Although Plaintiff Limited Liability Company’s Articles of Incorporation Were Not Filed When It Took Title to Real Property—It May Have Validly Taken Title Pursuant to the “De Facto Corporation Doctrine”

The Second Department determined the defense motion to dismiss based upon documentary evidence was properly denied. Plaintiff limited liability company was able to demonstrate that it may be entitled to a declaration that it was the fee simple owner of property under the “de facto corporation doctrine.” When plaintiff limited liability company took title, the company was not yet “in legal existence” because all the necessary documents had not been filed. Under the “de facto corporation doctrine” the limited liability company could be deemed to have taken title if (1) a law existed under which it might be organized, (2) there was an attempt to organize, and (3) there was an exercise of corporate powers thereafter:

Here, the documentary evidence submitted by [defendants] in support of their motion demonstrated that the plaintiff’s articles of organization had not been filed with the New York State Department of State prior to the conveyance to the plaintiff of the subject property. However, in opposition to the motion, the plaintiff submitted the affidavit of its sole member, which demonstrated the applicability of the de facto corporation doctrine … . Specifically, the affidavit of the plaintiff’s sole member demonstrated that there was a law under which the LLC might be organized (see Limited Liability Law §§ 203, 209), that the plaintiff made a “colorable attempt” to comply with the statutes governing the formation of an LLC, including the filing requirement, and that the plaintiff exercised its powers as an LLC thereafter… . Lehlev Betar, LLC v Soto Dev. Group, Inc., 2015 NY Slip Op 06496, 2nd Dept 8-12-15