Court Addresses Requirements for Showing a Commercially Reasonable Sale

Court Addresses Requirements for Showing a Commercially Reasonable Sale

      In a decision rendered last week, the federal district court denied summary judgment to a bank in connection with its claim that it had disposed of certain collateral, a houseboat, in a commercially reasonable manner. In doing so, the court identified certain requirements for a future similarly situated lender to satisfy the those requirements. Regions Bank v. Lenox, Civ. Act. No. 5:18-014-DCR, 2019 WL 320566 (E.D. Ky. Jan. 24, 2019).

      Regions Bank made a loan to Steven Lenox of $465,000 with which to buy a houseboat. Lenox defaulted on the loan, at which point the houseboat was repossessed. Later it sold at auction for $287,500. In a counterclaim that eventually became the only matter in dispute, Regions sought a deficiency judgment against Lenox in the amount of $140,682.32, that constituting the remaining balance on the loan, accrued but unpaid interest, late fees and repossession expenses.

      While Regions Bank sought summary judgment in opposition to the claim that the sale had not been commercially reasonable, the court found Regions had not made a sufficient demonstration to justify such a ruling. Rather:

Regions has failed to provide any specific information regarding reasonable commercial practices among dealers and houseboats, and whether it’s conduct conformed to those practices. It also has failed to provide any information regarding the reasonableness of its charges for storage, repossession, and an auction fee. …. and although the sale proceeds approach the low end of Marina Mile’s estimate, there is no evidence demonstrating how the estimate was calculated or whether it was reasonable.

Region’s motion for summary judgment will be denied because the Court cannot conclude that the sale of collateral conformed with reasonable commercial practices among houseboat dealers.

      The question will apparently now go to a jury to determine, as a matter of fact, whether the practices employed in selling the houseboat collateral were reasonable.