## Facts

- Tim McDonald and Dennis Yarchenko were members of an Oregon limited liability company (the LLC).
- McDonald loaned Yarchenko $22,000, and the parties executed a promissory note memorializing the debt.
- The loan was secured by Yarchenko’s membership interest in the LLC, which was valued at more than $400,000.
- Yarchenko defaulted on the promissory note.
- After the default, McDonald sent Yarchenko an unconditional proposal stating that McDonald would accept Yarchenko’s LLC membership interest as collateral in full satisfaction of the loan.
- Yarchenko did not respond to the proposal and did not object within the time allowed by the strict-foreclosure procedure.
- McDonald proceeded with strict foreclosure (acceptance of collateral in full satisfaction) under Oregon’s enactment of UCC § 9-620 (ORS 79.0620).
- McDonald later sued Yarchenko seeking to recover the loan and accrued interest, and Yarchenko asserted a counterclaim contending McDonald’s strict foreclosure failed to satisfy ORS 79.0620.

## Issues

1. Whether a secured party’s acceptance of collateral in full satisfaction under ORS 79.0620 (UCC § 9-620) is effective when the secured party sends an unconditional, authenticated proposal and the debtor does not object.
2. Whether the debtor’s silence after receiving the proposal can satisfy the statute’s consent requirement for strict foreclosure.

## Decision

- The court granted McDonald’s motion for partial summary judgment on Yarchenko’s counterclaim challenging the strict foreclosure.
- The court held that McDonald’s strict foreclosure complied with ORS 79.0620 (UCC § 9-620).
- The court concluded that Yarchenko’s failure to object after receiving the unconditional proposal constituted consent under the statute.

## Legal Principles

- Under ORS 79.0620 (UCC § 9-620), after default a secured party may accept collateral in full satisfaction of the secured obligation if statutory conditions are met.
- The secured party must send an authenticated proposal to the debtor stating the terms of acceptance, including that the acceptance is in full satisfaction.
- Debtor consent for strict foreclosure can be established by the debtor’s failure to object within the statutory time after receipt of a compliant proposal.
- When the statutory requirements are satisfied, the acceptance of collateral is effective and defeats claims based on alleged lack of consent or improper strict-foreclosure procedure.

## Conclusion

McDonald’s unconditional post-default proposal to accept Yarchenko’s LLC membership interest in full satisfaction satisfied ORS 79.0620’s proposal requirements, and Yarchenko’s failure to object within the statutory period constituted consent; as a result, the court ruled the strict foreclosure was effective and dismissed the counterclaim challenging it.


McDonald v. Yarchenko, 81 UCC Rep. Serv. 2d 165 (2013)