30.3 Use the IRAC Method to breifly identify the Issue, the Legal Rule (Legal Te

Question

30.3 Use the IRAC Method to breifly identify the Issue, the Legal Rule (Legal Test), the Facts Applied to the Test (Analysis), and the Conclusion/ Holding of the case.

Smith v. Firstbank Corp. Court of Appeals of Michigan, 2013 WL 951377 (2013 Plaintiffs further take possession of the collateral follow- ing plaintiffs' default. The parties agree argue, however, tha that plaintiffs defaulted in the instant even if defendant's case, and that defendant was within its choice to conduct a In the Language of the Court The facts in this secured transac ions case are not in dispute. Plainifs rights to take possession of the pledged was reasonable, the manner in w conducted the private sale was n shares Bradley Smith, on his own behalf and on behalf of the John J. Smith Revo- cable Living Trust] borrowed funds from (defendant tionl in 2002; the notes to defendant MCL. 440.9610 [Michigan's version The record does not su of UCC 9-610] governs the disposition tion. An e-mail from Rick of collateral after default, and provides in of defendant, to Oberon Firstbank Corpora cated that, in addition to requesting z indi Oberon bring them a buyer, defenda "directed (our investment banker ges o Every aspect of a disposition of collat- Corporation stock as well as other collat- era, including the method, manner eral. Plaintiffs defaulted on these loans Eventually, after many modifications and extensions, defendant took possession time, place, and orher terms, must be to bring similar type offers to us In addition, defendant's Chief Exeouti Officer testified that discouns Further, MCL 440.9627 Michi 627] provides stocks, were common" and that he wa hortly thereafter, defendant sold thegan's version of UCC 9 mination of whether advised by employces of Oberon Securi- the disposition of collateral was com- mercially reasonable, and provides in that selling a "block this large wo require a discount of 15 to 20 percene uary 12, 2010, it sold 602,170 shares to erage firm at $4.84 per share, and on February 19, 2010, it sold 450,000 relevant part: shares to a brokerage firm at $5.05 per The evidence thus does not sup- port the contention that defendant did not seek multiple offers or seck to get the best price for the stock. Rather, the The fact that a greater amount have been obtained by a collection, enforcement, disposition, or accep- tance at a different time or in a dif- ferent method from that selected by price for Sparton stock on the New York Stock Exchange on boch sale dates was $6.05 per share. Defendant then released the remaining collateral to plaintiffs and remitted to plaintiffs by cashier's check the excess funds collected in the private sales. The value of the collateral retained by plaintiffs was over five million dollars.ance was made in a commercially received one offer for Smith's stock the secured party is not of itself s at a discount. Rather than risk public sales and a repeat of what happened in 2008, defendant made the sale. In fact plaintiffs contention that defendant did not attempt to garner the best sale prikt from establishing that the collection, enforcement, disposition, or accep- manner Plaintiffs filed suit [in a Michigan state court against defendant, alleging that the sales violated defendant's con- it could is contradicted by the fact thr defendant was able to sell the second The circumssances survoundin tractual duties to plaintiff's because they previous sales of Sparton stock on the public the trust) for 21 cents more per sales would do to the share price, rendered defendants choice to sell in private tran gblock of shares (the shares pledged by market, and concerns about what public notwithstanding that the closing p Defendant moved the trial court for for Sparton was exactly the same and tions reasonable. In 2008, Wachovia sac day of both the first and second sales Order granting defendant's motion[Bankj sold approximately 400,000 shares of Sparton to satisfy plaintiff Smith's debts. The sale required 18 Thi that public sales would have resuled At issue in the instant case is the ecured partys disposition of collateral after the debtors' default. Defendant, the secured party, was authorized by MCL It swas not commercialy unreasenable Michigan Compiled Laws] 440.9609 for dafendant to seek a private sale to avoid disposition [Michigan's version of UCC 9-609] tothis risk. (Emphasis added.] separate transactions over a two-month buyer could have been indi period; during that period the share higher price, speculation an price declined by almost 50 percent are insufficient to allow an ops

Explanation / Answer

Caption: JOHN J SMITH REVOCABLE LIVING TRUST V FIRSTBANK CORP

Cause of Action: The plaintiff had borrowed funds from the defendant against stocks of Sparton Corporation and other collaterals. The plaintiff defaulted on the loans and defendant took possession of the collaterals. The defendant sold the collaterals to third party. The plaintiff filed suit against defendant claiming that sales of collaterals violated the contractual duties of defendant towards the plaintiff

Legal Issues and Rules:

Michigan’s uniform commercial code governs the cases of commercial transactions. The commercial reasonableness depends on 2 conditions:

The court contemplated summary disposition in this case. The court found that no genuine issue of material fact existed as to the commercial reasonableness of the sale of collaterals. Hence the claim of the defendant was valid

Ruling and Reason: The plaintiff’s appeal was dismissed.

Citation: Latham v Barton Malow Co, 480 Mich 105, 111; 746 NW2d 868 (2008)

Joseph v Auto Club Ins Ass'n, 491 Mich 200, 206; 815 NW2d 412

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