Scott Mollen

UCC Foreclosure—It Was Commercially Reasonable To Hold UCC Sale During COVID-19 Pandemic—Governor's Executive Order Staying Judicial Proceedings Did Not Bar UCC Sales

A plaintiff moved to enjoin the defendant from conducting a UCC sale of the plaintiff's "member and equity interest" in an LLC and from taking any action to "effectuate such sale."

The parties had entered into an agreement pursuant to which the plaintiff borrowed money from the defendant to fund a construction project. A plaintiff had signed a pledge and security agreement which provided that the collateral for the loan would be an interest in the plaintiff's LLC entity. The plaintiff defaulted on the loan, but had obtained a loan extension on condition that all arrears be satisfied. The plaintiff paid three months of arrears, but had failed to make a payment on the March 1, 2020 due date. The March 1 payment was ultimately made 17 days after the due date, on March 18, but late fees had accrued and had not been included in the payment.

The defendants now sought to exercise their right to conduct a UCC sale based upon the plaintiff's default. The plaintiffs sought to stay the sale on the grounds that, inter alia, that "orders of the Governor of New York as well as the Administrative Judge of the Courts of New York have stayed all such proceedings during the COVID-19 pandemic." The defendant argued that an injunction was appropriate because it was "entitled to the loan extension funds."