Preview
FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021
NYSCEF DOC. NO. 63 RECEIVED NYSCEF: 11/02/2021
Exhibit B
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FILED: ROCKLAND COUNTY CLERK 09/15/2021
11/02/2021 04:40
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NYSCEF DOC. NO. 27
63 RECEIVED NYSCEF: 09/15/2021
11/02/2021
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ROCKLAND
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HELLO LIVING DEVELOPER NOSTRAND, LLC,
and HELLO NOSTRAND, LLC,
Plaintiffs, Index No.
034885/2021
-against-
1580 NOSTRAND MEZZ, LLC, and MADISON
REALTY CAPITAL, L.P.,
Defendants.
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TEAMS VIRTUAL PROCEEDING
Rockland County Courthouse
One South Main Street
New City, New York
August 24, 2021
BEFORE: HON. PAUL I. MARX,
Justice of the Supreme Court
APPEARANCES:
For the Plaintiffs:
MARCUS & ZELMAN, LLC
1 Deer Run Road
Pomona, New York 10970
BY: YITZCHAK ZELMAN, ESQ.
LAW OFFICES OF VICTOR A. WORMS
48 Wall Street,Suite 1100
New York, New York 10005
BY: VICTOR A. WORMS, ESQ.
For the Defendants:
KRISS & FEUERSTEIN, LLP
360 Lexington Avenue
New York, New York 10017
BY: MICHAEL J. BONNEVILLE, ESQ.
GREG A. FRIEDMAN, ESQ.
Leslie M. Arzoomanian
Senior Court Reporter
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1 THE COURT: Good morning, everybody.
2 This is number one on today's calendar,
3 Hello Living, Developer, Nostrand, LLC, and
4 Hello Nostrand, LLC, Plaintiffs, against 1580
5 Nostrand Mezz, LLC, and Madison Realty Capital,
6 LP, Index Number 34885 of 2021.
7 Can I get appearances, please, starting
8 with the attorney for the Plaintiffs.
9 MR. ZELMAN: For the Plaintiffs, my name
10 is Yitzchak Zelman, from the Office of Marcus &
11 Zelman. Good morning, your Honor.
12 THE COURT: Good morning. For the
13 Defendants.
14 MR. BONNEVILLE: Good morning, your Honor.
15 From the Law Firm of Kriss & Feuerstein,
16 LLP, Michael Bonneville, on behalf of the
17 Defendants. We also have Greg Friedman from my
18 office on the call, as well.
19 THE COURT: Okay. Great.
20 Mr. Friedman, I am looking at your tie. I
21 can't see your face. If you are going to have
22 the camera on, just point it at your face,
23 would you please. It is a lovely tie, by the
24 way.
25 MR. FRIEDMAN: Is that better?
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1 THE COURT: Yes. Thank you. I appreciate
2 that.
3 Pending before the Court is an
4 application, filed by Order to Show Cause, for
5 a preliminary injunction and Temporary
6 Restraining Order.
7 The application was filed by Mr. Zelman,
8 by which he seeks to stay the scheduled sale of
9 the Plaintiff, Hello Living Developer Nostrand,
10 LLC's one-hundred-percent membership interest
11 in the Plaintiff Hello Nostrand, LLC.
12 The sale is currently scheduled for
13 September 2, 2021, at 1:00 p.m.
14 The application was filed on -- I don't
15 recall when it was filed -- last Wednesday or
16 last Thursday; and was noticed for submission
17 to me on Friday morning, at 10:30 in the
18 morning.
19 While I was reviewing the application
20 Friday, I was attempting to ascertain whether
21 the Summons and Complaint had been served. So,
22 I checked the NYSCEF system, and it was only
23 then that I found a letter that had been filed
24 by Mr. Bonneville, indicating that he desired
25 to be heard.
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1 The Part Rules specifically provide not to
2 file letters on NYSCEF. So, Mr. Bonneville,
3 you dodged a bullet, only because of my own
4 diligence. Otherwise, I would have simply
5 signed the Order to Show Cause as if it had
6 been submitted without any opposition or
7 without any request to be heard by you.
8 We did have a conversation, you and I and
9 Mr. Zelman, on Friday afternoon, as I was on my
10 way out, in which Mr. Bonneville agreed to
11 accept service of the Summons and Complaint in
12 behalf of his clients, and in which Counsel
13 agreed to defer the presentation of the Order
14 to Show Cause, to allow me to take the weekend
15 off and to leave early last Friday.
16 Gentlemen, I very much appreciate your
17 accommodating me in that fashion.
18 So, I have a number of questions for you
19 before we get to the merits.
20 My first question goes to Mr. Zelman. Mr.
21 Zelman, there is a related action pending in
22 Kings County, brought by your clients against
23 these same Defendants, which I discovered only
24 because it is mentioned in your Memorandum of
25 Law. That action is entitled Eli Karp against
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1 Madison Realty Capital and others, in Kings
2 County, under Index Number 513756 of 2021.
3 In that action, your client and other
4 related plaintiffs seek monetary damages,
5 allege causes of action for fraud, conspiracy
6 to commit fraud and predatory lending
7 practices, which resulted in certain mortgages
8 against the underlying real property which is
9 the subject of this action, that real property
10 being located at 1580 Nostrand Avenue in
11 Brooklyn, consisting of 209 residences, fifteen
12 thousand square feet of community space, 134
13 parking spaces, and some storage units.
14 Why isn't this action more properly laid
15 in Brooklyn, sir?
16 MR. ZELMAN: Well, your Honor, venue was
17 laid here in Rockland County based on the
18 residency of the Plaintiff.
19 Now, the action, you mean, can we also
20 bring it in Kings County? Maybe. But, the
21 action in Kings County is not actually that
22 related to this action. That action brings
23 very different causes of action than the ones
24 raised in this action. There is no overlap.
25 As your Honor mentioned, there, we are
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1 talking about complex, you know, mortgages, and
2 we have all these arguments about how there was
3 a conspiracy and fraud. And my client is going
4 to litigate that action there, because, I mean,
5 what they did to him in this case is really
6 messed up.
7 I mean, they targeted this building. They
8 bought out his loan from his lender. They
9 strung him along with fake promises, and
10 basically forced him into foreclosure and to
11 the point now where they are going to try to
12 take over his business and his building.
13 THE COURT: Mr. Zelman, how can you tell
14 me it is not related, and not similar in
15 nature, when the crux of your argument here,
16 and the basis for your seeking the Temporary
17 Restraining Order and the preliminary
18 injunction, is your claim that Madison engaged
19 in predatory lending practices, under what you
20 call a lend-to-own practice, when, in your own
21 papers, Page 15 of your Memorandum of Law, you
22 describe the damages that are being sought by
23 your client in the Kings County action as,
24 quote, "Arising from the predatory lending
25 practices of the Defendant, Madison Capital"?
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1 Doesn't this Court have to make a
2 determination, in connection with your
3 application for an injunction, whether or not
4 Madison, in fact, engaged in those lending
5 practices, and won't that necessarily impact
6 the Brooklyn litigation?
7 MR. ZELMAN: No, your Honor.
8 So, while we reference the predatory
9 lending and Defendants' predatory loan-to-own
10 scheme in this action, that is to get
11 background to the claims in this action.
12 But, ultimately, the claims in this action
13 address the reasonableness and the propriety of
14 the U.C.C. sale. We don't really address the
15 U.C.C. sale at all in the Kings County action.
16 But, that's what we are raising here. That's
17 what our five causes of action in this case are
18 targeted at. So, they do not actually overlap.
19 They are the same background to each of
20 the cases, but the causes of action do not
21 overlap. And the determinations that this
22 Court makes, let's say, on the reasonableness,
23 the commercial reasonableness, of the proposed
24 sale, or the Defendants' ability to maintain a
25 U.C.C. sale in the State of New York until they
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1 are registered, stuff like that, that is not
2 raised in the other action, and those questions
3 won't be answered by Judge Ruchelsman in Kings
4 County.
5 THE COURT: Mr. Bonneville, does this
6 action belong in Brooklyn?
7 MR. BONNEVILLE: Your Honor, strictly
8 speaking, I don't know that the action would be
9 required to be in Brooklyn.
10 What does bother me is we have a judge
11 assigned in Brooklyn. We have moved to dismiss
12 that case, which can be characterized however
13 the Plaintiffs here would like to characterize
14 it. We filed a motion to dismiss. There are
15 grounds to believe that that case should be
16 dismissed in its entirety.
17 But, we are before a judge in Brooklyn,
18 Judge Ruchelsman, who has dealt with this
19 specific issue before, about enjoining
20 mezzanine debt sales under the U.C.C.,
21 specifically holding that it is inappropriate
22 to enjoin such sales.
23 The case that I am talking about, your
24 Honor, is 893 Fourth Avenue Lofts, LLC, v.
25 5AIF Nutmeg, LLC. It is Kings County Index
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1 Number 511942 of 2020; and specifically, you
2 know, stated there is this fundamental
3 principle that there is no imminent threat of
4 irreparable harm when faced with the U.C.C.
5 sale, because what is being potentially lost is
6 nothing more than a commercial interest that is
7 tangential to real property.
8 So, this entire idea that, well, somehow
9 there is real property involved in this, that,
10 therefore, real property is unique and there
11 should be a stay, courts, uniformly, through
12 last year, in the First Department, in
13 Brooklyn, even prior to the pandemic, I have
14 got decisions from Judge Livote, out of Queens
15 County, all making the continued determination
16 that injunctive relief just is not appropriate
17 in these circumstances.
18 The borrowers have the right to redeem.
19 If they want to redeem before a sale, they can
20 go ahead and do that.
21 But, specifically with respect to why we
22 are not in Brooklyn, I think the only reason,
23 you know, maybe cynically, but I think the only
24 reason why this was brought in Rockland County
25 is this idea that I think they are trying to
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1 get away from Judge Ruchelsman with respect to
2 the injunctive relief. It seems like judge
3 shopping to me.
4 THE COURT: That's why I raised the issue,
5 in the first instance, when I saw that there
6 was a Kings County action. It struck me that,
7 since there was a related action, I wondered
8 whether somebody wasn't, in fact, forum
9 shopping.
10 MR. ZELMAN: Your Honor, if I could
11 address one thing I just want to point out,
12 because it did mention a motion to dismiss
13 being in front of Judge Ruchelsman, saying that
14 Judge Ruchelsman doesn't allow Orders to Show
15 Cause. That is garbage. I have worked for
16 Judge Ruchelsman for two summers. But, that is
17 neither here nor there.
18 The point that I am trying to make, they
19 reference a motion to dismiss that they made
20 before Judge Ruchelsman. That motion to
21 dismiss doesn't address any of the merits of
22 issuing an Order to Show Cause or a temporary
23 restraining order in these types of actions.
24 THE COURT: I'm sorry. Except that you,
25 you, specifically reference Mr. Bonneville's
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1 Motion to Dismiss in Kings County as having
2 been made returnable on September 2nd, and,
3 somehow, you infer from the fact that the
4 motion is returnable on the same day of the
5 scheduled sale, you inferred from that bad
6 faith. I don't understand how that could be.
7 So, let me ask this more directly. Aren't
8 you really seeking a stay pending a decision in
9 Kings County?
10 MR. ZELMAN: Not at all, your Honor.
11 That's what I was trying to get at.
12 Here is the thing: The Motion to Dismiss
13 in that action is solely based on one issue,
14 and that is the issue of release.
15 They claim that when my client signed this
16 mezzanine promissory note, he released any bad
17 acts that the Defendants have done to him
18 before that time. That is the entire basis of
19 that Motion to Dismiss.
20 The things that we are raising in this
21 action, have nothing to do with those prior
22 claims that they now claim is entire release.
23 So, if they prevail on their Motion to
24 Dismiss, based on their issue of release, Judge
25 Ruchelsman has nothing to decide. But, who is
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1 going to decide the issue of the propriety of
2 the commercial reasonableness of this U.C.C.
3 sale, or whether or not this U.C.C. sale can
4 even stand, when real property interests are
5 implicated.
6 THE COURT: So, let's talk about this
7 Notice of Sale. On Page 13 of your papers, you
8 say, in the last paragraph, that the Notice of
9 Sale is commercially unreasonable. How can a
10 notice of sale be commercially unreasonable?
11 MR. ZELMAN: Several ways, your Honor.
12 First, in the language that they use in the
13 sale.
14 THE COURT: An agreement fostered between
15 parties can be commercially unreasonable if
16 they are on uneven footing. But, how can a
17 notice of sale, in and of itself, be
18 commercially unreasonable?
19 MR. ZELMAN: Well, we maintain that the
20 entire proposed sale would be commercially
21 unreasonable. We maintain they did not
22 adequately publish it. They didn't get enough
23 interest. They are basically rigging a sale
24 where they are going to be the only interested
25 buyer. It is hardly the way to earn fair
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1 market value for an asset worth many millions
2 of dollars, because no one else is going to
3 purchase this.
4 But, the Notice of Sale, specifically,
5 your Honor, should address the question that
6 you asked. It references all these other loans
7 that they say that the buyer of the property is
8 now going to be reasonable for.
9 When you are selling a four-million-dollar
10 mezzanine loan, but you are saying that the
11 buyer of the property is going to be
12 responsible for all these underlying mortgages,
13 which the property is worth roughly 65 million
14 dollars. Once you pay the four million
15 dollars, you are still going to have to pay off
16 another 65 million dollars in loans. The two
17 things are now more than the property is worth,
18 which means that the only person who is going
19 to bid on that property is the person who
20 credit bids on that property.
21 THE COURT: Isn't that nothing more than
22 advertising a sale of an asset subject to an
23 existing lien?
24 MR. ZELMAN: Well, --
25 THE COURT: Why is it commercially
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