On July 30, 2026, the Illinois Appellate Court, First District, issued a Rule 23 opinion in Marchi v. Centrust Bank, N.A., 2026 IL App (1st) 231476-U,1 affirming a trial court’s finding that a secured lender’s private UCC Article 9 sale of a borrower’s assets was not commercially reasonable. The decision underscores the significant risks lenders face when disposing of collateral through a private sale—particularly the risk of years-long post-sale litigation over whether the sale process was adequate. Critically, the finding that the sale was not commercially reasonable triggered the rebuttable presumption under 810 ILCS 5/9-626(3)–(4) that a commercially reasonable sale would have satisfied the debt in full, eliminating the bank’s deficiency claims against the personal guarantors entirely.
This alert examines the case’s key holdings, discusses the practical lessons for secured lenders conducting Article 9 dispositions, and highlights a potential alternative collateral-disposition strategy available under Illinois’ new receivership statute (765 ILCS 1090/1 et seq.), which took effect in January 2026. While litigation risk cannot be eliminated entirely, the receivership route may allow lenders to front-load judicial review of marketing, pricing, and process before a sale closes—rather than defending those decisions years after the fact.
I. Case Background
A. The Loan Relationship and Default
Centrust Bank, N.A. (now SmartBiz Bank, N.A.) extended MCI, a wedding dress manufacturer, a combination of SBA loans and a line of credit for over $1.5 million. The loans were secured by MCI’s equipment, inventory, accounts receivable, and intangible assets. As minority shareholders, David Marchi personally guaranteed both SBA loans and executed a limited personal guarantee on the line of credit, and Robert Goodrich personally guaranteed the December 2017 SBA loan.
MCI missed certain payments starting in 2018, and Centrust installed its own chief operating officer/collateral manager, declared a default, accelerated the obligations, redirected customer payments to itself and decided to liquidate MCI’s assets as a means of recovery.
B. The UCC Article 9 Sale
Following default, Centrust pursued a private disposition of MCI’s assets under UCC Article 9. Appraisals of the collateral ranged widely—from approximately $3.8 million in March 2019 (which relied on MCI’s financial statements and reported inventory) to just $275,000 in a 2022 appraisal (which excluded certain disputed assets and a revised inventory assessment). Over approximately one year of marketing, offers ranged from $50,000 to over $400,000. Centrust ultimately sold MCI’s assets in a private sale for $775,000 to a group including Marchi and Goodrich themselves, with Centrust financing the purchase. Centrust then pursued Marchi and Goodrich as guarantors for the remaining deficiency.
C. Procedural History
Centrust originally sued MCI, Marchi, Goodrich, and a fourth individual (Gary Rada) in 2019. The case was voluntarily dismissed and refiled in 2022–2023 following Rada’s bankruptcy filing. MCI did not appear, answer, or assert affirmative defenses in the proceedings. Marchi separately filed a derivative action on MCI’s behalf against Centrust alleging breach of fiduciary duty, tortious interference, and improper disposition of collateral. The cases were consolidated for a three-day bench trial in Cook County in 2023.
The trial court entered its ruling on July 14, 2023, finding the UCC sale was not commercially reasonable and ruling for the guarantors on all of Centrust’s claims. Because MCI did not appear, answer, or assert affirmative defenses, the trial court also entered a default judgment against MCI for the full loan amount of $1,528,001.21.
The appellate court affirmed across the board on July 30, 2026, except that it dismissed the purported appeal from MCI’s default judgment for lack of standing.
II. Key Holdings
A. The Sale Was Not Commercially Reasonable
The appellate court affirmed the trial court’s finding that Centrust’s private Article 9 sale was not commercially reasonable under 810 ILCS 5/9-610. The court emphasized that every aspect of a collateral disposition—method, manner, time, place, and terms—must be commercially reasonable, and that the secured party bears the burden of proof. While price is relevant, it is not dispositive; marketing efforts, process, and the totality of the circumstances are equally important.
The court focused on several factors supporting the unreasonableness finding:
- Limited marketing efforts relative to the value and nature of the collateral;
- Centrust’s redirection of MCI’s customer payments to itself during the sale process;
- Centrust’s decision to fully finance the buyer’s acquisition; and
- The large disparity between an early appraisal (∼$3.8 million in 2019) and a later appraisal ($275,000 in 2022, excluding contested assets)—both reconstructed through competing expert testimony years after the sale.
B. The 9-626 Presumption Eliminated the Deficiency
Under 810 ILCS 5/9-626(3)–(4), when a collateral disposition is found commercially unreasonable, the burden shifts to the secured party to rebut the presumption that a commercially reasonable sale would have yielded proceeds sufficient to satisfy the secured obligation in full. Because Centrust did not attempt to rebut this presumption, the guarantors avoided deficiency liability entirely. This is the most significant practical consequence of the holding: an unreasonable sale does not merely reduce the deficiency—it can eliminate it altogether if the lender cannot demonstrate what a reasonable sale would have actually yielded.
C. Contract and Personal Guarantee
Marchi and Goodrich executed valid, enforceable personal guarantees. MCI’s June 2018 default triggered Centrust’s right to accelerate and pursue the guarantors. The enforceability of any deficiency was directly affected by the commercial reasonableness of the collateral disposition. Because the sale was found commercially unreasonable, Centrust’s recovery was limited under 810 ILCS 5/9-626(3), (3)(B) to the difference between the secured obligation and what a commercially reasonable sale would have yielded. Since Centrust did not rebut the statutory presumption on appeal, the guarantors owed nothing.
III. Why the Commercial Reasonableness Fight Took Many Years
This case illustrates a structural problem with post-sale commercial-reasonableness challenges to private UCC Article 9 sales. From the original 2019 sale through the July 2026 appellate decision, the parties, in essence, litigated the adequacy of the sale for over seven years. The dispute required:
- Dueling expert appraisals, each conducted years after the sale and each reaching dramatically different valuations ($3.8 million vs. $275,000);
- Extensive factual disputes about marketing efforts, the scope of assets sold, the meaning of offers received, and Centrust’s conduct during the sale process;
- A three-day bench trial and a full appellate briefing cycle addressing multiple claims and cross-claims; and
- Procedural complications including voluntary dismissal, refiling, bankruptcy-related delays, and consolidation of multiple actions.
The core difficulty is inherent to the structure of a private UCC sale: because no court supervises the sale in advance, the only opportunity for a guarantor or debtor to challenge commercial reasonableness arises after the sale closes—often years later, in litigation over a deficiency claim. By that point, witnesses’ memories have faded, market conditions have changed, and appraisals must be reconstructed on a hypothetical basis. The result is protracted, expensive, and uncertain litigation for all parties.
IV. A Potential Alternative: Illinois’ New Receiver Act (765 ILCS 1090 et seq.)
A. Overview
Had this dispute arisen after January 2026, Centrust would have had an additional strategic option: seeking the appointment of a receiver under Illinois’ Receiver Act, 765 ILCS 1090 et seq. (the “Act”), which only took effect at that time. Rather than conducting a private UCC Article 9 sale and risking years of post-sale commercial-reasonableness litigation, a lender proceeding under the Act can seek court-supervised disposition of the collateral through the receivership process.
B. Pre-Sale Court Approval Requirement
Under Sections 16(b) and (c) of the Act, a sale of receivership property outside the ordinary course of business requires advance court approval. Additionally, under Section 3(c)(1) of the Act, the receiver must provide advance notice to “the owner and all other persons having an interest in the property that would be affected by the sale.”
This means that, in a receivership context, the adequacy of marketing, pricing, and sale process can be tested and objected to at a hearing before the sale closes—not reconstructed years later through competing expert appraisals. The borrower, guarantors, junior lienholders, and other interested parties receive notice and have an opportunity to raise objections in real time, while evidence is fresh and market conditions are known.
C. How This Could Have Changed the Outcome
In Marchi, the parties spent around seven years litigating whether Centrust’s sale was commercially reasonable—with the bank ultimately losing because it could not prove the adequacy of its marketing efforts and sale terms. Importantly, Centrust did not have the option of proceeding under the Act because, as noted above, it did not even come into existence until January 2026. Hypothetically, if a suit were filed or pending in 2026, and the UCC sale had not occurred, Centrust could have sought the appointment of a receiver, who, with the Court’s approval, could have conducted a sale with the parameters decided first. Although that decision (and the appointment of the receiver) would have still taken months, it would have saved many years of litigation and tens of thousands of dollars (or more) in attorney’s fees litigating the matter.
D. Important Caveat: Litigation Remains Slow
Lenders should not read this alert as suggesting that the receivership route eliminates delay or litigation risk. A receivership proceeding is itself a court process that involves filing a petition, obtaining appointment of a receiver, providing statutory notice, conducting the marketing and sale process, filing a motion for court approval, and holding a hearing—all of which take time. Interested parties may file objections to the proposed sale, and contested hearings can be adjourned, briefed, and appealed. Courts’ dockets are congested, and receivership matters compete for judicial attention alongside other civil litigation. This is especially true because judges are still learning the ins and outs of the Act.
What the receivership route does offer is a structural shift in timing: rather than litigating commercial reasonableness as a post-hoc challenge to a completed private sale (as occurred over seven years in Marchi), the dispute is front-loaded into a pre-sale approval process. This narrows the scope of the dispute (the court rules on the proposed sale before it closes) and produces a contemporaneous judicial record supporting the lender’s process—but it does not guarantee speed. Lenders evaluating this alternative should budget time and resources for the court proceedings and consider receivership as a risk-mitigation tool rather than a fast-track disposition method.
V. Key Takeaways and Practical Considerations for Secured Lenders
Based on the Marchi decision and the new receivership statute, secured lenders evaluating collateral disposition strategies after default should consider the following:
1. Marketing efforts matter as much as price.
The appellate court reiterated that price is relevant but not dispositive to commercial reasonableness under Article 9. A sale price that may appear reasonable on its face can still be attacked if the marketing effort was limited, the pool of buyers was narrow, or the sale process appears designed to favor a particular purchaser. Lenders should document extensive, arm’s-length marketing before any private sale.
2. Obtain appraisals proactively—before the sale, not after.
Much of the dispute in Marchi involved competing appraisals prepared years after the sale, each reaching vastly different conclusions. A credible, independent appraisal obtained before the sale closes provides a contemporaneous benchmark that is far more defensible than a retroactive valuation prepared for litigation.
3. The UCC Section 626 presumption is powerful and must be planned for.
If a sale is found commercially unreasonable, the secured party must rebut the statutory presumption that a reasonable sale would have satisfied the debt in full. Failure to rebut this presumption—as occurred in Marchi—eliminates deficiency recovery entirely. Lenders should build the evidentiary record for rebuttal at the time of sale, not only when challenged in litigation.
4. Consider receivership as an alternative or complement to a private Article 9 sale.
For collateral of significant value or complexity—particularly where the borrower or guarantors are likely to be adversarial—lenders should evaluate whether seeking a receiver and obtaining pre-sale court approval may reduce the risk of post-sale commercial-reasonableness challenges. The upfront receivership process is not faster than simply sending out notice and conducting a sale, but it front-loads the dispute, narrows its scope, and produces a judicial record supporting the adequacy of the sale.
5. Seller financing and related-party sales invite heightened scrutiny.
The court’s emphasis on Centrust’s decision to fully finance the buyer’s acquisition suggests that non-arm’s-length sale terms will be closely examined. Lenders should carefully evaluate whether seller-financed or related-party transactions can withstand scrutiny, and should document the business rationale for any non-standard terms.
6. Commercial unreasonableness does not guarantee affirmative damages.
Even when a sale is found commercially unreasonable, borrowers and guarantors seeking affirmative damages must prove those damages with reasonable certainty. The UCC Section 626 presumption can eliminate deficiency claims but does not create an automatic damages award; the claimant must establish the value that would have been realized in a commercially reasonable sale and a proper basis for computing damages.
VI. Conclusion
Marchi v. Centrust Bank is a cautionary case for secured lenders conducting private sales of collateral under UCC Article 9. It demonstrates the substantial risks of years-long commercial-reasonableness litigation, the power of the UCC Section 626 presumption when that litigation is lost, and the importance of proactive documentation of marketing and valuation. The case also presents an opportunity to highlight a potential new tool in lenders’ strategic toolkit: Illinois’ Receivership Act, which—while not a panacea—may offer a more structured and defensible path to collateral disposition when the circumstances warrant it.
- Importantly, this decision was issued as an unpublished order under Illinois Supreme Court Rule 23, which limits its precedential value. Additionally, the case remains subject to potential further review through a petition for leave to appeal to the Illinois Supreme Court, meaning the holdings discussed herein could be modified, reversed, or vacated.
