Newly-enacted California Commercial Code section 9610 (former Section 9504(1), (3)), 9611 (former
Section 9504(3)), 9612 (new), and 9613 (new) have replaced the former requirements for noticing a
disposition of non-consumer personal property collateral by sale, previously found at Section 9504.
The new statute somewhat simplifies the procedure, releasing the party noticing the sale from a number
of obligations, but adds a few minor requirements as well. The Section goes so far as to include a rather
simple, fill-in-the-blanks "safe-harbor" form of notice, which will be deemed adequate as
long as all provisions of the Section are complied with.
The new "safe-harbor" form and the concise, specific requirements of the revised statutes
combine to provide a more fool-proof method of noticing a collateral disposition. Under the new procedure,
publication of such a sale is not mandated by the statute. Section 9504(3) prescribed that the notice
must be mailed and published within 5 days prior to the sale. Under 9611,
publication is no longer required by the Section, but, as discussed below, may be a necessity in terms
of compliance with the noticing party's duty to conduct the sale in a commercially reasonable manner,
as required by section 9610 (see also section 9612). What is "reasonable" in any given situation
is a question of fact, and is not specifically defined by the statute, although some suggestions are
offered at Section 9627. The aim of this requirement is to provide a more fact-based reasonableness
requirement, depending on the property to be sold, the industry in which it is customarily used, and the
customary practices therein.
The new notice now requires service 10 at least days prior to the date set for the sale, rather than 5;
an increased notice period, however, may be elected to ensure "commercial reasonableness."
The practitioner, however, cannot delay until the last minute to prepare this notice, and may unwittingly
send out a defective notice should he or she do so. Section 9611 has reduced the number of parties entitled
to notice, providing for notification only to (1) the debtor; (2) any secondary obligor; and (3) [commercial
sale only] (A) any party from whom the secured party has received an authenticated notification of a claim
of an interest in the collateral; or (B) any other secured party or lienholder that, 10 days before the
notification date, held a security interest in or other lien on the collateral perfected by a financing
statement (section 9611(c)(3)(B), or by compliance with a statute, regulation or treatey described in
section 9311(a) (section 9611(c)(3)(C)).
This limited notice list, however, comes in exchange for a new requirement that the foreclosing creditor
must perform an official lien search with the appropriate office, at least 20, but not more that 30 days
prior to issuance of the sale, to ensure compliance with section 9611(c)(3)(B) or (C). The requirement is
simple enough to comply with, but may catch the unwary practitioner off-guard. Non-compliance with this
requirement, as with those imposed by the other new provisions) may lead to imposition of certain sanctions
listed at section 9625, as to which the courts appear to have been granted significant discretion in
creating an appropriate penalty, and section 9626, regarding collection of any deficiency after the sale.
One saving grace provided by the statute, however is the ability to obtain a waiver as to any defect from
the debtor or secondary obligor, allowed by section 9624. While some debtors may be reluctant to waive
the notice requirements, many are as eager to see the collateral sold and a deficiency established as the
foreclosing creditor.
All but two of the fifty states appear to have adopted this Chapter of the Commercial Code. As a practical
matter, a bankruptcy practitioner should have a good working knowledge of these requirements, whether
representing debtors or creditors. A thorough read of these Sections is a must, and not unduly burdensome.
