Preview
FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021
NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021
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
MEMORANDUM OF LAW IN 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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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ......................................................................................................... iii
PRELIMINARY STATEMENT .....................................................................................................1
FACTS .............................................................................................................................................2
STANDARD OF REVIEW OF CPLR 3211(A) MOTION ............................................................2
CPLR 3211(a)(1) – Defense of Documentary Evidence ................................................. 2
CPLR 3211(a)(7) – Failure to State a Cause of Action ................................................... 3
ARGUMENT ...................................................................................................................................4
A. Plaintiffs’ Fail to State a Cause of Action Against Madison ...................................4
B. The Declaratory Judgment Claims in the Second, Third, and
Fourth Causes of Action Should Be Dismissed as a Matter of Law
Because They Are Moot ..........................................................................................6
Plaintiffs’ Allegations that the Mezz Lender is not Authorized to
do Business in the State of New York is Now Moot ...............................................7
Plaintiffs’ Allegations that the September 2, 2021 UCC Sale of the
Collateral is Commercially Unreasonable is Moot as Evidenced by
the October 25, 2021 Order .....................................................................................7
Plaintiffs’ Fourth Cause of Action – Bad Faith .......................................................8
C. The UCC Sale Does Not Improperly Clog Plaintiffs' Right of
Redemption as Alleged in the Complaint’s Fourth Cause of Action.....................10
D. That the Mortgage Borrower obtained a TCO Does Not Preclude
the Mezz Lender from Exercising its Rights and Remedies under
the Mezz Loan Documents ....................................................................................12
E. Plaintiffs’ Predatory Lending Allegations Do Not Relate to this
Action .....................................................................................................................13
F. Plaintiffs Fail to State a Cause of Action for Declaratory Judgment
that the Collateral is not Subject to a UCC Auction and Sale ...............................14
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G. Plaintiffs Fifth Cause of Action for a Permanent Injunction Fails to
State a Cause of Action ..........................................................................................16
CONCLUSION ..............................................................................................................................20
WORD COUNT CERTIFICATION .............................................................................................21
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TABLE OF AUTHORITIES
Page(s)
Cases
893 4th Ave. Lofts LLC & Michael UHR v. 5AIF Nutmeg, LLC,
2020 WL 6940968 (Sup. Ct. Kings Cty. Nov. 2, 2020) ....................................................18, 19
Abelman v. Shoratlantic Development Co., Inc.,
153 A.D.2d 821, 545 N.Y.S.2d 333 (2d Dept 1989) .............................................................5, 6
Alexander & Alexander v. Fritzen,
114 A.D.2d 814, 495 N.Y.S.2d 386 (1st Dept 1985),
aff'd, 68 N.Y.2d 968, 510 N.Y.S.2d 546 (1986) ........................................................................5
American Ins. Assn. v. Chu,
64 NY2d 379 (1985) ..................................................................................................................7
American Protein Corp. v. AB Volvo,
844 F.2d 56 (2d Cir. 1988), cert. denied, 488 U.S. 852 (1988) .............................................4, 5
Atlas MF Mezzanine Borrower, LLC v. Macquarie Texas Loan Holder, LLC,
2017 WL 729128 (S.D.N.Y. Feb. 23, 2017) ..............................................................................9
Baines v. Berlin,
125 AD3d 439 (1st Dept 2015)..................................................................................................7
Bennett v. Nardone,
298 A.D.2d 790 (3d Dept 2002) ..............................................................................................16
Berzin v. W. P. Carey & Co., Inc.,
293 A.D.2d 320 (1st Dept 2002)..............................................................................................12
Breytman v. Olinville Realty, LLC,
54 A.D.3d 703, 864 N.Y.S.2d 70 ...............................................................................................3
Broadway 500 W. Monroe Mezz II LLC,
80 A.D.3d 483 (1st Dep't 2011) ...............................................................................................18
Campo v. 1st Nationwide Bank FN,
857 F. Supp. 264 (E.D.N.Y. 1994) ............................................................................................5
Cervini v. Zanoni,
95 A.D.3d 919 (N.Y. App. Ct. 2012).........................................................................................2
Chicago Research & Trading v. New York Futures Exch., Inc.,
84 A.D.2d 413, 446 N.Y.S.2d 280 (1st Dep't 1982) ................................................................17
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Chrysler Credit Corp. v. Dioguardi Jeep Eagle, Inc.,
192 A.D.2d 1066 (4th Dept 1993) ...........................................................................................12
Clarke v. Parkway Village Equities Corp.,
927 N.Y.S.2d 815, 31 Misc. 3d 1217(A) (Queens Co. Sup. Ct. 2011)......................................3
Coastal States Trading, Inc, v. Zenith Navigation S.A.,
446 F. Supp. 330 (S.D.N.Y. 1977) ............................................................................................4
Cusumano v. Iota Industries, Inc.,
100 A.D.2d 892, 474 N.Y.S.2d 579 (2d Dept 1984) .................................................................6
DH Cattle Holdings Co. v Reinoso,
176 A.D.2d 1057 (3d Dep't 1991)............................................................................................14
Dopp v. Franklin National Bank,
461 F.2d 873 (2d Cir. 1972).....................................................................................................11
Fidenas AG v. Honeywell Inc.,
501 F. Supp. 1029 (S.D.N.Y. 1980)...........................................................................................4
Flushing Landmark Realty Mezz LLC et al v. Landmark Portfolio Mezz, LLC,
Index No. 708487/2019 (Sup. Ct. NY Qns. Cty. June 18, 2019) ............................................11
Goshen v. Mutual Life Ins. Co. of N.Y.,
98 N.Y.2d 314 (App. Ct. 2002) .................................................................................................2
Gramercy Warehouse Funding I LLC v. Wells Fargo Bank,
No. 602332/2009, 2009 WL 7830356 (Sup. Ct. N.Y. Cnty. July 31, 2009) ...........................18
HH Cincinnati Textile L.P. v. Acres Capital Servicing LLC,
2018 WL 3056919 (Sup. Ct., N.Y. Cnty. June 19, 2018) ..................................................10, 11
High Line Dev. LLC v. 450 W. Nth St. Corp.,
2015 NY Slip Op 32693(U) (Sup Ct, NY County Feb. 1, 2016) ..............................................7
Hotel 71 Mezz Lender LLC v. Falor,
14 NY3d 303, 900 NYS2d 698 [2010] ....................................................................................18
Indianapolis Morris Plan Corp. v. Karlen,
28 N.Y.2d 30 (1971) ................................................................................................................11
In re Adobe Trucking, Inc.,
2011 WL 6258233 2011 WL 6258233
(W.D. Tex. Bankr. Dec. 15, 2011) .......................................................................................9, 10
In re Luis Elec. Contracting Corp.,
149 B.R. 751 (Bankr. E.D.N.Y. 1992) .....................................................................................14
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Jamaica Savings Bank v. Cohan,
36 A.D.2d 743 (2d Dept 1971) ................................................................................................12
James v. Alderton Dock Yards Ltd.,
256 NY 298 (1931) ....................................................................................................................7
Leon v. Martinez,
84 N.Y.2d 83, 614 N.Y.S.2d 972, 638 N.E.2d 511 ...................................................................3
McDermott v. Albany,
309 A.D.2d 1004, 765 N.Y.S.2d 903 (3d Dep't 2003).............................................................17
McNeary v. Niagara Mohawk Power Corp.,
286 A.D.2d 522, 728 N.Y.S.2d 840 (3d Dept 2001) ...............................................................16
Meshel v. Resorts International of New York, Inc.,)
160 A.D.2d at 211, 553 N.Y.S.2d 342 (1990) .......................................................................4, 5
Meyer v. Guinta,
692 N.Y.S.2d 159 (2d Dept. 1999) ............................................................................................3
Mills Novelty Co. v. Sunderman,
266 N.Y. 32, 193 N.E. 541 (1934) ...........................................................................................16
Morales v. Copy Right, Inc.,
813 N.Y.S.2d 731 (2d Dept. 2006) ............................................................................................3
Morris v. New York State Dep't of Tax. and Fin.,
82 N.Y.2d 135, 603 N.Y.S.2d 807 (1993) .................................................................................4
Mukhopadhyay v. Genesis Corp.,
894 N.Y.S.2d 430 (1st Dept. 2010) ...........................................................................................3
Newcomb v. Sims,
63 A.D.3d 1022 (App. Div. 2008) .........................................................................................2, 3
Orix Credit Alliance, Inc. v. East End Dev. Corp.,
260 A.D.2d 454 (2d Dept 1999) ................................................................................................9
Pacific Elec. Wire & Cable Co. v. Set Top Int'l Inc.,
2004 U.S. Dist. Lexis 3400 (S.D.N.Y. Jan. 20,2004) ........................................................17, 18
Parsippany Constr. Co. v. Clark Patterson Assocs.,
839 N.Y.S.2d 179 (2d Dept. 2007) ............................................................................................3
Pebble Cove Homeowners' Assoc., Inc. v. Fidelity New York FSB,
153 A.D.2d 843, 545 N.Y.S.2d 362 (2d Dept. 1989) ................................................................6
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Peck v. Philipson,
265 A.D. 110, 37 N.Y.S.2d 788 (1st Dept 1942).....................................................................16
Roswell Capital Partners LLC v. Alternative Constr. Techs.,
638 F. Supp. 2d 360 (S.D.N.Y. 2009)......................................................................................12
Stockacre Limited v. Pepsico, Inc.,
- A.D.2d-, 696 N.Y.S.2d 500 (2d Dept 1999) ............................................................................6
Thome v. Alexander & Louisa Calder Foundation,
70 AD3d 88 (1st Dept 2009)......................................................................................................7
Thorndock v. Kinderhill Corp.,
702 F. Supp. 468 (S.D.N.Y. 1988) ..........................................................................................18
TNS Holdings, Inc. v. MKI Sec. Corp.,
92 N.Y.2d 335, 680 N.Y.S.2d 891 (1998) .................................................................................4
Truglia v. KFC Corp.,
692 F. Supp. 271 (S.D.N.Y. 1988) ............................................................................................4
YL Sheffield LLC v. Wells Fargo Bank, N.A.,
2009 WL 6408598 (Sup. Ct. N.Y. Cty. July 30, 2009) .....................................................17, 18
Statutes
CPLR § 3001....................................................................................................................................6
CPLR § 3211(a) ...............................................................................................................................2
CPLR § 3211(a)(1) ..........................................................................................................................2
CPLR § 3211(a)(7) ..........................................................................................................................3
LLC Law § 802 ................................................................................................................................7
UCC Article 9 ..........................................................................................................................18, 19
UCC § 9-102(47) ...........................................................................................................................15
UCC § 9-102(65) ...........................................................................................................................14
UCC § 9-109(d)(11) .................................................................................................................14, 16
UCC § 9-506 ..................................................................................................................................11
UCC § 9-501(3) .........................................................................................................................9, 10
UCC § 9-603 ....................................................................................................................................9
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UCC § 9-610 ..................................................................................................................................11
UCC § 9-623 ............................................................................................................................10, 11
UCC § 145:39 ................................................................................................................................19
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PRELIMINARY STATEMENT
This Memorandum of Law is submitted in 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’ claims for the most part, are moot either because the Mezz Lender has
become licensed to do business in the State of New York, or because the claims in the Complaint
are with respect to the cancelled September 2, 2021 UCC sale of the Collateral. Indeed, the
Court’s October 25, 2021 Order (NYSCEF Dkt. No. 58) directed, “… any dispute(s) regarding
the sale of the Collateral scheduled for September 2, 2021, including, but not limited to,
publication and commercial reasonableness, are moot.” Feuerstein Affirm, Exhibit “C”. These
causes of action include, the First Cause of Action, the Third Cause of Action, and many of the
claims set forth in the Fourth Cause of Action.
The Second Cause of Action should be dismissed because the documentary evidence in
the form of the Mezzanine Loan Documents, definitively show that the collateral that secures the
Mezzanine Note is pledged membership interests in the Mezz Borrower (“Collateral”), not any
mortgages.
While many of the “bad faith” allegations in the Fourth Cause of Action in the Complaint
are now moot, the Fourth Cause of Action also alleges that the Mezz Lender acted in “bad faith”
by clogging the equity of redemption. As set forth in greater detail below, the law in New York
is quite clear that a mezzanine borrower still maintains an equity of redemption up until a sale.
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The Complaint further alleges that the Mezz Lender acted in bad faith by noticing a UCC sale of
the Collateral after the Mortgage Borrower obtained a Temporary Certificate of Occupancy
(“TCO”). As set forth in more detail below, caselaw in New York is clear that a lender
exercising its contractual rights, as the Mezz Lender did here, by noticing a UCC Sale of its
collateral, does not constitute bad faith. Accordingly, the Plaintiffs have failed to state a cause
of action for “bad faith.”
Finally, Plaintiffs’ cause of action to permanently enjoin the UCC sale of the Collateral
fails to state a cause of action because the Plaintiffs have cannot show irreparable injury and
Plaintiffs also failed to plead that they have no adequate remedy at law.
For all of the foregoing reasons and the reasons set forth below, it is respectfully urged
that the Complaint must be dismissed in its entirety, with prejudice.
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.”) submitted herewith. All defined terms and exhibits thereto are
incorporated by reference herein.
STANDARD OF REVIEW OF CPLR 3211(a) MOTION
CPLR 3211(a)(1) – Defense of Documentary Evidence
Pursuant to CPLR § 3211(a)(1), dismissal of a complaint is appropriate where "a
defense is founded upon documentary evidence." The documentary evidence must "utterly"
refute a "plaintiff's factual allegations, conclusively establishing a defense as a matter of
law." Cervini v. Zanoni, 95 A.D.3d 919, 920-21 (N.Y. App. Ct. 2012) (citing Goshen v.
Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 (App. Ct. 2002)); Newcomb v. Sims, 63
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A.D.3d 1022, 1023 (App. Div. 2008) (affirming dismissal based on the documentary
evidence, finding the stipulation and settlement agreement refuted the plaintiffs claim
alleging entitlement to a first mortgage on the subject property). "The documentary evidence
must resolve all factual issues as a matter of law and conclusively [dispose] of the plaintiff's
claim." Clarke v. Parkway Village Equities Corp., 927 N.Y.S.2d 815, 31 Misc. 3d 1217(A),
at 7 (Queens Co. Sup. Ct. 2011) (citations omitted). The documentary evidence before the
Court constitutes full defenses to all 3 Causes of Action.
CPLR 3211(a)(7) – Failure to State a Cause of Action
“[T]he facts as alleged by Plaintiffs” do not support any of the Causes of Action claimed
in this Complaint:
“On a motion to dismiss the complaint pursuant to CPLR 3211(a)(7) for
failure to state a cause of action, the court must afford the pleading a
liberal construction, accept all facts as alleged in the pleading to be true,
accord the plaintiff the benefit of every possible inference, and determine
only whether the facts as alleged fit within any cognizable legal theory”
(Breytman v. Olinville Realty, LLC, 54 A.D.3d 703, 703–704, 864
N.Y.S.2d 70; see, also, Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d
972, 638 N.E.2d 511).
A motion to dismiss pursuant to CPLR § 3211(a)(7) shall be granted where, even viewing
the allegations in the complaint as true, the plaintiff fails to allege facts sufficient to state a cause
of action. See Mukhopadhyay v. Genesis Corp., 894 N.Y.S.2d 430, 431 (1st Dept. 2010); see also
Parsippany Constr. Co. v. Clark Patterson Assocs., 839 N.Y.S.2d 179, 180 (2d Dept. 2007);
Morales v. Copy Right, Inc., 813 N.Y.S.2d 731, 732 (2d Dept. 2006) (on a 3211(a)(7)
motion, "[t]he court must determine whether the alleged facts fit any cognizable legal
theory"); see also Meyer v. Guinta, 692 N.Y.S.2d 159 (2d Dept. 1999) (holding that "bare
legal conclusions and factual claims, which are flatly contradicted by the evidence, are not
presumed to be true on a motion to dismiss for failure to state a cause of action").
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Defendants present a comprehensive written record, which reflects Plaintiffs’ voluntary
participation in business transactions.
ARGUMENT
A. Plaintiffs’ Fail to State a Cause of Action Against Madison
Notwithstanding the fact all of the causes of action seek relief as against the Mezz Lender
only (see Complaint (Prayer for Relief)), and not Madison, to the extent Plaintiffs actually did
assert any claims against Madison, the Plaintiffs failed to pierce the corporate veil in order to
assert claims against Madison.
Under New York law, a party seeking to pierce the corporate veil bears a heavy burden.
See TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 893 (1998).
The doctrine of piercing the corporate veil is an infrequently imposed limitation on the principle
that a corporation exists independently of its owners as a legally separate and distinct entity. See
Morris v. New York State Dep't of Tax. and Fin., 82 N.Y.2d 135, 140, 603 N.Y.S.2d 807, 810
(1993). See also American Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir. 1988), cert.
denied, 488 U.S. 852 (1988); Fidenas AG v. Honeywell Inc., 501 F. Supp. 1029, 1036 (S.D.N.Y.
1980). The protection afforded separate corporate entities can be overcome only by a showing
that “the parent is the alter ego' of the subsidiary and that the subsidiary is the mere
instrumentality' of the parent." Fidenas, 501 F. Supp. at 1036. Stated differently, "a parent must
completely dominate and control its subsidiary before the corporate veil can be pierced." Truglia
v. KFC Corp., 692 F. Supp. 271, 275 (S.D.N.Y. 1988); Coastal States Trading, Inc, v. Zenith
Navigation S.A., 446 F. Supp. 330, 337 (S.D.N.Y. 1977). Thus, "in the absence of a clear
indication of domination and control, parent, subsidiary or affiliated corporations are treated
separately and independently for purposes of assigning legal responsibility." Meschel v. Resorts
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International of New York, Inc., 160 A.D.2d 211, 213, 553 N.Y.S.2d 342, 343 (1990) (citing
Alexander & Alexander v. Fritzen, 114 A.D.2d 814, 815, 495 N.Y.S.2d 386 (1st Dept 1985),
aff'd, 68 N.Y.2d 968, 510 N.Y.S.2d 546 (1986).
Plaintiff’s allegations against Madison fail to meet the requisite pleading standard under
New York law to state a cause of action against Madison for "alter ego" liability and therefore
fails to state a cause of action as against the Madison. Indeed, there are no allegations contained
anywhere in the Complaint alleging that Madison completely dominated and controlled the Mezz
Lender. Plaintiff merely alleges that Madison acted through its “shell company”, the Mezz
Lender. Even the most liberal construction of Plaintiff’s allegations demonstrate that Plaintiff
fails to aver even a single specific factual allegation against Madison pertaining to its
relationship with the Mezz Lender that go to any material element of Plaintiff’s claims. The
exhibits submitted with the Complaint show that i) the Mezz Borrower entered into a Mezzanine
Loan with the Mezz Lender, not Madison; and the Notice of Sale and Notification of Disposition
of Collateral was sent by the Mezz Borrower, not Madison.
Under New York law, two elements must be pleaded and proven to establish liability
under an "alter ego" or "piercing the corporate veil" theory:
The parent must exercise complete domination in respect to the transaction
attacked' . .. that the subsidiary . . . had no separate will of its own, and such
domination must have been used to commit fraud or wrong' against plaintiff,
which proximately caused plaintiff's injury.
American Protein Corp. v. AB Volvo, 844 F. 2d 56, 60 (2d Cir. 1988)((citation omitted); Campo
v. 1st Nationwide Bank FN, 857 F. Supp. 264, 270-71 (E.D.N.Y. 1994).
To satisfy the first prong of the test, "[p]laintiffs may not rely on conclusory statements
but must show specific facts showing that [the parent corporation] exercised dominion over the
subsidiary." Campo, 857 F. Supp. at 271. In Abelman v. Shoratlantic Development Co., Inc., 153
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A.D.2d 821, 823, 545 N.Y.S.2d 333, 334 (2d Dept 1989), the Second Department affirmed the
dismissal of a complaint against a parent corporation because "the complaint was couched in the
most conclusory terms." Id. The Court found the allegations that "upon information and belief,
defendant . . . is a corporation doing business in New York, which dominated and controlled [the
subsidiary] in all of the conduct of [the subsidiary] referred to herein and for which [the
subsidiary] acted as an alter ego" to be insufficient to state a cause of action against the parent
corporation. Id. Thus, to state a well-pleaded veil piercing claim, a complaint must allege
specific facts to justify disregarding the corporate form. See also Cusumano v. Iota Industries,
Inc., 100 A.D.2d 892, 893, 474 N.Y.S.2d 579, 580 (2d Dept 1984) (complaint dismissed which
"merely contained conclusory statements that [defendant] was the alter ego' of the corporations
with whom plaintiff has allegedly contracted to perform financial services"); Stockacre Limited
v. Pepsico, Inc., - A.D.2d-, 696 N.Y.S.2d 500, 501 (2d Dept 1999) (dismissing corporate veil
claim where evidence failed to demonstrate sufficient domination and control); Pebble Cove
Homeowners' Assoc., Inc. v. Fidelity New York FSB, 153 A.D.2d 843, 844, 545 N.Y.S.2d 362,
363 (2d Dept. 1989).
The Complaint fails to allege, even in an improper conclusory fashion, that Madison is
the alter ego of the Mezz Lender. Accordingly, the Plaintiffs fail to state any cause of action as
against Madison.
B. The Declaratory Judgment Claims in the Second, Third, and Fourth Causes
of Action Should Be Dismissed as a Matter of Law Because They Are Moot.
Plaintiffs' claim for a declaratory judgment against the Defendants in the Second and
Third Causes of Action should be dismissed as moot.
Declaratory judgments are used to render decisions “having the effect of a final judgment
to the rights and other legal relations of the parties to a justiciable controversy.” CPLR 3001.
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“The general purpose of the declaratory judgement is to serve some practical end in quieting or
stabilizing an uncertain or disputed jural relation either as to present or prospective obligations.”
(Thome v. Alexander & Louisa Calder Foundation, 70 AD3d 88, 99 (1st Dept 2009), quoting
James v. Alderton Dock Yards Ltd., 256 NY 298, 305 (1931)). A justiciable, present and actual
case or controversy, affecting the rights of the parties on both sides, is thus fundamental to the
maintenance of an action for declaratory relief. (American Ins. Assn. v. Chu, 64 NY2d 379, 383
(1985)). Accordingly, as observed in High Line Dev. LLC v. 450 W. Nth St. Corp., “[i]f a
controversy is rendered moot, there is no justiciable controversy,” and thus no basis for a claim
for a declaratory judgment. (2015 NY Slip Op 32693(U) at *21 (Sup Ct, NY County Feb. 1,
2016) (Kornreich, J.), citing Baines v. Berlin, 125 AD3d 439, 440 (1st Dept 2015).
Plaintiffs’ Allegations that the Mezz Lender is not Authorized to do Business in the State
of New York is Now Moot
The First Cause of Action seeks a declaratory judgment that the Mezz Lender has not
complied with the requirements of LLC Law §802 and is not authorized to do business in the
state of New York, and therefore, cannot conduct a UCC sale until such time as it is authorized
to do business in the state of New York. Without conceding the validity of Plaintiffs’ claim that
a lender cannot conduct a UCC sale when it is not authorized to do business in the state of New
York, as set forth in the Feuerstein Affirmation, after Plaintiff filed its Complaint, on August 23,
2021, Mezz Lender became authorized to do business in the state of New York. See Exhibit
“D”. Accordingly, there is no longer a justiciable, actual and present controversy as to whether
the Mezz Lender is authorized to do business in the state of New York.
Plaintiffs’ Allegations that the September 2, 2021 UCC Sale of the Collateral is
Commercially Unreasonable is Moot as Evidenced by the October 25, 2021 Order
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The purpose of the declaratory judgment sought by Plaintiffs against the Defendants in
the Third Cause of Action is to adjudicate whether the September 2, 2021 UCC sale is
commercially unreasonable. The September 2, 2021 UCC sale was cancelled when the Court
granted Plaintiffs Order to Show Cause for an injunction. This was confirmed in the Court’s
October 25, 2021 Order (NYSCEF Dkt No. 58) directing that “… any dispute(s) regarding the
sale of the Collateral scheduled for September 2, 2021, including, but not limited to, publication
and commercial reasonableness, are moot.” As a result, there is no longer a justiciable, actual
and present controversy as to whether the cancelled September 2, 2021 UCC sale is
commercially unreasonable.
Plaintiffs’ Fourth Cause of Action – Bad Faith
With respect to the cancelled September 2, 2021 sale of the Collateral, the Complaint
alleges that the Defendants have acted in “bad faith” by, among other things, (i) conducting a
commercially unreasonable sale of the Collateral and by having the Mezz Borrower unlawfully
waive its right to object to the commercially reasonable sale of the Collateral when such waiver
is void under New York law, and (ii) giving itself veto power in the Terms of Sale (as that term
is defined in the Complaint) over who can bid at the auction . See Complaint, ¶ 110. As set
forth in the October 25, 2021 Order (NYSCEF Dkt No. 58), “… any dispute(s) regarding the sale
of the Collateral scheduled for September 2, 2021, including, but not limited to, publication and
commercial reasonableness, are moot.”
The Complaint also attempts to allege that the Pledge unlawfully had the Mezz Borrower
waive its right to object to the commercial reasonableness of a sale entirely, and does so by
quoting Section 12 of the Pledge in piecemeal fashion. New York law is clear that parties to a
8
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contract can agree on terms that are deemed to be commercially reasonable, and it is not
“unlawful” for parties to do so.
In New York, “where a contract provision exists dictating terms of sale which are not
manifestly unreasonable, and the sale is performed in accordance with those terms, the sale cannot
be considered commercially unreasonable.” In re Adobe Trucking, Inc., 2011 WL 6258233, *9
2011 WL 6258233, *9 (W.D. Tex. Bankr. Dec. 15, 2011) (citing Orix Credit Alliance, Inc. v. East
End Dev. Corp., 260 A.D.2d 454, 455 (2d Dept 1999)). A secured party's ability to change the date
of a disposition, withdraw the collateral from sale, or impose requirements on interested parties is
not “manifestly unreasonable.” Quite the contrary, such stipulations are practical necessities. See,
e.g., Atlas MF Mezzanine Borrower, LL
Preview
FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 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 MEMORANDUM OF LAW IN 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 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 TABLE OF CONTENTS Page TABLE OF AUTHORITIES ......................................................................................................... iii PRELIMINARY STATEMENT .....................................................................................................1 FACTS .............................................................................................................................................2 STANDARD OF REVIEW OF CPLR 3211(A) MOTION ............................................................2 CPLR 3211(a)(1) – Defense of Documentary Evidence ................................................. 2 CPLR 3211(a)(7) – Failure to State a Cause of Action ................................................... 3 ARGUMENT ...................................................................................................................................4 A. Plaintiffs’ Fail to State a Cause of Action Against Madison ...................................4 B. The Declaratory Judgment Claims in the Second, Third, and Fourth Causes of Action Should Be Dismissed as a Matter of Law Because They Are Moot ..........................................................................................6 Plaintiffs’ Allegations that the Mezz Lender is not Authorized to do Business in the State of New York is Now Moot ...............................................7 Plaintiffs’ Allegations that the September 2, 2021 UCC Sale of the Collateral is Commercially Unreasonable is Moot as Evidenced by the October 25, 2021 Order .....................................................................................7 Plaintiffs’ Fourth Cause of Action – Bad Faith .......................................................8 C. The UCC Sale Does Not Improperly Clog Plaintiffs' Right of Redemption as Alleged in the Complaint’s Fourth Cause of Action.....................10 D. That the Mortgage Borrower obtained a TCO Does Not Preclude the Mezz Lender from Exercising its Rights and Remedies under the Mezz Loan Documents ....................................................................................12 E. Plaintiffs’ Predatory Lending Allegations Do Not Relate to this Action .....................................................................................................................13 F. Plaintiffs Fail to State a Cause of Action for Declaratory Judgment that the Collateral is not Subject to a UCC Auction and Sale ...............................14 i 2 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 G. Plaintiffs Fifth Cause of Action for a Permanent Injunction Fails to State a Cause of Action ..........................................................................................16 CONCLUSION ..............................................................................................................................20 WORD COUNT CERTIFICATION .............................................................................................21 ii 3 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 TABLE OF AUTHORITIES Page(s) Cases 893 4th Ave. Lofts LLC & Michael UHR v. 5AIF Nutmeg, LLC, 2020 WL 6940968 (Sup. Ct. Kings Cty. Nov. 2, 2020) ....................................................18, 19 Abelman v. Shoratlantic Development Co., Inc., 153 A.D.2d 821, 545 N.Y.S.2d 333 (2d Dept 1989) .............................................................5, 6 Alexander & Alexander v. Fritzen, 114 A.D.2d 814, 495 N.Y.S.2d 386 (1st Dept 1985), aff'd, 68 N.Y.2d 968, 510 N.Y.S.2d 546 (1986) ........................................................................5 American Ins. Assn. v. Chu, 64 NY2d 379 (1985) ..................................................................................................................7 American Protein Corp. v. AB Volvo, 844 F.2d 56 (2d Cir. 1988), cert. denied, 488 U.S. 852 (1988) .............................................4, 5 Atlas MF Mezzanine Borrower, LLC v. Macquarie Texas Loan Holder, LLC, 2017 WL 729128 (S.D.N.Y. Feb. 23, 2017) ..............................................................................9 Baines v. Berlin, 125 AD3d 439 (1st Dept 2015)..................................................................................................7 Bennett v. Nardone, 298 A.D.2d 790 (3d Dept 2002) ..............................................................................................16 Berzin v. W. P. Carey & Co., Inc., 293 A.D.2d 320 (1st Dept 2002)..............................................................................................12 Breytman v. Olinville Realty, LLC, 54 A.D.3d 703, 864 N.Y.S.2d 70 ...............................................................................................3 Broadway 500 W. Monroe Mezz II LLC, 80 A.D.3d 483 (1st Dep't 2011) ...............................................................................................18 Campo v. 1st Nationwide Bank FN, 857 F. Supp. 264 (E.D.N.Y. 1994) ............................................................................................5 Cervini v. Zanoni, 95 A.D.3d 919 (N.Y. App. Ct. 2012).........................................................................................2 Chicago Research & Trading v. New York Futures Exch., Inc., 84 A.D.2d 413, 446 N.Y.S.2d 280 (1st Dep't 1982) ................................................................17 iii 4 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 Chrysler Credit Corp. v. Dioguardi Jeep Eagle, Inc., 192 A.D.2d 1066 (4th Dept 1993) ...........................................................................................12 Clarke v. Parkway Village Equities Corp., 927 N.Y.S.2d 815, 31 Misc. 3d 1217(A) (Queens Co. Sup. Ct. 2011)......................................3 Coastal States Trading, Inc, v. Zenith Navigation S.A., 446 F. Supp. 330 (S.D.N.Y. 1977) ............................................................................................4 Cusumano v. Iota Industries, Inc., 100 A.D.2d 892, 474 N.Y.S.2d 579 (2d Dept 1984) .................................................................6 DH Cattle Holdings Co. v Reinoso, 176 A.D.2d 1057 (3d Dep't 1991)............................................................................................14 Dopp v. Franklin National Bank, 461 F.2d 873 (2d Cir. 1972).....................................................................................................11 Fidenas AG v. Honeywell Inc., 501 F. Supp. 1029 (S.D.N.Y. 1980)...........................................................................................4 Flushing Landmark Realty Mezz LLC et al v. Landmark Portfolio Mezz, LLC, Index No. 708487/2019 (Sup. Ct. NY Qns. Cty. June 18, 2019) ............................................11 Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314 (App. Ct. 2002) .................................................................................................2 Gramercy Warehouse Funding I LLC v. Wells Fargo Bank, No. 602332/2009, 2009 WL 7830356 (Sup. Ct. N.Y. Cnty. July 31, 2009) ...........................18 HH Cincinnati Textile L.P. v. Acres Capital Servicing LLC, 2018 WL 3056919 (Sup. Ct., N.Y. Cnty. June 19, 2018) ..................................................10, 11 High Line Dev. LLC v. 450 W. Nth St. Corp., 2015 NY Slip Op 32693(U) (Sup Ct, NY County Feb. 1, 2016) ..............................................7 Hotel 71 Mezz Lender LLC v. Falor, 14 NY3d 303, 900 NYS2d 698 [2010] ....................................................................................18 Indianapolis Morris Plan Corp. v. Karlen, 28 N.Y.2d 30 (1971) ................................................................................................................11 In re Adobe Trucking, Inc., 2011 WL 6258233 2011 WL 6258233 (W.D. Tex. Bankr. Dec. 15, 2011) .......................................................................................9, 10 In re Luis Elec. Contracting Corp., 149 B.R. 751 (Bankr. E.D.N.Y. 1992) .....................................................................................14 iv 5 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 Jamaica Savings Bank v. Cohan, 36 A.D.2d 743 (2d Dept 1971) ................................................................................................12 James v. Alderton Dock Yards Ltd., 256 NY 298 (1931) ....................................................................................................................7 Leon v. Martinez, 84 N.Y.2d 83, 614 N.Y.S.2d 972, 638 N.E.2d 511 ...................................................................3 McDermott v. Albany, 309 A.D.2d 1004, 765 N.Y.S.2d 903 (3d Dep't 2003).............................................................17 McNeary v. Niagara Mohawk Power Corp., 286 A.D.2d 522, 728 N.Y.S.2d 840 (3d Dept 2001) ...............................................................16 Meshel v. Resorts International of New York, Inc.,) 160 A.D.2d at 211, 553 N.Y.S.2d 342 (1990) .......................................................................4, 5 Meyer v. Guinta, 692 N.Y.S.2d 159 (2d Dept. 1999) ............................................................................................3 Mills Novelty Co. v. Sunderman, 266 N.Y. 32, 193 N.E. 541 (1934) ...........................................................................................16 Morales v. Copy Right, Inc., 813 N.Y.S.2d 731 (2d Dept. 2006) ............................................................................................3 Morris v. New York State Dep't of Tax. and Fin., 82 N.Y.2d 135, 603 N.Y.S.2d 807 (1993) .................................................................................4 Mukhopadhyay v. Genesis Corp., 894 N.Y.S.2d 430 (1st Dept. 2010) ...........................................................................................3 Newcomb v. Sims, 63 A.D.3d 1022 (App. Div. 2008) .........................................................................................2, 3 Orix Credit Alliance, Inc. v. East End Dev. Corp., 260 A.D.2d 454 (2d Dept 1999) ................................................................................................9 Pacific Elec. Wire & Cable Co. v. Set Top Int'l Inc., 2004 U.S. Dist. Lexis 3400 (S.D.N.Y. Jan. 20,2004) ........................................................17, 18 Parsippany Constr. Co. v. Clark Patterson Assocs., 839 N.Y.S.2d 179 (2d Dept. 2007) ............................................................................................3 Pebble Cove Homeowners' Assoc., Inc. v. Fidelity New York FSB, 153 A.D.2d 843, 545 N.Y.S.2d 362 (2d Dept. 1989) ................................................................6 v 6 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 Peck v. Philipson, 265 A.D. 110, 37 N.Y.S.2d 788 (1st Dept 1942).....................................................................16 Roswell Capital Partners LLC v. Alternative Constr. Techs., 638 F. Supp. 2d 360 (S.D.N.Y. 2009)......................................................................................12 Stockacre Limited v. Pepsico, Inc., - A.D.2d-, 696 N.Y.S.2d 500 (2d Dept 1999) ............................................................................6 Thome v. Alexander & Louisa Calder Foundation, 70 AD3d 88 (1st Dept 2009)......................................................................................................7 Thorndock v. Kinderhill Corp., 702 F. Supp. 468 (S.D.N.Y. 1988) ..........................................................................................18 TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 680 N.Y.S.2d 891 (1998) .................................................................................4 Truglia v. KFC Corp., 692 F. Supp. 271 (S.D.N.Y. 1988) ............................................................................................4 YL Sheffield LLC v. Wells Fargo Bank, N.A., 2009 WL 6408598 (Sup. Ct. N.Y. Cty. July 30, 2009) .....................................................17, 18 Statutes CPLR § 3001....................................................................................................................................6 CPLR § 3211(a) ...............................................................................................................................2 CPLR § 3211(a)(1) ..........................................................................................................................2 CPLR § 3211(a)(7) ..........................................................................................................................3 LLC Law § 802 ................................................................................................................................7 UCC Article 9 ..........................................................................................................................18, 19 UCC § 9-102(47) ...........................................................................................................................15 UCC § 9-102(65) ...........................................................................................................................14 UCC § 9-109(d)(11) .................................................................................................................14, 16 UCC § 9-506 ..................................................................................................................................11 UCC § 9-501(3) .........................................................................................................................9, 10 UCC § 9-603 ....................................................................................................................................9 vi 7 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 UCC § 9-610 ..................................................................................................................................11 UCC § 9-623 ............................................................................................................................10, 11 UCC § 145:39 ................................................................................................................................19 vii 8 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 PRELIMINARY STATEMENT This Memorandum of Law is submitted in 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’ claims for the most part, are moot either because the Mezz Lender has become licensed to do business in the State of New York, or because the claims in the Complaint are with respect to the cancelled September 2, 2021 UCC sale of the Collateral. Indeed, the Court’s October 25, 2021 Order (NYSCEF Dkt. No. 58) directed, “… any dispute(s) regarding the sale of the Collateral scheduled for September 2, 2021, including, but not limited to, publication and commercial reasonableness, are moot.” Feuerstein Affirm, Exhibit “C”. These causes of action include, the First Cause of Action, the Third Cause of Action, and many of the claims set forth in the Fourth Cause of Action. The Second Cause of Action should be dismissed because the documentary evidence in the form of the Mezzanine Loan Documents, definitively show that the collateral that secures the Mezzanine Note is pledged membership interests in the Mezz Borrower (“Collateral”), not any mortgages. While many of the “bad faith” allegations in the Fourth Cause of Action in the Complaint are now moot, the Fourth Cause of Action also alleges that the Mezz Lender acted in “bad faith” by clogging the equity of redemption. As set forth in greater detail below, the law in New York is quite clear that a mezzanine borrower still maintains an equity of redemption up until a sale. 1 9 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 The Complaint further alleges that the Mezz Lender acted in bad faith by noticing a UCC sale of the Collateral after the Mortgage Borrower obtained a Temporary Certificate of Occupancy (“TCO”). As set forth in more detail below, caselaw in New York is clear that a lender exercising its contractual rights, as the Mezz Lender did here, by noticing a UCC Sale of its collateral, does not constitute bad faith. Accordingly, the Plaintiffs have failed to state a cause of action for “bad faith.” Finally, Plaintiffs’ cause of action to permanently enjoin the UCC sale of the Collateral fails to state a cause of action because the Plaintiffs have cannot show irreparable injury and Plaintiffs also failed to plead that they have no adequate remedy at law. For all of the foregoing reasons and the reasons set forth below, it is respectfully urged that the Complaint must be dismissed in its entirety, with prejudice. 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.”) submitted herewith. All defined terms and exhibits thereto are incorporated by reference herein. STANDARD OF REVIEW OF CPLR 3211(a) MOTION CPLR 3211(a)(1) – Defense of Documentary Evidence Pursuant to CPLR § 3211(a)(1), dismissal of a complaint is appropriate where "a defense is founded upon documentary evidence." The documentary evidence must "utterly" refute a "plaintiff's factual allegations, conclusively establishing a defense as a matter of law." Cervini v. Zanoni, 95 A.D.3d 919, 920-21 (N.Y. App. Ct. 2012) (citing Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 (App. Ct. 2002)); Newcomb v. Sims, 63 2 10 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 A.D.3d 1022, 1023 (App. Div. 2008) (affirming dismissal based on the documentary evidence, finding the stipulation and settlement agreement refuted the plaintiffs claim alleging entitlement to a first mortgage on the subject property). "The documentary evidence must resolve all factual issues as a matter of law and conclusively [dispose] of the plaintiff's claim." Clarke v. Parkway Village Equities Corp., 927 N.Y.S.2d 815, 31 Misc. 3d 1217(A), at 7 (Queens Co. Sup. Ct. 2011) (citations omitted). The documentary evidence before the Court constitutes full defenses to all 3 Causes of Action. CPLR 3211(a)(7) – Failure to State a Cause of Action “[T]he facts as alleged by Plaintiffs” do not support any of the Causes of Action claimed in this Complaint: “On a motion to dismiss the complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory” (Breytman v. Olinville Realty, LLC, 54 A.D.3d 703, 703–704, 864 N.Y.S.2d 70; see, also, Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d 972, 638 N.E.2d 511). A motion to dismiss pursuant to CPLR § 3211(a)(7) shall be granted where, even viewing the allegations in the complaint as true, the plaintiff fails to allege facts sufficient to state a cause of action. See Mukhopadhyay v. Genesis Corp., 894 N.Y.S.2d 430, 431 (1st Dept. 2010); see also Parsippany Constr. Co. v. Clark Patterson Assocs., 839 N.Y.S.2d 179, 180 (2d Dept. 2007); Morales v. Copy Right, Inc., 813 N.Y.S.2d 731, 732 (2d Dept. 2006) (on a 3211(a)(7) motion, "[t]he court must determine whether the alleged facts fit any cognizable legal theory"); see also Meyer v. Guinta, 692 N.Y.S.2d 159 (2d Dept. 1999) (holding that "bare legal conclusions and factual claims, which are flatly contradicted by the evidence, are not presumed to be true on a motion to dismiss for failure to state a cause of action"). 3 11 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 Defendants present a comprehensive written record, which reflects Plaintiffs’ voluntary participation in business transactions. ARGUMENT A. Plaintiffs’ Fail to State a Cause of Action Against Madison Notwithstanding the fact all of the causes of action seek relief as against the Mezz Lender only (see Complaint (Prayer for Relief)), and not Madison, to the extent Plaintiffs actually did assert any claims against Madison, the Plaintiffs failed to pierce the corporate veil in order to assert claims against Madison. Under New York law, a party seeking to pierce the corporate veil bears a heavy burden. See TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 893 (1998). The doctrine of piercing the corporate veil is an infrequently imposed limitation on the principle that a corporation exists independently of its owners as a legally separate and distinct entity. See Morris v. New York State Dep't of Tax. and Fin., 82 N.Y.2d 135, 140, 603 N.Y.S.2d 807, 810 (1993). See also American Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir. 1988), cert. denied, 488 U.S. 852 (1988); Fidenas AG v. Honeywell Inc., 501 F. Supp. 1029, 1036 (S.D.N.Y. 1980). The protection afforded separate corporate entities can be overcome only by a showing that “the parent is the alter ego' of the subsidiary and that the subsidiary is the mere instrumentality' of the parent." Fidenas, 501 F. Supp. at 1036. Stated differently, "a parent must completely dominate and control its subsidiary before the corporate veil can be pierced." Truglia v. KFC Corp., 692 F. Supp. 271, 275 (S.D.N.Y. 1988); Coastal States Trading, Inc, v. Zenith Navigation S.A., 446 F. Supp. 330, 337 (S.D.N.Y. 1977). Thus, "in the absence of a clear indication of domination and control, parent, subsidiary or affiliated corporations are treated separately and independently for purposes of assigning legal responsibility." Meschel v. Resorts 4 12 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 International of New York, Inc., 160 A.D.2d 211, 213, 553 N.Y.S.2d 342, 343 (1990) (citing Alexander & Alexander v. Fritzen, 114 A.D.2d 814, 815, 495 N.Y.S.2d 386 (1st Dept 1985), aff'd, 68 N.Y.2d 968, 510 N.Y.S.2d 546 (1986). Plaintiff’s allegations against Madison fail to meet the requisite pleading standard under New York law to state a cause of action against Madison for "alter ego" liability and therefore fails to state a cause of action as against the Madison. Indeed, there are no allegations contained anywhere in the Complaint alleging that Madison completely dominated and controlled the Mezz Lender. Plaintiff merely alleges that Madison acted through its “shell company”, the Mezz Lender. Even the most liberal construction of Plaintiff’s allegations demonstrate that Plaintiff fails to aver even a single specific factual allegation against Madison pertaining to its relationship with the Mezz Lender that go to any material element of Plaintiff’s claims. The exhibits submitted with the Complaint show that i) the Mezz Borrower entered into a Mezzanine Loan with the Mezz Lender, not Madison; and the Notice of Sale and Notification of Disposition of Collateral was sent by the Mezz Borrower, not Madison. Under New York law, two elements must be pleaded and proven to establish liability under an "alter ego" or "piercing the corporate veil" theory: The parent must exercise complete domination in respect to the transaction attacked' . .. that the subsidiary . . . had no separate will of its own, and such domination must have been used to commit fraud or wrong' against plaintiff, which proximately caused plaintiff's injury. American Protein Corp. v. AB Volvo, 844 F. 2d 56, 60 (2d Cir. 1988)((citation omitted); Campo v. 1st Nationwide Bank FN, 857 F. Supp. 264, 270-71 (E.D.N.Y. 1994). To satisfy the first prong of the test, "[p]laintiffs may not rely on conclusory statements but must show specific facts showing that [the parent corporation] exercised dominion over the subsidiary." Campo, 857 F. Supp. at 271. In Abelman v. Shoratlantic Development Co., Inc., 153 5 13 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 A.D.2d 821, 823, 545 N.Y.S.2d 333, 334 (2d Dept 1989), the Second Department affirmed the dismissal of a complaint against a parent corporation because "the complaint was couched in the most conclusory terms." Id. The Court found the allegations that "upon information and belief, defendant . . . is a corporation doing business in New York, which dominated and controlled [the subsidiary] in all of the conduct of [the subsidiary] referred to herein and for which [the subsidiary] acted as an alter ego" to be insufficient to state a cause of action against the parent corporation. Id. Thus, to state a well-pleaded veil piercing claim, a complaint must allege specific facts to justify disregarding the corporate form. See also Cusumano v. Iota Industries, Inc., 100 A.D.2d 892, 893, 474 N.Y.S.2d 579, 580 (2d Dept 1984) (complaint dismissed which "merely contained conclusory statements that [defendant] was the alter ego' of the corporations with whom plaintiff has allegedly contracted to perform financial services"); Stockacre Limited v. Pepsico, Inc., - A.D.2d-, 696 N.Y.S.2d 500, 501 (2d Dept 1999) (dismissing corporate veil claim where evidence failed to demonstrate sufficient domination and control); Pebble Cove Homeowners' Assoc., Inc. v. Fidelity New York FSB, 153 A.D.2d 843, 844, 545 N.Y.S.2d 362, 363 (2d Dept. 1989). The Complaint fails to allege, even in an improper conclusory fashion, that Madison is the alter ego of the Mezz Lender. Accordingly, the Plaintiffs fail to state any cause of action as against Madison. B. The Declaratory Judgment Claims in the Second, Third, and Fourth Causes of Action Should Be Dismissed as a Matter of Law Because They Are Moot. Plaintiffs' claim for a declaratory judgment against the Defendants in the Second and Third Causes of Action should be dismissed as moot. Declaratory judgments are used to render decisions “having the effect of a final judgment to the rights and other legal relations of the parties to a justiciable controversy.” CPLR 3001. 6 14 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 “The general purpose of the declaratory judgement is to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation either as to present or prospective obligations.” (Thome v. Alexander & Louisa Calder Foundation, 70 AD3d 88, 99 (1st Dept 2009), quoting James v. Alderton Dock Yards Ltd., 256 NY 298, 305 (1931)). A justiciable, present and actual case or controversy, affecting the rights of the parties on both sides, is thus fundamental to the maintenance of an action for declaratory relief. (American Ins. Assn. v. Chu, 64 NY2d 379, 383 (1985)). Accordingly, as observed in High Line Dev. LLC v. 450 W. Nth St. Corp., “[i]f a controversy is rendered moot, there is no justiciable controversy,” and thus no basis for a claim for a declaratory judgment. (2015 NY Slip Op 32693(U) at *21 (Sup Ct, NY County Feb. 1, 2016) (Kornreich, J.), citing Baines v. Berlin, 125 AD3d 439, 440 (1st Dept 2015). Plaintiffs’ Allegations that the Mezz Lender is not Authorized to do Business in the State of New York is Now Moot The First Cause of Action seeks a declaratory judgment that the Mezz Lender has not complied with the requirements of LLC Law §802 and is not authorized to do business in the state of New York, and therefore, cannot conduct a UCC sale until such time as it is authorized to do business in the state of New York. Without conceding the validity of Plaintiffs’ claim that a lender cannot conduct a UCC sale when it is not authorized to do business in the state of New York, as set forth in the Feuerstein Affirmation, after Plaintiff filed its Complaint, on August 23, 2021, Mezz Lender became authorized to do business in the state of New York. See Exhibit “D”. Accordingly, there is no longer a justiciable, actual and present controversy as to whether the Mezz Lender is authorized to do business in the state of New York. Plaintiffs’ Allegations that the September 2, 2021 UCC Sale of the Collateral is Commercially Unreasonable is Moot as Evidenced by the October 25, 2021 Order 7 15 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 The purpose of the declaratory judgment sought by Plaintiffs against the Defendants in the Third Cause of Action is to adjudicate whether the September 2, 2021 UCC sale is commercially unreasonable. The September 2, 2021 UCC sale was cancelled when the Court granted Plaintiffs Order to Show Cause for an injunction. This was confirmed in the Court’s October 25, 2021 Order (NYSCEF Dkt No. 58) directing that “… any dispute(s) regarding the sale of the Collateral scheduled for September 2, 2021, including, but not limited to, publication and commercial reasonableness, are moot.” As a result, there is no longer a justiciable, actual and present controversy as to whether the cancelled September 2, 2021 UCC sale is commercially unreasonable. Plaintiffs’ Fourth Cause of Action – Bad Faith With respect to the cancelled September 2, 2021 sale of the Collateral, the Complaint alleges that the Defendants have acted in “bad faith” by, among other things, (i) conducting a commercially unreasonable sale of the Collateral and by having the Mezz Borrower unlawfully waive its right to object to the commercially reasonable sale of the Collateral when such waiver is void under New York law, and (ii) giving itself veto power in the Terms of Sale (as that term is defined in the Complaint) over who can bid at the auction . See Complaint, ¶ 110. As set forth in the October 25, 2021 Order (NYSCEF Dkt No. 58), “… any dispute(s) regarding the sale of the Collateral scheduled for September 2, 2021, including, but not limited to, publication and commercial reasonableness, are moot.” The Complaint also attempts to allege that the Pledge unlawfully had the Mezz Borrower waive its right to object to the commercial reasonableness of a sale entirely, and does so by quoting Section 12 of the Pledge in piecemeal fashion. New York law is clear that parties to a 8 16 of 29 FILED: ROCKLAND COUNTY CLERK 11/02/2021 04:55 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 11/02/2021 contract can agree on terms that are deemed to be commercially reasonable, and it is not “unlawful” for parties to do so. In New York, “where a contract provision exists dictating terms of sale which are not manifestly unreasonable, and the sale is performed in accordance with those terms, the sale cannot be considered commercially unreasonable.” In re Adobe Trucking, Inc., 2011 WL 6258233, *9 2011 WL 6258233, *9 (W.D. Tex. Bankr. Dec. 15, 2011) (citing Orix Credit Alliance, Inc. v. East End Dev. Corp., 260 A.D.2d 454, 455 (2d Dept 1999)). A secured party's ability to change the date of a disposition, withdraw the collateral from sale, or impose requirements on interested parties is not “manifestly unreasonable.” Quite the contrary, such stipulations are practical necessities. See, e.g., Atlas MF Mezzanine Borrower, LL