The opinion
Aareal Capital Corp. v 462BDWY Land, L.P.
2025 NY Slip Op 30952(U)
March 24, 2025
Supreme Court, New York County
Docket Number: Index No. 850639/2023
Judge: Margaret A. Chan
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
State and local government sources, including the New
York State Unified Court System's eCourts Service.
This opinion is uncorrected and not selected for official
publication.
INDEX NO. 850639/2023
NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 03/24/2025
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49M
-------X
AAREAL CAPITAL CORPORATION et al., INDEX NO. 850639/2023
Plaintiffs,
MOTION DATE 11/14/2024
- V -
MOTION SEQ. NO. 003
4628DWY LAND, L.P. A/K/A 462 BDWY LAND, L.P. et al.,
Defendants. DECISION+ ORDER ON
MOTION
· - - - - - -----------------------X
HON. MARGARET A. CHAN:
The following e-filed documents, listed by NYSCEF document number (Motion 003) 84, 85, 86, 87, 88,
89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99,100,101,102,103,104,105,106,107,108
were read on this motion to/for AMEND CAPTION/PLEADINGS
In this foreclosure action, plaintiffs Aareal Capital Corporation (ACC), Areal
Bank AG (Aareal Bank), and PacificCal Debt III, LLC (PacificCal) (collectively, the
original plaintiffs) move for an order pursuant to CPLR 1018 and 1021 granting the
substitution of (i) PCAL Debt IV Broadway, LLC (PCAL Debt IV), as plaintiff in
place and stead of ACC and Aareal Bank, and (ii) PCAL Debt III Broadway, LLC
(PCAL Debt III, and together with PCAL Debt IV, the substitute plaintiffs) as
plaintiff in place and stead of PacificCal. Plaintiffs also move pursuant to CPLR
3025 amending the caption of this action (NYSCEF # 84). Defendants 462BDWY
Land, L.P. a/k/a 462 BDWY Land, L.P. 464 Broadway Associates, Stephen J.
Meringoff, Jay H. Shidler, and Meringoff Properties, Inc. (the Loan Defendants) do
not oppose the motion but cross-move for an order directing compliance with party
discovery in connection with any substitution of plaintiffs (NYSCEF # 104).
Plaintiffs oppose the Loan Defendants' cross-motion. For the following reasons,
plaintiffs' motion is granted, and the Loan Defendants' cross motion is denied.
Background
The court assumes familiarity with the facts of the case. On November 22,
2023, the original plaintiffs commenced this action to foreclose on the two
outstanding mortgages under Section 1301 of the RP APL (NYSCEF # 2 - Complaint
or compl ,i 1). The original plaintiffs allege that Borrowers defaulted on the loans
consolidated by Consolidated Loan Agreement, secured by Mortgage, by failing to
obtain and deliver a supplemental "Interest Rate Protection Agreement," and by
failing to pay the interest due (id. ,i,i 23-24, 31, 62, 63-66; NYSCEF # 10 - the
Consolidated Loan Mortgage). On September 21, 2023, ACC, as agent for the
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Lenders, accelerated the loans and declared the indebtedness evidenced by the
Notes (compl ,r 67).
On March 14, 2024, PacificCal Debt IV, LLC entered into a Loan Sale
Agreement with ACC and Aareal Bank (NYSCEF # 87 - Towle aff ,r 2; NYSCEF #
88 - Loan Sale Agreement). PacificCal Debt IV, LLC subsequently entered into an
Assignment and Assumption of Loan Sale Agreement, effective as of March 27,
2024, by and between PacificCal Debt IV, LLC and PCAL Debt IV (Towle aff ,r 3;
NYSCEF # 89 -Assignment and Assumption of Loan Sale Agreement). On March
28, 2024, ACC and PCAL Debt IV entered into an Assignment and Acceptance
Agreement, as did Aareal Bank and PCAL Debt IV (Towle aff ,r 4; NYSCEF # 90·91
- Assignment and Acceptance Agreements). ACC and Aareal Bank then delivered to
PCAL Debt IV, and PacificCal Debt IV delivered to PCAL Debt III all the Substitute
Notes and Mortgage Assignments related to the loan agreements with the Loan
Defendants (Towle aff ,r 5·7).
On March 29, 2024, plaintiffs filed an Assignment and Assumption of Cause
of Action, which sets forth that ACC and Aareal Bank assigned unto PCAL Debt IV
all the right, title, and interest in this mortgage foreclosure action (NYSCEF # 107 -
Cross Opp at 2; NYSCEF # 73 -Assignment of Cause of Action). On May 29, 2024,
plaintiffs filed another Assignment and Assumption of Cause of Action, which sets
forth that PacificCal assigned unto PCAL Debt III all the right, title, and interest in
this mortgage foreclosure action (NYSCEF # 107 - Cross Opp at 2; NYSCEF # 76 -
Assignment of Cause of Action).
Following the assignments of the loan documents, mortgages, and causes of
action from original plaintiffs to the substitute plaintiffs, plaintiffs now collectively
move to substitute the original plaintiffs in this action as assignees and amend the
caption (NYSCEF # 103 - plaintiffs' MOL).
Discussion
Motion to substitute plaintiffs
In support of their motion, the original plaintiffs and the substitute plaintiffs
(together, plaintiffs) assert that, in accordance with CPLR 1018 and 1021, a motion
to substitute plaintiffs should be granted in a foreclosure action where the notes
and mortgages have been assigned to a third-party after the action has commenced
(NYSCEF # 103 - plaintiffs' MOL at 5). They claim that since the substitute
plaintiffs have established that the loans, notes, and mortgages at issue that were
previously held by the original plaintiffs were assigned to them after the action was
commenced, the court should substitute them into this action and amend the
caption accordingly (id at 6). Loan Defendants do not have any opposition to the
substitution and amendment of the caption (NYSCEF # 106 - Mac Avoy aff ,r 18).
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CPLR 1018 provides that upon any transfer of interest, the action may be
continued by or against the original parties unless the court directs the person to
whom the interest is transferred to be substituted or joined in the action (CPLR
1018). A motion for substitution may be made by the successors or representatives
of a party or by any party (CPLR 1021). Assignment of a note and mortgage may be
by an executed writing or by their physical delivery (Meyerson Cap. V. LLC v
Anderson, 110 AD3d 468 [1st Dept 2013]; see also Flushing Sav. Bank v Chester
Latham, 139 AD3d 663, 663 [2d Dept 2016] [reversing denial if assignees' motion
for substitution of plaintiffs in a foreclosure action where the original lender
assigned its interest in the note, mortgage, and the action to the first assignee after
the action had been commenced, and the assignee assigned a security interest in the
note and mortgage to the second assignee under CPLR 1018, and the borrower did
not oppose the substitution requestD. The substituted plaintiff must establish its
standing by demonstrating that the note and mortgage were validly assigned to this
new plaintiff (FTBK Inv. II LLC v Genesis Holding LLC, 48 Misc 3d 274, 280 [Sup
Ct, New York County 2014]).
Here, the movants have demonstrated that the original plaintiffs validly
assigned and delivered to the substitute plaintiffs, PCAL Debt IV Broadway LLC
and PCAL Debt III Broadway LLC, the notes and mortgages upon which this
foreclosure action was commenced. As such, there is no prejudice to the Loan
Defendants (Rocha Toussier y Asociados, SC. v Rivero, 184 AD2d 398, 398-399 [1st
Dept 1992]). As the Loan Defendants do not raise any substantial objection to the
substitution, the motion to substitute plaintiffs and amend caption is granted.
Defendants' Cross-Motion to Direct Compliance with the Discovery Demands
Defendants' cross motion is for an order directing the original plaintiffs to
fulfill their discovery obligations as parties, pursuant to the deadlines agreed to in
the court-ordered preliminary conference order (NYSCEF # 106 - Mac Avoy aff ,I
17). They argue that the counsel for original plaintiffs ACC and Aareal Bank
despite accepting service of the discovery demands, nonetheless stated that neither
original plaintiff has any interest in the litigation (id ,I 13).
Plaintiffs counter that the cross-motion should be denied as procedurally
improper, referring to Rule 14 of the Commercial Division Rules that provides for
discovery disputes to be resolved through court conference as opposed to motion
practice (NYSCEF # 107 - Cross Opp at 3). Plaintiffs claim that the Loan
Defendants did not take these measures before filing their cross-motion and
consequently have run afoul of Rule 14 (id.). Plaintiffs argue that the cross-motion
was unnecessary because original plaintiffs never refused to comply with the
discovery requests in accordance with the deadlines requested by the Loan
Defendants (id).
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At the outset, based on plaintiffs' response in opposition to defendants' cross·
motion, it appears that the apparent dispute that served as the basis for defendants'
cross·motion has been resolved. But even if it were not resolved, defendants have
not yet attempted to follow the Rule 14 process to resolve any conflict prior to
submit their cross-motion (see 22 NYCRR § 202. 70, Rule 14 ["If counsel are unable
to resolve any disclosure dispute in this fashion, counsel for the moving party shall
submit a letter to the court not exceeding three single-spaced pages outlining the
nature of the dispute and requesting a telephone conference"]). Given that
defendants did not comply with this court's rules with respect to identifying and
notifying the court of discovery disputes or plaintiffs' purported non-compliance
with the preliminary conference order the request to issue an order directing
plaintiffs to comply with discovery demands is denied without prejudice (see
D'Amour v Ohrenstein & Brown, LLP, 17 Misc 3d 1130(A) [Sup Ct, New York
County 2007] [denying plaintiffs motion to obtain production where they did not
contact the court before making the motion-as required by Rule 14 of the Rules of
the Justices of the Commercial Division-to arrange a conference for the purpose of
resolving the issues raised by the motion]).
To the extent any dispute still exists between the parties, defendants shall
submit a Rule 14 letter within two weeks of this order. Such a letter must include a
representation that the party has conferred with opposing counsel in a good faith
effort to resolve the issues raised in the letter or shall indicate good cause as to why
no such consultation occurred.
Connected to defendants' discovery issues, defendants seek to prohibit
plaintiffs from moving to have any costs defrayed for nonparty discovery (Mac Avoy
aff ,i 17). Defendants are concerned that, because discovery had been proceeding
prior to the substitution, the original plaintiffs may later seek to defray their
production expenses as non·party witnesses under CPLR 3122(d) (see CPLR 3122(d)
["The reasonable production expenses of a non·party witness shall be defrayed by
the party seeking discovery"]). Plaintiffs counter that the Loan Defendants
improperly seek to preemptively bar the original plaintiffs from seeking to defray
discovery costs under CPLR 3122, despite their willingness to comply with
discovery. Further, the Loan Defendants fail to meet the requirements for
injunctive relief as the issue is hypothetical and not ripe for judicial determination
(NYSCEF # 107 - Cross Opp at 4).
Initially, it bears noting that CPLR 3122(d) applies to non-parties responding
to subpoenas and is designed to ensure that non ·parties are not unfairly burdened
with the costs of litigation in which they are not directly involved. The statute does
not, however, include provisions that would allow a party to preemptively bar
plaintiffs who later become non·parties from seeking reimbursement for such costs.
And the Loan Defendants did not otherwise demonstrate any reasonable
justification for what is effectively a request for injunctive relief.
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As plaintiffs correctly note, the possibility that the original plaintiffs will
seek reimbursement of their costs in the future is hypothetical and premature. At
the current stage, they have not requested the court for such relief. Moreover, it
would be impossible for the court at this point to assess whether the costs the
original plaintiffs may seek in the future are "reasonable."
The Loan Defendants' cross-motion is denied without prejudice to renew if
and when a controversy ripens for resolution.
Conclusion
For the foregoing reasons, it is hereby
ORDERED that the original plaintiffs Aareal Capital Corporation, Aareal
Bank AG, and PacificCal Debt III, LLC's motion to substitute PCAL Debt IV
Broadway, LLC and PCAL Debt, LLC as substitute plaintiffs is granted; and it is
further
ORDERED that the amended caption to this action shall read as follows:
---- ---- -- --- --- ----- -------------------------- ------ ----- -- --- ----- -- X
PCAL Debt IV Broadway, LLC and
PCAL Debt III Broadway, LLC,
Plaintiffs,
-against-
462BDWY Land, L.P. a/k/a 462 BDWY Land, L.P.,
464 Broadway Associates, Stephen J. Meringoff,
Jay H. Shindler, Meringoff Properties, Inc., New
York State Department of Taxation and Finance,
New York City Department of Taxation and
Finance, Criminal Court of the City of New York,
and "John Doe" #1-12, the names of the last 12
defendants being fictious and unknown to
Plaintiffs, Plaintiffs intending to designate thereby
persons or parties having or claiming to have an
interest in or lien upon the descried premises,
Defendants.
---------------------------------------------------------------------- X
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NYSCEF DOC. NO. 117 RECEIVED NYSCEF: 03/24/2025
and it is further
ORDERED that within 10 days of this order, plaintiffs shall serve a copy of
this order with notice of entry on the General Clerk's Office and the County Clerk,
who are directed to mark the court records to reflect the amendment in the caption;
and it is further
ORDERED that the Loan Defendants' cross·motion on discovery issues is
denied without prejudice.
This constitutes the Decision and Order of the court.
03/24/2025
DATE MAlrREiJt'"CHAN,J~
~
CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION
GRANTED □ DENIED GRANTED IN PART 0 OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE
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