Bonito v. Empire Chesapeake Holdings LLC

Docket NumberIndex 656943/2021
Decision Date26 January 2022
Citation2022 NY Slip Op 30295 (U)
PartiesVIRGINIA BONITO, Plaintiff, v. EMPIRE CHESAPEAKE HOLDINGS LLC, CHELSEA ARTS HOLDINGS LLC and IAN PECK Defendants.
CourtNew York Supreme Court

Unpublished Opinion

PRESENT: HON. NANCY BANNON Justice.

DECISION + ORDER ON MOTION

HON NANCY M. BANNON, JUDGE.

The following e-filed documents, listed by NYSCEF document number (Motion 001) 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51 were read on this motion to/for INJUNCTION/RESTRAINING ORDER.

I. INTRODUCTION

This action arises from a dispute over rights to a 16th century painting entitled Portrait of Ottaviano de 'Medici by the artist Andrea del Sarto, which is scheduled for auction at Sotheby's. The plaintiff challenges the validity of a UCC-1 lien filed by the defendants against the painting in May 2021, arguing that they have no security interest. The plaintiff now moves for injunctive relief and the defendants cross-move to dismiss the complaint. Both motions are denied.

II. BACKGROUND

The plaintiff, an art historian with a Ph.D. in Art History, acquired a 51% interest in the painting in 1997 for approximately $200, 000 from its owner, non-party Giorgio Gibelli, who apparently retains his interest. According to the plaintiff, she thereafter embarked on a mission to restore the painting so as to have it take its proper place in the world of Old Masters and her investment in the restoration process over the years resulted in a personal debt of approximately $850, 000.

In 2020, defendant Ian Peck, offered to purchase the painting for $1, 250, 000. Peck, an "art lender", buys and sells fine art and is the principal of defendants Empire Chesapeake Holdings, LLC and Chelsea Fine Arts Holdings, LLC. The plaintiff and defendant Chelsea Arts Holding, LLC, entered into a protracted negotiation wherein Chelsea Arts was to purchase the piece for $1, 250, 000 and the plaintiff would also receive a percentage of the sale price upon a resale by Chelsea Arts pursuant to a residual contingency profit-sharing arrangement. The written agreement was never signed, and Chelsea Arts did not pay the $1, 250, 000. However, at her request, Peck advanced certain monies to the plaintiff in 2020 as she was in a poor financial position. She claims she was "desperate." Specifically, Peck advanced approximately $35, 000 over three payments, and paid an insurance premium of $8, 800 to insure the painting. The defendants claim that these advances create a security interest in the painting.

Peck sent a letter to the plaintiff on December 7, 2020, to memorialize their agreement. The letter stated in part:

As discussed, this letter is to confirm our interest pursuant to the purchase and sale agreement that the purchaser has advanced certain sums listed below. These payments have been made in good faith and at the seller's request with the understanding and agreement that they constitute a pro-rated direct ownership interest in the subject painting by Andera del Sarto and that they will be applied as a credit against the purchase price.
The seller grants the purchaser a perfected security interest in the subject painting to secure purchaser's rights regarding amounts owed, totaling $43, 000 as identified below. Lastly, it is agreed and understood that the seller grants the purchaser the right of first exclusivity and a right of first refusal as it relates to the purchase closing by December 31, 2020, as noted, on the acquisition on previously agreed terms.

In closing, the letter stated, "Please confirm your acceptance and agreement with the above terms by return e-mail." The plaintiff responded by e-mail on December 8, 2020 suggesting revisions to the proposal regarding the crediting of the advances.

Five months later, in May 2021, Peck filed a UCC-1 against the painting on behalf of defendant Chelsea Arts, claiming a 13% interest. The plaintiff and counsel for the plaintiff were made aware of the filing sometime between May and November 2021, the exact date is disputed.

In the meantime, the defendants, by Peck, were also negotiating with an unnamed "business partner" to consign the painting to an auction house, once they obtained it. The details of that deal are not made clear except that Peck claims that, for that deal to go through, he needed access to the painting for expert evaluation and access was refused by the plaintiff. She denies that assertion. The defendants further claim that there was a prior $80, 000 lien against the painting, filed by creditor Ansible Ventures, Inc. that had to be removed before the defendants could purchase the painting. The lien was satisfied in December 2021.

The plaintiff, in turn, was engaged in negotiations to sell the painting to yet another entity, non-party Bottom Line Exchange Company, Inc., whose principal is a private collector. The painting was sold by the plaintiff and Gibelli to Bottom Line in December 2021 for $1, 200, 000. Bottom Line arranged a consignment to Sotheby's and the painting was included in the Old Masters Auction scheduled for January 27, 2022. According to the defendants, Bottom Line also knew that the defendant had filed a UCC-1 claiming a security interest. Also, there were unsuccessful attempts by the plaintiff to reimburse the defendants for the advances made.

The plaintiff commenced this action on December 13, 2021, alleging that the defendants' UCC-1 was invalid because the defendants had no security interest in the painting and seeking (1) an order directing the defendants to file a UCC-3 to terminate the UCC-1 or, in the alternative, an order of the court terminating the UCC-1 and (2) money damages for the filing of an invalid UCC-1 pursuant to UCC 9-625. The plaintiff maintains that the parties never reached a final agreement and the defendants never paid the $1, 250, 000 purchase price. She argues that the UCC-1 lien is therefore invalid within the meaning of Article 9 of the UCC. She also argues that the lien impairs its value at auction and that the painting from the auction now will also serve to diminish its value in the estimation of potential purchasers.

On December 27, 2021, the plaintiff moved by Order to Show Cause seeking an order "immediately directing the defendants to file UCC-3 Termination Statements which were filed against plaintiff relating to the artwork" or "an order immediately discharging and terminating the UCC-1 filed against the plaintiff with regard to the artwork."

The defendants oppose the motion and cross-move, pre-answer, to dismiss the complaint pursuant to CPLR 3211(a)(2), (a)(3) and (a)(7), lack of subject matter jurisdiction, no legal capacity to sue and failure to state a cause of action, respectively, and for the imposition of sanctions against the plaintiff pursuant to 22 NYCRR 130-1.1.

III. DISCUSSION

(A) The Plaintiff's Motion

The plaintiff's motion is denied as she has failed to establish entitlement to the relief sought on the papers submitted. That is, she has not established by clear and convincing evidence all that is necessary for a preliminary injunction: (1) a likelihood of success on the merits, (2) irreparable injury if a preliminary injunction is not granted, and (3) a balance of equities in her favor. See CPLR 6301; Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 N.Y.3d 839, 840 (2005); Doe v Axelrod, 73 N.Y.2d 748, 750 (1988); St. Paul Fire and Marine Ins. Co. v Yorks Claim Service, Inc., 308 A.D.2d 347 (1st Dept. 2003).

The legal underpinnings of the application are found in Article 9 of the Uniform Commercial Code (UCC). That article:

"governs the enforcement of a creditor's security interest…. UCC 9-625 .. address[es] the remedies available to a debtor when a secured party fails to comply with article 9. The section provides for injunctive relief 'if it is established that a secured party is not proceeding in accordance with this article' and permits a court to 'order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions' (UCC 9-625[a]). Money damages are available 'in the amount of any loss causes by a failure to comply with this article' (UCC 9-625[b])." Atlas MF Mezzanine Borrower, LLC v Macqaurie Texas Loan Holder, LLC, 174 A.D.3d 150, 161-162 (1st Dept. 2019).

Initially, the court notes that although in her proposed Order to Show Cause the plaintiff seeks an order directing the defendants to file a UCC-3 or an order granting a discharge of the UCC-1, in her supporting papers the plaintiff presents her application as one for a preliminary injunction, and opines that she has satisfied the requirements for that relief - (1) a likelihood of success on the merits, (2) irreparable injury if a preliminary injunction is not granted, and (3) a balance of equities in his or her favor. See CPLR 6301. In the supporting papers, she also requests other relief and relief against a non-party, asking the court to "enjoin the defendants from interfering in the sale of the artwork on January 27, 2022, and to direct Sotheby's to conduct the sale."

Contrary to the defendants' contention, the court could issue an order granting interim relief such as halting the sale or otherwise restraining a disposition of the painting, since the court has the authority to 'order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions' (UCC 9-625[a])." Atlas MF Mezzanine Borrower, LLC v Macqaurie Texas Loan Holder, LLC, supra at 161. However, the defendants correctly argue that the relief sought here cannot be granted as it constitutes ultimate relief in the action. See Sithe...

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