Big-Time Trouble For A Secured Creditor Who Engaged In Foreclosure Misbehavior

LexisNexis (March 20, 2017, 12:42 PM EDT) -- In a notable decision from Texas, the majority partner in a single-asset limited partnership sold the minority partner's interest in a private foreclosure sale, using the debt that was allegedly owed to the partnership by the minority partner as the basis of a credit bid.  The court ruled that such a foreclosure sale was flatly prohibited by UCC 9-610(c)(2), which forbids the secured party from buying the collateral at a private sale unless the collateral is of a kind that is customarily sold on a recognized market or is "the subject of widely distributed standard price quotations."  So a public auction sale was required for disposition of the partnership minority interest.  The majority partner contended that the requirement of a public sale had been waived, but the court found that there was no such waiver.  The court awarded actual damages to the minority partner of $520,278, plus exemplary tort damages of $1,040,576, though it denied recovery of attorney's fees.   It was not a good day for the majority partner/secured lender....