## Facts

- Frank D. Frazier and Jamie Carter Frazier obtained an $850,000 secured loan from First Tennessee Bank to finance the purchase of an aircraft, with the aircraft serving as collateral.
- James F. Chavers and Linda H. Chavers guaranteed the Fraziers’ obligation to the bank.
- After the Fraziers defaulted, they filed a Chapter 7 bankruptcy petition.
- In separate settlement negotiations related to the guaranty, the bank assigned to the Chavers all of the bank’s rights, title, and interest in the loan agreement and collateral.
- The Chavers took possession of the aircraft under the rights assigned to them.
- The Chavers then disposed of the aircraft at a public sale (conducted in June 1986) for about $415,000, as contemplated by their settlement agreement with the bank.
- The Fraziers and related debtor entities objected that the manner, timing, and preparation for the sale were deficient for an aircraft transaction, including a very short marketing period, limited advertising, and incomplete sales information (such as the lack of a logbook summary).
- Evidence indicated that marketing a sophisticated, high-value aircraft normally requires substantially more time and more focused outreach to likely purchasers (often corporations and aircraft brokers), along with customary steps to make the aircraft “sale-ready” (including evaluating inspections and maintenance items that affect resale).
- After crediting the sale proceeds, the Chavers asserted that a substantial balance remained due and sought to recover that amount as a deficiency.

## Issues

1. Whether the Chavers’ disposition of the repossessed aircraft at a public sale was conducted in a “commercially reasonable” manner under U.C.C. Article 9.
2. If the sale was not commercially reasonable, whether the Chavers could recover the claimed deficiency balance on the debt.

## Decision

- The court found that, under the facts and circumstances, the Chavers did not conduct the sale of the aircraft in a commercially reasonable manner as required by U.C.C. Article 9.
- Because the Chavers failed to prove a commercially reasonable disposition, the court rejected their attempt to collect the deficiency based on that sale.

## Legal Principles

- A secured party that disposes of collateral after default must show that every aspect of the disposition—including method, manner, time, place, and terms—was commercially reasonable.
- Commercial reasonableness is determined from the facts and circumstances of the particular sale, measured against prevailing commercial practices in the relevant market for that type of collateral.
- For specialized collateral such as an aircraft, a commercially reasonable sale commonly requires targeted marketing to the expected buyer pool, adequate time for buyers to evaluate the asset, and sale materials and condition consistent with common aircraft-sales practices.
- When a secured party fails to carry its burden to prove commercial reasonableness, the secured party may be barred from recovering a deficiency based on the challenged disposition.

## Conclusion

In *In re Frazier*, the bankruptcy court concluded that the Chavers—having taken an assignment of the bank’s secured rights—disposed of the aircraft through a hurried, poorly marketed public sale that did not reflect ordinary practices for selling a sophisticated aircraft. Because the Chavers did not prove that the sale was commercially reasonable under Article 9, their claim for a deficiency balance was denied.


In re Frazier, 93 B.R. 366 (1988)