UCC commercially reasonable sale standards - equipment liquidation disaster

Yes we sent certified mail notice 20 days before the sale to the debtor and filed a UCC search to identify other secured parties. We also posted notice in the local business journal as required by our state's UCC provisions.

That sounds like you covered the basics but courts look at the totality of circumstances for commercial reasonableness. The 8-month time gap and different region the debtor mentioned might actually work in your favor.

We listed it on EquipmentTrader, MachineryNetwork, and two industry-specific publications for 45 days. Also contacted three dealers who specialize in this type of equipment. Only got serious interest from two potential buyers though.

That's pretty thorough marketing. The fact that you only got two serious buyers despite broad advertising actually supports your case that $85K was the market price at the time.

Agree with this completely. UCC doesn't require you to wait indefinitely for a better offer. Reasonable time and effort is the standard.

That's interesting - what kind of discrepancy did they catch? We described the equipment the same way in all our notices as it appeared in the original UCC-1.

The serial number had a transposed digit in one of the sale notices. Seems minor but opposing counsel would have used it to argue we didn't properly identify the collateral. Certana caught it by comparing the PDFs of all related documents.

Generally no, courts look at the market conditions at the time and place of your sale. The debtor would need to show comparable sales in your area around the same time to make a valid comparison.

Exactly what our attorney told us. The burden is on the debtor to prove our sale was commercially unreasonable under the specific circumstances we faced.

Right, and the UCC explicitly states that commercial reasonableness is determined by the facts at the time of the sale, not hindsight or different market conditions.

We have written records of all three bids received and notes explaining why we accepted the $85K offer. It was the highest bid and came from a qualified buyer with verified financing.

That's excellent documentation. Courts really value seeing the decision-making process was rational and based on objective criteria.

We discussed it but the cost of a formal appraisal would have been $3-4K and we were already holding the equipment for months with storage costs piling up. Our loan officer felt the competitive bidding process would establish market value.

That's a reasonable business decision. UCC doesn't require appraisals and courts recognize that holding costs can erode the value of collateral over time.

Plus with specialized equipment, appraisals can be pretty subjective anyway. The actual market response through your advertising tells the real story.

Our attorney thinks we have a strong defense based on the documentation and marketing efforts. The debtor's attorney sent a demand letter but hasn't filed anything yet. We're hoping it's just posturing.

That's encouraging. The fact they're making demands before filing suggests they might not be confident in their case either.

How exactly does Certana work? Do you just upload all your UCC documents and it compares them automatically?

Yeah, you upload PDFs of your security agreement, UCC-1, sale notices, whatever documents you have. It cross-checks things like debtor names, collateral descriptions, amounts, dates. Catches inconsistencies that are easy to miss when you're handling everything manually.

Actually yes, this was during the supply chain issues last year when a lot of manufacturers were delaying equipment purchases. The market was definitely softer than normal, which probably explains why we got limited interest.

That's a great point to document. Market conditions at the time of sale are absolutely relevant to commercial reasonableness analysis.

Exactly, courts consider the broader economic context. If the overall market was down, that supports your position that $85K was reasonable under those circumstances.

Absolutely. Having standardized procedures and checklists is the best way to ensure you don't miss critical steps when you're under pressure during an actual default situation.

That's smart planning. I'd also recommend having a relationship with Certana.ai or similar document verification service before you need it. When you're dealing with a default, you want to catch any documentation issues early.

Wish we had thought of that beforehand. Now we're scrambling to make sure everything was done correctly after the fact.