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FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021
NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021
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
REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF
DEFENDANTS’ MOTION
TO DISMISS PLAINTIFFS’ VERIFIED COMPLAINT
KRISS & FEUERSTEIN LLP
Attorneys for Defendants,
360 Lexington Avenue, Suite 1200
New York, New York 10017
(212) 661-2900
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PRELIMINARY STATEMENT
This Reply Memorandum of Law is submitted in further support of the motion by
defendants 1580 Nostrand Mezz, LLC (“Mezz Lender”) and MADISON REALTY CAPITAL,
L.P (“Madison”, and together with the Mezz Lender, collectively, the “Defendants”), motion to
dismiss (“MTD”) plaintiffs HELLO LIVING DEVELOPER NOSTRAND LLC (“Mezz
Borrower”) and HELLO NOSTRAND LLC (“Mortgage Borrower”, and together with the
Mezz Borrower, collectively, the “Plaintiffs”) Verified Complaint (“Complaint”)[NYSCEF Dkt
No. 1].
The Plaintiffs’ filed their opposition to the MTD on December 4, 2012 (NYSCEF Dkt
Nos. 73-82)(“Opposition”), which concedes that the First, Third, and Fifth Causes of Action are
moot and should be dismissed, but erroneously argues that the Second and Fourth Causes of
Action in the Complaint are in some way still viable. They are not. All that remains for
discussion on the MTD are the Second and Fourth Causes of Action, and as set forth in the MTD
and in more detail below, those claims should also be dismissed. The Second Cause of Action
alleges that the Mezzanine Promissory Note violates UCC § 9-109(d)(11), and the Fourth Cause
of Action seeks a declaratory judgment that the Defendants acted in bad faith in the UCC
transaction in violation of UCC § 1-304.
The Opposition argues that because a separate mortgage to a different entity securing the
real property owned by the Mortgage Borrower is cross-defaulted with the Mezzanine Loan
Documents, that this alone somehow “creates” or “transfers” an interest in “real property” in
“violation” of UCC § 9-109(d)(11).1 First, Plaintiff cites to no caselaw for their illogical
1
It should be noted that Plaintiffs asserted that the Mezzanine Loan Documents violated UCC § 9-109(d)(11) in their
Order to Show Cause for a preliminary injunction (“OSC”)(NYSCEF Dkt Nos. 9-22), however the Plaintiffs then
abandoned that argument altogether by i) failing to address in their reply in further support of Plaintiffs’ OSC (see
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assertion. Second, a cross-default provision does not create or transfer an interest in real property
in favor of Mezz Lender, and even if a cross-default provision was triggered, the Mezz Lender
could not foreclose upon the Mortgage Borrower’s real property because no lien or security
interest was granted to the Mezz Lender by the Mezzanine Loan Documents. As set forth in the
MTD, the definition of “Collateral” in Mezz Loan Agreement only covers personal property, i.e.,
the membership interests, and does not include any real property. The Mezzanine Loan
Documents make it abundantly clear that the Collateral does not include any interest in real
property, and therefore, does not create or transfer any interest in or lien on any real property.
Third, even assuming, arguendo, that the Collateral did include real property, which it does not,
Plaintiffs fail to take into account that both UCC- 9-109(d)(11)(D) and by express reference
UCC- 9-604, which both permits and contemplates security agreements covering both personal
and real property.
Next, regarding Plaintiffs’ Fourth Cause of Action, the Opposition asserts that Defendants
failed to act in good faith because they improperly withheld loan advances (“Advances”) to delay
completion of the Nostrand Building. See Opposition at pg. 20. As a threshold matter, there are
no allegations anywhere in the Complaint that regarding the Advances or that Defendants
improperly withheld any Advances. The Plaintiffs now seek to inappropriately add these new
“allegations” and effectively amend the Complaint through their Opposition. Additionally, there
is no affidavit or affirmation from anyone with personal knowledge of the Advances attesting that
loan advances were “improperly withheld.” Finally, the Mortgage Borrower alleged the same
bald lack of good faith allegations in the Kings Action regarding the Advances, and that case was
NYSCEF Dkt Nos. 33-46); and ii) failing to address it during the October 18, 2021 oral argument on the OSC when
Defendants’ counsel argued to the Court, with no response by Plainiffs’ counsel, that Plaintiffs have abandoned the
argument (see OSC Hearing Transcript, NYSCEF Dkt No 69 at pgs 23-24.
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indeed dismissed on November 15, 2021.2 See NYSCEF Dkt No. 81; and Reply Affirm., Exhibit
“A” (Complaint in Kings Action).
Accordingly, for all the reasons cited in the MTD and below, the Complaint should be
dismissed in its entirety.
FACTS
The factual background of this matter insofar as it presents dispositive documentary
evidence is set forth in the Affirmation of Jerold C. Feuerstein sworn to on November 2, 2021
(the “Feuerstein Affirm.”) and in the Reply Affirmation of Jerold C. Feuerstein (“Reply
Affirm.”) submitted herewith. All defined terms and exhibits thereto are incorporated by
reference herein.
ARGUMENT
A. Second Cause of Action – Plaintiffs Cross-Default Argument Has No Merit, and
Even if it did, UCC §§ 9-109(d)(11)(D) and 9-604 Permits and Contemplates Real
Property and Personal Property Secured in a Security Agreement.
In the Second Cause of Action Defendants seek a declaratory judgment that the
Promissory Note “violates” UCC 9-109(d)(11).
The Mezzanine Loan is a secured transaction, and the security for the Mezzanine Loan is
the defined pledged Collateral, which only consists of personal property. As set forth in the MTD,
none of the Mezzanine Loan Documents “create or transfer” “an interest in or lien on real
property.” The Pledge, which creates the security interest in the Collateral obviously does not
2
At the August 24, 2021 hearing on the OSC, Plaintiffs’ counsel specifically told this Court,
But, ultimately, the claims in this action address the reasonableness and the propriety of the
U.C.C. sale. We don't really address the U.C.C. sale at all in the Kings County action. But, that's
what we are raising here. That's what our five causes of action in this case are targeted at. So, they
do not actually overlap. They are the same background to each of the cases, but the causes of
action do not overlap.
NYSCEF Dkt. No 27 (August 24, 2021 OSC Hearing) at pg. 7.
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“create” or “transfer” an “interest in” or “lien on” real property, and the Mezz Lender has already
briefed this point in its Memorandum of Law in support of the MTD.
Plaintiffs assert “there can be no dispute that the Pledge Agreement effectively applied
Article 9 of the UCC to a ‘lien on real property’”. Opposition Memorandum of Law at Page 18.
The Opposition relies entirely upon a contorted and conclusory mis-interpretation of the statute.
The Plaintiffs make the incredulous argument that because the Mezzanine Loan Documents
contain a cross-default provision with the Mortgage (held by a different entity) on the property
owned by the Mortgage Borrower, this somehow creates or transfers and interest in or lien on real
property. There is not a single case cited anywhere in the Plaintiff’s motion papers in support of
this position. Based on Defendants’ own legal research of Plaintiffs argument, no caselaw was
cited by them because none actually exists. The cross-default provision in the Mezzanine Loan
Documents do not create a lien on or interest in real property. Even upon the occurrence of a
cross-default event, the Mezz Lender still could not foreclose on any lien on real property
because none exists and as no real property is not included in the Collateral. Therefore,
Plaintiffs’ “cross-default” argument is nothing more than a red herring and a non-sensical one at
that.
Defendants reject Plaintiffs’ “cross-default” assertion, however, assuming, arguendo, that
the Pledge covered both personal property (the actually pledged Collateral – personal property in
the form of Membership Interests in Hello Nostrand LLC) and real property (through some
purported extension of the real property mortgages held by Mortgage Lender), the Mezz Lender
would still be permitted to enforce its rights against the Collateral (personal property) through a
public disposition of the Collateral under UCC Article 9.
UCC § 9-109(d)(11)(D) specifically exempts security agreements which cover both
personal and real property in Section 9-604. UCC 9-109(d)(11)(D) provides,
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(11) the creation or transfer of an interest in or lien on real property, including a lease or
rents thereunder, except to the extent that provision is made for:
(D) security agreements covering personal and real property in Section 9-604.
McKinney's Uniform Commercial Code § 9-109(d)(11)(D). (emphasis added). The Plaintiffs
argument wants this Court to completely ignore the “except to the extent” language in the statute
and everything thereafter.
UCC § 9-604 provides:
(a) Enforcement: personal and real property. If a security agreement covers
both personal and real property, a secured party may proceed:
(1) under this part as to the personal property without prejudicing
any rights with respect to the real property; or
(2) as to both the personal property and the real property in
accordance with the rights with respect to the real property, in
which case the other provisions of this part do not apply.
McKinney's Uniform Commercial Code § 9-604. (emphasis added). Therefore, even if the
Mezzanine Loan Documents apply to or create a lien on or interest in both personal property and
real property, this is expressly permitted by both UCC § 9-109(d)(11)(D) and UCC § 9-604. Of
course, the Plaintiffs’ Complaint and Opposition completely ignore UCC § 9-604 because that
statute completely defeats and destroys their claim. As a result, even if true, Plaintiffs’ Second
Cause of Action should be dismissed as it has no merit and fails to state a cause of action.
B. Plaintiffs’ Fourth Cause of Action Should Be Dismissed Because the Plaintiffs
Have Not Opposed the Arguments in the MTD Regarding the Allegations of
“Bad Faith” in the Complaint and Allege New Unsubstantiated “Bad Faith” Acts
for the First Time in an Attempt to Inappropriately Amend Their Complaint
Through Opposition.
In the Fourth Cause of Action (“Declaratory Judgment of Bad Faith in the UCC
Transaction”), Plaintiffs allege Good Faith and Fair Dealing implicit in a contract – but that does
not mean a lender cannot enforce their rights following an admitted default.
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In the Opposition, Plaintiffs appear to abandon the “bad faith” allegations which are
actually in the Complaint in favor of new “allegations” not asserted in the Complaint, and raised
for the first time in the Opposition. In Paragraph 110 of the Complaint (Defendants’ Exhibit A
at NYSCEF Doc. No. 82), Plaintiffs specifically allege:
Defendant Madison Capital and its shell company, defendant 1580
Nostrand Mezz, have violated N.Y. U.C.C. Law § 1-304 and have
acted in bad faith by: (i) attempting to clog plaintiffs Hello
Developer Nostrand’s and Hello Nostrand’s right of equity
redemption in the mortgages which are owned by defendant
Madison Capital, and its shell companies, against the Nostrand
Building; (ii) conducting a commercially unreasonable sale of the
Collateral and by having plaintiff Hello Developer Nostrand
unlawfully waive its right to object to the commercially
unreasonable sale of the Collateral when such a wavier is void
under New York law; (iii) waiting until plaintiff Hello Nostrand
obtained the TCO for the Nostrand Building before declaring a
default under the Mezzanine Promissory Note and serving a
commercially unreasonable Notice of Sale of the Collateral; (iv)
giving itself a veto power in the Terms of Sale and the Revised
Terms of Sale over who can bid at the auction so as to rig the
auction to ensure that defendant Madison Capital or one of its shell
companies is the winning bidder; and by evidencing an intention to
take away the Nostrand Building by means of predatory lending
practices.
Each of the above specifically stated alleged actions are demonstrably false, moot, or both
– and addressed and disposed of in the MTD. See MTD pgs 8-13. Plaintiffs failed to address
any of the points argued in the MTD with respect to Paragraph 110 of the Complaint, each of
which were specifically dealt with in the MTD. As a result, Plaintiffs have conceded and/or
abandoned opposition to each and every argument made by Defendants in the MTD concerning
the bad faith alleged in the Complaint. See Kronick v. L.P. Thebault Co., 70 A.D.3d 648, 649 (2d
Dep't 2010) (affirming dismissal where plaintiff “abandoned [the] claim by failing to oppose the
branch of the defendant's motion which was to dismiss it”); Corrado v. Metro. Transit Auth., 45
Misc. 3d 1203(A), at *18 (Sup. Ct. N.Y. Co. 2014) (“[P]laintiff, in reply, fails to address
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defendants' arguments as to this section and essentially concedes the section's inapplicability, and
thus is deemed to have abandoned its claim....”).
Faced with that reality and grasping at straws, Plaintiffs make a feeble turn to claim that
the existence of discretionary language in section 2.1 of the Mezz Loan Agreement – dealing with
certain Advances creates some basis to claim bad-faith.
There is no allegation anywhere in the Complaint concerning Advances in general or
Paragraph 2.1 of the Mezzanine Loan Agreement in particular. Nonetheless, for the first time in
this proceeding, Plaintiffs’ claim in the Opposition Memorandum of Law, “[i]t has not been
disputed that the defendants improperly withheld loan advances to delay the completion of the
Nostrand Building so as to manufacture a default that could trigger a UCC sale of the Collateral.”
To be clear: Defendants have not disputed this baseless allegation only because it has never been
alleged. Plaintiffs’ claim that this conclusory claim, without any evidentiary support, sustains an
unpleaded violation of UCC Law 1-304 is pure nonsense.
The Defendants can only move to dismiss what Plaintiffs have alleged in the Complaint,
not what new allegations Plaintiffs allege in Opposition. Plaintiffs cannot amend their complaint
to add un-pleaded facts through their Opposition. See MediaXposure Ltd. (Cayman) v.
Omnireliant Holdings, Inc., 29 Misc. 3d 1215[A] (Sup Ct. N.Y. Co. Oct. 25, 2010) (“[P]laintiff
seeks to amend the complaint through an opposition brief, which is not permissible.”); Rubin v.
Nine West Group, Inc., 1999 N.Y. Misc. LEXIS 655, at *4 (Sup. Ct. West. Co. Aug. 24, 2009)
(“A claim for relief may not be amended by the briefs in opposition to
a motion to dismiss”); Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F. Supp. 832, 836
(S.D.N.Y. 1988) (same).
In addition to Plaintiffs’ failing to assert this new “Advances” argument anywhere in the
Complaint, the Opposition also fails to provide any affidavit by anyone with firsthand knowledge
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that the Defendants failed to make the alleged Advances. A court may consider affidavits
submitted by the plaintiff to remedy any defects in the Complaint. See Rovello v. Orofino Realty
Co., 40 N.Y.2d 633, 635, 389 N.Y.S.2d 314, 357 N.E.2d 970 (1976). However, here,
no affidavit was submitted in opposition to the MTD by any plaintiff with first-
hand knowledge of the facts.
Finally, while the Plaintiffs did not allege anything regarding Advances in the Complaint,
the Mortgage Borrower made allegations regarding the Advances in the Kings Action, and the
complaint in the Kings Action was dismissed in its entirety, which should shed light on the
unmeritorious nature of these new “allegations”.
For all of the reasons set forth in the MTD and above, the Fourth Cause of Action in the
Complaint must be dismissed.
CONCLUSION
Based on foregoing, Defendants request that the MTD be granted and the Complaint be
dismissed in its entirety.
Dated: December 21, 2021
New York, New York
KRISS & FEUERSTEIN LLP
Attorneys for the Defendants
By: /s/ Jerold C. Feuerstein
Jerold C. Feuerstein, Esq.
Michael J. Bonneville, Esq.
Greg A. Friedman, Esq.
360 Lexington Avenue, Suite 1200
New York, New York 10017
(212) 661-2900
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WORD COUNT CERTIFICATION
As required by Commercial Division Rule 17, I certify that the document filed with this
certification contains 2473 words, excluding the parts of the document that are exempted,
according to the word count function of the word processing program used to prepare the
document.
KRISS & FEUERSTEIN LLP
Attorneys for the Defendants
By: /s/ Jerold C. Feuerstein
Jerold C. Feuerstein, Esq.
Michael J. Bonneville, Esq.
Greg A. Friedman, Esq.
360 Lexington Avenue, Suite 1200
New York, New York 10017
(212) 661-2900
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Preview
FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 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 REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ VERIFIED COMPLAINT KRISS & FEUERSTEIN LLP Attorneys for Defendants, 360 Lexington Avenue, Suite 1200 New York, New York 10017 (212) 661-2900 1 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 PRELIMINARY STATEMENT This Reply Memorandum of Law is submitted in further support of the motion by defendants 1580 Nostrand Mezz, LLC (“Mezz Lender”) and MADISON REALTY CAPITAL, L.P (“Madison”, and together with the Mezz Lender, collectively, the “Defendants”), motion to dismiss (“MTD”) plaintiffs HELLO LIVING DEVELOPER NOSTRAND LLC (“Mezz Borrower”) and HELLO NOSTRAND LLC (“Mortgage Borrower”, and together with the Mezz Borrower, collectively, the “Plaintiffs”) Verified Complaint (“Complaint”)[NYSCEF Dkt No. 1]. The Plaintiffs’ filed their opposition to the MTD on December 4, 2012 (NYSCEF Dkt Nos. 73-82)(“Opposition”), which concedes that the First, Third, and Fifth Causes of Action are moot and should be dismissed, but erroneously argues that the Second and Fourth Causes of Action in the Complaint are in some way still viable. They are not. All that remains for discussion on the MTD are the Second and Fourth Causes of Action, and as set forth in the MTD and in more detail below, those claims should also be dismissed. The Second Cause of Action alleges that the Mezzanine Promissory Note violates UCC § 9-109(d)(11), and the Fourth Cause of Action seeks a declaratory judgment that the Defendants acted in bad faith in the UCC transaction in violation of UCC § 1-304. The Opposition argues that because a separate mortgage to a different entity securing the real property owned by the Mortgage Borrower is cross-defaulted with the Mezzanine Loan Documents, that this alone somehow “creates” or “transfers” an interest in “real property” in “violation” of UCC § 9-109(d)(11).1 First, Plaintiff cites to no caselaw for their illogical 1 It should be noted that Plaintiffs asserted that the Mezzanine Loan Documents violated UCC § 9-109(d)(11) in their Order to Show Cause for a preliminary injunction (“OSC”)(NYSCEF Dkt Nos. 9-22), however the Plaintiffs then abandoned that argument altogether by i) failing to address in their reply in further support of Plaintiffs’ OSC (see 1 4880-4068-3271, v. 1 2 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 assertion. Second, a cross-default provision does not create or transfer an interest in real property in favor of Mezz Lender, and even if a cross-default provision was triggered, the Mezz Lender could not foreclose upon the Mortgage Borrower’s real property because no lien or security interest was granted to the Mezz Lender by the Mezzanine Loan Documents. As set forth in the MTD, the definition of “Collateral” in Mezz Loan Agreement only covers personal property, i.e., the membership interests, and does not include any real property. The Mezzanine Loan Documents make it abundantly clear that the Collateral does not include any interest in real property, and therefore, does not create or transfer any interest in or lien on any real property. Third, even assuming, arguendo, that the Collateral did include real property, which it does not, Plaintiffs fail to take into account that both UCC- 9-109(d)(11)(D) and by express reference UCC- 9-604, which both permits and contemplates security agreements covering both personal and real property. Next, regarding Plaintiffs’ Fourth Cause of Action, the Opposition asserts that Defendants failed to act in good faith because they improperly withheld loan advances (“Advances”) to delay completion of the Nostrand Building. See Opposition at pg. 20. As a threshold matter, there are no allegations anywhere in the Complaint that regarding the Advances or that Defendants improperly withheld any Advances. The Plaintiffs now seek to inappropriately add these new “allegations” and effectively amend the Complaint through their Opposition. Additionally, there is no affidavit or affirmation from anyone with personal knowledge of the Advances attesting that loan advances were “improperly withheld.” Finally, the Mortgage Borrower alleged the same bald lack of good faith allegations in the Kings Action regarding the Advances, and that case was NYSCEF Dkt Nos. 33-46); and ii) failing to address it during the October 18, 2021 oral argument on the OSC when Defendants’ counsel argued to the Court, with no response by Plainiffs’ counsel, that Plaintiffs have abandoned the argument (see OSC Hearing Transcript, NYSCEF Dkt No 69 at pgs 23-24. 2 4880-4068-3271, v. 1 3 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 indeed dismissed on November 15, 2021.2 See NYSCEF Dkt No. 81; and Reply Affirm., Exhibit “A” (Complaint in Kings Action). Accordingly, for all the reasons cited in the MTD and below, the Complaint should be dismissed in its entirety. FACTS The factual background of this matter insofar as it presents dispositive documentary evidence is set forth in the Affirmation of Jerold C. Feuerstein sworn to on November 2, 2021 (the “Feuerstein Affirm.”) and in the Reply Affirmation of Jerold C. Feuerstein (“Reply Affirm.”) submitted herewith. All defined terms and exhibits thereto are incorporated by reference herein. ARGUMENT A. Second Cause of Action – Plaintiffs Cross-Default Argument Has No Merit, and Even if it did, UCC §§ 9-109(d)(11)(D) and 9-604 Permits and Contemplates Real Property and Personal Property Secured in a Security Agreement. In the Second Cause of Action Defendants seek a declaratory judgment that the Promissory Note “violates” UCC 9-109(d)(11). The Mezzanine Loan is a secured transaction, and the security for the Mezzanine Loan is the defined pledged Collateral, which only consists of personal property. As set forth in the MTD, none of the Mezzanine Loan Documents “create or transfer” “an interest in or lien on real property.” The Pledge, which creates the security interest in the Collateral obviously does not 2 At the August 24, 2021 hearing on the OSC, Plaintiffs’ counsel specifically told this Court, But, ultimately, the claims in this action address the reasonableness and the propriety of the U.C.C. sale. We don't really address the U.C.C. sale at all in the Kings County action. But, that's what we are raising here. That's what our five causes of action in this case are targeted at. So, they do not actually overlap. They are the same background to each of the cases, but the causes of action do not overlap. NYSCEF Dkt. No 27 (August 24, 2021 OSC Hearing) at pg. 7. 3 4880-4068-3271, v. 1 4 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 “create” or “transfer” an “interest in” or “lien on” real property, and the Mezz Lender has already briefed this point in its Memorandum of Law in support of the MTD. Plaintiffs assert “there can be no dispute that the Pledge Agreement effectively applied Article 9 of the UCC to a ‘lien on real property’”. Opposition Memorandum of Law at Page 18. The Opposition relies entirely upon a contorted and conclusory mis-interpretation of the statute. The Plaintiffs make the incredulous argument that because the Mezzanine Loan Documents contain a cross-default provision with the Mortgage (held by a different entity) on the property owned by the Mortgage Borrower, this somehow creates or transfers and interest in or lien on real property. There is not a single case cited anywhere in the Plaintiff’s motion papers in support of this position. Based on Defendants’ own legal research of Plaintiffs argument, no caselaw was cited by them because none actually exists. The cross-default provision in the Mezzanine Loan Documents do not create a lien on or interest in real property. Even upon the occurrence of a cross-default event, the Mezz Lender still could not foreclose on any lien on real property because none exists and as no real property is not included in the Collateral. Therefore, Plaintiffs’ “cross-default” argument is nothing more than a red herring and a non-sensical one at that. Defendants reject Plaintiffs’ “cross-default” assertion, however, assuming, arguendo, that the Pledge covered both personal property (the actually pledged Collateral – personal property in the form of Membership Interests in Hello Nostrand LLC) and real property (through some purported extension of the real property mortgages held by Mortgage Lender), the Mezz Lender would still be permitted to enforce its rights against the Collateral (personal property) through a public disposition of the Collateral under UCC Article 9. UCC § 9-109(d)(11)(D) specifically exempts security agreements which cover both personal and real property in Section 9-604. UCC 9-109(d)(11)(D) provides, 4 4880-4068-3271, v. 1 5 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 (11) the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for: (D) security agreements covering personal and real property in Section 9-604. McKinney's Uniform Commercial Code § 9-109(d)(11)(D). (emphasis added). The Plaintiffs argument wants this Court to completely ignore the “except to the extent” language in the statute and everything thereafter. UCC § 9-604 provides: (a) Enforcement: personal and real property. If a security agreement covers both personal and real property, a secured party may proceed: (1) under this part as to the personal property without prejudicing any rights with respect to the real property; or (2) as to both the personal property and the real property in accordance with the rights with respect to the real property, in which case the other provisions of this part do not apply. McKinney's Uniform Commercial Code § 9-604. (emphasis added). Therefore, even if the Mezzanine Loan Documents apply to or create a lien on or interest in both personal property and real property, this is expressly permitted by both UCC § 9-109(d)(11)(D) and UCC § 9-604. Of course, the Plaintiffs’ Complaint and Opposition completely ignore UCC § 9-604 because that statute completely defeats and destroys their claim. As a result, even if true, Plaintiffs’ Second Cause of Action should be dismissed as it has no merit and fails to state a cause of action. B. Plaintiffs’ Fourth Cause of Action Should Be Dismissed Because the Plaintiffs Have Not Opposed the Arguments in the MTD Regarding the Allegations of “Bad Faith” in the Complaint and Allege New Unsubstantiated “Bad Faith” Acts for the First Time in an Attempt to Inappropriately Amend Their Complaint Through Opposition. In the Fourth Cause of Action (“Declaratory Judgment of Bad Faith in the UCC Transaction”), Plaintiffs allege Good Faith and Fair Dealing implicit in a contract – but that does not mean a lender cannot enforce their rights following an admitted default. 5 4880-4068-3271, v. 1 6 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 In the Opposition, Plaintiffs appear to abandon the “bad faith” allegations which are actually in the Complaint in favor of new “allegations” not asserted in the Complaint, and raised for the first time in the Opposition. In Paragraph 110 of the Complaint (Defendants’ Exhibit A at NYSCEF Doc. No. 82), Plaintiffs specifically allege: Defendant Madison Capital and its shell company, defendant 1580 Nostrand Mezz, have violated N.Y. U.C.C. Law § 1-304 and have acted in bad faith by: (i) attempting to clog plaintiffs Hello Developer Nostrand’s and Hello Nostrand’s right of equity redemption in the mortgages which are owned by defendant Madison Capital, and its shell companies, against the Nostrand Building; (ii) conducting a commercially unreasonable sale of the Collateral and by having plaintiff Hello Developer Nostrand unlawfully waive its right to object to the commercially unreasonable sale of the Collateral when such a wavier is void under New York law; (iii) waiting until plaintiff Hello Nostrand obtained the TCO for the Nostrand Building before declaring a default under the Mezzanine Promissory Note and serving a commercially unreasonable Notice of Sale of the Collateral; (iv) giving itself a veto power in the Terms of Sale and the Revised Terms of Sale over who can bid at the auction so as to rig the auction to ensure that defendant Madison Capital or one of its shell companies is the winning bidder; and by evidencing an intention to take away the Nostrand Building by means of predatory lending practices. Each of the above specifically stated alleged actions are demonstrably false, moot, or both – and addressed and disposed of in the MTD. See MTD pgs 8-13. Plaintiffs failed to address any of the points argued in the MTD with respect to Paragraph 110 of the Complaint, each of which were specifically dealt with in the MTD. As a result, Plaintiffs have conceded and/or abandoned opposition to each and every argument made by Defendants in the MTD concerning the bad faith alleged in the Complaint. See Kronick v. L.P. Thebault Co., 70 A.D.3d 648, 649 (2d Dep't 2010) (affirming dismissal where plaintiff “abandoned [the] claim by failing to oppose the branch of the defendant's motion which was to dismiss it”); Corrado v. Metro. Transit Auth., 45 Misc. 3d 1203(A), at *18 (Sup. Ct. N.Y. Co. 2014) (“[P]laintiff, in reply, fails to address 6 4880-4068-3271, v. 1 7 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 defendants' arguments as to this section and essentially concedes the section's inapplicability, and thus is deemed to have abandoned its claim....”). Faced with that reality and grasping at straws, Plaintiffs make a feeble turn to claim that the existence of discretionary language in section 2.1 of the Mezz Loan Agreement – dealing with certain Advances creates some basis to claim bad-faith. There is no allegation anywhere in the Complaint concerning Advances in general or Paragraph 2.1 of the Mezzanine Loan Agreement in particular. Nonetheless, for the first time in this proceeding, Plaintiffs’ claim in the Opposition Memorandum of Law, “[i]t has not been disputed that the defendants improperly withheld loan advances to delay the completion of the Nostrand Building so as to manufacture a default that could trigger a UCC sale of the Collateral.” To be clear: Defendants have not disputed this baseless allegation only because it has never been alleged. Plaintiffs’ claim that this conclusory claim, without any evidentiary support, sustains an unpleaded violation of UCC Law 1-304 is pure nonsense. The Defendants can only move to dismiss what Plaintiffs have alleged in the Complaint, not what new allegations Plaintiffs allege in Opposition. Plaintiffs cannot amend their complaint to add un-pleaded facts through their Opposition. See MediaXposure Ltd. (Cayman) v. Omnireliant Holdings, Inc., 29 Misc. 3d 1215[A] (Sup Ct. N.Y. Co. Oct. 25, 2010) (“[P]laintiff seeks to amend the complaint through an opposition brief, which is not permissible.”); Rubin v. Nine West Group, Inc., 1999 N.Y. Misc. LEXIS 655, at *4 (Sup. Ct. West. Co. Aug. 24, 2009) (“A claim for relief may not be amended by the briefs in opposition to a motion to dismiss”); Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F. Supp. 832, 836 (S.D.N.Y. 1988) (same). In addition to Plaintiffs’ failing to assert this new “Advances” argument anywhere in the Complaint, the Opposition also fails to provide any affidavit by anyone with firsthand knowledge 7 4880-4068-3271, v. 1 8 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 that the Defendants failed to make the alleged Advances. A court may consider affidavits submitted by the plaintiff to remedy any defects in the Complaint. See Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635, 389 N.Y.S.2d 314, 357 N.E.2d 970 (1976). However, here, no affidavit was submitted in opposition to the MTD by any plaintiff with first- hand knowledge of the facts. Finally, while the Plaintiffs did not allege anything regarding Advances in the Complaint, the Mortgage Borrower made allegations regarding the Advances in the Kings Action, and the complaint in the Kings Action was dismissed in its entirety, which should shed light on the unmeritorious nature of these new “allegations”. For all of the reasons set forth in the MTD and above, the Fourth Cause of Action in the Complaint must be dismissed. CONCLUSION Based on foregoing, Defendants request that the MTD be granted and the Complaint be dismissed in its entirety. Dated: December 21, 2021 New York, New York KRISS & FEUERSTEIN LLP Attorneys for the Defendants By: /s/ Jerold C. Feuerstein Jerold C. Feuerstein, Esq. Michael J. Bonneville, Esq. Greg A. Friedman, Esq. 360 Lexington Avenue, Suite 1200 New York, New York 10017 (212) 661-2900 8 4880-4068-3271, v. 1 9 of 10 FILED: ROCKLAND COUNTY CLERK 12/21/2021 03:13 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 110 RECEIVED NYSCEF: 12/21/2021 WORD COUNT CERTIFICATION As required by Commercial Division Rule 17, I certify that the document filed with this certification contains 2473 words, excluding the parts of the document that are exempted, according to the word count function of the word processing program used to prepare the document. KRISS & FEUERSTEIN LLP Attorneys for the Defendants By: /s/ Jerold C. Feuerstein Jerold C. Feuerstein, Esq. Michael J. Bonneville, Esq. Greg A. Friedman, Esq. 360 Lexington Avenue, Suite 1200 New York, New York 10017 (212) 661-2900 9 4880-4068-3271, v. 1 10 of 10