Barbara M. Goodstein CNH Diversified (Marblegate 2.0) and Strict Foreclosure
In this edition of her Secured Transactions column, Barbara M. Goodstein discusses a recent ruling by the New York Court of Appeals in a case involving strict foreclosure. She writes: While the decision has received considerable attention for the potential power it gives to minority noteholders, it also leaves unanswered questions as to whether the effects on that foreclosure of UCC §$9-620-9-622 were properly considered.
December 02, 2020 at 12:45 PM
11 minute read
"Strict foreclosure" under UCC Article 9 is a remedy that allows a secured party to accept collateral in full or partial satisfaction of a debtor's secured obligation. The collateral can be acquired free of competing claims and without a sale or any judicial process. In exchange, all or a portion of the secured debt will be cancelled. Of course, all of this is subject to the specific requirements of UCC §$9-620 and 9-621, among them being a willing debtor and creditor. In the rancorous world of restructuring that is more often than not a major hurdle.
Just recently the New York Court of Appeals issued a ruling in a case involving strict foreclosure. In CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, 2020 WL 6163305 (N.Y. Ct. App. Oct. 22, 2020), the Court of Appeals sustained a challenge by a group of minority noteholders claiming that they were entitled to consent to the foreclosure process.
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