Opinion
No. 712094/2021
03-14-2023
STAR201, LLC., Plaintiff, v. VALENTIN MARTINEZ, ET. AL., Defendants.
Unpublished Opinion
Motion Date: October 3, 2022
The following papers numbered EF39-88 read on this motion by the plaintiff, inter alia, for summary judgment on the complaint insofar as asserted against the defendant Valentin Martinez,. for an order of reference, to strike the answer of the defendant Valentin Martinez, and to appoint a referee to determine the amount due; and cross motion by the defendant Valentin Martinez., for summary judgment dismissing the complaint.
Papers Numbered
Notice of Motion - Affidavits - Exhibits.......... EF 39-58
Notice of Cross Motion - Affidavits -Exhibits... EF 59-81
Answering Affidavits - Exhibits................. EF 82-88
Upon the foregoing papers it is ordered that the motion and cross motion are determined as follows:
In May .2021, the plaintiff commenced this foreclosure action . against, among others, the defendant Valentin Martinez (the. defendant) to foreclose on a mortgage which was -executed, in' February 2006; The plaintiff alleges that the .defendant defaulted on the payment due in December 2010 and all payments thereafter. The defendant answered the . complaint and asserted, various affirmative defenses and counterclaims. As is relevant here, the defendant's affirmative defenses were based on, among other things, the expiration of the statute of limitations, the plaintiff's lack of standing, the plaintiff's failure to comply with the RPAPL § 1304 notice requirements, unclean hands, and the plaintiff's lack of capacity to sue. The plaintiff subsequently moved to dismiss the defendant's first counterclaim and several of the defendant's affirmative defenses, and in an order dated June 15, 2022, this Court granted so much of the plaintiff's motion which was to dismiss the defendant's affirmative defenses based on lack of standing and unclean hands.
The plaintiff now moves, inter alia, for summary judgment and an order of reference. In support of its position, the plaintiff submits, among other things, the pleadings, a copy of the note, mortgage, and the assignment of the mortgage to the plaintiff, copies of the default notices required under the mortgage and RPAPL 1304, and an affidavit of merit from an employee of the plaintiff's loan servicer. The plaintiff contends that, because these submissions establish that the defendant defaulted under the note and mortgage, the plaintiff is therefore entitled to summary judgment. The plaintiff further argues that the counterclaim and each of the affirmative defenses asserted by the defendant lack merit, and thus, the defendant's answer should be stricken.
The defendant opposes the plaintiff's motion and cross-moves for summary judgment dismissing the complaint insofar as asserted against him. The defendant relies on, among other things, a copy of the deed, note, and mortgage, screenshots from the Florida Division of Corporations and the New York Department of State, and printouts from several docket searches in NYSCEF. In opposition to the plaintiff's motion, the defendant asserts that the plaintiff failed to establish, prima facie, that the defendant's affirmative defenses based on standing, the expiration of the statute of limitations, and the plaintiff's incapacity to sue lack merit.
The defendant further asserts that he is entitled to summary judgment dismissing the complaint because the plaintiff lacks capacity to sue in New York. Specifically, he argues that, pursuant to sections 802 and 808 of the Limited Liability Company Law, a foreign limited liability company that is doing business in New York must obtain a certificate of authority from the Department of State in order to maintain a lawsuit in New York courts. The defendant contends, however, that the plaintiff did not obtain a certificate of authority from the Department of State, and insists that the plaintiff's act of purchasing mortgage notes secured by real property in New York and commencing foreclosure actions constitutes "doing business" in the state within the meaning of the Limited Liability Company Law. In opposition to the cross motion, the plaintiff concedes that it is a foreign limited liability company and that it did not apply for or obtain a certificate of authority from the Department of State. Nevertheless, the plaintiff argues that the defendant's cross motion is insufficient to rebut the presumption that the plaintiff is not doing business in New York.
Based on the circumstances presented here, the Court will address the defendant's cross motion first. Under the Limited Liability Company Law, a foreign limited liability company that is doing business in New York "may not maintain any action, suit or special proceeding in any court of this state unless and until such limited liability company shall have received a certificate of authority in this state" (Limited Liability Company Law § 808; see Limited Liability Company Law § 802). When analyzing a provision of the Business Corporation Law that is nearly identical to section 808 of the Limited Liability Company Law, the Second Department has noted that "there is a presumption that a plaintiff does business in its State of incorporation rather than in New York" (Alicanto, S. A. v Woolverton, 129 A.D.2d 601, 602 [2d Dept 1987]; see Construction Specialties v Hartford Ins. Co., 97 A.D.2d 808 [2d Dept 1983]; Great White Whale Adv. v First Festival Prods., 81 A.D.2d 704 [3d Dept 1981]; compare Business Corporation Law § 1312 with Limited Liability Company Law § 808) . To establish that a foreign entity's business activities in New York constitute "doing business" in New York, a party must establish that the activities were not simply "casual or occasional," but rather were "systematic and regular" and essential to the plaintiff's corporate business (see JPMorgan Chase Bank, N.A. v Didato, 185 A.D.3d 801, 802-803 [2d Dept 2020]; Schwarz Supply Source v Redi Bag USA, LLC, 64 A.D.3d 696, 696 [2d Dept 2009]; Alicanto, S. A., 129 A.D.2d at 602).
Here, the defendant's submissions are sufficient to establish, prima facie, that the plaintiff is a foreign corporation doing business in New York without having first obtained a certificate authority from the Department of State, and thus, it lacks capacity to maintain this action. Notably, it is the unique nature of a foreclosure action which leads to this conclusion. The plaintiff submitted a list of twenty-three foreclosure actions commenced by the plaintiff in Nassau, Queens, Kings, Richmond, and Bronx Counties. A review of the dockets in these cases reveals that, as is the case here, the plaintiff was not the mortgagee of the loan at issue, but took possession of the note and mortgage at a later date. It follows, therefore, that the plaintiff purchased these mortgage notes, sent default notices to each mortgagor by way of its attorneys and its loan servicer, and commenced these foreclosure actions for the purpose of selling these properties -all of which are located in New York - at foreclosure sales, and in turn, generating revenue. In light of the scope and purpose of these actions taken by the plaintiff, the defendant's submissions establish, prima facie, that the plaintiff's activities in New York are systematic, regular and essential to the plaintiff's corporate business (see Highfill, Inc. v Bruce &Iris, Inc., 50 A.D.3d 742, 744 [2d Dept 2008]; cf. Gemstar Can., Inc. v George A. Fuller Co., Inc., 127 A.D.3d 689, 691 [2d Dept 2015]).
The plaintiff's submissions in opposition to the cross motion are insufficient to raise an issue of fact as to whether the plaintiff is "doing business" within New York. The plaintiff relies on two cases, CadleRock Joint Venture v Klar (278 A.D.2d 39 [1st Dept 2000]) and Wilmington Sav. Fund. Soc. v Cange (2022 N.Y. Slip Op. 32966 [U] [Sup Ct Queens County 2022]) as well as a WebCivil docket search for Wilmington Savings Fund Society to assert that the sheer number of foreclosure actions commenced by a party does not indicate that it was doing business in New York. Yet the plaintiff's reliance on these cases is misplaced, as there is no evidence that, in either instance, the court considered or was presented with the argument that the plaintiff raises before this Court.
Critically, however, a "plaintiff LLC's failure to obtain a certificate of authority to do business in New York before initiating [an] action is not a fatal jurisdictional defect" . (Basile v Mulholland, 73 A.D.3d 597, 597 [1st Dept 2010]). Therefore, the plaintiff is entitled to a reasonable opportunity to cure its noncompliance with Limited Liability Company Law § 802 before dismissal of the action should be considered (see Matter of Mobilevision Med. Imaging Servs., LLC v Sinai Diagnostic & Intervntional Radiology,. P.C., 66 A.D.3d 685, 686 [2d Dept 2009]; Tri-Terminal Corp, v CITC Indus., 78 A.D.2d 609, 609 [1st Dept 1980]).
Accordingly, it is
ORDERED that the defendant's cross motion for summary judgment dismissing the complaint is granted solely to the extent that the plaintiff is directed to provide proof of compliance with Limited Liability Company Law § 802 within 30 days of the date of this order; and it is further, ORDERED that the plaintiff's failure to do so shall result in dismissal of the action; and it is further, ORDERED that the plaintiff's motion is denied without prejudice with leave to renew upon proof of compliance with the requirements of this order.