All Points Capital Corp. v B.C.A. Leasing Ltd.
Annotate this CaseDecided on January 10, 2012
Supreme Court, Nassau County
All Points Capital Corp., Plaintiff,
against
B.C.A. Leasing Ltd., Rave Leasing, Ltd., B.C. Benjamin Auto Sales, Inc., C & A, LLC, Christopher Vitucci and Anita Vitucci, Defendants.
13692-11
Counsel for Plaintiff: Moritt Hock & Hamroff, LLP
Counsel for Defendants: Bellavia, Gentile & Associates, LLP
Timothy S. Driscoll, J.
This matter is before the Court for decision on the Order to Show Cause filed by Plaintiff All Points Capital Corp. ("Plaintiff" or "All Points") on September 23, 2011 and submitted on December 22, 2011 following oral argument before the Court. For the reasons set forth below, the Court denies Plaintiff's Order to Show Cause, except that the Court directs that the portion of the TRO that directed Defendants to comply with the affirmative covenants contained in the parties' Agreement, including, but not limited to, making the records and books of accounts [*2]regarding the Financed Vehicles available for All Points' inspection and copying at reasonable times, and to forthwith provide All Points with access to each of their books and records to perform an audit and inspection of such books and records, shall remain in effect, pending further court order or stipulation of the parties, on the condition that Plaintiff post a bond in the sum of $5,000 within thirty (30) days of the date of this Order.BACKGROUND
A. Relief Sought
Plaintiff moves for an Order 1) pursuant to CPLR § 6301, enjoining the Defendants and their principals, employees, representatives, affiliates, subsidiaries, successors, assigns and all those action in concert with and on behalf of them, pending a final judgment in this action froma) converting any monies paid or to be paid for sales or leases of any vehicles financed pursuant to the Loan and Security Agreement (Motor Vehicles) (the "Agreement"), annexed as Exhibit B to the Affidavit of Richard Antonacci ("Antonacci") ("Financed Vehicles"); b) transferring, leasing, encumbering, disposing of and/or selling any Financed Vehicles; c) interfering in any way with All Point's efforts to safeguard and preserve its Financed Vehicles or the proceeds thereof; and d) removing any Financed Vehicles in their possession, custody or control from their current locations or from the State of New York; 2) pursuant to CPLR § 6301, directing the Defendants and their principals, employees, representatives, affiliates, subsidiaries, assigns and all those acting in concert with and on behalf of them to a) deliver and turn over to All Points monies paid, or to be paid, on account of the sale or lease of the Financed Vehicles; b) identify in writing the whereabouts of any Financed Vehicles not in possession of the original lessees and if any of the Financed Vehicles was sold, leased or otherwise transferred to anyone other than the original lessee, to i) identify to whom it was sold, leased or otherwise transferred; ii) state the consideration paid; and iii) produce all documents in connection with the sale, lease or transfer of the Financed Vehicles; 3) pursuant to CPLR § 6301, directing Defendants to comply with the affirmative covenants contained in the Agreement, including, but not limited to, making the records and books of account regarding the Financed Vehicles available for All Points' inspection and copying at reasonable times, and to forthwith provide All Points with access to each of their books and records to perform an audit and inspection of such books and records;4) pursuant to CPLR § 7102 et seq. directing the Sheriff of any county within the State of New York, or such authority in any other state, in which the Defaulted Vehicles identified in the Schedule annexed as Exhibit H to the Antonacci Affidavit are found, to a) seize those Defaulted Vehicles that are not voluntarily delivered to All Points or said Sheriff; and b) to break open, enter and search for the Defaulted Vehicles at 300 Great Neck Road, Great Neck, NY 11021, or at such other location as the Defaulted Vehicles are located, as may be uncovered by All Points or the Sheriff; 5) pursuant to CPLR § 7102 et seq. directing Defendants a) to disclose the location(s) of all of the Defaulted Vehicles; b) to identify the person(s) or entity (or entities) in possession of the Defaulted Vehicles; c) to identify the owner of the premises at which the Defaulted Vehicles are located; and d) to take all steps reasonably necessary to allow All Points to take possession of the Defaulted Vehicles; and 5) pursuant to CPLR § 7102 et seq. temporarily restraining, enjoining and preventing, among other things, the sale, disposition, lease, encumbrance and/or transfer of the Defaulted Vehicles, or removing the Defaulted Vehicles from their current location or from the State of New York.
On September 23, 2011, the Court issued a temporary restraining order ("TRO") which [*3]directed that, pending the hearing and determination of the instant motion, and any adjourned date thereof, Defendants, their agents, servants and/or employees, and all persons acting in concert with them, are hereby: 1) enjoined from a) converting any monies paid or to be paid for sales or leases of any vehicles financed pursuant to the Loan and Security Agreement (Motor Vehicles) (the "Agreement") annexed as Exhibit "B" to the Antonacci Affidavit (the "Financed Vehicles"); b) transferring, leasing, encumbering, disposing of and/or selling any Financed Vehicles except that they may sell a Financed Vehicle for not less than the full payoff balanced due on that Vehicle and subject to Para. 1(a) above and 2(a) below; c) interfering in any way with All Points' efforts to safeguard and preserve its Financed Vehicles or the proceeds thereof as provided for in this Order; and d) removing any Financed Vehicles in their possession, custody or control from their current locations or from the State of New York; 2) directed to a) deliver and turn over to All Points monies paid, or to be paid, on account of the sale or lease of any Financed Vehicles; b) within 4 days of the date of this Order, identify in writing the whereabouts of any Financed Vehicles not in possession of the original lessees and if any of the Financed Vehicles was sold, leased or otherwise transferred to anyone other than the original lessee, to i) identify to whom it was sold, leased or otherwise transferred; ii) state the consideration paid; andiii) produce all documents in connection with the sale, lease or transfer of the Financed Vehicles; and 3) directed to comply with the affirmative covenants contained in the Agreement, including, but not limited to, making the records and books of accounts regarding the Financed Vehicles available for All Points' inspection and copying at reasonable times, and to forthwith provide All Points with access to each of their books and records to perform an audit and inspection of such books and records.
B. The Parties' History
The Verified Complaint ("Complaint") (Ex. A to Antonacci Aff. in Supp.), dated September 20, 2011, alleges as follows:
Defendant B.C.A. Leasing Ltd. ("B.C.A.") is engaged in the business of leasing automobiles. On or about May 30, 2001, B.C.A. and All Points entered into the Agreement, pursuant to which All Points provided financing for B.C.A.'s acquisition of automobiles for lease to B.C.A.'s customers. Defendants Rave Leasing, Ltd. ("Rave"), B.C. Benjamin Auto Sales, Inc. ("B.C. Benjamin"), C & A, LLC ("C & A"), Christopher Vitucci ("Christopher") and Anita Vitucci ("Anita") executed guaranties ("Guaranties") that guaranteed B.C.A.'s obligations under the Agreement. In addition, B.C.A.'s obligations under the Agreement were secured by certain collateral, defined in Paragraph 1(d) of the Agreement, which includes the "Car(s)" defined in Paragraph 1(b) of the Agreement and the "Lease(s)") defined in Paragraph 1(k) of the Agreement.
Pursuant to paragraph 2 of the Agreement, All Points made a series of advances ("Advances") to B.C.A., each of which was evidenced by a "Loan Receipt" defined in the Agreement. The Cars financed by the Advances are titled to B.C.A., with All Points as the lien holder on the titles.
As of the date of the Complaint, there are approximately fifty (50) Cars that were financed by All Points pursuant to the Agreement, on which there is a principal balance due from B.C.A. totaling $2,797,442.23. As of August 4, 2011, B.C.A. had defaulted pursuant to Paragraph 13 of the Agreement by failing to make payments due on the Advances for the [*4]vehicles listed on the Schedule provided ("Defaulted Vehicles"). Pursuant to paragraph 14 of the Agreement, titled "Remedies," upon an event of default all of the liabilities become due and payable without further notice or demand. That section sets forth other remedies available to All Points, including the right to repossess and sell or dispose of any Cars, Leases or other Collateral.
The Complaint contains fourteen (14) causes of action: 1) against B.C.A. in light of its defaults under the Agreement, 2) against B.C.A. for attorney's fees incurred by All Points in enforcing its rights pursuant to the Agreement, 3) against Rave for breach of its Guaranty with respect to B.C.A.'s obligations under the Agreement. 4) against Defendant Rave, pursuant to its Guaranty, for attorney's fees and other expenses incurred by All Points, 5) against Defendant B.C. Benjamin for breach of its Guaranty with respect to B.C.A.'s obligations under the Agreement. 6) against Defendant D.C. Benjamin, pursuant to its Guaranty, for attorney's fees and other expenses incurred by All Points, 7) against Defendant C & A for breach of its Guaranty with respect to B.C.A.'s obligations under the Agreement. 8) against Defendant C & A, pursuant to its Guaranty, for attorney's fees and other expenses incurred by All Points, 9) against Defendant Christopher for breach of his Guaranty with respect to B.C.A.'s obligations under the Agreement. 10) against Defendant Christopher, pursuant to his Guaranty, for attorney's fees and other expenses incurred by All Points, 11) against Defendant Anita for breach of her Guaranty with respect to B.C.A.'s obligations under the Agreement, 12) against Defendant Anita, pursuant to her Guaranty, for attorney's fees and other expenses incurred by All Points, 13) against all Defendants, in light of B.C.A.'s failure to surrender the Collateral to All Points, for a judgment of possession of the Collateral, and 14) against all Defendants for an accounting with respect to the whereabouts of the Collateral and other information regarding the Collateral.
In his Affidavit in Support, Antonacci, an Executive Vice President of All Points, affirms the truth of the allegations in the Complaint regarding the Agreement, Guaranties, Collateral, and Defendants' defaults pursuant to the Agreement and Guaranties. Antonacci affirms that All Points attempted, unsuccessfully, to repossess the Defaulted Vehicles from B.C.A.'s premises.
In opposition, Christopher, the President of B.C.A. and husband of Anita, affirms that All Points operates as a subsidiary of Capital One, NA ("Capital One"). On or about May 1, 2008, B.C. Benjamin and Plaintiff entered into a credit and security agreement pursuant to which Capital One would provide floor plan financing for B.C. Benjamin's acquisition of automobiles for resale. In or about 2008, due to deteriorating economic conditions, Capital One decided to exit the automotive floor plan lending business and advised B.C. Benjamin that it would need to locate a new floor plan source. Despite Christopher's request that Capital One continue in business with him until he could sell off the remaining vehicles, Capital One commenced an action against the Defendants ("Related Action") in which Capitol One demanded payment in full for all floor planned vehicles. As part of the settlement of the Related Action, Defendants and Capitol One entered into a Forbearance Agreement dated November 11, 2009 (Ex. A to Christopher Aff. in Opp.). Pursuant to the Forbearance Agreement, Defendants, inter alia, executed and delivered a collateral second mortgage in the amount of $3,300,000 secured by the premises located at 300 Great Neck Road, Great Neck, New York ("Mortgaged Premises").
With respect to the motion sub judice, Christopher affirms that, in the ordinary course of the parties' business relationship under the Agreement, when a leased vehicle was returned to B.C.A. at the conclusion of the particular lease, Plaintiff would afford B.C.A. a period of time to [*5]sell the leased vehicle and, upon the sale, repay Plaintiff. Christopher avers, further, that Plaintiff has never asserted a default by Defendants in the events that funds were owing; rather, the parties agreed to create an account of amounts due "that would be reconciled when the last of the inventory of leased vehicles financed by Plaintiff was returned to and sold by Defendants" (Christopher Aff. in Opp. at ¶ 20).
Following oral argument on the motion, Defendants' counsel provided the Court and opposing counsel with a letter in which he asserted, inter alia, that 1) B.C. Benjamin provided Plaintiff with a check dated November 29, 2011 in the sum of $33,322.72, which Plaintiff rejected because it was slightly less than the payoff figure for the vehicle in question; 2) B.C. Benjamin was providing Plaintiff with a check dated December 5, 2011 in the sum of $125,000, which came from Defendants' prior sale of a vehicle and withholding of those funds due to Plaintiff's refusal to provide Defendants with an accurate payoff statement, 3) Defendants anticipated remitting additional funds to Plaintiff in the next several days; and 4) Plaintiff's suggestion that it is undercapitalized is belied by an October 25, 2008 appraisal reflecting that the value of the Mortgaged Premises is over $4 million.
In response, counsel for Plaintiff asserts that 1) Plaintiff rejected one of the checks tendered by Defendants because "although the lessee had made a full payoff to Defendants and was expecting to receive the title to the vehicle, the Defendants skimmed $276.50 of cash flow' from the payment and then tendered the reduced payment to All Points;" 2) All Points also rejected Defendants' check because it did not want to be viewed as ratifying Defendants' argument that the parties engaged in a particular course of dealing; 3) with respect to the $125,000 check to which Defendants' counsel referred, which was drawn on Capital One Bank, All Points was advised by that bank that there were insufficient funds in the account to cover that check on December 7th; 4) Defendants' anticipated payments are irrelevant to Plaintiff's application; and 5) in light of the well-known decline in the real estate market since 2008, the appraisal of the Mortgaged Premises provided by Defendants is of minimal value.
The Court was provided with correspondence dated October 11, 2201 and August 3, 2011 reflecting Christopher's alleged refusal to provide Capital One with access to the Mortgaged Premises for the purpose of conducting an appraisal, in contravention of the terms of the Mortgage. The Court was also provided with an appraisal of the Mortgaged Premises reflecting a March 22, 2011 valuation of the Mortgaged Premises of One Million Five Hundred Fifty Thousand Dollars ($1,550,000).
C. The Parties' Positions
Plaintiff submits that 1) it has demonstrated its right to an Order of Seizure by establishing the Defendants' default under the Agreement and Guaranties, and in light of the express terms of the Agreement which entitle All Points to take possession of the Financed Vehicles; and 2) it has demonstrated its right to injunctive relief by a) establishing a likelihood of success on the merits through the Antonacci Affidavit which establishes that Defendants owe Plaintiff in excess of $2.7 million; b) demonstrating that All Points will be irreparably harmed without injunctive relief because it will be unable to protect its security interest in the Financed Vehicles; and c) showing that a balancing of the equities favors Plaintiff, in light of Defendants' undisputed default under the Agreement.
Defendants oppose Plaintiff's application submitting, inter alia, that 1) the Court should [*6]reject Plaintiff's claims of irreparable injury without injunctive relief given that there is no evidence that Defendants have attempted to transfer the Vehicles without Plaintiff's consent and knowledge, and in light of the fact that Plaintiff holds the title to the leased vehicles at issue and Defendants could not transfer those vehicles without Plaintiff's consent; 2) injunctive relief is not appropriate in light of the fact that Defendants' indebtedness to Plaintiff is collateralized not only by the leased vehicles but also the Mortgage; and 3) the Court should deny Plaintiff's application in light of the fact that it is financially beneficial to Plaintiff for Defendants to continue to monitor and service the leased vehicles at issue, and potentially sell those vehicles after the lease expires, which funds may be used to repay Plaintiff.
RULING OF THE COURT
A. Standards for Preliminary Injunction
A preliminary injunction is a drastic remedy and will only be granted if the movant establishes a clear right to it under the law and upon the relevant facts set forth in the moving papers. William M. Blake Agency, Inc. v. Leon, 283 AD2d 423, 424 (2d Dept. 2001); Peterson v. Corbin, 275 AD2d 35, 36 (2d Dept. 2000). Injunctive relief will lie where a movant demonstrates a likelihood of success on the merits, a danger of irreparable harm unless the injunction is granted and a balance of the equities in his or her favor. Aetna Ins. Co. v. Capasso, 75 NY2d 860 (1990); W.T. Grant Co. v. Srogi, 52 NY2d 496, 517 (1981); Merscorp, Inc. v. Romaine, 295 AD2d 431 (2d Dept. 2002); Neos v. Lacey, 291 AD2d 434 (2d Dept. 2002). The decision whether to grant a preliminary injunction rests in the sound discretion of the Supreme Court. Doe v. Axelrod, 73 NY2d 748, 750 (1988); Automated Waste Disposal, Inc. v. Mid-Hudson Waste, Inc., 50 AD3d 1073 (2d Dept. 2008); City of Long Beach v. Sterling American Capital, LLC, 40 AD3d 902, 903 (2d Dept. 2007); Ruiz v. Meloney, 26 AD3d 485 (2d Dept. 2006).
Proof of a likelihood of success on the merits requires the movant to demonstrate a clear right to relief which is plain from the undisputed facts. Related Properties, Inc. v. Town Bd. of Town/Village of Harrison, 22 AD3d 587 (2d Dept. 2005); see Abinanti v. Pascale, 41 AD3d 395, 396 (2d Dept. 2007); Gagnon Bus Co., Inc. v. Vallo Transp. Ltd., 13 AD3d 334, 335 (2d Dept. 2004). Thus, while the existence of issues of fact alone will not justify denial of a motion for a preliminary injunction, the motion should not be granted where there are issues that subvert the plaintiff's likelihood of success on the merits to such a degree that it cannot be said that the plaintiff established a clear right to relief. Advanced Digital Sec. Solutions, Inc. v Samsung Techwin Co., Ltd., 53 AD3d 612 (2d Dept. 2008), quoting Milbrandt & Co. v. Griffin, 1 AD3d 327, 328 (2d Dept. 2003); see also CPLR § 6312(c). The existence of a factual dispute, however, will not bar the imposition of a preliminary injunction if it is necessary to preserve the status quo and the party to be enjoined will suffer no great hardship as a result of its issuance. Melvin v. Union College, 195 AD2d 447, 448 (2d Dept. 1993).
A plaintiff has not suffered irreparable harm warranting injunctive relief where its alleged injuries are compensable by money damages. See White Bay Enterprises v. Newsday, 258 AD2d 520 (2d Dept. 1999) (lower court's order granting preliminary injunction reversed where record demonstrated that alleged injuries compensable by money damages); Schrager v. Klein, 267 AD2d 296 (2d Dept. 1999) (lower court's order granting preliminary injunction reversed where record failed to demonstrate likelihood of success on merits or that injuries were not [*7]compensable by money damages).
B. Application of these Principles to the Instant Action
The Court denies Plaintiff's application for injunctive relief, and vacates the TRO, except that the Court directs that the portion of the TRO that directed Defendants to comply with the affirmative covenants contained in the Agreement, including, but not limited to, making the records and books of accounts regarding the Financed Vehicles available for All Points' inspection and copying at reasonable times, and to forthwith provide All Points with access to each of their books and records to perform an audit and inspection of such books and records, shall remain in effect, pending further court order or stipulation of the parties, on the condition that Plaintiff post a bond in the sum of $5,000 within thirty (30) days of the date of this Order.
Although Plaintiff has established a likelihood of success on the merits by establishing Defendants' default under the Agreement and Guaranties, and a balancing of the equities in its favor in light of Defendants' default, the Court concludes that Plaintiff has not established that it will suffer irreparable harm without injunctive relief. The Court is mindful that in aSeptember 8, 2009 decision in the Related Action, Capital One, N.A. v. B.C. Benjamin Auto Sales, Inc., Nassau County Index Number 12430-09, Justice Bucaria granted Plaintiff's application for injunctive relief based on his conclusion that the relationship among the parties was "equitable in nature and deserving of preservation by injunctive relief, where the lender is a secured creditor with a legally recognized interest in the borrower's/debtor's inventory" (Decision in Related Action at p. 9). The decision in the Related Action, however, was issued prior to the Forbearance Agreement, and the execution and delivery of the Mortgage in the amount of $3,300,000, which provides additional security to Plaintiff, even assuming arguendo that the appraisal provided reflects an artificially high value on the Mortgaged Premises. In light of this extra security, and the Court's conclusion that Plaintiff's injury is compensable by money damages, the Court denies Plaintiff's application for injunctive relief, except to the extent provided herein.
The Court also, in its discretion, denies Plaintiff's application for an Order of Seizure based on the Court's conclusion that such an extreme remedy is not warranted, particularly because Defendants' ability to sell the vehicles may enhance their ability to repay Plaintiff.
All matters not decided herein are hereby denied.This constitutes the decision and order of the Court.
The Court directs counsel for the parties to appear before the Court on February 9, 2012 at 9:30 a.m. for a Preliminary Conference.ENTER
DATED: Mineola, NY
January 10, 2012
__________________________
HON. TIMOTHY S. DRISCOLL
J.S.C.
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