducted in a commercially reasonable manner.
Motion in Limine
Plaintiff seeks the court to exclude the expert witness opinion and testimony of Kenneth Fowler, the expert designated by defendants. Plaintiff alleges that under a Daubert analysis, Mr. Fowler's opinions are not reliable, as they are "either based on factual speculation, unsupported by fact, or based on assumptions that are inconsistent with known facts and common sense."Defendants identified Mr. Fowler as an expert with specialized knowledge in the area of construction appraisal. Mr. Fowler prepared a report expressing an opinion on the value of the collateral (construction equipment) at issue. Mr. Fowler's report is a "Hypothetical Limited Use Desk-Top Summary Study," defined as a "restricted use study containing an opinion of value without a physical inspection and one in which the scope of work is less than, or different from, the work that would otherwise be required." In preparing his report, Mr. Fowler did not personally inspect the collateral. Instead, Mr. Fowler gathered information about the collateral from defendants for the purposes of conducting the appraisal. That is, Mr. Fowler relied upon defendants "to provide a general description of the condition of the assets."
Federal Rule of Evidence 702Federal Rule of Evidence 702 allows expert testimony, by opinion or otherwise, if the witness is qualified as an expert and his specialized knowledge "will assist the trier of fact to understand the evidence or to determine a fact in issue." Fed.R.Evid. 702. Expert testimony is admissible only if it is both relevant and reliable. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999) (citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)). The court has a "gatekeeping" obligation to determine the admissibility of expert testimony. Id. However, rejection of expert testimony has been the exception rather than the rule. Fed.R.Evid. 702, advisory committee notes (Dec. 1, 2000). "Vigorous cross-examination, presentation of contrary evidence and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence." Daubert, 509 U.S. at 595.
Lack of Personal Inspection and Reliance on "Inaccurate" Information
In their motion in limine, plaintiff seeks to exclude Mr. Fowler's testimony, arguing it is not reliable. First, plaintiff argues Mr. Fowler's expert testimony is not reliable because his opinion is not based on a personal inspection of the collateral and the information defendants provided to Mr. Fowler contained inaccuracies. Mr. Fowler's report indicated that some of the information supplied by defendants to Mr. Fowler "contained some inaccuracies." The court is not persuaded by plaintiff's argument. Plaintiff has not cited to the court, nor has the court's research revealed, any precedent indicating that in all cases an appraisal conducted without a physical inspection of the assets at issue is unreliable. Further, Mr. Fowler's report appears to have accounted for the "inaccuracies" in the asset data, by noting how his report corrected and/or made assumptions regarding the inaccuracies.
Plaintiff also contends that the court may not rely upon Mr. Fowler's expert testimony in the context of their summary judgment motion because the underlying information defendants supplied to Mr. Fowler has not been presented to the court in an admissible form, i.e., in the form of an affidavit or other verified statement. The court disagrees. Although defendants have not presented the information supplied to Mr Fowler in the form of an affidavit or other verified statement, Rule 56 summary judgment standards do not govern the admissibility of expert testimony and consequently, Rule 56 standards do not govern the admissibility of the bases for expert testimony. Instead, the Supreme Court has set forth standards for admissibility of expert opinion and it is this analysis that governs the admissibility of Mr. Fowler's opinion testimony and its underlying bases. Daubert, 509 U.S. 579; Fed.R.Evid. 702. Under Daubert, the proper method to challenge the basis for an admissible expert's opinion is through "[v]igorous cross-examination, presentation of contrary evidence and careful instruction on the burden of proof. . . ." Id. at 595.
Accordingly, as rejection of expert testimony has been the exception rather than the rule, the court is not persuaded by plaintiff's first argument that Mr. Fowler's opinion is unreliable under a Daubert analysis.
Valuation Analysis
Plaintiff next argues Mr. Fowler's expert testimony is not reliable because the valuation analysis used in his report indicates that Mr. Fowler's valuation is inapplicable to a forced sale situation, as was present in the sale of the collateral at issue here. Specifically, Mr. Fowler's report indicates that a "liquidation sale would typically not maximize financial benefit and would be irrelevant to a highest and best use." The highest and best use of an asset is that "use which is physically possible, legal and produces the maximum financial benefit. In the event assets are to be or have been liquidated the assets cannot have had a highest and best use in place as part of an operating facility." The report continues, "The assets which are the subject of this report were seized by a creditor. The seizure indicates the assets were not utilized in a capacity which yielded the highest present value. Thus, the highest and best use would have been to sell them to an alternate user which could have used the assets for their intended design use."
Mr. Fowler's report then indicates that because the assets were seized, the report "assumes the highest and best use for the subject assets would be to be sold to pay the creditor. . . . [and]. . . [t]he type of sale which would have maximized the present value of the assets is a fair market value-removal sale." It is not clear from the parties' papers that a fair market value-removal sale as suggested by Mr. Fowler and a forced sale (as conducted in this case) are at odds and that Mr. Fowler's valuation under one scenario would not be valid under the other. Accordingly, the court does not find Mr. Fowler's assumption regarding the type of sale that would have maximized the present value of the assets was faulty or unreliable. Counsel have not set forth any precedent to guide the court. Therefore, as noted above, because rejection of expert testimony has been the exception rather than the rule, the court is not persuaded by plaintiff's second argument that Mr. Fowler's opinion is unreliable under a Daubert analysis.
Reliance on Undisclosed Data
Finally, plaintiff argues Mr. Fowler's expert testimony is not reliable because he utilized faulty appraisal data when making comparisons between the collateral sold and similar types of assets. Mr. Fowler's report indicated that "[i]n estimating market values, [Mr. Fowler] relied on market information supplied by new and used machinery and equipment vendors. Used market data was not found for some items. In such cases [Mr. Fowler] relied on information from data that was developed from similar types of assets." Plaintiff asserts that because the "similar type of assets" are not identified in the report, Mr. Fowler's analysis is incomplete and unreliable. The court again notes that Mr. Fowler's opinion and the basis for his opinion can be scrutinized via the traditional method of "attacking shaky but admissible evidence," that is via "[v]igorous cross-examination, presentation of contrary evidence and careful instruction on the burden of proof." Daubert, 509 U.S. at 595. Therefore, as noted regarding the prior two arguments, because rejection of expert testimony has been the exception rather than the rule, the court is not persuaded by plaintiff's final argument that Mr. Fowler's opinion is unreliable under a Daubert analysis.
In its role as "gatekeeper," and upon examination of the reliability of Mr. Fowler's opinion testimony, the court finds Mr. Fowler's opinion testimony is admissible. Plaintiff's motion in limine is denied.
III. Motion for Summary Judgment
Summary Judgment Standard
Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). A fact is "material" if, under the applicable substantive law, it is "essential to the proper disposition of the claim." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). An issue of fact is "genuine" if "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way." Id. (citing Anderson, 477 U.S. at 248).The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Id. at 670-71. In attempting to meet that standard, a movant who bears the burden of persuasion at trial, must support its motion with evidence which would entitle it to a directed verdict at trial, if the evidence were not controverted. Celotex Corp. v Catrett, 477 U.S. 317, 331 (1986) (Brennan, J., dissenting); United States v. One 107.9 Acre Parcel of Land Located in Warren Township, 898 F.2d 396, 398 (3d Cir. 1990). In contrast, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim. See id. at 671 (citing Celotex, 477 U.S. at 325).
Justice Brennan agreed with the majority's analysis of Rule 56. He dissented, however, because he believed that the majority did not adequately explain what is required of the moving party who does not bear the burden of persuasion at trial. Celotex, 477 U.S. at 329-31.
Once the movant has met this initial burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256; see Adler, 144 F.3d at 671 n. 1 (concerning shifting burdens on summary judgment). The nonmoving party may not simply rest upon its pleadings to satisfy its burden. Anderson, 477 U.S. at 256. Rather, the nonmoving party must "set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant." Adler, 144 F.3d at 671. "To accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein." Id.
Finally, the court notes that summary judgment is not a "disfavored procedural shortcut," rather, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action." Celotex, 477 U.S. at 327 (quoting Fed.R.Civ.P. 1).
Commercially Reasonable
As liability in this case has been resolved, the issue that remains is whether the sale of the collateral securing the loan to defendants was conducted in a commercially reasonable manner. Determination of whether a sale has been held in a commercially reasonable manner is a question of fact to be determined by the trier of fact. Westgate State Bank v. Clark, 231 Kan. 81, 91, 642 P.2d 961, 969 (1982).
It is unclear, based upon the papers presented to the court, which state law's Uniform Commercial Code governs the Agreements between the parties in this diversity action. The parties have not addressed the issue directly, nor have they pointed to portions of the record providing guidance on this matter to the court. Because all parties cite to the Kansas Uniform Commercial Code in presenting their arguments to the court, the court assumes it is the Kansas code that governs the Agreement between the parties.
In addition, the court notes that the provisions of the revised version of the Kansas UCC, effective July 1, 2001, do not govern this action. See Uniform Commercial Code-Secured Transactions, ch. 142, § 9-702(c), 2000 Kan. Sess. Laws 949, 1046-47 (2001) (" Pre-effective date proceedings. This act does not affect an action, case, or proceeding commenced before this act takes effect.").
Plaintiff, as the secured creditor, has the burden to establish that the sale of the collateral at issue was conducted in a commercially reasonable manner. Id. ("in an action for a deficiency judgment, the secured creditor has the burden of proof to show that the disposition or sale of the collateral was made in a commercially reasonable manner"). Accordingly, to prevail on its summary judgment motion, plaintiff must set forth evidence demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law in its favor in the amount of $147,966.24, for principal and interest through August 24, 1999, plus pre-judgment and post-judgment interest accruing after that time at a per diem rate of $54.91, plus reasonable attorneys fees and costs. Celotex, 477 U.S. at 331. Plaintiff must support its motion with uncontroverted evidence which would entitle it to a directed verdict at trial. Id.
The Kansas Uniform Commercial Code (UCC) provides that "every aspect of the disposition [of collateral] including the method, manner, time, place and terms must be commercially reasonable." Kan. Stat. Ann. § 84-9-504(3) (1996). When determining whether the sale of collateral was conducted in a commercially reasonable manner, "the trial court should consider all of the relevant factors together as part of a single transaction." Westgate, 231 Kan. at 91, 642 P.2d at 969. In Westgate, the Kansas Supreme Court identified nine factors relevant to determining whether a sale has been conducted in a commercially reasonable manner, including: (1) the duty to clean, fix up, and paint the collateral; (2) public or private disposition; (3) wholesale or retail disposition; (4) disposition by unit or in parcels; (5) the duty to publicize the sale; (6) length of time collateral held prior to sale; (7) duty to give notice of the sale to the debtor and competing secured parties; (8) the actual price received at the sale; and (9) other methods, including the number of bids received and the method employed in soliciting bids, the time and place of the sale. 231 Kan. at 91-94, 642 P.2d at 970-971. This list of factors is not exclusive and a court should consider other factors, where relevant in a particular case. Id.
Proper Notice
Defendants assert three separate arguments contending that the sale was not conducted in a commercially reasonable manner. First, defendants contend plaintiff did not provide proper notice of the sale. Prior to a sale or other disposition of repossessed collateral, a secured creditor is required to give the debtor notice of any proposed disposition. Kan. Stat. Ann. § 84-9-504(3) (1996). Generally, it is the secured party's decision whether to dispose of the collateral by public or private sale. See id. § 84-9-504(3) ("[d]isposition of the collateral may be by public or private proceedings. . ."). Under Kansas law, a public sale is "a sale by auction." Id. § 84-2-706, official UCC Comment, 4. In contrast, a private sale "may be effected by solicitation and negotiation conducted either directly or through a broker." Id.
The parties do not seem to dispute that the sale of the collateral here was by private sale, as it was not conducted by auction. Instead, defendants contend plaintiff did not properly notice the private sale. Pursuant to the Kansas UCC, any notice of sale must state the time and place of any public sale or the time after which any private sale or other intended disposition of the collateral will take place. Id. § 84-9-504(3).
The court finds plaintiff's notice of the private sale was sufficient under the Kansas UCC. The uncontroverted facts demonstrate that plaintiff notified defendants that the sale of the collateral would occur on or after August 6, 1999. The heading of plaintiff's notice indicated "NOTICE OF PRIVATE SALE OF COLLATERAL UNDER SECTION 9-504 OF THE UNIFORM COMMERCIAL CODE." The text of the notice provided "NOTICE is hereby given that on or after August 6, 1999, General Electric Capital Corporation ("GECC") will sell at a public or private sale the following property" . . . the notice then listed each item of property to be sold.
Although it is clear under Kansas law that the notice of a public sale and subsequent holding of a private sale does not satisfy the statutory requirement of notice, Topeka Datsun Motor Co. v. Stratton, 12 Kan. App. 2d 95, 102, 736 P.2d 82, 88 (1987), defendants have not cited any precedent to the court demonstrating that the notice here is noncompliant. That is, defendants have not demonstrated that when a private sale is held following a notice: (1) including both public and private sale language, (2) not containing any indication that a public sale will take place at a specified time and place (as required for notice of a public sale), and (3) indicating the date after which a sale will take place (as required for notice of a private sale), that such sale is commercially unreasonable. Further, one of the primary reasons for the notice requirement is to allow the interest holder the opportunity to redeem the security by paying off the debt. Kan. Stat. Ann. § 84-9-506. Here, the court finds the notice provided by plaintiff allowed defendants this opportunity, as the defendants were notified that the sale of the collateral would take place "on or after August 6, 1999." Accordingly, the court finds plaintiff's notice is compliant with the Kansas UCC and therefore, such notice does not render the sale of the collateral commercially unreasonable.
Piecemeal Sale
Second, defendants contend that, in order for the sale to have been commercially reasonable, the collateral should have been disposed of on a piecemeal basis, rather than in bulk. Specifically, defendants argue the plaintiff's advertisements for the collateral implied that the collateral was offered only in bulk.
As noted above, the Kansas UCC allows that the "sale or other disposition [of repossessed collateral] may be as a unit or in parcels . . ." However, "the linchpin remains commercial reasonableness." Id. § 84-9-504, 1996 Kansas Comment, subsection (3). Accordingly, "the secured party may have a duty to dispose of collateral on a piecemeal basis if such a method would generate a higher price."
Reviewing plaintiff's advertisements, the court does not find that a reasonable fact finder could conclude that potential bidders were misled into believing that the collateral was available only as a lot, rather than individually. Plaintiff's advertisements for the sale of the collateral list each item of collateral and indicate that they are "accepting bids." The advertisements do not indicate the collateral may be purchased only in its entirety.
On summary judgment, where a question of ultimate fact does not require further factual development or turn on any dispute over credibility, there is no reason for a full trial in a case where the court is the fact finder. Nunez v. Superior Oil Co., 572 F.2d 1119, 1124 (5th Cir. 1978). See also Transworld Airlines v. Am. Coupon Exch., 913 F.2d 676, 684 (9th Cir. 1990) ("where the ultimate fact in dispute is destined for decision by the court rather than by a jury, there is no reason why the court and the parties should go through the motions of a trial if the court will eventually end up deciding on the same record"). Here, the court is the finder of fact, as the parties' pretrial order specifies that trial is to the court, rather than to a jury.
Defendants emphasize that each of the six bids received for the collateral was for the entire lot, rather than for a single item. However, an examination of the bids reveals that although each bidder did seek to purchase the entire lot, they did not use identical language, as may have been done where the advertisements limited purchase to the "entire lot." For example, the bidders placed bids on "your schedule of equipment," "entire package of equipment (16 pieces)," the "entire lot," the "total package," and the "package of equipment."
Moreover, although defendants' expert report places the fair market value of the collateral as a whole at $457,400, compared to the $311,000 received for the collateral by plaintiff, the expert did not opine that selling the collateral individually, rather than in bulk, would have been more likely to generate the fair market value of the collateral.
Accordingly, the court finds the plaintiff's advertisements and the plaintiff's acceptance of one of six bids for the entire lot, did not render the sale commercially unreasonable.
Price Received for Collateral at Sale
Finally, defendants contend that the price received for the collateral indicates the sale was commercially unreasonable. Specifically, defendants argue the difference between defendants' expert's assessment of the fair market value of the collateral ($457,400) and the price plaintiff obtained from the sale ($311,000) demonstrates the commercial unreasonableness of the sale. That is, defendants argue the $146,400 difference makes the sale presumptively commercially unreasonable.
Although the court must examine the price obtained for the collateral in determining the commercial reasonableness of a sale, "[t]he fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the secured party is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner." Id. § 84-9-507(2). "If the secured party either sells the collateral in the usual manner in any recognized market therefor or if he sells at the price current in such market at the time of his sale or if he has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold he has sold in a commercially reasonable manner." Id.
Defendants do not argue that the collateral was not sold in a recognized market for the equipment or that the collateral was not sold in the usual manner for the sale of such equipment. Nor do defendants contend that plaintiff did not follow reasonable commercial practices among dealers in the type of equipment sold when selling the collateral. Instead, defendants contend the price obtained for the collateral was not the current price in the market at the time of the sale.
"[C]ourts will frown at a sale which yields a shockingly low price unless the secured creditor can offer a valid explanation. . . ." Id. § 84-9-504, 1996 Kansas Comment, subsection (3). Here, plaintiff's agent set forth a valuation of the collateral at the time of repossession of $258,200. In contrast, defendants' expert valued the collateral at the time of the sale at $457,400. Plaintiff obtained a price of $311,000 upon sale of the collateral. The difference between the price obtained and the presumptively correct valuation of the collateral by defendants' expert is large. However, as noted in the Kansas UCC and in Kansas case law, simply because a higher price could have been obtained does not establish a sale was not commercially reasonable. As noted herein, the court finds that each of the remaining factors regarding commercial reasonableness weigh in favor of plaintiff. Therefore, even though a low price was obtained from the sale, because the court has found all procedures regarding the sale of the collateral were handled in line with section 84-9-504 of the Kansas UCC, the court finds the low price, on its own, does not render the sale of the collateral commercially unreasonable. See id. § 84-9-504, 1996 Kansas Comment, subsection (3) ("However, if a low price is obtained in a sale for which all procedures were handles in line with this subsection [Kan. Stat. Ann. § 84-9-504], the creditor has a much stronger argument that the sale should not be considered commercially unreasonable.").
The court construes all facts in the light most favorable to defendants, as the non moving party. Fed.R.Civ.P. 56.
Remaining Factors
Plaintiff argues that, in addition to the three factors discussed above, the five additional relevant factors set forth in Westgate demonstrate the commercial reasonableness of the sale of the collateral. First, plaintiff contends it satisfied its duty to prepare the collateral for sale by hiring Elcor, Inc. to assess, prepare and clean each piece of collateral prior to the sale. Plaintiff invested $6,800 preparing the collateral in order to maximize the ultimate sale price. Second, plaintiff contends it chose the method of disposition — a private sale — most likely to result in a higher return. See Westgate, 231 Kan at 92, 642 P.2d at 970 (noting that a private sale should be used whenever such a disposition is likely to result in a higher return). Third, plaintiff advertised the sale in multiple national trade publications and on several internet sites commonly used by the construction industry. Plaintiff also conducted direct mail solicitations all over the country to likely purchasers. Plaintiff made the collateral available for inspection prior to any sale. Fourth, plaintiff held the collateral for approximately one month prior to agreeing to a sales price. And fifth, plaintiff received six bids from third party bidders prior to accepting the highest bid.
Plaintiff contends, without dispute by defendants, that Westgate's third factor — wholesale or retail disposition — is inapplicable in this case.
Defendants do not dispute the facts set forth by plaintiff supporting these five factors. Accordingly, the court finds plaintiff has set forth evidence sufficient to establish no genuine issue of material fact exists as to these five factors.
Conclusion
Accordingly, given the above analysis, the court finds plaintiff has met its burden to establish entitlement to judgment as a matter of law on its damages claim. That is, plaintiff has met its burden to establish the commercial reasonableness of the sale of the collateral at issue. Therefore, plaintiff's motion for summary judgment on damages is granted. Plaintiff is granted judgment in the amount of $147,966.24, for principal and interest through August 24, 1999, plus pre-judgment and post-judgment interest accruing after that time at a per diem rate of $54.91, plus reasonable attorneys' fees and costs in an amount to be approved by the court.
Attorneys' Fees
Plaintiff asserts entitlement to attorneys' fees by virtue of the parties' agreements. However, defendants contend that they are responsible for plaintiff's attorneys' fees and costs only if plaintiff is successful at trial.
Pursuant to the terms of the Agreements, defendants agreed to pay plaintiff's attorneys fees and costs incurred in collecting under the Agreements. Specifically, the Security Agreement provides "In the event this Agreement, any Note or any other Debt Documents are placed in the hands of an attorney for collection of money due or to become due or to obtain the performance of any provision hereof, Debtor agrees to pay all reasonable attorneys' fees incurred by Secured Party, and further agrees that payment of such fees is secured hereunder. Debtor and Secured Party agree that such fees to the extent not in excess of twenty percent (20%) of subject amount owing after default (if permitted by law, or such lesser sum as may otherwise be permitted by law) shall be deemed reasonable." (Security Agreement, ¶ 8(d)). Further, the Security Agreement entered into between the parties provides "Proceeds from any sale or lease or other disposition shall be applied: first, to all costs of repossession, storage, and disposition including without limitation attorneys'. . . fees." (Id. at ¶ 8(c)).
Even when construing the Agreement in the light most favorable to defendants, the court finds the parties' agreements indicate defendants agreed to pay plaintiff's attorneys' fees from the time the "Agreement . . . [was] placed in the hands of an attorney for collection of money due or to become due or to obtain the performance of any provision hereof." Accordingly, the court finds attorneys' fees are due and owing. Plaintiff shall submit to the court an itemized accounting of attorneys' fees allegedly due and owing within 30 days of entry of this order.
IV. Order
IT IS THEREFORE ORDERED that plaintiff's motion in limine (Doc. 51) is denied.
IT IS FURTHER ORDERED that plaintiff's motion for summary judgment on damages (Doc. 52) is granted. The clerk is directed to enter judgment against defendants in the amount of $147,966.24 for principal and interest due and owing as of August 24, 1999, plus interest accruing from August 25, 1999 at the contract per diem rate of $54.91, plus attorneys' fees in an amount to be approved by the court. Plaintiff is ordered to submit to the court a detailed accounting of attorneys' fees allegedly due and owing within 30 days of entry of this order.