Motion,Ex Parte: Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital Lp

On August 17, 2021 a Motion,Ex Parte was filed involving a dispute between Hello Living Developer Nostrand Llc, Hello Nostrand Llc, and 1580 Nostrand Mezz Llc, Madison Realty Capital Lp, for Commercial - Business Entity in the District Court of Rockland County.

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ROCKLAND
___________________________________________________X
HELLO LIVING DEVELOPER NOSTRAND LLC and
HELLO NOSTRAND LLC, Index No.: 034885/2021

Plaintiffs,
-against-

1580 NOSTRAND MEZZ, LLC,
MADISON REALTY CAPITAL, L.P.,

Defendants.
___________________________________________________X

DEFENDANTS’ MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS’
ORDER TO SHOW CAUSE

KRISS & FEUERSTEIN LLP
Attorneys for Defendants,
360 Lexington Avenue, Suite 1200
New York, New York 10017
(212) 661-2900

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .......................................................................................................... ii

PRELIMINARY STATEMENT .....................................................................................................1

FACTS .............................................................................................................................................3

ARGUMENT ...................................................................................................................................4

POINT I

THE PROPOSED UCC SALE OF THE COLLATERAL CANNOT CAUSE
IRREPARABLE HARM .........................................................................................................5

A. Loss of Pledged Membership Interests do not Equate to Loss of
Real Estate ............................................................................................................7

POINT II

PLAINTIFFS CANNOT SUCCEED ON THE MERITS .......................................................8

A. Mezz Lender is Presently Authorized to do Business in the
State of New York ................................................................................................8

B. The Mezz Note Does Not Violate NY UCC Section 9-109(d)(11) ......................9

C. The UCC Sale of the Collateral is Commercially Reasonable and
in any Event, Certainly Not Manifestly Unreasonable .......................................11

D. The UCC Sale Does Not Improperly Clog Plaintiffs' Right of
Redemption .........................................................................................................14

E. The Mortgage Borrower’s Obtaining a TCO Has No Bearing on
Mezz Borrower’s Default ...................................................................................16

POINT III

A BALANCING OF THE EQUITIES FAVORS ENFORCING MEZZ
LENDER'S RIGHTS .............................................................................................................18

CONCLUSION ..............................................................................................................................20

WORD COUNT CERTIFICATION .............................................................................................21

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TABLE OF AUTHORITIES
Page

Cases

1234 Broadway LLC v West Side SRO Law Project, Goddard Riverside
Community Ctr.,
86 Ad3d 18, 39 (1st Dept 2011).................................................................................................6

1248 Associates Mezz II LLC v. 12E48 Mezz II LLC,
2020 WL 2569405 (Sup Ct. NY Cty May 18, 2020) .................................................................6

893 4th Ave. Lofts LLC & Michael UHR v. 5AIF Nutmeg, LLC,
2020 WL 6940968 (Sup. Ct. Kings Cty. Nov. 2, 2020) ................................................2, 4, 7, 8

Aetna Ins. Co. v. Capasso,
75 N.Y.2d 860 (1990) ................................................................................................................4

Atlas MF Mezzanine Borrower, LLC v. Macquarie Texas Loan Holder, LLC,
2017 WL 729128 (S.D.N.Y. Feb. 23, 2017) ............................................................................11

Atlas v. Mezzanine Borrower, LLC v. Macquarie Texas Loan Holder LLC,
174 AD3d 150 (1st Dept 2019)..............................................................................................6, 7

Berzin v. W. P. Carey & Co., Inc.,
293 A.D.2d 320 (1st Dep't 2002) .............................................................................................17

B'way 500 W. Monroe Mezz II LLC v. Transwestern Mezzanine Realty
Partners II LLC,
80 AD3d 483,484 (1st Dept 2011)...................................................................................5, 6, 18

Chrysler Credit Corp. v. Dioguardi Jeep Eagle, Inc.,
192 A.D.2d 1066 (4th Dep't 1993) ..........................................................................................17

Copart of Conn., Inc. v. Long Island Auto Realty, LLC,
42 A.D.3d 420 (2d Dept 2007) ..................................................................................................4

DH Cattle Holdings Co. v Reinoso,
176 A.D.2d 1057 (3d Dep't 1991)..............................................................................................9

Doe v. Axelrod,
73 N.Y.2d 748 (1988) ................................................................................................................4

Dopp v. Franklin National Bank,
461 F.2d 873 (2d Cir. 1972).....................................................................................................15

Eli Karp, Hello Nostrand LLC et al. v. Madison Realty Capital, L.P. et al.,
Index No. 513756/2021 .............................................................................................................2

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Flushing Landmark Realty Mezz LLC et al v. Landmark Portfolio Mezz, LLC,
Index No. 708487/2019 (Sup. Ct. NY Qns. Cty. June 18, 2019) ............................................16

Golden v. Steam Heat, Inc.,
216 A.D.2d 440 (2d Dept 1995) ................................................................................................4

Gramercy Warehouse Funding v. Wells Fargo Bank,
2009 WL 7830356 (Sup. Ct. NY Cty. July 31, 2009) .............................................................18

HH Cincinnati Textile L.P. v. Acres Capital Servicing LLC,
2018 WL 3056919 (Sup. Ct. NY Cty. June 31, 2009) ...............................................6, 7, 15, 16

Hotel 71 Mezz Lender LLC v. Falor,
14 NY3d 303, 900 NYS2d 698 (2010) ......................................................................................7

In re Adobe Trucking, Inc.,
2011 WL 6258233 2011 WL 6258233 (W.D. Tex. Bankr. Dec. 15, 2011) ......................11, 12

In re Futterman,
602 B.R. 465 (Bankr. S.D.N.Y. 2019) .....................................................................................14

In re Luis Elec. Contracting Corp.,
149 B.R. 751 (Bankr. E.D.N.Y. 1992) .......................................................................................9

Indianapolis Morris Plan Corp. v. Karlen,
28 N.Y.2d 30 (1971) ................................................................................................................15

Jamaica Savings Bank v. Cohan,
36 A.D.2d 743 (2d Dep't 1971)................................................................................................17

Jamie B. v. Hernandez,
274 AD2d 335,336 (1st Dept 2000)...........................................................................................6

Liotta v. Mattone,
71 A.D.3d 741 (2d Dept 2010) ..................................................................................................4

Lombard v. Station Square Inn Apartments Corp.,
94 A.D.3d 717 (2d Dept 2012) ..................................................................................................5

Nobu Next Door, LLC v. Fine Arts Hous., Inc.,
4 N.Y.3d 839 (2005) ..................................................................................................................4

Orix Credit Alliance, Inc. v. East End Dev. Corp.,
260 A.D.2d 454 (2d Dept 1999) ........................................................................................11, 12

Roswell Capital Partners LLC v. Alternative Constr. Techs.,
638 F. Supp. 2d 360 (S.D.N.Y. 2009)......................................................................................17

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Shelbourne BRF LLC v. SR 677 B’way LLC,
2021 WL 816691 (1st Dept 2001) .............................................................................................4

Town of Smithtown v. Carlson,
204 A.D.2d 537 (2d Dept 1994) ................................................................................................4

YL Sheffield v. Wells Fargo Bank N.A.,
2009 WL 6408598 (Sup. Ct. NY Cty. July 29, 2009) .............................................................18

Statutes

CPLR 6301.......................................................................................................................................1

CPLR 6312(c) ..................................................................................................................................6

U.C.C. Article 9 ...........................................................................................................................8, 9

UCC § 9-102(47) .......................................................................................................................9, 10

UCC § 9-102(65) .............................................................................................................................9

UCC § 9-109(d)(11) ...................................................................................................................9, 11

UCC § 9-501(3) .......................................................................................................................12, 13

UCC § 9-506 ............................................................................................................................15, 16

UCC § 9-601(a)(1) ...........................................................................................................................9

UCC § 9-603 ..................................................................................................................................12

UCC § 9-610 ..........................................................................................................................5, 6, 16

UCC § 9-623 ......................................................................................................................14, 15, 16

UCC § 9-625 ....................................................................................................................................5

UCC § 9-627(c)(1) .........................................................................................................................14

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This Memorandum of Law is submitted in opposition to plaintiffs’ Hello Living Developer

LLC (“Mezz Borrower”) and Hello Nostrand LLC (“Mortgage Borrower”, and together with

the Mezz Borrower, collectively, the “Plaintiffs”), Order to Show Cause (“OSC”) for a

preliminary injunction pursuant to CPLR 6301 to enjoin 1580 Nostrand Mezz, LLC (“Mezz

Lender”) from conducting a UCC sale.

PRELIMINARY STATEMENT

The OSC fails to satisfy the requirements necessary to enjoin the UCC sale of Mezz

Borrower’s pledged membership interests. While the Plaintiffs baselessly allege Defendants

engaged in scheme to take away the Nostrand Building, the facts remain: i) the Mezz Borrower

entered into an agreement to borrow up to $3,000,000.00 from Mezz Lender and voluntarily

executed the Mezzanine Promissory Note (“Mezz Note”), the Mezzanine Loan Agreement (“Mezz

Agreement”), and the Ownership Interests Pledge and Security Agreement (“Pledge”, and

together with the Mezz Note and Mezz Agreement, collectively, the “Mezz Loan Documents”);

and ii) the Mezz Borrower defaulted under the Mezz Loan Documents.

The Mezz Borrower does not dispute that it executed the Mezz Loan Documents, received

the proceeds of the Mezz Loan, or that that it defaulted under the Mezz Loan Documents. When

a default occurs under a loan, the lender is entitled to exercise the rights and remedies voluntarily

agreed upon by the parties. The exercise of those rights and remedies, is not a “scheme”, “bad

faith” nor is it “fraud.” It is simply an exercise of a lender’s contractual rights.

Numerous courts have rejected a finding of imminent threat of irreparable harm against a

mezzanine borrower in the context of a mezzanine lender seeking to conduct a UCC sale of pledged

membership interests. These cases have consistently determined that money damages alone are an

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appropriate remedy subsequent to a UCC sale, and therefore, no imminent threat of irreparable

harm exists. Plaintiffs’ OSC fails to cite a single case concerning whether a UCC sale of pledged

membership interests constitutes imminent threat of irreparable harm. The lack of case citation is

not because this is novel issue, but rather because the established case law is contrary to Plaintiff’s

position. The OSC claims that absent an injunction, the Mezz Borrower will suffer irreparably

harm and lose a substantial interest in real property, however Justice Ruchelsman, in 893 4th Ave.

Lofts LLC & Michael UHR v. 5AIF Nutmeg, LLC, 2020 WL 6940968 (Sup. Ct. Kings Cty. Nov.

2, 2020) recently held that “[t]here is really no authority supporting the argument that ownership

in an entity that owns property is considered an interest in real property.” 1

Next, Plaintiffs have no likelihood of success on the merits of their Complaint. Plaintiffs’

assertion that the Mezz Lender is not authorized to conduct business in the State of New York is

now moot because since the filing of the OSC, the Mezz Lender has obtained authorization to do

business in the state of New York. In any event, there is no such requirement to enforce Mezz

Lender’s rights via a single sale regarding a single loan, which is being conducted by Manion

Auctions, LLC, an LLC that is also licensed to do business in the state of New York.

Plaintiffs’ clogging of the equity of redemption”, claims have also been addressed, and

rejected by courts in New York. Conspicuously absent from the OSC, are any citations to New

York caselaw in support of Plaintiffs’ position.

Plaintiffs also make the incredulous argument that the Mezz Lender cannot conduct a UCC

sale because the Mezz Note itself violates the UCC because it references mortgage loan

agreements. Again, Plaintiffs’ assertion cites to no case supporting its position. Additionally, the

1
Justic Ruchelsman is presently presiding over the related Kings County action commenced by Plaintiffs’ principal,
captioned as Eli Karp, Hello Nostrand LLC et al. v. Madison Realty Capital, L.P. et al., Index No. 513756/2021
(“Kings County Action”), that the OSC discusses at length, yet curiously, the Plaintiffs decided to bring the OSC
and their action before this Court in Rockland County.

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Mezz Note is a promise to pay the $3,000,000.00 loan, it does not create or transfer any interest in

or lien on any real property. It is the Pledge that creates a security interest in the Collateral. The

Collateral is without question personal, not real, property.

The Plaintiffs erroneously argue that terms they agreed to in the Pledge regarding a

commercially reasonable sale are “bad faith” and “unlawful”. The UCC and caselaw are clear: it

is not “unlawful” for parties to agree ahead of time as to commercially reasonable terms as long

as such terms are not “manifestly unreasonable.” Neither the OSC nor the Complaint make any

allegation that the expressly agreed upon terms in the Pledge are in any way “manifestly

unreasonable”. Notwithstanding, given the postponement of the previously scheduled UCC

disposition on September 2, 2021 due to the Court's issuance of the temporary restraining order,

the Mezz Lender submits to modify the procedures in connection with a future UCC disposition

of the Pledged Membership Interest (assuming the Court otherwise determines that such UCC

disposition may go forward) to address the objections raised by Plaintiff regarding the UCC

disposition process itself (regardless of the legitimacy of such objections).

FACTS

The factual background of this matter insofar as it presents dispositive documentary

evidence is set forth in the Affidavit of Greg Corbin and the Affirmation of Jerold C. Feuerstein,

Esq. (“Feuerstein Affirmation”).

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ARGUMENT

A preliminary injunction constitutes “drastic” relief which should be issued sparingly.

Town of Smithtown v. Carlson, 204 A.D.2d 537, 537 (2d Dept 1994). To obtain preliminary

injunctive relief, New York Law requires the plaintiff to show, by clear and convincing evidence,

(i) a probability of success; (ii) irreparable injury in the absence of an injunction; and (iii) a balance

of the equities in their favor. See Aetna Ins. Co. v. Capasso, 75 N.Y.2d 860, 862 (1990) (affirming

denial of a preliminary injunction); see also Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4

N.Y.3d 839, 840 (2005); Liotta v. Mattone, 71 A.D.3d 741, 741 (2d Dept 2010).

As to the first prong, the moving party must show a likelihood of success on the merits by

clear and convincing evidence. Doe v. Axelrod, 73 N.Y.2d 748, 750-51 (1988); see also 893 4th

Ave. Lofts LLC, 2020 WL 4936913, at *1-2. The second prong, thought by courts to be the most

critical, also requires the movant to show by clear and convincing evidence that the harm is more

than a mere possibility and, in fact, is imminent and likely to occur absent the issuance of the

requested injunction. Golden v. Steam Heat, Inc., 216 A.D.2d 440, 442 (2d Dept 1995); see also

Shelbourne BRF LLC v. SR 677 B’way LLC, 2021 WL 816691, *1 (1st Dept 2001) (vacating

preliminary injunction on basis that plaintiffs “failed to demonstrate the requisite irreparable harm”

because “the feared loss of an investment can be compensated in money damages”). As to the third

prong, the court must balance the equities to determine whether the supposed irreparable harm to

the moving party substantially outweighs the injury the injunctive relief will cause the non-moving

party. Copart of Conn., Inc. v. Long Island Auto Realty, LLC, 42 A.D.3d 420, 421 (2d Dept 2007)

(plaintiff must show the absence of the preliminary injunction would inflict greater harm than that

inflicted by imposition of the injunction upon the defendant).

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Plaintiffs have failed to demonstrate by clear and convincing evidence a probability of

success on the merits, that it will suffer irreparable harm if the requested injunction is not granted,

or that the balance of equities tips in its favor. Accordingly, Defendants respectfully submit that

the OSC should be denied.

POINT I

THE PROPOSED UCC SALE OF THE COLLATERAL CANNOT CAUSE
IRREPARABLE HARM

Section 9-625 of the UCC provides that “a court may ... restrain collection, enforcement,

or disposition of collateral on appropriate terms and conditions.” N.Y. U.C.C. § 9-625 (emphasis

added). However, although Section 9-625 authorizes injunctive relief, it in no way mandates

injunctive relief, let alone modifies the irreparable harm standard required under New York law.

See id. Rather, even in the case of an injunction seeking to stop a UCC sale of an equity interest

in an entity that owned real property, courts have upheld the denial of a preliminary injunction

because the movant could not establish irreparable harm, holding that where a party's “interest in

the real estate is commercial, and the harm they fear is the loss of their investment...they can be

compensated by damages and therefore cannot demonstrate irreparable harm.” Broadway 500 W.

Monroe Mezz II LLC v. Transwestern Mezzanine Realty Partners II, LLC, 80 A.D.3d 483, 484

(1st Dept 2011) (alterations and citation omitted) (affirming denial of preliminary injunction of

UCC disposition of equity interest in property); see also Lombard v. Station Square Inn

Apartments Corp., 94 A.D.3d 717, 721 (2d Dept 2012) (reversing and vacating preliminary

injunction of disposition under UCC § 9-610 of stock and proprietary leases in co-op units as there

was no irreparable harm since plaintiff did not reside in any of the apartments, “his interest in the

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apartments [was] commercial,” and his harm could be fully compensated by monetary damages).

For a loss of real estate to qualify as irreparable harm, it needs to be a party's “home or a unique

piece of property in which [they have] an unquantifiable interest.” Id. (emphasis added).

Here, the Property is not Mezz Borrower’s home and nowhere in the OSC do the Plaintiffs’

assert that the property is a “unique piece of property”. Where the collateral at issue is membership

interest in commercial property and the concerned loss is a commercial investment, there is no

irreparable harm because Plaintiff can be compensated with monetary damages. The Collateral

here is Plaintiff's membership interest in a commercial property, and where Plaintiff's loss is

simply a commercial investment that is quantifiable, money damages suffice and irreparable harm

does not befall the Mezz Borrower.

Recently, the Court in 1248 Associates Mezz II LLC v. 12E48 Mezz II LLC, agreed with

the above arguments in denying an injunction of a UCC sale of pledged membership interests,

stating:

[h]owever, any such damages may be properly remedied subsequent to the sale
(see Atlas v. Mezzanine Borrower, LLC v. Macquarie Texas Loan Holder LLC, 174
AD3d 150, 162 [1st Dept 2019]; see also, B'way 500 W. Monroe Mezz II LLC v.
Transwestern Mezzanine Realty Partners II LLC, 80 AD3d 483,484 [1st Dept
2011]). Where harm to a plaintiff's commercial property interest is the loss of
investment as opposed to a loss of an unquantifiable interest, damages suffice and
irreparable harm does not befall plaintiff (id.). Thus, plaintiff has not demonstrated,
on this motion, a likely success on the merits warranting injunctive relief (1234
Broadway LLC v West Side SRO Law Project, Goddard Riverside Community Ctr.,
86 Ad3d 18, 39 [1st Dept 2011]). As plaintiff had not demonstrated in its papers
the elements required for the issuance of a preliminary injunction, a hearing is not
required (c.f. id. at 40; CPLR 6312(c); Jamie B. v. Hernandez, 274 AD2d 335,336
[1st Dept 2000]).

2020 WL 2569405, *1 (Sup Ct. NY Cty May 18, 2020).

In HH Cincinnati, the court, in rejecting the developer's motion to enjoin the UCC sale,

held that:

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[A]ny loss to the Plaintiffs' real estate investment is compensable by money
damages. “Since [plaintiffs'] interest in the real estate is commercial, and the harm
[they] fear[] is the loss of [their] investment, as opposed to loss of [their] home or
a unique piece of property in which [they have] an unquantifiable interest, they can
be compensated by damages and therefore cannot demonstrate irreparable harm.”
“Defendants' legitimate exercise [] of their remedies upon default-- in this case,
foreclosure-- cannot constitute irreparable harm to Plaintiffs... In this case there
is no dispute that the [loan] is valid, in default, and subject to foreclosure. That
foreclosure then cannot, as a matter of law, cause irreparable harm to Plaintiffs.”

2018 WL 3056919, (Sup. Ct. NY Cty. June 31, 2009) *3 (emphasis added) (internal citations

omitted). Here, just as in HH Cincinnati, to the extent there is any loss to Plaintiffs' real estate

investment, it would be compensable by money damages and they therefore cannot demonstrate

irreparable harm as a matter of law.

A. Loss of Pledged Membership Interests do not Equate to Loss of Real Estate
The Plaintiffs make the erroneous argument that an injunction should be granted because

the moving party will lose substantial interest in real property through the UCC sale of the Pledged

Membership Interests. See OSC at pg.25. Justice Ruschelman, who is presiding the Kings County

Action, recently analyzed Plaintiffs’ exact argument in the context of a UCC sale of pledged

membership interests. See 893 4th Ave. Lofts LLC & Michael UHR v. 5AIF Nutmeg, LLC, 2020

WL 6940968 (Sup. Ct. Kings Cty. Nov. 2, 2020). In denying an injunction of a UCC sale of

pledged membership interests, the Court in 893 4th Ave. Lofts LLC & Michael UHR v. 5AIF

Nutmeg, LLC, stating,

There is really no authority supporting the argument that ownership in an entity
that owns property is considered an interest in real property. In Hotel 71 Mezz
Lender LLC v. Falor, 14 NY3d 303, 900 NYS2d 698 [2010] the court noted that
loans similar to the loan in this case “is secured not by the real property itself, but
by stock of or some ownership interest in the company that owns the real property”
(id at Footnote 1). Likewise, “in the context of loans that are secured by the personal
property of a debtor, such as the stock of a development company that enters into a
mezzanine loan agreement, New York's Uniform Commercial Code (U.C.C.) offers
a mechanism for foreclosing on the personal property. Unlike mortgages that are
secured by real estate, loans secured by personal property that grant the lender a

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perfected security interest can generally be foreclosed under Article 9 of the
U.C.C.” (see, The New York Practice Series-Commercial Litigation in New York
State Courts- Commercial Real Estate § 145:39 Uniform Commercial Code
proceedings to foreclose loans by Robert Haig [October 2020 Update]). These
sources clearly demonstrate that foreclosing upon an interest in an entity that
owns property does not implicate the real property itself to the extent the U.C.C.
does not allow the foreclosure.

2020 WL 6940968 at *1. Accordingly, Plaintiffs incorrectly conflate the rights of the Mezz

Borrower with the rights of the Mortgage Borrower, and therefore, the Mezz Borrower will not

“lose substantial interest in real property through the UCC sale of the Pledged Membership

Interests.”

POINT II

PLAINTIFFS CANNOT SUCCEED ON THE MERITS

A. Mezz Lender is Presently Authorized to do Business in the State of New York
As a threshold matter, the allegations in the Complaint (First Cause of Action) and the

assertions in the OSC that Mezz Lender is not authorized to do business in the state of New York

is now moot. As set forth in Exhibit “A” to the Feuerstein Affirmation, Mezz Borrower has

applied for and is presently authorized to do business in the state of New York. Accordingly, any

assertion that Mezz Lender cannot conduct a UCC sale in New York is now irrelevant.

Notwithstanding the foregoing, there is no requirement that the Mezz Lender be authorized to do

business in the state of New York to enforce its non-judicial remedies by utilizing a licensed

auctioneer and broker to conduct at UCC sale. Moreover, a UCC sale of the Collateral is a single

sale, it is not the conducting of regular and continuous business activity. A foreign LLC must be

authorized to do business in the state of New York in order to maintain a judicial proceeding in

New York Courts, which the Mezz Lender is not doing here. A disposition of collateral is a non-

judicial proceeding. Indeed, the UCC states that a secured party has the right to “foreclose... by

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any available judicial procedure” in addition to its Article 9 remedies, making this very distinction.

See UCC § 9-601(a)(1).

B. The Mezz Note Does Not Violate NY UCC Section 9-109(d)(11)

The Plaintiffs’ Second Cause of Action alleges that the Mezz Note violates NY UCC

Section 9-109(d)(11), which provides that the law does not apply to the creation or transfer of an

interest in or lien on real property. The Complaint alleges that “[t]he inclusion of the additional

promises with references to loan agreements and documents collateral to the mezzanine loan, and

which are secured by mortgages, rendered the Mezzanine Promissory Note not a negotiable

instrument subject to the UCC.” Complaint at ¶ 39. This claim has no likelihood of success

because an instrument does not have to be “negotiable” to be enforceable.

The UCC defined “promissory note” to mean “an instrument that evidences a promise to

pay a monetary obligation, does not evidence an order to pay, and does not contain an

acknowledgment by a bank that the bank has received for deposit a sum of money or funds.” UCC

§ 9-102(65). Whether the Mezz Note is a negotiable instrument or not is irrelevant. The Mezz

Note is still enforceable because not every promissory note (or every contract evidencing a debt to

be repaid, however that contract is labeled) must be a negotiable instrument in-order-to be

enforceable. See, e.g., in re Luis Elec. Contracting Corp., 149 B.R. 751, 758 (Bankr. E.D.N.Y.

1992) (“A promissory note, upon which a loan transaction is created, is a simple contract governed

solely by contract law if it is a nonnegotiable instrument ...”); DH Cattle Holdings Co. v Reinoso,

176 A.D.2d 1057, 1058 (3d Dep't 1991) (promissory note including an interest payment that was

“to be determined ....was still enforceable as commercial paper under the law applicable to

contracts” even though it was not negotiable). This is consistent with the very definition of

“instrument” set forth in UCC § 9-102(47), which provides,

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(47) "Instrument" means a negotiable instrument or any other writing that
evidences a right to the payment of a monetary obligation, is not itself a security
agreement or lease, and is of a type that in ordinary course of business is transferred
by delivery with any necessary indorsement or assignment. The term does not
include (i) investment property, (ii) letters of credit, or (iii) writings that evidence
a right to payment arising out of the use of a credit or charge card or information
contained on or for use with the card.

N.Y. UCC § 9-102(47). (emphasis added). Here, the operative instrument is the Mezz Note, which

evidences the Mezz Borrower’s obligation to pay the Mezz Lender, and it is the Pledge that creates

the security interest in the Membership Interests, not in any real property (as set forth in greater

detail below).

The Mezz Note does not create or transfer any interest in or lien on real property simply

by referencing other loans which were already secured by liens. The Mezz Note is a promise to

pay and there is no language in the Mezz Note, and certainly no language cited by the Plaintiffs,

granting a security interest in real property. To the extent the Mezz Borrower alleges that the

Pledge somehow creates a lien on real property, that is also belied by the language of both the

Pledge and the Mezz Loan Agreement. Under the Mezz Loan Documents, a security interest is

created in the “Collateral”, which is defined in Section 1.9 of the Mezz Loan Agreement as,

[t]he Pledged Interests, and all amounts on deposit in any reserve account
established under the Loan Documents and any and all other property or collateral
in which the Lender is granted a security interest under any of the Loan Documents,
in each case whether existing on the date hereof or hereafter pledged or assigned to
the Lender.

Complaint, Exhibit “B” at Section 1.9. It should be noted that the term “Loan Documents” does

not include any of the Mortgage Loan Documents (as that term is defined in the Mezz Loan

Agreement). See id. at pg. 4. Accordingly, the Mezz Loan Documents make it abundantly clear

that the Collateral does not include any interest in real property, and therefore, does not create or

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FILED: ROCKLAND COUNTY CLERK 09/20/2021 04:46 PM INDEX NO. 034885/2021
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transfer any interest in or lien on real property. The Pledge does however create a security interest

in the Collateral. See Complaint, Exhibit “C”.

Plaintiffs’ argument to this Court is that merely referencing loan agreements secured by

mortgages somehow creates a transfer of an interest in or lien on real property this violating UCC

Section 9-109(d)(11). Notably, the OSC does not cite to a single case that even remotely supports

such a nonsensical position. Accordingly, the Plaintiffs find no support in either the Mezz Loan

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Case Info

Judge

Paul I Marx Track Judge’s New Case

Case No.

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Document Filed Date

September 20, 2021

Case Filing Date

August 17, 2021

County

Parties

1580 NOSTRAND MEZZ LLC Defendant
ALOE, PAUL H. Attorney for the Plaintiff
BONNEVILLE, MICHAEL JAMES Attorney for the Defendant
BROOKS, JEFFREY D Attorney
CURRAN, FRANCIS M Attorney for the Plaintiff
FEUERSTEIN, JEROLD C Attorney for the Defendant
FITZGERALD, JAIMIE L. Attorney
GRAY, CORY M Attorney
HELLO LIVING DEVELOPER NOSTRAND LLC Plaintiff
HELLO NOSTRAND LLC Plaintiff
MADISON REALTY CAPITAL LP Defendant
Nostrand Mezz Lender Non Party
Nostrand Mezz Lender LLC Non Party
POLLACK, GAYLE E Attorney
SAPONARA, DAVID NICHOLAS Attorney for the Plaintiff
SCHARF, YEHUDA D Attorney
SEISS, KYLE ALLEN Attorneys for Plaintiffs
WORMS, VICTOR A. Attorney for the Plaintiff
ZELMAN, YITZCHAK Attorney for the Plaintiff
ZELTSER, NAOMI Attorney for the Plaintiff
ALAN BRODY Attorney
LEO FOX Attorney
JEFFREY ZWICK Attorney
PAUL KORNGOLD Attorney
JEROLD COUTURE Attorney
THOMAS LANDRIGAN Attorneys for Plaintiffs
GREGG FRIEDMAN Attorneys for Defendants
THOMAS CAMBIER Attorney
GREG FRIEDMAN Attorneys for Defendants
ELLIOTT MARTIN Attorneys for Defendants
ARI MARCUS Attorney
MICHAEL ONEILL Attorney
ABRAHAM LEITNER Attorney

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Motion,Ex Parte: Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital Lp

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