What Is Adequate Notice of a UCC Sale Via the Internet?

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For some time, secured parties have been eyeing the Internet as a facility for the public auction of repossessed collateral. Many have been reluctant to do so because the law applicable to such sales is in the early stages of development. Moore v. Wells Fargo (1) begins to flesh out the rules concerning auction sales of collateral over the Internet.

Richard Moore was one of the guarantors of the indebtedness of McCawith Energy, Inc., to Wells Fargo Construction, the successor to the CIT Group/Equipment Financing, Inc. When McCawith defaulted on a loan it procured from CIT, CIT repossessed the collateral, an excavator.

CIT sent an initial notice to Moore that it planned to sell the excavator and all attachments at a private sale after December 16, 2003. The notice stated that Moore would be held liable for any deficiency. A second notice was sent in October 2005 for a sale by a public auction conducted on the Internet on October 19 of that year at 8 a.m. at Salvage Sale, [street address], Houston, Texas. Once again, Moore was advised he would be held liable for any deficiency.

The Internet auction sale was unsuccessful, so CIT later sold the excavator privately. The sale resulted in a deficiency and CIT sued Moore.

Moore argued the second notice of sale was defective because it failed to comply with the mandate in the UCC that the notice state the "time and place of a public disposition. …