In re Excello Press, Inc.

Metlife Capital Credit Corp. (Metlife) (creditor) sold two web presses (presses) to Excello Press, Inc. (Excello) (debtor) for approximately $3,000,000. Metlife kept a security interest pending full payment. In 1985, Excello filed for bankruptcy. Excello still owed Metlife approximately $2,700,000. On April 4, 1986, the bankruptcy court entered the parties’ agreed order allowing Metlife to sell the presses. The parties agreed that Metlife must remove the presses from Excello’s property by April 30, and Metlife’s deficiency claim would be limited to $900,000. Metlife privately sold the presses on April 23 and sometime in June for $550,000 each. On April 23, before the sale, Metlife mailed Excello written notice stating that it planned to sell the presses, with no other information. Metlife subsequently filed the maximum $900,000 claim, and Excello’s unsecured creditor’s committee objected. At the hearing, Metlife argued that its sales were commercially reasonable, and it received fair market value. Metlife produced employee witnesses who testified about its months-long search for buyers, evidence of its marketing efforts, and an appraisal from March 1985 estimating the total value of the presses at $1,200,000. Further, Excello owned two similar presses that could print an additional color, which Excello sold for less at a public auction. Excello argued that Metlife failed to provide adequate notice and failed to conduct a commercially reasonable sale, as required by Uniform Commercial Code (UCC) Article 9. The bankruptcy court ruled for Excello. The bankruptcy court found that New York would likely require reasonable notice of the time of the sale in writing, and the absence of notice created a rebuttable presumption that the collateral’s fair market value equaled the amount of the debt. Metlife failed to overcome the presumption because, among other things, its witnesses were biased, the appraisal was old, and the prices paid for Excello’s similar presses were immaterial. The district court affirmed. The district court found it unnecessary to determine whether New York requires written notice because Metlife had not shown adequate oral notice, agreed that New York would apply the rebuttable presumption, and deferred to the bankruptcy court’s decision that Metlife failed to overcome the presumption.