## Facts

- Excello Press, Inc., a commercial printer, bought two web presses from Metlife Capital Credit Corp. for over $3 million; Metlife retained a security interest.
- When Excello filed Chapter 11 in October 1985, it owed Metlife about $2.7 million; the case later moved toward liquidation.
- The bankruptcy court entered an agreed order modifying the automatic stay to allow Metlife to sell the presses and capping any deficiency claim at $900,000.
- Metlife privately sold each press for $550,000 (one in April 1986, the other in June), leaving more than $1.6 million unpaid; Metlife filed a $900,000 deficiency claim (the cap).
- Metlife sent Excello written notice shortly before the first sale stating that a sale would occur, but without meaningful details about timing or manner.
- Excello and the unsecured creditors’ committee objected, asserting lack of “reasonable notification” and lack of a commercially reasonable disposition under New York’s U.C.C. Article 9 (chosen by contract).
- Metlife offered evidence of marketing efforts, a March 1985 appraisal valuing the two presses at about $1.2 million, and comparison to Excello’s later auction sale of similar presses for less.

## Issues

1. Under New York U.C.C. Article 9, what is the effect on a secured creditor’s deficiency claim when the creditor fails to provide reasonable notice of a collateral sale?
2. Does New York law impose a rebuttable presumption that the collateral’s value equaled the debt upon deficient notice, placing the burden on the creditor to prove otherwise?
3. Did Metlife provide adequate notice and, if not, did its evidence rebut the presumption so it could recover the capped $900,000 deficiency in bankruptcy?

## Decision

- The Seventh Circuit affirmed the denial of Metlife’s deficiency claim.
- Applying New York law, the court accepted that inadequate Article 9 notice triggers a rebuttable presumption that the collateral’s value equaled the debt, eliminating any deficiency unless rebutted by the secured creditor.
- The court upheld the bankruptcy court’s finding that Metlife did not comply with Article 9 notice requirements and did not rebut the presumption with sufficiently credible proof.
- The court deferred to the bankruptcy court’s credibility and fact findings (including discounting interested testimony, the age of the appraisal, and limited comparability of other sales) and found no clear error.

## Legal Principles

- A secured creditor seeking a deficiency after disposing of collateral must comply with U.C.C. Article 9 requirements, including reasonable notification and commercial reasonableness.
- Under New York law, failure to provide proper sale notice gives rise to a rebuttable presumption that the collateral’s fair market value was at least the amount of the debt.
- The secured creditor bears the burden to rebut that presumption with persuasive, credible evidence of the collateral’s value and the propriety of the disposition.
- In bankruptcy, an undersecured creditor’s ability to share in the estate on a deficiency claim depends on satisfying these Article 9 conditions; appellate review of bankruptcy factfinding is deferential (clear-error standard).

## Conclusion

The court held that, under New York U.C.C. Article 9, Metlife’s deficient sale notice triggered a presumption that the presses were worth at least the debt, and Metlife failed to rebut that presumption; therefore, its capped $900,000 deficiency claim was disallowed in the bankruptcy estate.


In re Excello Press, Inc., 890 F.2d 896 (7th Cir. 1989)