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PLAINTIFF, WHICH PUT UP ITS EQUITY INTERESTS IN 11 PROPERTIES TO SECURE A $71 MILLION LOAN FROM DEFENDANT, SUED TO DECLARE VOID THE UCC NONJUDICIAL SALE OF THE PROPERTIES BY DEFENDANT, THAT ASPECT OF THE SUIT SHOULD HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Kapnick, determined defendant’s cause of action seeking to declare void the Uniform Commercial Code (UCC) sale of plaintiff’s property, which was put up as collateral for a loan made to plaintiff by defendant, should have been dismissed. Plaintiff, Atlas, put up its equity interest in 11 properties as collateral for a $71 million loan from defendant, Macquarie. Atlas and Macquarie were unable to agree on an extension of time for repayment of the loan. After a UCC nonjudicial sale held by Macquarie, at which Atlas submitted bids, another buyer outbid Atlas. Atlas sued to void the sale:

Article 9 of the Uniform Commercial Code (UCC) governs the enforcement of a creditor’s security interest. “The underlying purposes and policies of the [UCC] as a whole are to simplify, clarify, and modernize the law governing commercial transactions; to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and to make uniform the law among the various jurisdictions” … . Here, plaintiff … (Atlas), the debtor, is asking this Court to unwind a UCC sale of the equity interest in 11 commercial properties, which was collateral for Atlas’s $71 million mezzanine loan, borrowed from defendant … (Macquarie), the secured creditor. It is difficult to see how such an action would simplify the laws governing commercial transactions. Rather, if UCC sales could be unwound, it would only serve to muddy the waters surrounding nonjudicial sales conducted pursuant to article 9 of the UCC, and to deter potential buyers from bidding in nonjudicial sales, which would, in turn, harm the debtor and the secured party attempting to collect after a default. Moreover … Atlas’s argument does not have support in the plain reading of the UCC nor in existing case law. Atlas MF Mezzanine Borrower, LLC v Macquarie Tex. Loan Holder LLC, 2019 NY Slip Op 04495, First Dept 6-6-19

 

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JUDGE SHOULD NOT HAVE, SUA SPONTE, DISMISSED THE COMPLAINT AND VACATED THE DEFAULT...