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G.P. Publications Inc. v. Quebecor Printing3/4/1997
WYNN, Judge.
Plaintiffs G.P. Publications, Inc. ("G.P.") and Technology Funding Secured Investors II ("TFSI II") filed a complaint against defendants Quebecor Printing - St. Paul, Inc. ("Quebecor") and Signal Research, Inc. ("Signal") in October 1992, seeking a declaratory judgment that a foreclosure sale conducted by TFSI II on Signal's assets was commercially reasonable. TFSI II is a California limited partnership that makes secured loans to technology-oriented companies. Signal, formerly a Delaware corporation that published books and magazines about computers and video games, was a customer of Quebecor, a Minnesota corporation whose principal business is printing.
This matter came on for jury trial in May 1995. The plaintiffs' evidence tended to show the following:
In February 1991, TFSI II extended a $2.5 million credit to Signal for debt financing and obtained a first priority security interest in all of Signal's assets. Meanwhile, Quebecor provided printing services to Signal on credit such that by December 1991, Signal owed Quebecor $2.6 million . Quebecor, however, never obtained a security interest in Signal's assets nor obtained guarantees from Signal's management or equity holders. Thus, the debt owed by Signal to Quebecor was completely unsecured.
The basis for this litigation started when Signal defaulted on its loan obligations to TFSI II in late 1991. Repeated work-out negotiations with TFSI II failed, and Signal fired its employees and ceased all operation on 13 February 1992. On 17 February 1992, a majority of Signal's disinterested directors agreed to TFSI II conducting a consensual foreclosure on its assets.
To help preserve the collateral, TFSI II entered into consulting agreements with three former Signal employees: Mike Romano, its head of advertising; Tom Valentino, vice president of finance and its controller; and Selby Bateman, an editor. TFSI II alleged that it relied upon these individuals to determine whether Signal's assets could be: (1) liquidated; (2) sold to a third party; or (3) utilized in an effort to develop a new company.
In an attempt to privately sell Signal's assets, TFSI II contacted over thirty publishers, brokers and Signal competitors. This effort resulted in only one offer: $200,000 in cash and a $1.6 million promissory note in exchange for all the assets, which TFSI II declined due to the lack of adequate cash. Thereafter, TFSI II prepared to conduct a public foreclosure sale under Article 9 of the Uniform Commercial Code ("UCC") at Signal's former offices in Greensboro, North Carolina. It sent Gerry Hansen and Anthony Todd, officers with TFSI II's managing partner, Technology Funding, Inc. ("TFI") and both certified public accountants, to conduct due diligence on its behalf. Todd estimated a reasonable bid price to be $1.1 - $1.2 million for all the collateral.
Regarding the notice given for the foreclosure sale, the parties stipulated to the following facts:
TFSI II conducted a foreclosure sale on the assets of Signal on March 6, 1992. It had previously posted notice of the sale in accordance with North Carolina law and sent notice to all parties entitled thereto, as well as to the other parties TFSI II thought might be interested in bidding on the assets.
TFSI II did not provide formal notice to Quebecor, which, as an unsecured creditor, was not entitled to it.
In anticipation of the foreclosure sale, a group of Signal investors considered making a bid on the assets. Steve Purcelli, a Signal director and representative for the group, testified that the investors considered bidding $1 to $1.5 million, but ultimately declined to do
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