2.6 Public Sales

• Library: Enforcement of Liens and Judgments in Virginia (Virginia CLE) (2019 Ed.)

2.6 PUBLIC SALES

2.601 Notice. The debtor (including all obligors and the owner, if not the same) must be sent reasonable notification of the time and place of a public sale unless the collateral is perishable or threatens to decline rapidly in value, or is of a type customarily sold on a recognized market. ¹⁴⁴ The secured party also must directly notify other claimants of record holding security interests in nonconsumer goods if they have provided authenticated notification to the secured party of their interest in the collateral, or if they have filed financing statements claiming an interest in the collateral. ¹⁴⁵

2.602 Waiver of Notice. The debtor or a secondary obligor may renounce or modify the right to notification by agreement entered into and authenticated after default. ¹⁴⁶

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2.603 Waiver of Public Sale. The debtor may not waive a public sale in the security agreement, ¹⁴⁷ although the secured party has wide, if not total, discretion in electing between a public and a private sale. ¹⁴⁸

2.604 Commercial Reasonableness. The public sale, taken as a whole, must be commercially reasonable in all respects, and the secured party should document all steps taken to solicit and encourage interested buyers. ¹⁴⁹

A. Public Notice. Public notice must be sufficiently conspicuous and timely so as to give potentially interested purchasers an opportunity to bid. ¹⁵⁰

B. Inspection. Allowance of inspection before sale is a factor that may be relevant to commercial reasonableness and good faith, especially if there is a trade custom permitting inspection, and there is no likelihood that inspection will reduce the bid price. ¹⁵¹

C. Terms. The terms of sale should be set forth in the notice.

D. Advertisement. If the collateral is of significant value and is customarily sold to a particular interest group, advertisements in trade journals are recommended. ¹⁵² The secured party should contact persons known to have a potential interest in the collateral. An excellent example of how ample notice, advertising, and direct contact can excuse other factors that render a sale superficially suspect is set forth in C.I.T. Corp. v. Lee Pontiac, Inc., ¹⁵³ where the court upheld a much publicized auction of two

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airplanes, one of which was in another city because of mechanical failure and bad weather.

E. Bidding. Whether the goods are to be sold under a reservation of right to bid or right to withdraw should be set forth in the notice, even if not strictly...