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  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
  • Hello Living Developer Nostrand Llc, Hello Nostrand Llc v. 1580 Nostrand Mezz Llc, Madison Realty Capital LpCommercial - Business Entity document preview
						
                                

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FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ROCKLAND ..------------------------------..--- -------------- -------------------.. HELLO LIVING DEVELOPER NOSTRAND LLC, Plaintiff, Index No: 034885/2021 AMENDED COMPLAINT NOSTRAND MEZZ LENDER LLC, Defendants. -------- ----------- ----- -- ----------------- - Plaintiff Hello Living Developer Nostrand LLC ("Developer"), by itsattorneys, K udman Trachten Aloe Posner LLP and the Law Offices of Victor A. Worms, for its amended and supplemented complaint against defendant Nostrand Mezz Lender LLC, states and alleges the following: 1. This is a lawsuit seeking damages for a non-judicial sale which was not commercially reasonable, which failed to comply with the New York Unifonn Commercial Code ("UCC"), of which the borrower was not given the legally required notice, which did not permit a third-party who was a legitimate potential purchaser to make a bid, and which was rigged in bad faith to reach a predetermined result-i.e., allowing Lender and itsaffiliates seize control of the multi-million dollar development property at issue. 2. All conditions precedent to the institution of this action have been met, perfonned, or waived. THE PARTIES . 3. Plaintiff Developer is a New York limited liabilitycompany with itsprincipal place of business located at 17 Tokay Lane, Monsey, New York 10952. 1 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 ("Defendant" 4. Defendant Nostrand Mezz Lender LLC or "Lender") is a domestic 27* 65 limited liability company with itsprincipal place of business located at 15 West Street, Floor, New York, New York. 10001. JURISDICTION AND VENUE 5. Lender is subject to the personal jurisdiction of this Court under CPLR 301 because it isa New York limited liability company, and its principal place of business is located in New York. 6. Venue is proper in this Court under CPLR 503(a) because Developer has its principal place of business in Rockland County. FACTUALBACKGROUND 7. Prior to September 21, 2022, Developer owned 100% of the membership interests LLC' of Hello Nostrand ("Hello Nostrand"). 8. Hello Nostrand LLC is the owner of a real estate project consisting of 209 planned residential rental units, 15,000 square feet of community space, 134 parking spots, and 50 storage units located at 1580 Nostrand Avenue, Brooklyn, New York (the "Nostrand Building"). A. The Original Loan With Prophet Mortgage 9. On or about December 6, 2017, Hello Nostrand and non-party Prophet Mortgage Lender" Opportunities LP (the "Original or "Prophet Mortgage") entered into a loan agreement that would provide Hello Nostrand with financing for the construction of the Nostrand Building (the "Loan"), consistent with a letter of intent dated October 31, 2017. 10. The Loan was for $63,000,000.00 and was trifurcated into senior project and building loan components during the period of December 6, 2017 to March 6, 2020 (the "Term"). 1 As a result of the unreasonable UCC saleat Hello Nostrand is now controlled at liates of commercially issue, by Lender. 2 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 11. The Loan was secured by mortgages against the Nostrand Building. B. Madison Capital Acquires the Loan and Stops Construction Funding 12. On or about June 7, 2019, Prophet Mortgage assigned all of itsrights and interest in the three loans to 1580 Nostrand Ave LLC ("Interim Lender"). 13. Interim Lender was an affiliate of, and controlled by, Madison Capital. As soon as Madison Capital (through Interim Lender) acquired the Loan, itpromptly stopped providing any funding for the completion of the Nostrand Building. 14. In response, Developer, Hello Nostrand, and Eli Karp, the manager of Developer, repeatedly requested payoff letterson the Loan from Madison Capital and Interim Lender in order to refinance the Loan. 15. However, for more than 10 weeks, despite repeated requests for payoff letters, Madison Capital and Interim Lender failed and refused to provide the requested payoff letters. 16. When the payoff letters were finally provided, Madison Capital and Interim Lender had declared a default on the Loan, backdated that alleged default, and added millions of dollars of default interest to the Loan. 17. The transparent objective of these fraudulent lending practices by Madison Capital, its agents, and those actmg m concert with them, was to manufacture a default on the Loan and to ultimately obtain ownership of the Nostrand Building. 18. As part of its scheme to obtain ownership of the Nostrand Building by means of predatory lending practices, Madison Capital and Interim Lender required Hello Nostrand, Developer, and Mr. Karp to execute a forbearance agreement, which added millions of dollars more to the Loan. 19. The key to the scheme to gain ownership of the Nostrand Building was to make sure that Madison Capital (through one or more of itsshell company affiliates) was both the owner 3 3 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 of the mortgages and the financing company that would be providing the refinancing to pay off those loans. 20. By operating from both ends of the loan transactions, Madison Capital could manufacture defaults by delaying refinancing ofthe loans running up millions of dollars in defaults interest, ultimately making itfinancially oppressive for Mr. Karp, Developer, and Hello Nostrand to pay off the loans. 21. As part of its scheme, Madison Capital, acting through Interim Lender (which was the shell company itformed for the UCC transaction) had Developer sign a promissory note (the Note," "Mezzanine Promissory attached as Exhibit "A"), a mezzanine loan agreement (the Agreement," "Mezzanine Loan attached as Exhibit "B"), and a pledge and security agreement (the "Mezzanine Pledge and Security Agreement", attached as Exhibit "C") for a mezzanine loan of $3,000,000.00 on August 28, 2020. 22. The maturity date of the Mezzanine Promissory Note was March 1, 2021. "Borrower" 23. In the Mezzanine Loan Agreement, Developer is defined as the and ' Interim Lender is defined as the "Lender 24. The Mezzanine Loan Agreement states, in pertinent part, as follows: WHEREAS, Borrower is the direct beneficial owner of all of the membership interests in Mortgage Borrower (collectively, the "Pledged Interests"); WHEREAS, Borrower has requested Lender to make a loan to it inthe principal amount of up to $3,000,000.00 (the "Loan"), which Loan is evidenced by that certain Mezzanine Promissory Note executed by Borrower in favor of Lender (the "Note"); WHEREAS, as a condition precedent to the obligation of Lender to make the Loan to Borrower, Borrower has entered into that certain Ownership Interests Pledge and Security Agreement, dated as of the date hereof, in favor of Lender (as amended, supplemented or otherwise modified from time to time, the "Pledge Agreement"), pursuant to which Borrower has granted to Lender a firstpriority security interest in the Collateral (as hereinafter defined) as collateral security for the Debt (as 4 4 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 hereinafter defined) (the Pledge Agreement, together with the Note, this Agreement, and all other documents and guarantees executed by Borrower and Guarantor and any other party in favor of Lender in connection with the Loan, hereinafter, the "Loan Documents") 25. In the Mezzanine Pledge and Security Agreement, Developer was required to pledge to Interim Lender 100% of its membership mterest m Hello Nostrand (the "Collateral"), the owner of the Nostrand Building. 26. Notwithstanding the clear language of N.Y. U.C.C. Law § 9-602(g), the language Agreement2 waives" of the Mezzanine Pledge and Security states that Developer "irrevocably any right to assert the defense of commercial unreasonableness to a UCC sale of the Collateral. 27. This purported waiver by Developer of the right to raise the defense of commercial unreasonableness to any sale of the Collateral under the UCC was null and void under New York law and reflected the bad faith of Madison Capital and itsaffiliates. 28. As a result of the manufactured defaults, Interim Lender issued a Notice of Sale on July 14, 2021 to sell the Collateral at a UCC sale. The Notice of Sale indicated that the UCC sale 2021." of the Collateral would "take place beginning at 1:00 p.m. on September 2, 29. The Notification of Disposition of Collateral stated that Developer defaulted under Documents" the "Loan for the failure to pay "the real estate taxes due on January 1, 2021 in Documents" accordance with the Mortgage Loan and for failing to pay off the mezzanine loan on the maturity date of March 1, 2021. 30. Because the Notice of Sale and the Notification of Disposition of Collateral contained multiple examples of intended self-dealing by Interim Lender and Madison, Developer and Hello Nostrand filed this action on August 17, 2021 and sought a temporary restraining order 2 Exhibit "C," ¶¶ 12 (b),(d),(d)(iv)& (vi). 5 5 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 and a prehmmary nKunction enjoming the proposed auction sale of the Collateral scheduled for September 2, 2021. 31. On August 24, 2021, the Court entered an Order to Show Cause, which in pertinent part cancelled the scheduled auction sale of the Collateral pending a hearing. (NYSCEF No. 24) 32. The Court held a hearing on October 18, 2021, and in a written Order dated October plaintiffs' 25, 2021 (NYSCEF No. 5_8),denied the motion for a preliminary injunction. 33. The October 25, 2021 Order imposed certain conditions on any auction sale of the Collateral, stating in pertinent part that. ORDERED, that any future Sale of the Collateral shall be subject to the following days' conditions: (i) at least sixty (60) notice of the Sale shall be provided; (ii) publication of the Sale shall be advertised four (4) times prior to the Sale in the New York Times and in The Real Deal online website, but ifadvertised in The Real Deal monthly magazine, only one (1) advertised Sale is required; (iii) any qualifying bid deposit at a future Sale must be in the amount of $450,000.00; and (iv) all remaining aspects of the Sale must be in accordance with the terms and provisions of the Ownership Interests Pledge and Security Agreement by and between the Mezz Borrower and Mezz Lender, and shall be commercially reasonable in accordance with the Unifonn Commercial Code. 34. On December 21, 2021, Developer filed for relief under Chapter 11 of the United States Bankruptcy Code, triggering an automatic stay. 35. On or about March 8. 2022, Interim Lender assigned all of its nghts, title and interest in the Mezzanine Promissory Note, the Mezzanine Loan Agreement, and the Mezzanine Pledge and Security Agreement to Lender. 36. Similarly, on or about March 8, 2022, 1580 Nostrand Ave LLC (an affiliate of Interim Lender) assigned all of itsrights, title,and interest in the Loan (including the mortgages on the Nostrand BuildiIg and personal guaranties) to Nostrand Senior Lender LLC, an affiliate of Lender. 6 6 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 37. Lender and Nostrand Senior Lender LLC are each wholly owned and controlled by Arch Companies LLC ("Arch"). 38. Developer's bankruptcy case was dismissed on July 25, 2022. C. Lender's Commercially Unreasonable UCC Sale 39. On August 18, 2022, Nostrand Senior Lender LLC filed a foreclosure action against Hello Nostrand, Mr. Karp, and others in Kings County, Index No. 524162/2022 ("the Foreclosure Action"), asserting that Hello Nostrand defaulted its obligations under the Loans, and that Nostrand Senior Lender LLC is entitled to foreclosure. 40. In late August .2022, counsel for Developer became aware that Lender had scheduled a UCC sale for Developer's membership mterests m Hello Nostrand with a broker named Rosewood Realty Group. The sale was scheduled for September 21, 2022, at 2 p.rn., with a bid deadline of September 19, 2022, at 4 p.m. 41. Neither Developer nor Mr. Karp had received any form of notice of the UCC sale from Lender, Rosewood Realty Group, or any of their agents. 42. On September 6, 2022, Greg Corbin of Rosewood Realty Group sent counsel for Developer a Word document which purported to be a notice of sale. This document did not include any of the in formation required by the Court in itsOctober 25, 202 1 Order, nor did itinclude any due diligence or other information that would allow Developer to assess whether the proposed sale would be commercially reasonable. 43. On September 6, 2022 counsel for Developer filed a letter (NYSCEF No. jji7) bringing to the Court's attention itsconcerns with the conduct of Lender and its affiliates in scheduling the sale and requesting an emergency conference with the Court. 7 7 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 44. Following a Teams conference on September 12, 2022, the Court directed, among other things, that counsel for Developer be provided with full infonnation regarding the sale, including access to the due diligence data room maintained by Rosewood Realty Group. 45. Counsel for Developer received access to the data room on September 13, 2022, a mere six days before the bid deadline. 46. Included in the materials maintained in the data room was a one-page Word document titled"Summary of Path for 421A". This document stated the following: Summary of path for421a o No action was needed to take place before the June 15, 2022 421a expiration date o To qualifyfor 421a forthe expanded building: " Amend plans/combine the tax lots " Reopen the application to a file PAA with cellarlevel connecting the two buildings " Amend the Permit Building " To enlarge the permit to include the second lot " Renew and expand TCO to the fullenlarged existing building " Existing CO originallyissued June 24, 2021 " Complete the expanded June 2026 building by a Pay fulltaxes on the existing building untilthe new expanded building iscomplete o Once TCO for the expanded building isreceived, follow the typicalsteps for421a application and approval 421A" 47. The "Summary of Path for Word document contained in the data room led prospective bidders to believe that the undeveloped portion of the property located at 1580 Nostrand Avenue, Brooklyn, New York 11226, Block 5131, lot 106 ("Lot 106") is ineligible for a 421a tax abatement as of right because the June 15, 2022 deadline to commence work on the undeveloped portion of the property was not met. "commence" 48. Under RPTL § 421-a(16)(a)(xxviii), work had to by June 15, 2022 for the property to be eligible for an abatement under that program. 49. The assertion that the June 15, 2022 deadline was not met was materially false and misleading. 8 8 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 50. A Site Safety Log dated May 22, 2018 and a ZD 1 Zoning Diagram conel usively demonstrate that required work commenced in May 2018, well before the deadline. 51. As construction on the project was overseen and monitored by the lenders from which Lender obtained assignment of the Mezzanine Promissory Note, the Mezzanine Loan Agreement, and the Mezzanine Pledge and Security Agreement, Lender and itsaffiliates had this infonnation available to them, but the information that Lender and itsaffiliates made available to potential bidders in the data room suggested the opposite. 52. On September 15, 2022, Developer requested that Lender correct the false infonnation and reschedule the sale for at least thirty (30) days to allow sufficient time for the correct material infonnation to be published to the market at large and disseminated to prospective bidders who had previously inquired with Rosewood Realty Group. 53. Despite this, the materially false and misleading intonnatmn remamed in the data room for review and analysis by prospective bidders. 54. The presence of this materially false and misleading information resulted in a sales process that was not commercially reasonable. Eligibility for a 421a tax abatement is a significant component in determining the value of commercial real estate and development projects in New York City. For a property the size of the one st issue in this proceeding, the difference in value based upon whether or not the property has (or could have) a 421a tax abatement could be in the tens of millions of dollars. 55. The existence of a 421a tax abatement on a fully completed building (as planned) would result in the property owner receiving tax savings of more than $1.5 million annually compared to the taxes owed if the building did not have such an abatement. This would result in an increase of at least $20 million of value to the property. 9 9 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 56. This suppression of information regarding the availability of 421a tax abatement, and thus the value of the Collateral and the underlying property that Hello Nostrand owned, was intentional. Because Lender and the current mortgage lenders on the property at issue are affiliates, and are each controlled by Arch, they had an incentive to discourage other bidders from participating in the sale and in suppressing the value of any bids. 57. Further, the filing of the Foreclosure Action six months after dismissal of Developer's Chapter 11 case was intended to discourage other bidders from in the participating sale and to suppress the value of any bids. 58. Instead of seeking to maximize the value of any bids to recover as much of their investment in the Nostrand Building as possible, Lender's goal was to gain control of Hello Nostrand so that itcould direct its capitulation on defaults and clear the path for a consensual foreclosure by itsaffiliated lenders, resulting in the seizure by Arch of ownership of the property and the Nostrand Building. The Misleading Notice of Sale 59. In addition to the false information contained in the data room the regarding availability of a 421a tax abatement, the language of the Notice of Sale misled potential bidders regarding the Collateral, thereby reducing the interest of potential bidders in the purchasing Collateral and in reducing the amount they might bid. 60. Lender asserts that notice of the sale was published in the New York Times for four (4) consecutive weeks beginning on July 21, 2022. However, Lender did not send Developer or Mr. Karp and form of notice of sale,whether formal or informal, at thattime. 10 10 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 61. Lender belatedly provided notice to Developer and Mr. Karp by of a letter sent way by certified mail dated September 8, 2022 and entitled NOTICE OF UCC PUBLIC SA LE OF Sale," COLLATERAL/NOTICE OF DISPOSITION (the "Notice of attached as Exhibit D). 62. The Notice of Sale states that the UCC sale of the Collateral would take place "on ET." September 21st, 2022, at 2:00 p.m. 63. Importantly, the Notice of Sale explicitly states on the bottom of itssecond page that the "[p]ledgor and other obligated parties may be liable for any indebtedness which shall Documents." remain after such sale to the extent permitted by applicable law and the Loan 64. The Mezzanine Promissory Note incorporated the loans and mortgages against the Nostrand Buildmg. 65. Thus, the Notice of Sale is materially misleading because it suggests that any purchaser of the Collateral could be liable on the loans and the mortgages against the Nostrand Building. 66. This materially misleading suggestion was commercially unreasonable because it artificially depressed the value of the Collateral and deterred prospective bidders from engaging in the sale process by leading them to believe that their purchase of the Collateral could subject them to significant liability on the underlying mortgages. 67. Lender knew that no bidder would be willing to purchase the Collateral, except at a significant discount, ifthe bidder would the liable on the various loans and mortgages against the Nostrand Building. 68. Accordingly, only Lender was interested in bidding on the Collateral since its affiliate owns the mortgages against the Nostrand Building. 11 11 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 69. Thus, the Notice of Sale was designed to ensure that Lender or one of its affiliated companies would be the only bidder for the Collateral, thereby resulting in an artificially I ow and commercially unreasonable sales price. . D. Lender's Self-Dealing During the Auction 70. To maximize itsefforts to rig the auction process to ensure that itwas the winning bidder, the Terms of and Conditions of Sale explicitly stated that the auctioneer and "Secured Party reserve the right to reject any offeror, who . .. [the auctioneer] and Secured Party believe is not Collateral." financially capable of consummating the purchase of the A copy of the Terms and "E." Conditions of Sale is attached as Exhibit 71. Lender discouraged outside bidders from participatmg m the auction in other ways. The Terms of and Conditions of Sale also states in part that "[i]n order to be permitted to bid on the Collateral, prior to the commencement of the Auction, on or before Monday, September 19, 2022 at 4:00 PM EST, each prospective bidder, other than Secured Party. must ... deliver to [the auctioneer] ... a $450,000.00 bid deposit by official bank check made payable to "Nostrand Mezz LLC" N.A." Lender, or (ii) complete a wire transfer in the amount of $450,000.00 to Citibank, (emphasis supplied). This gave Lender an unfair advantage over third party bidders. 72. Lender's veto power over all bidders, without any articulated standards as to how that veto power could be exercised, enabled it to control who would be eligible bidders at the auction and thereby ensure that Lender or one of itsaffiliates was the winning bidder. 73. At the actual auction, Lender exercised this control in a commercially unreasonable way. Itused itspower to determine who could or could not make bids to prevent a legitimate third- party bidder, whose lawyer attended the auction and stated that he had $450,000.00 in his attorney escrow account from the third-party bidder, from even participating in the auction. 12 12 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 74. Because Lender deprived the only third-party bidder who attended the auction of the opportunity to participate, there were no bidders other than Lender, who obtained the Collateral by simply applying a $450,000.00 credit bid. Thus, Lender and itsaffiliates gained control of the Nostrand Building (and itssignificant equity) for pennies. VIOLATIONS OF N.Y. U.C.C. LAW § 9-610 (b) and N.Y. U.C.C. LAW § 1-304 75. Developer repeats and realleges each of the allegations in the preceding paragraphs as if fully set forth herein. 76. N.Y. U.C.C. Law § 9-610(b) provides that "[e]very aspect of a disposition of collateral, including the method, manner, time. place, and other terms, must be commercially reasonable." 77. The Notice of Sale was commercially unreasonable because it was materially misleading by suggesting that the winning bidder at the auction could be liable for payment of the mortgages against the Nostrand Building. Itdid so by explicitly stating that the "[p]ledgor and other obligated parties may be liable for any indebtedness which shall remain after such sale to the Documents." extent permitted by applicable law and the Loan 78. The Notice of Sale was also commercially unreasonable because, by being materially misleading, it effectively rigged the auction to ensure that Lender or one of af liates was the winning bidder by a credit bid equal to the minimum required bid. 79. In addition. the Sale of the Collateral was commercially unreasonable because the Terms of Sale explicitly provided that the auctioneer and "Secured Party reserve the right to reject any offeror, who . . .[the auctioneer] and Secured Party believe is not financially capable of Collateral." consummating the purchase of the 13 13 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 80. By this language, Lender and itsagents gave themselves unfettered veto power over all bidders, discouraging prospective bidders from even engaging in the auction process. 81. Lender and its agents exercised this veto power in a commercially unreasonable way by denying a third-party who had placed the requisite $450,000 deposit m an attorney escrow account from even participating in the Auction. 421A" 82c Additionally, by including the false and misleading "Summary of Path for in the data room and by failing to correct the false information and reschedule the sale to allow sufficient time for the correct material information to be published to the market at large and disseminated to prospective bidders, Lender and its affiliates artificiallydeflated the value of the Nostrand Building and thus the Collateral. Lender's false and misleading "Summary of Path for 421A" document deterred prospective bidders from engaging in the auction process by understating the value of the Collateral that was up for sale. This allowed Lender to obtain the Collateral without any competing bids at a commercially unreasonable price. 83. Further, by filing the Foreclosure Action shortly before the sale of the Collateral Lender and itsaffiliates artificially deflated the value of the Collateral. 84. By artificially deflating the value of the Collateral, Lender increased the dollar amount of any deficiency allegedly owed by Developer to Lender. 85. As such, Developer seeks damages, pursuant to N.Y. U.C.C. Law § 9-625(b). for Lender's violations of N.Y. U.C.C. Law § 9-610 (b). 86. Additionally, N.Y. U.C.C. Law § 1-304 provides that "[e]ery contract or duty enforcement." within this act imposes an obligation of good faith in itsperfom1ance and 87. Good faith is defined by N.Y. U.C.C. Law § 1-201(20) as "honesty in fact in the concerned." transaction or conduct 14 14 of 17 FILED: ROCKLAND COUNTY CLERK 11/30/2022 07:23 PM INDEX NO. 034885/2021 NYSCEF DOC. NO. 155 RECEIVED NYSCEF: 11/30/2022 88. Lender and itsaffiliates have violated N.Y. U.C.C. Law § 1-304 and have acted in bad faith by: (i)by having Developer sign a document to waive itsright to purporting unlawfully object to the commercially unreasonable sale of the Collateral when such a wavier is void under New York law; (ii)conducting a commercially unreasonable sale of the Collateral; (iii)including materially false and misleading information about 421a tax benefits in the data room and then refusmg to correct it;and (iv) giving itse