1st Circuit Says Question of Fact Existed Whether Disposition of Repossessed Aircraft Was Commercially Reasonable

Under Nevada law, a creditor may demonstrate that a sale through a dealer was “commercially reasonable” by showing that the sale was conducted “in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.” Nev.Rev.Stat. Ann. § 104.9627(2)(c). The district court and Harley–Davidson point to Jones v. Bank of Nevada, 535 P.2d 1279 (Nev.1975), to suggest that using a dealer alone meets this requirement.  Reliance on Jones is misplaced. In reviewing a sale of collateral, the Jones court explained the rationale of a trial court by noting the trial court’s quoting of a comment to a former provision of the UCC. Id. at 1282. That comment, no longer existent in the UCC, stated that a sale through a dealer, if “fairly conducted, is recognized as commercially reasonable,” id . (quoting UCC § 9–507, cmt.). But Jones did not hold that using a dealer alone qualifies a sale as “commercially reasonable” regardless of whether the sale was “fairly conducted.” Indeed, it rather plainly states the opposite: use of a dealer must also be “fairly conducted.” Id. at 1282. Harley–Davidson points to no Nevada authorities supporting the district court’s holding that a creditor’s use of a dealer alone demonstrates commercial reasonableness, and we find none.   . . .We conclude that there is a genuine dispute of material fact, such that a reasonable trier of fact could find against Harley–Davidson.  Harley–Davidson asserts that the sale of the Aircraft was “commercially reasonable” because of its use of a dealer. We have already rejected that fact alone as insufficient. Rather, Harley–Davidson must show that in these particular circumstances, where the repossessed collateral was vandalized while in the dealer’s care such that the plane could not be flown, that Specialty’s disposition of the Aircraft was “in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.” . . . Furthermore, we agree with Galvin that there is a genuine dispute of material fact as to whether Specialty’s handling of the sale after the vandalism fell below the standard of reasonable commercial practices among such dealers. Galvin contends the Aircraft’s missing avionics would likely have turned away buyers. . .  Galvin’s personal knowledge is backed up by thirty years of experience as a private pilot, having purchased and sold at least seven aircraft, and having owned and operated three aviation-related businesses. He testified, “[t]he missing avionics and resulting questionability to the history of the aircraft, would turn away all but those who … ‘bottom fish’ for bargains,” resulting in lower offers. And beyond his affidavit, the record also contains the purchase agreement between Specialty and the individual buyer. Replacement of the avionics was specifically written into that agreement, which strongly indicates that having the avionics was important, as the buyer insisted upon their replacement as a condition of the sale. . . Galvin also contends that Specialty sold the Aircraft for an “unreasonably lower sales price” as a result of the vandalism. Under Nevada law, “[a]lthough the price obtained at the sale is not the sole determinative factor, nevertheless, it is one of the relevant factors in determining whether the sale was commercially reasonable.” Levers, 560 P.2d at 920; see also FDIC v. Moore Pharm., Inc., No. 2:12–cv–00067, 2013 WL 1195636, at *3 (D.Nev. Mar. 22, 2013) (“The conditions of a commercially reasonable sale should reflect a calculated effort to promote a sales price that is equitable to both the debtor and the secured creditor.” (quoting Dennison v. Allen Grp. Leasing Corp., 871 P .2d 288, 291 (Nev.1994) (per curiam))). Galvin points to the allegedly low invoice prices Harley–Davidson submitted as evidence that the Aircraft was not properly repaired, and that if not properly repaired, it was likely sold as not airworthy and would have obtained a lower price. Although Harley–Davidson has argued the plane was in poor condition and damaged when delivered to Specialty, it has not disputed Galvin’s testimony that the plane was nonetheless airworthy before the vandalism. The November 30, 2011, purchase agreement, however, states that the plane is being sold “as is” and expressly disclaims its “airworthiness.” Given the facts on the record, there is a genuine dispute of material fact regarding whether the vandalism’s effect on the plane’s airworthiness may have affected the price obtained. This conclusion is not altered by damage that already existed at the time of repossession. Simply put, a fact-finder could reasonably conclude that an airworthy craft would attract more interest and a higher price than would a non-airworthy craft that had been vandalized, even if the seller promised to repair the known damage. With the latter craft, the buyer may wonder what else happened to the plane and has no chance to test it out. . . Based on these facts, we find Harley–Davidson has failed to show that no reasonable trier of fact could find other than that the sale was “commercially reasonable.” Summary judgment should have been denied. That said, we note that given the amount in dispute, we see no reason why the parties should not be able to resolve this matter without further costly litigation.