JOHN and SUSAN VAN BRUNT, FROM A DISTRICT COURT APPELLANTS, v. BANCTEXAS QUORUM, N.A. and PAT GREER, APPELLEES

 
COURT OF APPEALS
FIFTH DISTRICT OF TEXAS
AT DALLAS
 
NO. 05-87-01165-CV
 
JOHN and SUSAN VAN BRUNT,                FROM A DISTRICT COURT
 
 
        APPELLANTS,
 
 
v.
 
 
BANCTEXAS QUORUM, N.A.
and PAT GREER,
 
 
        APPELLEES.                                  OF COLLIN COUNTY, TEXAS
 
 
 
BEFORE JUSTICES McCLUNG, BAKER, AND KINKEADE
DISSENTING OPINION BY JUSTICE KINKEADE
AUGUST 15, 1989
        The majority holds that the trial court erred in its finding on the issue of notice of sale from BancTexas to the Van Brunts. I respectfully dissent from that holding.
        The majority correctly states the facts of the case and the key issue of whether the notice of public sale, followed by a private sale for more money than was bid at the public sale, was also sufficient notice of the private sale. I would hold that such notice was sufficient.
        The relevant portion of section 9.504 provides:
            Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor, if he has not signed after default a statement renouncing or modifying his right to notification of sale.
TEX. BUS. & COM. CODE ANN. § 9.504(c) (Tex. UCC) (Vernon Supp. 1989) (emphasis added). FN:1 The purpose of the Code's requirement of reasonable notification is to provide the debtor sufficient notice to enable him to protect his interest in the collateral, MBank Dallas N.A. v. Sunbelt Manufacturing, Inc., 710 S.W.2d 633, 636 (Tex. App.--Dallas 1986, writ ref'd n.r.e.), "by paying the debt, finding a buyer or being present at the sale to bid on the property [at public auction] or have others do so, to the end that it not be sacrificed by a sale at less than its true value." Wright v. Interfirst Bank Tyler, N.A., 746 S.W.2d 874, 877 (Tex. App.--Tyler 1988, no writ) (emphasis added). The official comment to section 9.504 states:
            "Reasonable notification" is not defined in this Article; at a minimum it must be sent in such time that persons entitled to receive it will have sufficient time to take appropriate steps to protect their interests by taking part in the sale or other disposition if they so desire.
Tex. UCC § 9.504 comment 5.
        By letter dated January 6, 1987, BancTexas informed John Van Brunt of the following: "This letter shall constitute formal notice to you that the real property, improvements, personal property and other collateral (the 'Property') covered by the applicable documentation securing the repayment of the Indebtedness will be sold in accordance with the terms of the applicable security documentation." By letter dated January 29, 1987, BancTexas informed John Van Brunt:
            [P]ursuant to the provisions of Section 9.504 of the Texas Uniform Code, BancTexas will hold a public auction of the Collateral which is located at the Labels plant in Lawrence, Kansas on February 18, 1987, at 12:00 p.m. The public auction will be held at the Labels plant located at 2201 Haskell, Lawrence, Kansas 60044.
        John Van Brunt attended the public auction. At the commencement of the sale, Mason, the person BancTexas hired to evaluate and liquidate the secured collateral, orally notified all those present at the auction that BancTexas reserved the right to reject all bids. After the auction concluded, BancTexas rejected all bids. Shawnee submitted the highest bid of $40,000. Subsequently, without notifying John Van Brunt, Mason telephoned some of the individuals who had attended the auction and a few other persons. Mason eventually sold the collateral to Shawnee for $55,000.
        The majority holds that BancTexas's action in reserving the right to reject all bids at the public auction did not constitute notice that BancTexas would sell the collateral privately if it rejected all the bids at the public auction. The majority holds that the notice of the public auction does not constitute notice of a subsequent private sale. See Wright, 746 S.W.2d at 877; Gateway Aviation, Inc. v. Cessna Aircraft Co., 577 S.W.2d 860, 862-63 (Mo. Ct. App. 1978). The Court holds that the Van Brunts were entitled to notice of a specific date after which BancTexas would proceed to otherwise dispose of the collateral. See Tex. UCC § 9.504(c). For the reasons given below, I disagree.
        The majority relies on Wright v. Interfirst Bank Tyler, N.A. to support its holding. In Wright, on March 23, 1984, the bank wrote the debtor that if he did not repay his note, the bank would sell the collateral according to the terms of the security agreement. Wright, 746 S.W.2d at 875 n. 3. On April 2, 1984, the bank wrote the debtor that the bank intended to sell the collateral at a public auction to be held on April 13, 1984. The bank apparently never conducted a public auction and ended up selling the collateral privately on May 24, 1984. The court held that notice of a public sale did not constitute "reasonable notification" of the subsequent private sale as a matter of law. Wright, 746 S.W.2d at 877. The court noted that the purpose of the notice requirement was to enable the debtor to protect his interest in the collateral.
        The majority also relies on Gateway Aviation Inc. v. Cessna Aircraft Co.. In Gateway, the creditor gave the debtor notice of a public auction, held the public auction, rejected the highest bid of $130,000, and subsequently sold the collateral for $134,000. The creditor did not give the debtor a notice of its intent to sell the collateral privately. Gateway, 577 S.W.2d at 861. The court reasoned that because the debtor could have taken measures to protect his interest in the collateral, the failure to give the debtor notice of the private sale was fatal. Gateway, 577 S.W.2d at 862.
        I am not persuaded by these cases. Where a creditor intends to sell collateral privately, section 9.504 of the Code requires "reasonable notification of the time after which any private sale or other intended disposition is to be made. . . ." Tex. UCC § 9.504(c). At a minimum, "reasonable notification" requires the persons with interests in the collateral to have sufficient time "to take appropriate steps to protect their interests by taking part in the sale or other disposition if they so desire." Tex. UCC § 9.504 comment 5. BancTexas's January 6, 1987, letter to John Van Brunt informed him that BancTexas intended to sell the collateral. Failure of a notice to state whether the creditor intends to sell the collateral privately or at public auction is not fatal to the notice for purposes of section 9.504(c). Hall v. Crocker Equipment Leasing, Inc., 737 S.W.2d 1, 3 (Tex. App.--Houston [14th Dist.] 1987, writ denied). Accordingly, the only element arguably missing from the January 6, 1987, letter is the time after which BancTexas intended to make a private sale.
        BancTexas's January 29, 1987, letter informed John Van Brunt that BancTexas intended to sell the collateral on February 18, 1987, at a public auction. Considering both the January 6 and January 29 letters together, I would hold that the Van Brunts had reasonable notification that they had until February 18, 1987, to take whatever steps they could to protect their interest in the collateral. The fact that BancTexas did not sell the collateral on February 18, 1987, did not deprive the Van Brunts of an opportunity to protect their interest in the collateral; to the contrary, BancTexas's refusal to accept the $40,000 high bid provided the Van Brunts additional time to pursue other avenues.
        On the basis of the facts of this case, I would hold that when BancTexas rejected all the bids at the auction, the Van Brunts had reasonable notice that BancTexas intended to sell the collateral privately. I note that section 9.504 of the Code does not require the creditor to notify the debtor of whatever attempts the creditor is making to sell the collateral; rather, section 9.504 merely requires the creditor to inform the debtor that, as of a certain date, the creditor will attempt to sell the collateral privately. Once the creditor informs the debtor that the creditor intends to sell the collateral as of a certain date, the creditor has fulfilled its burden. From that point, the Code leaves the debtor to fend for himself on how best to protect his interests.
        In this case, John Van Brunt was present at the public auction and witnessed BancTexas's efforts to prevent the property from selling at less than its full value. Acting in the interest of John Van Brunt, BancTexas negotiated a price that was $15,000 higher than the highest auction bid. BancTexas' actions saved John Van Brunt that amount of loss. It is interesting to note that, based on the record in this case, BancTexas would have been better off taking the $40,000 bid at the public auction because BancTexas then would not have lost its right to pursue the Van Brunts for the deficiency, which in this case amounts to approximately $637,000. On the facts of this case, I would hold that the Van Brunts had notice that BancTexas intended to sell the collateral on February 18, 1987, or thereafter, either publicly or privately, and that the Van Brunts had until February 18, 1987, to act on that notice. I would overrule the Van Brunts' first point of error. Based on this holding, I would rule on points of error numbers two through five as follows:
        In point of error two, the Van Brunts contend that BancTexas's purported notice did not give them sufficient time to protect their interests. The Van Brunts argue that even if the rejection of all bids at the public auction constituted notice that BancTexas intended to sell the collateral privately, thereafter they had no time to take any steps to protect their interest in the collateral. I disagree. As of February 18, 1987, the Van Brunts had notice for approximately one month, by virtue of the January 6, 1987, letter, that BancTexas intended to sell the collateral. The January 29, 1987, letter told the Van Brunts that they had until February 18, 1987, to protect their interests. The Van Brunts do not argue that these periods were insufficient or unreasonable. I would overrule the Van Brunts' point of error number two.
        In point of error three, the Van Brunts contend that a notice under section 9.504 must be written and not oral. This Court has previously held that a notice under section 9.504 may be oral. MBank Dallas, N.A. v. Sunbelt Mfg., Inc., 710 S.W.2d 633, 635-36 (Tex. App.--Dallas 1986, writ ref'd n.r.e.). I would overrule point of error number three.
        In point of error four, the Van Brunts argue that because the notice was not given by a secured party, it failed to comply with section 9.504. The Van Brunts focus their argument on Mason's oral statement that BancTexas reserved the right to reject all bids at the auction. The Van Brunts maintain that there is no evidence that Mason was BancTexas's agent for purposes of giving the Van Brunts notice. I disagree. BancTexas hired Mason to perform the February 18, 1987, public auction. Mason performed the auction on behalf of BancTexas. I would hold that Mason had the authority to give the Van Brunts notice. I would overrule point of error four.
        In point of error five, the Van Brunts argue that the sale of the collateral was not commercially reasonable; therefore, BancTexas is not entitled to a deficiency judgment. The Van Brunts argue that where a party does not receive notice, the creditor may not recover the deficiency. Tanenbaum v. Economics Laboratory, Inc., 628 S.W.2d 769, 772 (Tex. 1982); Gentry v. Highlands State Bank, 633 S.W.2d 590, 591 (Tex. App.--Houston [14th Dist.] 1982, writ ref'd). The Van Brunts are correct in asserting that where a debtor does not receive notice of the sale of his property, the creditor may not recover any deficiency from the debtor. However, I would hold that the Van Brunts had sufficient notice; therefore, those authorities would not apply. I would overrule point of error five.
        I concur in the remainder of the majority opinion, and I would affirm the judgment of the trial court.
 
                                                          
                                                          ED KINKEADE
                                                          JUSTICE
 
 
PUBLISH
TEX. R. APP. P. 90.
 
88-01165.DF
 
FN:1 All textual references to "the Code" are to the Texas Uniform Commercial Code; all citations to "Tex. UCC" are to the Texas Uniform Commercial Code.
File Date[01-02-89]
File Name[871165]