whom the secured party has received written notice of a claim of an interest in the collateral. The secured party may purchase the collateral at a public sale, if the collateral is the type sold in a recognized market. Ch. 26 § 9-504(3).
After DuPage defaulted on the loan agreement, First Wisconsin, the first secured party, held a sale of the collateral at a public auction. Georgia-Pacific was provided with notice of the sale, and all potential buyers, including Georgia-Pacific, were given the opportunity to inspect the inventory the weekend prior to the sale. Representatives from Georgia-Pacific were present at the auction. First Wisconsin purchased the accounts for $ 500,000 and the inventory for $ 120,000. First Wisconsin subsequently sold the accounts and inventory for an amount greater than what it paid, but less than the loan amount due from DuPage. This excess was credited against DuPage's obligations to First Wisconsin.
The sale of the collateral was commercially reasonable. Not only did First Wisconsin abide by all of the procedural requirements of § 9-504, such as proper notification and advertising, but the sale itself was commercially reasonable because it was conducted by a professional auctioneer who had familiarized himself with the collateral, several bidders were present at the auction, and potential buyers were permitted to examine the inventory the weekend prior to the auction. In addition, First Wisconsin credited DuPage's debt obligation with the additional proceeds generated by First Wisconsin's subsequent sale of the accounts and inventory, even though there was no such requirement in the U.C.C.. In effect, First Wisconsin placed DuPage in the same position as it would have been had the final amount received from the ultimate purchaser been received at the auction. Commercial Discount Corp. v. King, 515 F. Supp. 988, 992 fn.5 (N.D.Ill. 1981) (finding that procedure of crediting the debtor for additional proceeds generated by subsequent private resale "eliminated potential arguments of chilled bidding or other breaches of fiduciary duties").
Georgia-Pacific argues that the price paid in an auction is the "key component" in assessing the commercial reasonableness of the sale and that First Wisconsin paid too low a price for the inventory and accounts. Standard Bank & Trust Co. v. Callaghan, 177 Ill. App. 3d 973, 127 Ill. Dec. 186, 189, 532 N.E.2d 1015 (1988). Georgia-Pacific, however, provides no evidence to demonstrate that the price was too low. Georgia-Pacific's claim that First Wisconsin's bid was "only 15 percent of the claimed value of the inventory and 25 percent of the 'book value' the accounts receivable" is not enough (plf. memo. at 21). Rather, plaintiff must give us some evidence that the claimed value or book value represented actual value, or plaintiff must demonstrate that a price of 15 percent and 25 percent of the collateral's book value was not reasonable at a forced sale. Callaghan, 127 Ill. Dec. at 189 (observing that "in determining whether price is commercially reasonable, Illinois courts have long recognized that property does not bring its full value at forced sales"). And, even if the price paid by First Wisconsin had been too low, Georgia-Pacific would not have been prejudiced because the resale proceeds were offset against DuPage's obligations, which were less than the amount owed First Wisconsin.
Finally, even though price is the key component in assessing commercial reasonableness, it is in itself "insufficient to establish the sale was not made in a commercially reasonable manner."
Louis Zahn Drug Co. v. Bank of Oak Brook Terrace, 95 Ill. App. 3d 435, 50 Ill. Dec. 959, 964, 420 N.E.2d 276 (1981). Georgia-Pacific has provided us with no other evidence to demonstrate that the sale was anything but commercially reasonable.
We briefly address Georgia-Pacific's remaining allegations that First Wisconsin breached the subordination agreement. First, Georgia-Pacific claims it had the right to receive an accounting from First Wisconsin. We disagree. U.C.C. section 9-504(2) provides that the "secured party must account to the debtor for any surplus." Georgia-Pacific was not a secured party, but a junior secured creditor. More importantly, there was no surplus to account for since the funds realized at the auction were less than the amount of DuPage's indebtedness. See Zahn, 50 Ill. Dec. at 964 .
Second, Georgia-Pacific argues that First Wisconsin's agent, Green, failed to pursue adequately the collection of the accounts. This argument also is without merit. Georgia-Pacific provides no evidence that would indicate Green did not diligently pursue collection or that Green's participation in collection diminished the amount of money received for the collateral. Further, Green became involved after the U.C.C. sale, at which time the security interest of Georgia-Pacific already had been discharged and First Wisconsin, as the U.C.C. purchaser, had taken the collateral "free of all such rights and interests." Ch. 26 § 9-504(4).
B. Breach of Fiduciary Duty
In count IV of its second amended complaint, Georgia-Pacific claims that it became a surety or guarantor to First Wisconsin by virtue of the subordination agreement and, therefore, that First Wisconsin had fiduciary obligations not to "hinder, delay, injure or release [Georgia-Pacific's] security or its ability to collect or secure the DuPage indebtedness" (plf. 2d am. cplt. at 18). Georgia-Pacific rattles off numerous acts which First Wisconsin allegedly engaged in to support its position that there was a breach of fiduciary duty. Without addressing each of those, we simply focus on whether First Wisconsin had any fiduciary duty to Georgia-Pacific other than selling the collateral in a commercially reasonable manner. We hold that it did not.
First Wisconsin disposed of the collateral in a commercially reasonable manner as required by statute and, thereby, fulfilled any obligations, fiduciary or otherwise, it owed to Georgia-Pacific as a junior creditor. While Georgia-Pacific alleges that First Wisconsin was required to do more than conduct a commercially reasonable sale, we do not believe that to be true. Georgia-Pacific has provided no evidence or support which would lead us to conclude otherwise.
Georgia-Pacific has not proffered sufficient evidence to create a genuine issue of material fact that First Wisconsin breached the subordination agreement or its fiduciary duty. We therefore grant First Wisconsin's motion for summary judgment.
JAMES B. MORAN,
Chief Judge, U.S. District Court
October 20, 1992