Opinion
No. 27471/10.
2010-12-15
EAST WEST BANK as assignee of the Federal Deposit Insurance Corporation, receiver of United Commercial Bank, Plaintiff, v. JUNG SUN LAUNDRY GROUP CORP., Feiyang Group, LLC, Tony X.F. Yang a/k/a Xuefeng Yang a/k/a Xue Feng Yang, Pin Ji You and Ping Fan You, Defendants.
ORIN R. KITZES, J.
Plaintiff's application for an Order directing the foreclosure of Plaintiff's security interest in all of Defendant's assets and personal property (hereinafter collectively referred to as the “Collateral”); enjoining the Defendant and its servants, agents, employees, officers, assigns, representatives and all other persons in active concert and participation with the Defendant from moving, selling, assigning, transferring, secreting or otherwise disposing of the Collateral; directing the Defendant pursuant to New York Uniform Commercial Code § 9–609 to assemble and deliver to the Plaintiff possession of the Collateral, including, but not limited to inventory, equipment, machinery, fixtures and furnishings, or in the alternative, make such Collateral available to the Plaintiff at a reasonably convenient time and place; issuing an order of seizure pursuant to C.P.L.R. § 7102 as to the Collateral or so much thereof which has not been surrendered and delivered by Defendant to Plaintiff and directing that if Defendant fails to assemble and deliver to Plaintiff possession of the Collateral, that the Defendant turnover the Collateral to the Sheriff and/or any other appropriate legal authority, and if Defendant fails to turnover the Collateral as aforesaid that the Sheriff and/or any other appropriate legal authority may break open, enter and search for the Collateral and/or proceeds thereof at 37–08/10 24th Street and 37–11 23rd Street, Long Island City, New York, or wherever such Collateral and/or the proceeds thereof may be located whether within or without the State of New York; directing the Defendant to segregate and escrow all proceeds received on any accounts receivable that form a part of the Collateral in a bank account to be designated the “Jung Sun Laundry Accounts Receivable Escrow Account” with Plaintiff's attorneys', Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, LLP, as escrow agent, depositing therein all such monies received and with no withdrawals to be made therefrom without further order of the Court; enjoining the Defendant and its servants, agents, employees, officers, assigns, representatives and all other persons in active concert and participation with them from, in any way, directly or indirectly, in whole or in part, absolutely or as security, paying, withdrawing, transferring, assigning or selling any and all existing accounts receivable of the Defendant and/or otherwise disposing any of the Defendant's Collateral to any creditor, person, or entity, except in the ordinary course of Defendant's business, until further order of this Court or until Defendant pays Plaintiff the sum of $534,486.30, plus interest, costs, disbursements and attorneys' fees; directing the Defendant to deliver to Plaintiff no later than the fifteen (15) days after the end of each month, monthly statements of all accounts receivable including thereon the amount due, name, address, telephone number and contact person of each account party; permitting Plaintiff, in its name or in the name of the Defendant, to immediately pursue collection of Defendant's accounts receivable directly from the account debtors or appointing Plaintiff's counsel, Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, LLP, as fiscal agent to collect Defendant's accounts receivable and deposit all proceeds received therefrom in the designated “Jung Sun Laundry Accounts Receivable Escrow Account” with no withdrawals to be made therefrom pending further order of this Court, is granted.
According to the complaint and the affidavit of Caterine Fenelon, Vice President and Portfolio Manager of Plaintiff, and the submitted documents, on or about July 10, 2008, Plaintiff entered into a Term Loan Agreement (the “Loan Agreement”) with Defendant Jung Sun Laundry Group Corp. (“Jung Sun”) pursuant to which Plaintiff extended a term loan (the “Term Loan”) in the principal amount of $895,730.00. As part of the loan terms, Defendant Jung Sun Laundry Group Corp duly executed and delivered to Plaintiff, a Note (the “Term Loan Note”) dated July 10, 2008, in the principal amount of $895,730.00. Concurrently with the granting of the Term Loan, Plaintiff also made available to Defendant Jung Sun for a one year period an uncommitted overdraft line of credit (the “LOC”) in an aggregate principal amount not to exceed $100,000.00. As evidence of LOC, Defendant duly delivered to Plaintiff a Promissory Note (the “LOC Note”) dated July 10, 2008, in the principal amount of $100,000.00.
On or about July 9, 2009, Plaintiff extended the availability of the LOC to Defendant to July 10, 2010, and as evidence thereof, Defendant executed and delivered to Plaintiff an Amended and Restated Promissory Note (the “Amended LOC Note”). As partial collateral security for the Term Loan and LOC (collectively hereinafter the “Loans”), Jung Sun executed and delivered to Plaintiff a Security Agreement (the “Security Agreement”), pursuant to which Jung Sun granted Plaintiff a first priority security interest in all its assets and personal property, including its accounts receivable (collectively, the “Collateral”). Plaintiff perfected its security interest in the Collateral by filing a UCC–1 Financing Statement with the office of the New York State Department of State UCC Section on July 16, 2008, as File No. 200807160502270. The Security Agreement provides that upon a default under the terms and conditions the Term Loan, Plaintiff is entitled, inter alia, to pursue all of the rights and remedies available to it at law or in equity against the Defendant, including the rights and remedies of a secured party under the Uniform Commercial Code. In pertinent part, the Security Agreement provides:Upon failure of [Defendant] to pay any Obligation when becoming due or made due, in accordance with its terms, [Plaintiff] shall have, in addition to all other rights and remedies allowed by law, the rights and remedies of a secured party under the [Uniform Commercial] Code
The Security Agreement further provides that upon the happening of an event of default under the Term Loan, Plaintiff is entitled to demand that Defendant segregate and/or pay over its accounts receivable to Plaintiff as well as assemble and deliver its other collateral to Plaintiff. In pertinent part the Security Agreement provides:at any time when a default exists in respect of any of the Obligations, the Bank may, without any notice to the Debtor, in its discretion, whether or not any of the Obligations are due, in its name or in the name of the Debtor, demand, sue for, collect and receive any money or property at any time due, payable or receivable on or on account of or in exchange for, and may compromise, settle or extend the time of payment of, any of the demands or obligations represented by any of the Collateral, the Debtor does hereby constitute and appoint the Bank the Debtor's true and lawful attorney to compromise, settle or extend payment of said demands or obligations and exchange such Collateral as the Debtor might or could do personally; all without liability or responsibility for action herein authorized and taken or not taken in good faith. The Bank is entitled at any time in its discretion to notify an account debtor or the obligor on any instrument to make payment to it, regardless of whether or not the Debtor had been previously making collections on the Collateral, and the Bank may take control of any proceeds of any of the Collateral. Upon request of the Bank, the Debtor shall receive and hold all proceeds of the Collateral in trust for the Bank and not commingle any collections with any of its own funds and immediately deliver such collections to the Bank.
[Defendant] also agrees to assemble the Collateral as such place or places as the [Plaintiff] designates by written notice.
Furthermore, the Security Agreement provides that:The Debtor agrees to mark its books and records as the Bank shall request in order to reflect the rights of the Bank granted herein, and the Bank may, in its sole discretion, take possession of the Collateral at any time, either prior to or subsequent to a default under any of the Obligations
On March 10, 2010, Jung Sun failed to make its required monthly installment of interest due and has not made any payment since then and Plaintiff now seeks to foreclose on the Collateral and collect all accounts receivables due or to become due to defendant Jung Sun. This election is pursuant to the Security Agreement. In a letter dated September 28, 2010, Plaintiff duly demanded that Jung Sun immediately (I) deliver possession of the Collateral to Plaintiff, (ii) notify all account debtors and/or others obligated on any of the Collateral to render future payments to Plaintiff, and (iii) segregate and escrow for Plaintiff's benefit all payments received on account of the Collateral. Defendant Jung Sun has not complied with Plaintiff's requests as contained in the September 28 Letter and has avoided all of Plaintiff's attempts at resolving these matters.
According to Ms. Fenelon, Jung Sun is continuing to collect payments on its accounts receivable, and failing to escrow and segregate such proceeds for Plaintiff's benefit as contractually agreed to. In light of the foregoing, Plaintiff claims that if Jung Sun is not directed by this Court to perform and abide by its agreements under the Security Agreement, and is not enjoined from transferring or assigning of its Collateral, in particularly the monies received on its accounts receivable, Plaintiff will have no source of payment of the outstanding and unpaid principal balance of the Term Loan and LOC and will therefore be irreparably harmed. Consequently, Plaintiff seeks the instant relief for a court order that Defendant must abide by its contractual obligations and segregate its accounts receivable and deliver possession of its other Collateral to Plaintiff.
Defendants oppose this application by claiming that Plaintiff does not have standing to bring this action. Defendants also claim that the request for a temporary restraining order enjoining Defendant from transferring its collateral is too broad. Defendants also claim that they have attempted to resolve the dispute. Regarding the injunction, Defendants claim that Plaintiff does not have a likelihood of success on the merits and has an adequate remedy at law to enforce its right to the Collateral and there should be no waiver of the undertaking. Finally, Defendants claim Plaintiff has not produced the personal guarantees signed by the individual defendants Tony Yang, Ji You and Fan You. In support of these claims, Defendants have submitted affidavits of Tony Yang, Ji You and Fan You, wherein they state, inter alia, they do not recall signing the personal guarantees.
Initially, Plaintiff has established standing by submitting proof that the Federal Deposit Insurance Company was appointed receiver over United Commercial Bank (“UCB”) and its assets. Thereafter, the FDIC entered into a Purchase and Assumption Agreement with the Plaintiff, pursuant to which it purchased certain assets of UCB, one of which was the loan that is the basis of the instant action. Furthermore, it is clear from the loan agreements that Plaintiff was induced into extending the loans in question by Defendant's granting of a security interest in all of its assets and personal property. As such, the request for a restraint on the transferring of collateral is not too broad.
The Court shall now address the request for a preliminary injunction to prevent the Defendant from transferring and/or otherwise disposing any of the Collateral until such time that Plaintiff's judgment can be obtained and entered, and the outstanding balance due on the Loans paid in full. A preliminary injunction may issue only if the moving party can demonstrate (1) the likelihood of success on the merits; (2) irreparable injury if the preliminary injunction is not granted, and (3) a balancing of the equities in its favor. (Doe v. Axelrod, 73 N.Y.2d 748;Preston Corp. v. Fabrication Enters., 68 N.Y.2d 397;W.T. Grant Co. v. Srogi, 52 N.Y.2d 496.) “Preliminary injunctive relief is a drastic remedy that will not be granted unless a clear right to it is established under the law ... and the burden of showing an undisputed right rests upon the movant.” (Zanghi v. State of New York, 204 A.D.2d 313, 314.)
As noted, this action is one for breach of a loan agreement. The elements of a cause of action for breach of loan agreement include: “(1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages.” (Rexnord Holdings, Inc. v. Bidermann, 21 F3d 522, 525;First Investors Corp. v. Liberty Mutual Ins. Co., 152 F3d 162.) Here, the Plaintiff has shown sufficient proof of the existence of a loan agreement and the promissory note and the security agreement. Defendants do not deny the existence of the loan agreement and this Court rejects their claims that they did not know they were signing the above mentioned documents. They signed their names to the documents and it is black letter law in New York that “if the signer of an agreement could have read it in its entirety, to not have read it was gross negligence.” Gillman v. Chase Manhattan Bank, N.A., 135 A.D.2d 488,appeal granted,72 N.Y.2d 803aff'd537 N.Y.S.2d 787, 73 N.Y.2d 1, 534 N.E.2d 824 (2nd Dept., 1987) [emphasis added]. See also, Chemical Bank v. Geronimo Auto Parts Corp., 225 A.D.2d 461 (1st Dept., 1996). Similarly, Defendants are presumed to have read and understood the documents which they signed, and cannot avoid liability by claiming that they failed to read them or understand the obligations imparted by the documents. Marine Midland Bank, N .A. v. Dino & Artie's Automatic Transmis, 168 A.D.2d 610 (2d Dept 1990.)
This is especially so since the terms of the documents are unambiguous and clearly set forth the nature of the loan agreements and the security interest in the collateral. See, Norstar Bank of Long Island v. Prompt Process Service, Inc., 117 A.D.2d 589 (2d Dept 1986.) Therefore, Plaintiff has established its likelihood of success on the merits.
Regarding the second element in procuring injunctive relief, establishing irreparable injury, in the instant case, Plaintiff seeks to protect its ability to collect the collateral it secured for the loan made to Defendants. In analyzing the irreparable harm component of this analysis, the Court considers the clear provisions of the Loan Agreements that 1) limit Defendants' right to sell or transfer the Collateral; and 2) authorize Plaintiff's recovery of that Collateral under certain circumstances. Although neither party has provided specifics regarding the weight and construction of the Collateral, the Court infers from the nature of the Collateral that it could be moved to another location, unknown to Plaintiff. The Court surmises that Plaintiff included the limitations in the Loan Agreements regarding transfer of the Collateral to ensure that Plaintiff had ready access to the property that serves as its security interest under the Loans. This analysis is equally applicable to the accounts receivables collateral. In light of the foregoing, the Court concludes that Plaintiff has demonstrated that it will suffer irreparable harm if the Court does not grant injunctive relief to the extent of limiting Defendants' transfer of the Collateral.
In regard to the weight of the equities, Plaintiff's instant application is not a request for monetary relief, but rather a request for injunctive relief in connection with an application for an order of seizure. There are no cases that suggest, where a complaint states a claim for money damages, Plaintiff may not obtain injunctive relief in connection with an application for an order of seizure. The Court believes that the equities balance in favor of the injunctive relief that Plaintiff seeks.
In light of the relevant provisions in the Loan Agreements, Defendants' not denying that they owe money to Plaintiff pursuant to the Loan Agreements, and the movable nature of the Collateral, the Court grants the branches of the application for an Order, pursuant to CPLR §§ 6301 and 6311. CPLR § 6312(b) provides, in pertinent part, that, “[P]rior to the granting of a preliminary injunction, the plaintiff shall give an undertaking in an amount to be fixed by the court, that the Plaintiff, if it is finally determined that [it] was not entitled to an injunction, will pay to the defendant all damages and costs which may be sustained by reason of the injunction[.]” The amount of an undertaking is a matter within the sound discretion of the court. Blueberries Gourmet v. Aris Realty, 255 A.D.2d 348 (2d Dept.1998). Upon consideration of all the circumstances, the Court directs Plaintiff to post an undertaking in the sum of $ 5,000 as a condition of the injunctive relief granted herein.In light of Defendants' failure to raise any issues regarding their default on the loan and the terms of the security agreements, the Court concludes that an order of seizure is appropriate at this juncture. Accordingly, the Court grants the branches of Plaintiff's application for an Order, pursuant to CPLR § 7102, authorizing the seizure of the collateral, as set forth in the loan agreements. The branches of the application concerning New York Uniform Commercial Code § 9–609 to assemble and deliver to the Plaintiff possession of the Collateral, are granted.
Similarly, the branch of the application directing the Defendant to segregate and escrow all proceeds received on any accounts receivable that form a part of the Collateral in a bank account to be designated the “Jung Sun Laundry Accounts Receivable Escrow Account” with Plaintiff's attorneys', Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, LLP, as escrow agent, depositing therein all such monies received and with no withdrawals to be made therefrom without further order of the Court is granted.
The branch of the application directing the Defendant to deliver to Plaintiff no later than the fifteen (15) days after the end of each month, monthly statements of all accounts receivable including thereon the amount due, name, address, telephone number and contact person of each account party is granted.
The branch of the application permitting Plaintiff, in its name or in the name of the Defendant, to immediately pursue collection of Defendant's accounts receivable directly from the account debtors or appointing Plaintiff's counsel, Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, LLP, as fiscal agent to collect Defendant's accounts receivable and deposit all proceeds received therefrom in the designated “Jung Sun Laundry Accounts Receivable Escrow Account” with no withdrawals to be made therefrom pending further order of this Court is granted.
SETTLE JUDGMENT