Commercial Division Blog

Posted: May 4, 2017 / Categories Commercial, Contracts

Collateral Holder's Disposition of Collateral Was Reasonable

On April 27, 2017, the First Department issued a decision in Bank Leumi USA v. GM Diamonds, Inc., 2017 NY Slip Op. 03266, affirming a holding that a collateral holder's disposition of collateral was reasonable, explaining:

In opposition, defendants failed to raise a triable issue of fact, relying on defendant Gilad's disagreement with plaintiff's expert concerning the valuation of the inventory and his assertion that plaintiff had unreasonably rejected a better offer made to GM Diamonds for only a portion of the inventory before plaintiff took possession of the collateral. However, even if such an offer were made, the fact that a greater amount could have been obtained by a collection, enforcement, disposition, or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition, or acceptance was made in a commercially reasonable manner.

While defendants argue that the collateral had a book value over twice as high as the accepted offer, it is well settled that a significant discrepancy between the original purchase price and the sales price does not, by itself, create a triable issue of fact.

(Internal quotations and citations omitted).