12 72ND LLC v. NYC MULTIFAMILY PORTFOLIO LLC (2026)

This action arises from a $31 million loan taken out by co-plaintiff 12 E 72nd LLC on a townhouse located at that address in Manhattan. To secure that loan, 12 E 72nd gave a mortgage on the property to the lender and also pledged to the lender ownership interests in 12 E 72nd that are held by co-plaintiffs Steven Croman and Harriet Croman, who live in the townhouse with their son.

Plaintiffs later defaulted on the loan. The holder of the note, mortgage, and pledge agreements sought to foreclose on the pledge agreements (and thus gain control of ownership of the townhouse) under UCC article 9. Plaintiffs then brought this action against defendant, NYC Multifamily Portfolio LLC, seeking injunctive relief and damages.

On this motion, brought on by order to show cause, plaintiffs seek a preliminary injunction barring the sale. (See NYSCEF No. 2 [proposed order to show cause].) Plaintiffs also sought, and this court granted, an interim temporary restraining order. (See NYSCEF No. 33 at 2 [signed order to show cause].) The parties have fully briefed the motion, including (by leave of court) the submission of surreply and surrebuttal papers addressing issues that arose during the course of briefing.

This court concludes that although any future sale of the pledged ownership interests, to be valid, must be made on 120 days’ notice in compliance with the UCC and the pledge agreements, plaintiffs are not entitled to preliminary injunctive relief. The motion is therefore denied.

DISCUSSION

I. Whether Defendant is a Proper Party

As an initial matter, plaintiffs named as defendant in this action NYC Multifamily Portfolio LLC, and have suggested that defendant is the party seeking to foreclose on the ownership interests in 12 E 72nd at issue. It is undisputed, however, that the party that holds the underlying note, mortgage, and pledge agreements is a different entity, NYC SFR Portfolio LLC.¹ (See NYSCEF No. 46 at 5-7; NYSCEF No. 58 at 7-8.) But defendant has not moved to dismiss the claims against it on improper-party grounds, or argued that injunctive relief must be denied on the ground that any injunction in this action would bind the wrong party. Neither party has sought joinder of NYC SFR Portfolio, either.

Because this court concludes that plaintiffs are not entitled to a preliminary injunction, this court does not reach the question whether the court would have power to grant a preliminary injunction here (and, if so, against whom), were an injunction otherwise appropriate. The court does conclude, though, that to obviate any such difficulties going forward, NYC SFR Portfolio LLC must be made a party to this action. (See CPLR 1001 [b].)

II. Whether Plaintiffs are Entitled to a Preliminary Injunction

A party seeking a preliminary injunction must show “a likelihood of ultimate success on the merits, irreparable injury if the preliminary injunction is withheld, and a balance of equities tipping in favor of the moving party.” (1234 Broadway LLC v West Side SRO Law Project, Goddard Riverside Community Ctr., 86 AD3d 18, 23 [1st Dept 2011].)

A. Irreparable Harm

In opposing plaintiffs’ preliminary-injunction motion, defendant argues among other things that the motion should be denied for lack of irreparable harm. In the particular circumstances of this case, this court disagrees.

The Appellate Division has, on several occasions, denied motions for injunctive relief seeking to block UCC sales of equity interests in entities that own real property. (See e.g. Broadway 500 W. Monroe Mezz II LLC v Transwestern Mezzanine Realty Partners II, LLC, 80 AD3d 483, 484 [1st Dept 2011]; accord Speyside Holdings, LLC v Nebari Natural Resources Credit Fund I, LP, 243 AD3d 714, 716 [2d Dept 2025].) In doing so, these decisions have emphasized the character of the property or the ownership interest. When the property in question is commercial, or the plaintiff is holding an ownership interest in the property for commercial reasons, the Court has concluded that plaintiff cannot show irreparable injury, because any harm stemming from a UCC sale may be compensated by money damages. (See id.; accord Kazantzis v Cascade Funding RM1 Acquisitions Grantor Trust, 217 AD3d 410, 412 [1st Dept 2024] [holding that plaintiff could not show irreparable injury because his interest in the cooperative apartment at issue was purely financial]; Lombard v Station Sq. Inn Apts. Corp., 94 AD3d 717, 721 [2d Dept 2012] [same].) And these decisions have specifically distinguished the scenario in which plaintiffs’ asserted harm is “loss of their home.” (Broadway 500 W. Monroe Mezz II, 80 AD3d at 484 [alterations omitted]; accord Kazantzis, 217 AD3d at 412 [noting that plaintiff “does not reside [in the apartment] or have some other personal, sentimental, familial, or otherwise unquantifiable interest therein”].) Conversely, in Chase v Wells Fargo Bank, N.A. (135 AD3d 751 [2d Dept 2016]), the Court held that a co-op resident's claim for permanent injunctive relief to stop a UCC sale of the shares appurtenant to her apartment was subject to dismissal on its merits—without addressing the issue of irreparable injury. (See id. at 753-754.)

Here, it is undisputed that plaintiffs Steven Croman and Harriet Croman live in the townhouse located at 12 East 72nd Street that is owned by mortgagor 12 E 72nd LLC. Thus, absent preliminary injunctive relief, defendant's planned sale of the Cromans’ ownership interests in 12 E 72nd would cause them irreparable injury by transferring control of the townhouse from them to defendant.

Defendant contends, relying on a decision of Supreme Court, Kings County, that “the fact that Steven and Harriet Croman do not own the Property precludes them from demonstrating irreparable harm.” (NYSCEF No. 32 at 21-22, citing Lincoln St. Mezz II, LLC v One Lincoln Mezz 2 LLC, 2021 NY Slip Op 32635[U] [Sup Ct, Kings County 2021].) This contention is unpersuasive. In Lincoln Street Mezz II, the court held that because (i) the mezzanine borrower did not own any real property (only equity interests in a corporation that in turn owned the real property); and (ii) the underlying mezzanine loan was not secured by real property (only ownership interests in the borrower), a UCC foreclosure sale of the borrower's equity interests would not deprive the borrower of “an interest in property that is unique that cannot consequently be compensated in money damages.” (2021 NY Slip Op 32635[U], at *4.)

Whatever its merits in the context of commercial mezzanine loans—a matter on which this court expresses no opinion—the holding in Lincoln Street Mezz II is an awkward fit for the circumstances of this case. Here, the underlying transaction is not a mezzanine loan, and the holder of the ownership interests at issue lives in the underlying real property. Defendant does not dispute that the ultimate effect of any UCC sale of the ownership interests in 12 E 72nd will be to give defendant control of the property owned by 12 E 72nd—i.e., the townhouse in which the Cromans live. That would be the result had defendant chosen to rely on its other form of security for the loan to 12 E 72nd, namely bringing an action to foreclose the mortgage on the townhouse given back by 12 E 72nd. And the outcome of a conventional mortgage foreclosure action, if successful, would inflict irreparable injury on the Cromans. (See Ahern v Pierce, 236 AD2d 343, 344 [2d Dept 1997] [holding in a reforeclosure action that “irreparable injury” to plaintiffs “would result from the sale of the subject premises at an execution sale” conducted by junior lienholders, entitling plaintiffs to a preliminary injunction].) This court sees no reason to conclude that the result should be different here merely because defendant is seeking to foreclose on the LLC interests through which the Cromans indirectly exercise ownership of and control over the townhouse. Indeed, accepting defendant's argument would imply the improbable conclusion that whenever a co-op apartment resident controls the apartment's appurtenant co-op shares through an LLC, a lender's foreclosure of a security interest in the shares could not cause irreparable harm to the resident. This court concludes instead that plaintiffs have shown that absent preliminary injunctive relief, they will suffer irreparable harm.

B. Likelihood of Success on the Merits

With respect to the likelihood-of-success prong of the injunction analysis, plaintiffs advance several arguments. Some of those arguments concern whether defendant may pursue its intended UCC foreclosure sale at all; the rest address asserted defects in defendant's planned sale. The court considers these arguments in turn.

I. Whether Defendant May Foreclose on the Pledge Agreement

Plaintiffs argue that defendant may not foreclose on the pledged ownership interests, because defendant has (assertedly) failed to show that it is the proper holder of the note and pledge agreement. (See NYSCEF No. 46 at 7; NYSCEF No. 59 at 4.) Defendant argues that it is the proper holder by assignment of the note and pledge agreements.² This court agrees with defendant.³

Plaintiffs’ argument is based on asserted discrepancies in the agreement assigning the note, mortgage, and pledge agreement from the original lender to defendant. In particular, plaintiffs point to the undisputed facts that (i) the date accompanying the signature of the assignor's representative in the signature block of the assignment instrument is October 29, 2024; and (ii) the notarization attesting to that signature is dated October 25, 2024, four days earlier. (See NYSCEF No. 18 at 5, 6.)

Plaintiffs initially argued that this discrepancy showed that the notarization was executed four days before the assignment instrument was signed, rendering the instrument “facially defective and invalid.” (NYSCEF No. 46 at 7.) In response, defendant provided an affidavit from a representative of the original lender to explain the sequence of the assignment instrument's signing, notarization, and dating. The affidavit—the accuracy of which plaintiffs do not dispute—represents that the assignment instrument had been signed on October 25, 2024, as attested to in the notarization. (See NYSCEF No. 56 at ¶ 5.) Defendant's affiant further represents that the discrepancy identified by plaintiffs stemmed from the fact that the date in the signature block had been left blank at the time of signing, and then filled in four days later when the assignment was released from escrow. (See NYSCEF No. 56 at ¶ 5.)

Plaintiffs, in reply to defendant's response, argue that defendant's fuller account of the circumstances of the execution of the assignment makes no difference. Plaintiffs assert that “a legal presumption” exists “that the date next to a signature is the date it was executed,” and “[n]otarizing a document before it is executed ․ does not comply with the law and is, therefore, invalid and a nullity.” (NYSCEF No. 59 at 4-5.) Defendant, on the other hand, contends that any discrepancy between when the assignment was executed and when it was dated is immaterial. (NYSCEF No. 58 at 2, 8.) This court agrees with defendant.

Any presumption here that the date next to the signature of the assignor's representative was the date of signature has been rebutted by the detailed affidavit from the assignor submitted by defendant. Plaintiffs do not contend that defendant's assignor made any changes to the body of the assignment in the four days between when the document was signed and when the date was filled in. Nor do plaintiffs provide authority for the proposition that a negotiable instrument like a promissory note is legally invalid if the date on that instrument is later in time than the date on which the instrument was signed and notarized. To the contrary, the UCC specifically holds that post-dated instruments are negotiable and valid. (See UCC 3-114 [1]-[2].) The instrument may not be effective until the stated date (see id. at 3-114 [2]), but plaintiffs do not contend that the four-day lapse in this case between signing and dating of the assignment is material.

This court is satisfied that the underlying note was properly assigned from the original lender to NYC SFR Portfolio and therefore that NYC SFR Portfolio has standing to seek foreclosure of the 12 E 72nd ownership interests pledged to it as security for the note.

2. Whether a UCC Foreclosure of the Pledged Ownership Interests Improperly Clogs Plaintiffs’ Equity of Redemption of the Mortgage

Plaintiffs also argue that defendant's right under the pledge agreement to foreclose on the Cromans’ pledged ownership interests in 12 E 72nd in the event of default impermissibly impairs, or “clogs,” 12 E 72nd's equity of redemption of the mortgage also given to defendant to secure the underlying loan. (See NYSCEF No. 7 at 12-14; NYSCEF No. 46 at 1-5.)

The equity of redemption of real property has for centuries been recognized by the New York courts (and by courts of other states). (See Mooney v Byrne, 163 NY 86, 92-94 [1900] [discussing this principle], citing Hart v Ten Eyck, 2 Johns Ch 62, 100 [Ch Ct 1816] [Kent, Ch.].) The equity of redemption “allows property owners to redeem their property by tendering the full sum at any point before the property is actually sold at a foreclosure sale.” (NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp., 13 NY3d 573, 579 [2009].)

To prevent erosion or evasion of this right, New York statute and caselaw provide that “[a] deed conveying real property, which, by any other written instrument, appears to be intended only as a security in the nature of a mortgage, although an absolute conveyance in terms, must be considered a mortgage,” and thus subject to the equity of redemption. (Real Property Law § 320; accord e.g. Leonia Bank v Kouri, 3 AD3d 213, 217 [1st Dept 2004], citing Mooney, 163 NY at 92-93.) A contractual provision that purports to waive the right of redemption, if executed at the same time as the mortgage, is unenforceable as contrary to public policy. (See Mooney, 163 NY at 92.) So too a “stipulation in open court” waiving that right (Maher v Alma Realty Co., 70 AD2d 931, 931 [2d Dept 1979]).

In this case, the provisions of the pledge agreement providing for defendant's right to foreclose on the pledged collateral (i.e., the ownership interests in 12 E 72nd) do not by their terms purport to affect 12 E 72nd's right to redeem the mortgaged property, namely the townhouse located at that address. Instead, the ownership interests in 12 E 72nd, and the townhouse owned by 12 E 72nd, operated as parallel forms of collateral that may be foreclosed on independently. Plaintiffs contend, though, that this collateral structure, by giving defendant a choice between multiple foreclosure avenues in the event of default, is itself an impermissible “end around foreclosure of the underlying real property secured by mortgages held by Defendant. (NYSCEF No. 7 at 12.) This approach, plaintiffs say, “improperly ․ abbreviate[s] Plaintiffs’ right to redeem” their townhouse. (Id. at 14.)

To the best of this court's research, no appellate authority—anywhere—considers this particular question, and only minimal trial-level precedent exists. The trial-court decisions that do exist have concluded, albeit without extended analysis, that a dual-collateral loan structure does not clog the right to redeem mortgaged real property in light of UCC 9-623’s statutory right of redemption for collateral secured under the UCC. (See Speyside Holdings LLC v Nebari Natural Resources Credit Fund I, Index No. 604646/2021, NYSCEF No. 79 at 4 [Sup Ct, Suffolk County May 28, 2021], affd 243 AD3d 714 [2d Dept 2025];⁴ Atlas Brookview Mezzanine LLC v DB Brookview LLC, Index No. 653986/2020, NYSCEF No. 120 at Tr. 8-19 [transcript of ruling on the record] [Borrok, J.]; HH Cincinnati Textile L.P. v Acres Capital Servicing LLC (2018 NY Slip Op 31263[U], at *2 [Sup Ct, NY County 2018] [Ostrager, J.];⁵ accord Wickapogue 1 LLC v Blue Castle [Cayman] Ltd., 657 F Supp 2d 234, 240 [ED NY 2023] [same].)

Considering the matter for itself, this court holds that 12 E 72nd's equity of redemption of the mortgage has not been impermissibly clogged by defendant's right to foreclose on the pledged ownership interests in 12 E 72nd.

This court agrees with the rulings of prior courts that a borrower's right under UCC 9-623 to redeem pledged ownership interests before they are sold under UCC 9-610 is an important point in the lender's favor. At the same time, this statutory right to redeem does not constitute a complete answer to the anti-clogging argument made by plaintiffs here. In particular, plaintiffs contend that their § 9-623 redemption right is insufficient because the “redemption period provided by the UCC is materially if not exponentially shorter than that which is available to a borrower in the foreclosure context.” (NYSCEF No. 46 at 3.) Therefore, plaintiffs assert, a lender's ability, through securing a real-property loan by a pledge of ownership interests, effectively affords the lender “a means to foreclose on the property far faster than a mortgage would otherwise permit.” (Id.) That difference in speed, they argue, “by definition, is a clogging of the equity of redemption.” (Id.) This argument warrants careful consideration. Ultimately, though, this court finds it unpersuasive.⁶

For one, odd consequences would follow from affording great weight to the disparity between the time needed to dispose of pledged collateral at a UCC foreclosure sale and the time needed to sell property following a judicial foreclosure action (as plaintiffs urge here). If nothing else, the judicial-foreclosure process will require more (or less) time depending on where (and when) the foreclosure proceeding is brought. Yet it is difficult to see how it would be workable for the scope of the anti-clogging doctrine in New York to vary based on judicial caseloads or geography.

Plaintiffs might avoid this problem by contending that even with that kind of variation, judicial foreclosures will nearly always take more time than foreclosure by UCC sale; and that a borrower is necessarily entitled to that longer period to redeem the mortgaged property. But plaintiffs do not identify any authority holding that the length of a post-default redemption period is material.

To the contrary, at different points in New York's history, the Legislature has provided for the availability of mortgage foreclosure through post-default sales on public notice, in addition to judicial foreclosure. (See e.g. Mowry v Sanborn, 68 NY 153, 161-162 [1877] [discussing history of statutes providing for foreclosure by advertised sale]; Lawrence v Farmers’ Loan & Trust Co., 13 NY 200, 210-213 [1855] [same]; Wehrum v Wehrum, 179 AD 814, 816 [1st Dept 1917] [discussing provisions in Code of Civil Procedure governing foreclosure by sale]; State ex rel. Dewey v Burdick, 52 Hun 348, 364 [Sup Ct, Gen Term, 4th Dept 1889] [same].) This method of nonjudicial foreclosure would, presumably, be a faster and easier way to foreclose than a foreclosure action. Nor would it be subject to ex ante judicial scrutiny, either. But decisions considering cases arising from foreclosures by sale do not suggest, let alone hold, that it would impermissibly abridge the equity of redemption for a lender to opt for this method of foreclosure—as long as the lender has strictly complied with the applicable statutory requirements. (See id.; see also e.g. Weir v Birdsall, 27 AD 404, 405-406 [3d Dept 1898]; Elliott v Wood, 53 Barb 284, 304 [Sup Ct, Gen Term 1869].)

Plaintiffs rely on decisions like Batty v Snook (5 Mich 231, 239 [Mich 1858]) and Holden Land & Live Stock Co. v Interstate Trading Co. (123 Pac 733, 735-736 [Kan 1912]). (See NYSCEF No. 46 at 3.) But those decisions did not consider the permissible length of a post-default redemption period. They addressed agreements that purported to provide that the borrower's failure to pay the amount due under the note at maturity, or by a date specified in the agreement, would of its own force forfeit to the lender all the borrower's rights to the mortgaged property, without any opportunity to redeem. (See Batty, 5 Mich at 238-239; Holden, 123 Pac at 735-736; accord e.g. American Lending Corp. v Grigg, 184 AD3d 613, 614, 616 [2d Dept 2020] [same]; Patmos Fifth Real Estate Inc. v Mazl Bldg., LLC, 140 AD3d 527, 527-528 [1st Dept 2016] [same].⁷ )

In other words, a security agreement will run afoul of the anti-clogging doctrine when it expressly ousts or cuts off the right to redeem. Similarly, it is impermissible for a lender to seek to evade the right to redeem through a security agreement that provides for the automatic or ministerial transferring of title to the land from borrower to lender upon the happening of a specified event or lapse of time, without further process.⁸ (See id.; Basile v Erhal, 148 AD2d 484, 484-486 [2d Dept 1989] [agreement in which borrower gave lender a deed to the property that lender would record upon borrower's default]; Goldblatt v Iris Constr. Corp., 28 Misc 2d 621, 622-623 [Sup Ct, Nassau County 1960] [same]; accord Restatement [Third] of Property [Mortgages] § 3.1, Reporters’ Note, Comment a, Illustrations 1-5 [describing “classic applications of the anti-clogging concept”].)

A contract providing for foreclosure pursuant to article 9 of the UCC, which provides for a carefully regulated post-default sale process and affords an express right to redeem until the sale, is materially different from these kinds of forbidden security-enforcement provisions. That an article 9 foreclosure of the ownership interests in a mortgage borrower will occur more quickly than judicial foreclosure of the mortgaged property itself is immaterial for anti-clogging purposes. The pledge agreement in this case—and defendant's effort to enforce its rights under that agreement—did not impermissibly abridge plaintiffs’ equity of redemption.

3. Commercial Reasonableness of the Foreclosure Sale

Plaintiffs claim that defendant's efforts to advertise and carry out the sale of the pledged ownership interests have not been commercially reasonable, as UCC 9-610 require. (See NYSCEF No. 7 at 6-11.) In opposition, defendant explains in detail, with a supporting affidavit and exhibits, how it has undertaken commercially reasonable measures to publicize the foreclosure sale, ensure a sufficient pool of bidders, and obtain an adequate sale price. (See NYSCEF No. 32 at 8-14 [mem. of law]; NYSCEF No. 26 [affirmation of representative of firm retained to carry out the foreclosure sale]; NYSCEF Nos. 27-31 [exhibits].) Notably, on reply, plaintiffs do not attempt to challenge—or even mention—defendant's commercial-reasonableness showing. (See generally NYSCEF No. 46 [reply mem. of law].) This court is not persuaded that plaintiffs have a likelihood of successfully demonstrating that the sale process here is commercially unreasonable.

4. Adequacy of the Foreclosure Sale Notice

Plaintiffs also argue that defendant's notice of the foreclosure sale is invalid for purposes of the pledge agreement and the UCC's requirements because that notice misidentified the secured party. (See NYSCEF No. 46 at 6-7; NYSCEF No. 59 at 2-3.) That is, as discussed above, the holder of the underlying note, mortgage, and pledge agreements is NYC SFR Portfolio LLC. (See NYSCEF No. 18 at 4, 6-11 [assignment agreement and exhibits].) But the initial notice of disposition instead incorrectly lists NYC Multifamily Portfolio LLC as the “Secured Party.” (NYSCEF No. 21 at 1.) Although defendant served another notice of disposition that correctly identifies NYC SFR Portfolio LLC as the secured party (see NYSCEF No. 22 at 1), that notice did not provide the 120 days’ advance notification required by the pledge agreement (see NYSCEF No. 14 at 11 § 13.3).

In opposition, defendant argues first that plaintiffs “do not cite a single statute or case to sup-port their contention that the misnomer at issue renders the First Notice of Disposition fatally defective,” because “none exists.” (NYSCEF No. 58 at 4.) This is incorrect. In Arthur v Carver Federal Savings Bank (150 AD3d 447 [1st Dept 2017]), the plaintiff sought damages stemming from a foreclosure sale of her shares in a residential cooperative—asserting, among other things, that the sale was invalid because the foreclosing party had not provided proper notice of the sale. The Appellate Division, First Department, reversed the dismissal of plaintiff's improper-notice cause of action, holding that dismissal was improper “because the notice of sale misidentified the secured party.” (150 AD3d at 448; see also Bronx Community Guardianship Network v 1809-15 7th Ave. Hous. Dev. Fund Corp., 2025 NY Slip Op 32231[U], at *3 [Sup Ct, NY County 2025] [Goetz, J.] [holding after a bench trial in the same action that because the notice of sale misidentified the secured party, it did not substantially comply with the statute].) Although the procedural posture of Arthur differs from that of the current action, that difference does not render inapplicable Arthur’s holding that a notice of a sale of collateral is invalid for purposes of UCC 9-613 if the notice misidentifies the secured party.

Additionally, UCC 9-613 (b) provides that the “contents of a notification providing substantially the information specified in subsection (a) are sufficient, even if the notification includes ․ (2) minor errors that are not seriously misleading.” This court is unpersuaded that a foreclosure notice's misidentifying the secured party—i.e., the party for whose benefit the foreclosure sale is being conducted—can constitute a “minor” error within the meaning of the statute. (See Bronx Community Guardianship Network, 2025 NY Slip Op 32231[U], at *3 [reaching the same conclusion]; cf. Peters v Caton Towers Owners Corp., 2026 NY Slip Op 30116[U], at *2 [Sup Ct, Kings County] [holding that a typographical error stating the wrong year in the body of a notice of disposition may be disregarded as a minor error].) Nor does defendant provide authority that a defect of this kind is minor for § 9-613 purposes.

Defendant argues at length that this defect in the initial notice of disposition should be disregarded as neither misleading nor prejudicial. (See NYSCEF No. 58 at 3-6.) UCC 9-613 (b) (2) provides, however, that errors in a notice of disposition may be overlooked only if they are both minor and not misleading. And, particularly in light of the First Department's holding in Arthur, this court is unpersuaded that it may treat the misidentification of the secured party in the first notice as merely a minor, technical irregularity in the notice.

Plaintiffs thus have a likelihood of success on their argument that the previously scheduled foreclosure sale would have been invalid due to lack of proper notice. However, this argument does not entitle plaintiffs to injunctive relief barring defendant “from scheduling a future nonjudicial sale, provided such sale is preceded by proper notice.”⁹ (Chase 135 AD3d at 753 [emphasis added].)

C. Balancing the Equities

Finally, the parties dispute how the equities in this action should be balanced. Plaintiffs urge this court to give weight to the fact that the townhouse at issue, however luxurious, is the Cromans’ home. (See NYSCEF No. 7 at 16; NYSCEF No. 46 at 8.) Defendant, on the other hand, emphasizes that plaintiffs are sophisticated parties, represented by experienced counsel, who carefully negotiated the terms of a $31 million loan; and that the Cromans have failed for a considerable period of time to make payments on the loan, while still living in their townhouse. (See NYSCEF No. 32 at 2-3, 19-20.)

This court finds defendant's argument more persuasive. Plaintiffs do not contend that the terms of the loan, or the circumstances under which defendant called a default on the loan and began seeking to foreclose, were the product of or resulted in unfair pressure on them. Taking into account the size of the loan (and property) at issue, and plaintiffs’ evident sophistication, this court does not believe it would be inequitable to enforce the terms of the loan and pledge agreement as written. That is particularly true given that, as defendant points out, permitting the sale of the ownership interests in 12 E 72nd to proceed, although it might result in the effective change of control over the property, would not “result in an immediate eviction of the Croman family.” (Id. at 20.)

Plaintiffs have established that any harm to the Cromans from permitting the foreclosure sale to go forward cannot later be redressed by money damages. But plaintiffs have not shown a likelihood of success on the merits of any challenge to a future, properly noticed sale. Nor is the balance of the equities in plaintiffs’ favor.

Accordingly, it is

ORDERED that plaintiffs’ preliminary-injunction motion is denied; and it is further

ORDERED that within 14 days of entry of this order, plaintiffs shall serve a supplemental summons and amended complaint on NYC SFR Portfolio LLC by the means set forth in CPLR article 3, joining it as a defendant in this action; and it is further

ORDERED that once plaintiffs have served the supplemental summonses and amended complaint, they shall also serve a copy of this order with notice of its entry and a copy of the amended complaint on the office of the General Clerk (using the NYSCEF document type “Service on Supreme Court Clerk (Genl. Clerk) w/Copy of Order”), which shall amend the caption and update its records accordingly; and on the office of the County Clerk (using the NYSCEF document type “Notice to the County Clerk - CPLR § 8019 (c)”), which shall update its records accordingly.

FOOTNOTES

1.   Whether the distinction between NYC Multifamily Portfolio LLC and NYC SFR Portfolio LLC is material for purposes of the validity of the challenged UCC foreclosure process is discussed in paragraph II.B.4, infra.

2.   This court is unpersuaded by defendant's contention that plaintiffs’ standing-related arguments about “the signature and notarization dates of the Mortgage are wholly irrelevant” here, in light of the fact that what is being sought is foreclosure of the Cromans’ ownership interests in 12 E 72nd, not foreclosure of the mortgage. (NYSCEF No. 58 at 7.) The Cromans pledged those ownership interests to secure the underlying promissory note. (See NYSCEF No. 14 at 1 [pledge agreement].) As this court understands the record, defendant (or, at any rate, NYC SFR Portfolio LLC) holds the note by virtue of an assignment of the note and mortgage from the original lender to NYC SFR Portfolio. (See NYSCEF No. 57 at ¶ 5 [affidavit of representative of original lender] [“[T]he Mortgage Assignment ․ memorialized Axos Bank's conveyance of all of its rights in the Loan and the Mortgage to NYC SFR Portfolio LLC.”].) And it is the validity of that assignment that plaintiffs are challenging.

3.   Strictly speaking, as noted above in Point I, it is undisputed that defendant (NYC Multifamily Portfolio LLC) is not the holder of the note and the pledge agreements. As the parties have briefed the issue, though, including on their surreply and surrebuttal papers filed by leave of court, the question is instead whether the entity that all agree is seeking to foreclose (NYC SFR Portfolio LLC) has standing to foreclose as the proper holder of the note and pledge agreements. Paragraph II.B.1 considers that question.

4.   The Second Department's decision in Speyside Holdings, although briefly concluding as an alternative holding that plaintiffs had not demonstrated a likelihood of success on the merits (see 243 AD3d at 716), did not identify the reasons that had led it to that conclusion. Nor did the Court separately mention or discuss the clogging/equity-of-redemption issue. (See id.)

5.   Justice Ostrager, in ruling on a motion to dismiss in a later, related action, rejected the argument that his decision in HH Cincinnati Textile foreclosed an anti-clogging claim asserted by the plaintiffs. (See HH Mark Twain LP v Acres Capital Servicing LLC, 2020 NY Slip Op 31737[U], at *2 [Sup Ct, NY County 2020].) He explained that in HH Cincinnati Textile, he had concluded merely that plaintiffs had not shown their entitlement to a preliminary injunction because their “claims were adequately remedied by money damages.” (Id.) Justice Ostrager denied defendants’ motion to dismiss on that basis, without further addressing the merits of the anti-clogging argument. (See id.)

6.   Some commentators have also contended that an anti-clogging challenge to a dual-collateral loan structure should be disregarded because it would require a court improperly to “conflate the separate legal identities of the Mortgagor (the entity that owns the real property) and the Pledgor (the owners of the Mortgagor) such that the owners’ loss of ownership of the Mortgagor equates to a loss of ownership of the mortgaged property without a right of redemption.” (Stuart Glick & Vivian Arias, Applying Well-Settled Law to Dismantle the Clogging of the Equities Argument for Dual Collateral Loans, Real Estate Fin. J., Spring 2023, 31, 34.) This argument, though, is in tension with the long-established principle that for purposes of determining whether an instrument is a mortgage protected by the equity of redemption, “[e]quity ․ always looks through the form and gives effect to a transaction so as to carry out the substantial intent of the parties.” (Lipe v Beech-Nut Packing Co., 243 AD 433, 436 [1st Dept 1935], citing Horn v Keteltas, 46 NY 605, 610 [1871].)

7.   The same is true of Frazer v Couthy Land Co. (149 A 428, 429 [Del Ch Ct 1929]) and Bradbury v Davenport (114 Cal 593, 597, 601-603 [Cal 1896]), also cited by plaintiffs. (See NYSCEF No. 7 at 14.)

8.   In Donohue v First Trust Co. of Albany (1 AD2d 573, 574-576 [3d Dept 1956]), the Appellate Division held that a half-interest in a parcel of real property could not be cut off by a post-default public auction and sale. But the defect identified by the Court in Donohue was not that the post-default process in that case was abbreviated or unregulated. Instead, it was that the lender could not, under applicable law, foreclose on a security interest in real property in the same way as if the property had been pledged personalty. (See id. at 576.) That conclusion has no application here, given that defendant is seeking to foreclose on pledged personal property by the means set forth by statute.

9.   In light of the fact that the original foreclosure sale “did not proceed” as scheduled, any new sale would have to be noticed at least 120 days in advance in any event. (Chase, 135 AD3d at 753, citing Stern-Obstfeld v Bank of Am., 30 Misc 3d 901, 906 [Sup Ct, NY County 2011].)

Gerald Lebovits, J.