On March 3, 2025, the U.S. District Court for the Southern District of New York granted a lender’s motion for declaratory judgment to order a borrower to recognize the effect of a non‑judicial UCC foreclosure sale. The court found that the borrower’s equitable defenses were inconsistent with the UCC and were barred because the declaratory judgment sought was legal—not equitable—in nature. The court therefore rejected the borrower’s equitable defenses and granted the lender’s motion for declaratory relief.
Before the COVID‑19 pandemic, Kookmin Bank Co., Ltd. loaned Union Station Sole Member, LLC (USSM) $100,000,000 through a mezzanine loan secured by the stock of the borrower’s subsidiary, a sublessor at Union Station in Washington, D.C. When the pandemic hit, the borrower stopped making payments. After two years, Kookmin noticed a non‑judicial UCC foreclosure sale of the subsidiary’s membership interests. The borrower neither sued to enjoin the sale nor declared bankruptcy. Kookmin was the sole bidder at the sale, but USSM refused to recognize Kookmin’s ownership or control.
In response, Kookmin sued USSM for a declaratory judgment to force USSM to recognize the results of the UCC foreclosure sale. In its answer, USSM asserted a variety of equitable defenses, the crux of which was that the foreclosure sale was unjust. The court rejected USSM’s equitable defenses for two primary reasons.
First, the court explained that USSM’s equitable defenses were inconsistent with UCC § 9‑625(a). Because the foreclosure sale was non‑judicial, the sale could not be unwound and USSM’s remedies were limited to money damages. The court explained that under the UCC, the winner of a UCC foreclosure sale takes all the debtor’s rights even if the secured party fails to comply with the UCC. Regardless of whether the claim for equitable relief is brought as a claim or defense, allowing USSM to unwind the foreclosure sale “would undermine that principle.”
Second, the court reasoned that because the foreclosure sale was non‑judicial, the declaratory relief sought was like an ejectment action and thus an action at law—not one of equity. And, under Second Circuit precedent, equitable defenses are not available for actions at law.
The case is DAOL Rexmark Union Station LLC v. Union Station Sole Member, LLC, No. 1:22‑cv‑6649‑GHW (S.D.N.Y. Mar. 3, 2025). DAOL Rexmark Union Station LLC is represented by Morris Cohen LLP and Haynes & Boone LLP. Union Station Sole Member, LLC is represented by Kasowtiz, Benson, Torres LLP and Pallas Partners (US) LLO. The order is available here.
