SRP 2014-18, LLC v Figaro
Categories
Attorneys and Parties
Brief Summary
Mortgage foreclosure; whether a foreign limited liability company (LLC) lacked capacity to sue in New York under Limited Liability Company Law § 808(a) [bars a foreign limited liability company doing business in New York without a certificate of authority from maintaining an action in New York courts unless and until it obtains that certificate].
The Supreme Court, Kings County, denied the plaintiff's motion for summary judgment against Majorie Songui and for an order of reference solely because it found issues of fact as to the plaintiff's capacity to sue in New York.
The Appellate Division reversed the denial of the motion insofar as appealed from and sent the matter back for a new determination of the plaintiff's motion for summary judgment and an order of reference.
The defendant failed to meet her burden of showing that the plaintiff's New York activities were so systematic and regular as to constitute doing business in New York without authority. Because that showing was not made, the presumption that the plaintiff does business in its state of incorporation, not New York, remained intact.
Background
The plaintiff brought a mortgage foreclosure action against, among others, Majorie Songui. In March 2019, the plaintiff moved for summary judgment on the complaint insofar as asserted against Songui and for an order of reference. Songui opposed, arguing that the plaintiff lacked capacity to sue in New York, failed to comply with Real Property Actions and Proceedings Law (RPAPL) 1304 [pre-foreclosure notice requirement for certain home loans], and lacked standing. The Supreme Court denied the motion only on the capacity issue. Babylon Capital, LLC, as assignee of the plaintiff, appealed.
Lower Court Decision
The lower court held that issues of fact existed as to whether the plaintiff had capacity to maintain the foreclosure action in New York and therefore denied the plaintiff's motion insofar as it sought summary judgment against Songui and an order of reference. The court did not decide the other defenses raised in opposition.
Appellate Division Reversal
The Appellate Division held that the defendant did not establish that the plaintiff conducted continuous and essential business activities in New York sufficient to trigger the bar in Limited Liability Company Law § 808(a). Relying on case law analogous to Business Corporation Law § 1312(a) [statute restricting unauthorized foreign corporations from maintaining actions in New York when doing business here], the court explained that the party invoking the statutory bar bears the burden of proving systematic and regular in-state business activity. Because that burden was not met, the Supreme Court erred in denying the motion on capacity grounds. The appellate court reversed insofar as appealed from and remitted for a new determination of the motion, including the unresolved arguments concerning RPAPL 1304 and standing.
Legal Significance
This decision reinforces that a defendant asserting lack of capacity under Limited Liability Company Law § 808(a) must prove more than occasional or casual New York activity by a foreign LLC. The defendant must show systematic, regular, and continuous in-state activity essential to the company's business. Absent such proof, New York courts presume the entity does business in its state of incorporation rather than in New York, and the action may proceed.
In a New York foreclosure case, a foreign LLC will not be barred from suing merely because it is not authorized in New York; the opposing party must prove the LLC was actually doing business in New York in a continuous and regular way. If that showing is not made, denial of foreclosure relief on capacity grounds is error.