Wilmington Savings Fund Society etc. v. Precila Okoronkwo et al.
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Attorneys and Parties
Brief Summary
Mortgage foreclosure and whether a foreign limited liability company (LLC) had capacity to sue in New York without proving authorization to do business here.
On reargument, Supreme Court directed the plaintiff to prove its predecessor-in-interest, NS194, LLC, complied with Limited Liability Company Law § 802 [foreign limited liability company doing business in New York must obtain authority before maintaining an action] within 30 days or face dismissal, and it stayed execution of the prior summary judgment and order of reference.
The Appellate Division reversed the order granting reargument and the directive requiring proof of NS194's compliance with Limited Liability Company Law § 802, and it denied defendants' motion for reargument.
Defendants failed to rebut the presumption that NS194 was not doing business in New York. The court held that purchasing and foreclosing on mortgages in New York, and maintaining a foreclosure action, do not constitute doing business under Limited Liability Company Law § 803(a)(1) ["maintaining or defending any action or proceeding" is not "doing business in this state"].
Background
In this foreclosure action, the plaintiff had obtained summary judgment, an appointment of a referee, and substitution in place of its predecessor-in-interest, NS194, LLC. Defendants then moved to reargue and contended that NS194 lacked capacity to sue because it had not shown compliance with Limited Liability Company Law § 802 [foreign limited liability company doing business in New York must obtain authority before maintaining an action].
Lower Court Decision
Supreme Court, Bronx County, granted defendants' motion to reargue and, upon reargument, ordered the plaintiff to prove NS194's compliance with Limited Liability Company Law § 802 within 30 days or face dismissal. The court also stayed execution of the December 5, 2024 order and the April 4, 2025 order of reference.
Appellate Division Reversal
The Appellate Division unanimously reversed, on the law, without costs, and denied defendants' motion for reargument. It held that Supreme Court erred in requiring proof of NS194's compliance with Limited Liability Company Law § 802 because defendants had not shown that NS194 was doing business in New York. The appellate court further explained that purchasing and foreclosing mortgages in New York and maintaining a foreclosure action fall within conduct that does not amount to doing business under Limited Liability Company Law § 803(a)(1) ["maintaining or defending any action or proceeding" is not "doing business in this state"].
Legal Significance
The decision reinforces that a foreign LLC is not barred from pursuing a New York foreclosure action merely because it has not shown authorization to do business in the state. A defendant challenging capacity under Limited Liability Company Law § 802 must rebut the presumption that the foreign LLC is not doing business here, and the mere purchase and enforcement of mortgages, including foreclosure litigation, is insufficient to trigger the statute.
A foreign LLC that only acquires and forecloses mortgages in New York is not, without more, considered to be doing business in the state, so it need not prove authorization under Limited Liability Company Law § 802 to maintain the foreclosure action.