What Defines a Commercially Reasonable Foreclosure Auction? Lessons from a 1st Department Ruling
This week we wanted to bring your attention to an interesting case decided in the 1st Department which dismissed an application that sought to overturn a foreclosure auction sale based on a theory that the process and procedures set forth in the Order were not followed in a Commercially Reasonable manner. In denying the Appellant’s claim, the Court’s Order gave some guidance and explanation as to what factors were weighed in determining what constitutes “Commercial Reasonableness.”
The relevant facts of, as well as a link to, the case are set forth below.
The Appellate Division, First Department, affirmed the ruling of the Supreme Court, New York County, dismissing a cause of action claiming that the process for the auction sale for the enforcement of a security interest for a mezzanine loan was not commercially reasonable. The Appellate Division noted, among its other findings, that a period of two months between the dates of the default and the auction was not insufficient as a matter of law; the requirement that the sale contract be executed and the deposit under the contract be paid at the auction was not commercially unreasonable; and it was not unreasonable to select a bidder with a deposit check in-hand over one that did not. Further, the modification of the contract with the successful bidder to allow extra time for HUD approval was allowed by bidding instructions that “the Secured Party may elect to accept any comments to the contract of sale from the [successful bidder] in its discretion. The resale price two years later did not establish that the price paid at the auction was “‘so inadequate as to shock the court’s conscience’… absent a showing that these were indicative if the value at the time of the auction.” Atlas MF Mezzanine Borrower LLC v. Macquarie Texas Loan Holder LLC, 2021 NY Slip Op 06070, decided November 9, 2021, is posted at
https://www.nycourts.gov/reporter/3dseries/2021/2021_06070.htm
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