Opinion
701149/21
10-18-2021
OT ASPEKT & CHIROPRACTIC PLLC, Kids Time Developmental Services, SLP, OT & Chiropractic, PLLC, Kids Time Daycare, Inc., ABC Therapies, SLP, OT, PT, Psychology & Chiropractic, PLLC, Valley Stream Occupational Therapy, P.C., First Aid Occupational Therapy PLLC d/b/a Kids Time Therapies, Plaintiffs, v. FOX CAPITAL GROUP, INC., Defendant.
Attorney for Plaintiffs: Leslie H. Tayne, Esq., Tayne Law Group, P.C., 135 Pinelawn Road, Suite 250N, Melville, New York 11747, (631)470-8204, ltayne@taynelaw.com Attorneys for Defendant: Jeffrey Box, Esq, and Jacob H. Nemon, Esq., 2 Wall Street, New York, New York 10005, (212)732-3200, Boxer@clm.com, nemon@clm.com
Attorney for Plaintiffs: Leslie H. Tayne, Esq., Tayne Law Group, P.C., 135 Pinelawn Road, Suite 250N, Melville, New York 11747, (631)470-8204, ltayne@taynelaw.com
Attorneys for Defendant: Jeffrey Box, Esq, and Jacob H. Nemon, Esq., 2 Wall Street, New York, New York 10005, (212)732-3200, Boxer@clm.com, nemon@clm.com
Robert I. Caloras, J.
The following numbered papers read on this motion by order to show cause by plaintiffs OT Aspekt & Chiropractic PLLC, Kids time Developmental Services, SLP, OT & Chiropractic, PLLC, Kids Time Daycare, Inc., ABC Therapies, SLP, OT, PT, Psychology & Chiropractic PLLC, Valley Stream Occupational Therapy, P.C., and First Aid Occupational Therapy PLLC d/b/a Kids Time Therapies (collectively referred to as plaintiffs), pursuant to UCC § 9-625 and CPLR § 5240, to vacate, strike and release any and all enforcement devices issued by defendant Fox Capital Group, Inc. (defendant), anyone acting in concert with defendant, and anyone acting on defendant's behalf or at defendant's direction, to collect upon or assist in the collection of a judgment entered against plaintiffs on February 24, 2020, including, without limitation, all Notices of Levy, Property Executions, Subpoenas, Restraining Notices, and UCC Lien Notices, and including the November 18, 2020, Subpoena Duces Tecum with Restraining Notice served upon plaintiffs, and the February 25, 2020, and October 7, 2020, Property Executions served upon the Marshal of the City of New York, and pursuant to CPLR § 5240 and/or CPLR § 6310, to permanently enjoin and restrain defendant, anyone acting in concert with defendant, and anyone acting on defendant's behalf or at defendant's direction from issuing any enforcement device with respect to the judgment entered against plaintiffs on February 24, 2020, from enforcing any UCC-1, or any other security interest, against any of the assets of plaintiffs, from taking any other action to collect upon the judgment entered against plaintiffs on February 24, 2020, and from taking any action to enforce the judgment entered against plaintiffs on February 24, 2020, or the terms of a Future Receivables Sale and Purchase Agreement entered into on or about January 29, 2020; and by notice of cross motion by defendant for an order pursuant to CPLR § 3211(a)(1) and (7), dismissing plaintiffs’ complaint.
Papers Numbered
Order to Show Cause - Affidavits - Exhibits EF 2, 15-16
Notice of Motion - Affidavits - Exhibits EF 3-14
Notice of Cross Motion - Affidavits - Exhibit EF 17
Answering Affidavits - Exhibits EF 18-25
Reply Affidavits EF 29-34
Upon the foregoing papers it is ordered that the motion and cross motion are determined as follows:
This is an action seeking to vacate a judgment by confession that defendant obtained against plaintiffs on or about February 24, 2020, in the State of New York, Supreme Court, Queens County, in a prior action entitled Fox Capital Group, Inc. v OT Aspekt & Chiropractic, PLLC , bearing Index No. 1157/20, which was subsequently converted to an E-filed case bearing Index No. 723895/20 (hereinafter referred to as 1157/20). Plaintiffs commenced the instant action to vacate all enforcement devices issued in connection with the February 2020 judgment, to declare void an agreement entered into by defendant and plaintiffs dated January 29, 2020, and to recover damages arising from defendant's alleged fraudulent conduct in inducing plaintiffs to enter into criminally usurious loans.
Plaintiffs have alleged that defendant induced plaintiffs to enter into a total of five merchant cash advances within a two-month period of time, all which were loaned at criminally usurious interest rates, and that these loans ultimately sent plaintiffs into nearly $1,300,000.00, in debt, from which they have been unable to recover during the COVID-19 pandemic. Plaintiffs have further alleged that after defendant commenced the action bearing Index No. 1157/20, and filed an affidavit of confession of judgment, defendant procured a judgment by confession in the amount of $125,901.62. As a result, plaintiffs commenced the instant action for the following causes of action: 1) vacatur of judgment under CPLR § 5015, 2) restitution under CPLR § 5015(d), 3) wrongful execution, 4) declaratory judgment, 5) breach of contract, 6) violation of General Business Law § 349, 7) fraud, 8) breach of the covenant of good faith and fair dealing, 9) excessive attorneys’ fees, and 10) injunctive relief.
The court will first address defendant's cross motion that has been made pursuant to CPLR § 3211(a)(1) and (7), dismissing plaintiffs’ complaint based upon documentary evidence and for failure to state a cause of action. CPLR § 3211(a)(1) provides that "[a] party may move for judgment dismissing one or more causes of action asserted against him on the ground that ... a defense is founded upon documentary evidence ..." "To successfully move to dismiss a complaint pursuant to CPLR 3211(a)(1), the movant must present documentary evidence that ‘resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim’ " ( AGCS Mar. Ins. Co. v Scottsdale Ins. Co. , 102 AD3d 899, 900 [2d Dept 2013], quoting Nevin v Laclede Professional Prods. , 273 AD2d 453 [2d Dept 2000] ; see Leon v Martinez , 84 NY2d 83, 88 [1994] ; Bonavita v Govt. Employees Ins. Co. , 185 AD3d 892, 893 [2d Dept 2020] ; Lakhi Gen. Contractor, Inc. v. NY City Sch. Const. Auth. , 147 AD3d 917 [2d Dept 2017] ).
CPLR § 3211 (a)(7) provides that a party may move to dismiss an action on the ground that "the pleading fails to state a cause of action." "On a motion to dismiss pursuant to CPLR § 3211, the complaint is to be afforded a liberal construction" ( Benitez v Bolla Operating LI Corp. , 189 AD3d 970 [2d Dept 2020] ; CPLR § 3026 ; see Gorbatov v Tsirelman , 155 AD3d 836 [2d Dept 2017] ; Feldman v Finkelstein & Partners, LLP , 76 AD3d 703, 704 [2d Dept 2010] ). " ‘In reviewing a motion pursuant to CPLR § 3211(a)(7) to dismiss the complaint for failure to state a cause of action, the facts as alleged in the complaint must be accepted as true, the plaintiff is accorded the benefit of every possible favorable inference, and the court's function is to determine only whether the facts as alleged fit within any cognizable legal theory’ " ( Benitez v Bolla Operating LI Corp. , 189 AD3d at 970, quoting Mendelovitz v Cohen , 37 AD3d 670, 671 [2d Dept 2007] ; see Bianco v Law Offices of Yuri Prakhin , 189 AD3d 1326 [2d Dept 2020] ; Gorbatov v Tsirelman , 155 AD3d at 836 ; Feldman v Finkelstein & Partners, LLP , 76 AD3d at 704 ).
" ‘Generally, a person seeking to vacate a judgment entered upon the filing of an affidavit of confession of judgment must commence a separate plenary action for that relief,’ " such as has been done by plaintiffs in commencing the instant action ( Funding Metrics, LLC v A & A Fabrication and Polishing Corp. , 187 AD3d 857 [2d Dept 2020], quoting Morocho v Monterroza , 170 AD3d 710, 711 [2d Dept 2019] ; see L.R. Dean, Inc. v Intl. Energy Resources, Inc. , 213 AD2d 455, 456 [2d Dept 1995] ). In support of its cross motion, defendant has argued that relief sought by plaintiffs in their first four causes of action in this matter must be dismissed as a matter of law. Defendant has argued that the criminal usury statute cannot serve as the basis for an affirmative claim and that documentary evidence has demonstrated that the agreement was not a loan, thus, the agreement was not subject to usury statutes.
"The rudimentary element of usury is the existence of a loan or forbearance of money, and where there is no loan, there can be no usury, however unconscionable the contract may be" ( LG Funding, LLC v United Senior Properties of Olathe, LLC , 181 AD3d 664, 665 [2d Dept 2020] ; see Seidel v 18 E. 17th St. Owners , 79 NY2d 735 [1992] ). "To determine whether a transaction constitutes a usurious loan, it must be considered in its totality and judged by its real character, rather than by the name, color, or form which the parties have seen fit to give it" ( LG Funding, LLC v United Senior Properties of Olathe, LLC , 181 AD3d at 665 [internal quotes and citation omitted]; see Abir v Malky, Inc. , 59 AD3d 646, 649 [2d Dept 2009] ). "The court must examine whether the plaintiff ‘is absolutely entitled to repayment under all circumstances’ " ( LG Funding, LLC v United Senior Properties of Olathe, LLC , 181 AD3d at 665, quoting K9 Bytes, Inc. v Arch Capital Funding, LLC , 56 Misc 3d 807, 816 [Sup Ct, Westchester County 2017] ). "Unless a principal sum advanced is repayable absolutely, the transaction is not a loan ... Usually, courts weigh three factors when determining whether repayment is absolute or contingent: (1) whether there is a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3) whether there is any recourse should the merchant declare bankruptcy" ( LG Funding, LLC v United Senior Properties of Olathe, LLC , 181 AD3d at 666 ; see K9 Bytes, Inc. v Arch Capital Funding, LLC , 56 Misc 3d at 816-819 ).
The record contains, among other things, copies of the pleadings, the affidavit of non-party Anatoly Spektor (Spektor), a copy of an agreement entitled "Future Receivables Sale and Purchase Agreement" dated January 29, 2020 (hereinafter referred to as the agreement), a copy of an affidavit of confession of judgment dated January 29, 2020, a copy of a judgment of confession dated February 21, 2020, and entered on February 24, 2020, a copy of an affidavit of non-payment dated February 21, 2020, and a copy of a subpoena duces tecum dated November 18, 2020.
Page 1 of the agreement contained a section entitled "THIS IS NOT A LOAN," which contained language that the parties "guaranteeing performance of the terms of this Agreement and are not guaranteeing absolute payment of the Purchased Amount." In a section entitled "Sale of Receipts," at part 1.9.1, the agreement provided that, the parties to the agreement "acknowledge and agree that the Purchase Price under this Agreement is in exchange for the Purchased Amount of Merchant's Receipts, and that such Purchase Price is not intended to be, nor shall it be construed, as a loan ..." The agreement further provided, at part 1.9.4, that "[i]n the event a court of competent jurisdiction finds this Agreement to be a loan or to require the payment of interest, despite the parties specifically representing that it does not require payment of Interest, this Agreement shall be modified such that no sum charged or collected hereunder shall exceed the highest rate permissible by New York law ..." Furthermore, at part 1.9.5, the agreement expressly provided that it would be treated "in a manner consistent with a sale in its accounting records and tax returns and not as a loan."
Based upon a thorough and careful review of the evidence in the record, in particular to the above-mentioned language of the agreement itself, which is unambiguous on its face, the court has determined that this was not a loan since the agreement did not require absolute repayment (see Colonial Funding Network, Inc. for TVT Capital, LLC v Epazz, Inc. , 252 F Supp 3d 274, 283 [SDNY 2017] ; see also K9 Bytes, Inc. v Arch Capital Funding, LLC , 56 Misc 3d at 816 ). Since the evidence has sufficiently demonstrated that the agreement was not a loan, it is not subject it to New York's usury statutes because "[i]t is well established that there can be no usury in the absence of a loan ..." ( Donatelli v Siskind , 170 AD2d 433, 434 [2d Dept 1991] ; see also Transmedia Rest. Co., Inc. v 33 E. 61st St. Rest. Corp. , 184 Misc 2d 706, 710 [Sup Ct, New York County 2000] ).
In the first four causes of action, plaintiffs have sought the affirmative relief of vacatur of the Judgment by Confession dated February 21, 2020, and entered on February 24, 2020, for restitution for all amounts collected by defendant, for an accounting for monies allegedly wrongfully collected by defendant and for the return of all funds to plaintiff, as well as for a declaratory judgment that all agreements and transactions related to the agreement between the parties, including the the Personal Guarantee, the Security Agreement, any and all UCC filings, Notices of Levy, Writs of Execution, the Affidavit of Confession, the Judgment by confession and any and all other supporting documents to the Transaction, be deemed void ab initio, all on the ground that the agreement was a "criminally usurious and unenforceable loan," pursuant to Penal Law § 190.40. However, in addition to the court's above findings, it is well settled that there is no private right of action for criminal usury pursuant to Penal Law § 190.40 (see FCI Enterprises Inc. v Richmond Capital Group, LLC , 2019 NY Slip Op 30711[U], 6 [Sup Ct, Kings County 2019]).
Therefore, given the court's determination that the agreement was not a loan, as well as taking into consideration that there is no private right of action for criminal usury pursuant to Penal Law § 190.40, in addition to the fact that the assertion of "criminal usury as defined in Penal Law § 190.40 ... [in general, is to be done] only as a defense to an action to recover repayment of a loan, and not as the basis for a cause of action ... for affirmative relief" ( Paycation Travel, Inc. v Glob. Merchant Cash, Inc. , 192 AD3d 1040, 1041 [2d Dept 2021] ; see Blue Wolf Capital Fund II, L.P. v Am. Stevedoring Inc. , 105 AD3d 178, 184 [1st Dept 2013], quoting Intima—Eighteen, Inc. v Schreiber Co. , 172 AD2d 456, 457 [1st Dept. 1991], lv denied 78 NY2d 856 [1991] ), defendant has sufficiently demonstrated that plaintiffs’ affirmative relief sought in their first four causes of action, on the basis of their allegation that this was a criminally usurious loan under Penal Law § 190.40, all fail as a matter of law ( CPLR § 3211 [a][1], [7] ). As such, in light of the above, defendant has sufficiently demonstrated its entitlement to the dismissal of plaintiff's first four causes of action for vacatur of judgment under CPLR § 5015, restitution under CPLR § 5015(d), wrongful execution, and declaratory judgment.
Next, with regard to plaintiffs’ fifth cause of action for breach of contract, the eighth cause of action for breach of the covenant of good faith and fair dealing, and the ninth cause of action for "excessive attorney's fees," defendant has argued that these causes of action are contradicted by documentary evidence. In the fifth cause of action for breach of contract, plaintiffs have alleged that defendant breached the agreement by violating terms set forth on page one of the agreement which provided that "Merchant going bankrupt or going out of business, or experiencing a slowdown in business or a delay in collecting receivables, in and of themselves, do not constitute a breach of this Agreement," and by violating the terms set forth in section 3.1 of the agreement which provided that "Merchant's nonpayment of the Daily Remittance in and of itself is not a default under the Agreement, provided no other Event of Default has occurred," because, although defendant has based plaintiffs’ alleged default upon plaintiffs’ failure to generate receivables to satisfy the payments under the agreement, that was a breach by defendant because it contradicted what constitutes a default under the terms of the agreement.
In the fifth cause of action for breach of contract, plaintiffs have further alleged that the agreement provided at Section 3.1(m), that a return of "three or more" payments for "not sufficient funds" on "three separate dates" where "Merchant has not given notice that there will be insufficient funds in the Account" shall constitute a default, and that in breach of this provision, defendant declared a default the same day that plaintiffs’ first and only ACH payment was denied. Additionally, plaintiffs have alleged that the agreement provided at Section 1.4, for purported reconciliation based upon actual receivables and that defendant denied plaintiffs’ an opportunity for reconciliation in breach of that provision.
Plaintiffs have alleged, in the fifth cause of action for breach of contract, that the agreement provided at Section 1.9.3 that: "It is the express intention of the parties that Merchant not pay or contract to pay, and that FCG not receive or contract to receive, directly or indirectly in any manner whatsoever, any amount deemed to be interest in excess of that which may be paid by Merchant under applicable law." They have alleged that in a breach of this provision, defendant collected interest at the rate of "232% APR," in violation of Penal Law 190.40. Plaintiffs have also alleged that the agreement provides at Section 1.1, that a Confession of Judgment shall be filed in a court in the state and county where the Merchant or Guarantor resides or has its principal place of business, and that in a breach of this provision and in violation of CPLR § 5015(a)(4), with regard to only two plaintiffs, defendant filed a Confession of Judgment in the County of Queens, when plaintiffs Valley Stream Occupational Therapy, P.C. and First Aid Occupational Therapy PLLC, were both operated and were, at all times, registered to do business in in the County of Nassau.
In the fifth cause of action for breach of contract, plaintiffs have alleged, that although the judgment states that defendant has incurred attorneys’ fees in the amount of $31,182.92, section 1.11 of the agreement does not permit a liquidated attorneys’ fee of 33%, but that the agreement calls for "reasonable attorney's (sic) fees" be awarded to the prevailing party, and that defendant's alleged attorneys’ fees are a breach of this provision.
In the eighth cause of action for breach of covenant of good faith and fair dealing, plaintiffs have alleged that defendant's "deceptive and fraudulent misrepresentations" induced plaintiffs to enter into the agreement, security agreement, personal guarantee, and sign the affidavit of confession, and destroyed their opportunity to fully comply with the agreement, that the rates and fees that defendant charged pursuant to the agreement "were so grossly excessive" that these all constituted a breach the implied covenant of good faith and fair dealing.
In the ninth cause of action for "excessive attorney's fees," plaintiffs have alleged that "[t]he Affidavit of Confession contains an unconscionable liquidated attorney's fees provision calculated at 33% of the balance at the time of default" which are not permitted by the agreement and that the $31,182.92 in attorney's fees sought to be recovered by defendant are in violation of the agreement.
Given a thorough and careful review of the allegations contained in plaintiffs’ complaint with regard to these two causes of action, as well as a thorough review of the documentary evidence presented, the court has determined that the evidence has failed to resolve all factual issues as a matter of law and conclusively dispose of plaintiffs’ causes of action brought for breach of contract, for breach of the covenant of good faith and fair dealing, and for "excessive attorney's fees" (see AGCS Mar. Ins. Co. v Scottsdale Ins. Co. , 102 AD3d at 900 ; Bonavita v Govt. Employees Ins. Co. , 185 AD3d at 893 ). The court notes that defendant has not sufficiently addressed these claims in regards to the branch of its motion made pursuant to CPLR § 3211 (a)(7). Therefore, defendant is not entitled to the dismissal of plaintiffs’ fifth cause of action for breach of contract, their eighth cause of action for breach of the covenant of good faith and fair dealing and the ninth cause of action for "excessive attorney's fees."
Next, with regard to plaintiffs’ sixth cause of action for defendant's alleged violation of General Business Law § 349, defendant has argued that plaintiffs have no cause of action under this section and that it is refuted by documentary evidence. Defendant has argued that it did not engage in consumer-oriented conduct, that the agreement was between business entities for business purposes, and that defendant made no material misrepresentation since the terms of the agreement have shown that it is a true merchant cash advance agreement.
In the complaint, plaintiffs have alleged that the agreement between the parties involves a consumer-oriented transaction, that usury is against the strong public policy of New York and that defendant's conduct in providing usurious loans has a broad impact on the public, that defendant has engaged in unlawful business practices and fraudulent conduct by intentionally misrepresenting the true nature of its cash advances in order to avoid the application of criminal usury laws, that defendant has made false and misleading statements to induce plaintiffs to enter into the agreement and documents related to the agreement, which were known to defendant to be false, that defendant's misrepresentations did influence plaintiffs’ decision to enter into the agreement and that defendant willfully and knowingly violated General Business Law § 349, resulting in damages to plaintiffs.
"The elements of a cause of action to recover damages for deceptive business practices under General Business Law § 349 are that the defendant engaged in a deceptive act or practice, that the challenged act or practice was consumer-oriented, and that the plaintiff suffered an injury as a result of the deceptive act or practice" ( Air & Power Transmission, Inc. v Weingast , 120 AD3d 524, 525 [2d Dept 2014] ; see Yellow Book Sales and Distrib. Co., Inc. v Hillside Van Lines, Inc. , 98 AD3d 663, 664-65 [2d Dept 2012] ). CPLR § 4544, provides in part, that "the term ‘consumer transaction’ means a transaction wherein the money, property or service which is the subject of the transaction is primarily for personal, family or household purposes," which definition is reiterated in case law (see Sheth v New York Life Ins. Co. , 273 AD2d 72 [1st Dept 2000] ).
Courts have found it to be a threshold issue whether "the conduct was consumer-oriented, ‘that is, an act having the potential to affect the public at large, as distinguished from merely a private contractual dispute’ " ( State of New York Workers’’Compensation Bd. v 26-28 Maple Ave., Inc. , 80 AD3d 1135, 1136 [3d Dept 2011], quoting Elacqua v Physicians’ Reciprocal Insurers , 52 AD3d 886, 888 [3d Dept 2008] ; see New York Univ. v Cont. Ins. Co. , 87 NY2d 308, 320 [1995] ). Section 2.12 of the agreement, entitled "Business Purpose," expressly provided that "Merchant is a valid business in good standing under the laws of the jurisdiction(s) in which it is organized and/or operates. Merchant hereby acknowledges that it fully understands that (i) FCG's ability to collect the Purchased Amount (or any portion thereof) is contingent upon Merchant's continued operation of its business ... Merchant is entering into this Agreement for the benefit and advancement of Merchant's business operations, and will use the Purchase Price exclusively for the benefit and advancement of Merchant's business operations and will not use any portion of the Purchase Price for any other purpose, including but not limited to consumer, personal, family or household purposes."
Affording plaintiffs’ allegations a liberal construction, accepting the facts alleged to be true, and granting plaintiffs the benefit of every possible favorable inference, the court has concluded that, under the particular circumstances in this matter, given the documentary evidence in the form of the parties’ agreement, in particular, the provisions of section 2.12, defendant has demonstrated that the conduct complained of was not consumer-oriented, as it did not affect consumers at large, and that plaintiffs have failed to state a cause of action under General Business Law § 349. Therefore, defendant is entitled to the dismissal of plaintiff's sixth cause of action for defendant's alleged violation of General Business Law § 349.
With regard to plaintiffs’ seventh cause of action for fraud, defendant has argued that plaintiffs have no cause of action for fraud because the documentary evidence has demonstrated that the parties contemplated and entered a legitimate merchant cash advance agreement. " ‘The elements of a cause of action [alleging] fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages’ " ( Garendean Realty Owner, LLC v Lang , 175 AD3d 653, 653 [2d Dept 2019], quoting Eurycleia Partners, LP v Seward & Kissel, LLP , 12 NY3d 553, 559 [2009] ; see Shahid v Ridgewood Bushwick Senior Citizens Council, Inc. , 181 AD3d 744, 745 [2d Dept 2020] ). " ‘A claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016(b) ’ " ( Shahid v Ridgewood Bushwick Senior Citizens Council, Inc. , 181 AD3d at 745, quoting Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 NY3d at 559 ).
In the affidavit of confession of judgment, included in the record, in paragraph 6, plaintiffs waived "any and all rights that any of the Defendants may have to: ... (b) interpose in any action any substantive defenses based upon any underlying transactions or occurrences (including without limitation the defenses of ... duress, usury, forgery, fraud ..." Given the court's determination that the agreement was not a loan, based upon a thorough reading of the allegations contained in plaintiffs’ complaint, affording those allegations a liberal construction, accepting the facts alleged to be true, and granting plaintiffs the benefit of every possible favorable inference, the court has concluded that, under the particular circumstances in this matter, the documentary evidence has sufficiently demonstrated that the terms of the agreement were fully disclosed within the document, in particular, that it was expressly stated that the agreement was not for a loan and that the other terms of the agreement were plainly stated in the provisions of the agreement. Therefore, based upon the evidence in the record, defendant has sufficiently demonstrated their entitlement to the dismissal of plaintiffs’ seventh cause of action for fraud ( CPLR § 3211 [a][1], [7] ).
Plaintiffs’ tenth cause of action seeks injunctive relief on the basis that defendant improperly obtained the judgment in the prior action bearing Index No. 1157/20. However, given the documentary evidence in the record, in particular, the agreement between the parties, and given the court's dismissal of plaintiffs’ cause of action to vacate that prior judgment, the court has determined that defendant has satisfied its burden as to this cause of action ( CPLR § 3211 [a][1], [7] ). Therefore, defendant is entitled to the dismissal of plaintiffs’ tenth cause of action for injunctive relief.
Now, the court will address plaintiffs’ motion made pursuant to UCC § 9-625 and CPLR § 5240, to vacate, strike and release any and all enforcement devices issued by defendant Fox Capital Group, Inc. (defendant), anyone acting in concert with defendant, and anyone acting on defendant's behalf or at defendant's direction, to collect upon or assist in the collection of a judgment entered against plaintiffs on February 24, 2020, including, without limitation, all Notices of Levy, Property Executions, Subpoenas, Restraining Notices, and UCC Lien Notices, and including the November 18, 2020, Subpoena Duces Tecum with Restraining Notice served upon plaintiffs, and the February 25, 2020, and October 7, 2020, Property Executions served upon the Marshal of the City of New York.
CPLR § 5240, entitled "Modification or protective order; supervision of enforcement," provides, in relevant part, the following: "The court may at any time, on its own initiative or the motion of any interested person, and upon such notice as it may require, make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure ..." UCC § 9-625, entitled "Remedies for Secured Party's Failure to Comply with Article," which provides remedies "if it is established that a secured party is not proceeding in accordance with this article," including, allowing a court to "restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions."
Plaintiffs have also moved pursuant to CPLR § 6310, to enjoin and restrain defendant, anyone acting in concert with defendant, and anyone acting on defendant's behalf or at defendant's direction from issuing any enforcement device with respect to the judgment entered against plaintiffs on February 24, 2020, from enforcing any UCC-1, or any other security interest, against any of the assets of plaintiffs, from taking any other action to collect upon the judgment entered against plaintiffs on February 24, 2020, and from taking any action to enforce the judgment entered against plaintiffs on February 24, 2020, or the terms of a Future Receivables Sale and Purchase Agreement entered into on or about January 29, 2020. CPLR § 6310, provides the grounds for preliminary injunction and temporary restraining order.
In an order to show cause dated March 11, 2021, on the ground that plaintiffs failed to demonstrate a likelihood of success on the merits, the court vacated a prior temporary restraining order issued on February 24, 2021. Therefore, in light of that showing, and taking into consideration the court's above determination dismissing plaintiff's tenth cause of aciton for injunctive relief as well as considering plaintiffs’ continued failure to demonstrate a likelihood of success on the merits (see generally Nobu Next Door, LLC v Fine Arts Hous., Inc. , 4 NY3d 839, 840 [2005] ; Aetna Ins. Co. v Capasso , 75 NY2d 860, 862 [1990] ; Vanderbilt Brookland, LLC v Vanderbilt Myrtle, Inc. , 147 AD3d 1104, 1105-06 [2d Dept 2017] ), the branch of plaintiffs’ motion made pursuant to CPLR § 6310, is denied. Furthermore, in light of the court's above determination that the agreement between the parties was not a loan and the resulting dismissal of plaintiffs’ causes of action to vacate defendant's judgment, for restitution, for wrongful execution, and for declaratory judgment, plaintiffs are not entitled to the relief sought on the branch of their motion made pursuant to UCC § 9-625 and CPLR § 5240.
Accordingly, the motion is denied in its entirety. Defendant's cross motion is granted only to the limited extent that plaintiffs’ first, second, third, fourth, sixth, seventh, and tenth causes of action are dismissed, and the cross motion is denied in all other respects.