FILED: NEW YORK COUNTY CLERK 09/14/ :55 PM INDEX NO /2018 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 09/14/2018

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ITRIA VENTURES LLC, - against - Petitioner, JPMORGAN CHASE BANK, NA; RELIANCE MOTORS LLC; FIRST HOME BANK; NEXTGEAR CAPITAL INC.; PRIVATE MORTGAGE INVESTMENTS LLC SERIES 3; US CAPITAL PARTNERS INC.; 1 WEST CAPITAL LLC; BUSINESS MERCHANT FUNDING; EMPIRE FUNDING; WORLD GLOBAL CAPITAL, LLC D/B/A YES FUNDING; YELLOWSTONE CAPITAL WEST LLC; GTR SOURCE, LLC; ACE FUNDING SOURCE, LLC; and RICHARD J. PAGNOTTA, Index No. VERIFIED PETITION FOR TURNOVER PURSUANT TO CPLR 5225 AND TO DETERMINE RIGHTS IN PROPERTY PURSUANT TO CPLR 5239 AND FOR TEMPORARY RESTRAINTS Respondents. Petitioner Itria Ventures LLC ( Itria ), by its undersigned attorneys, as and for its verified petition for turnover pursuant to 5225(b) of the New York Civil Practice Law & Rules ( CPLR ), and for temporary restraints pending the return date hereof, alleges as follows: PARTIES 1. Itria is a limited liability company organized and existing pursuant to the laws of the State of Delaware with a principal place of business at 462 Seventh Avenue, 20th Floor, New York, New York At all times relevant hereto, Itria was engaged in the business of providing financial accommodations to its customers, principally through the purchase of merchant accounts receivable. S:\Itria Ventures, LLC v. RPC Motors\chase turnover petition\chase turnover petition - pet.docx 1 of 19

2 2. Respondent JPMorgan Chase Bank, NA ( Chase Bank ) is a national banking association with a principal offices at 270 Park Avenue, New York, New York 10017, and branches throughout the United States, including the State of New York. 3. Reliance Motors LLC is a limited liability company organized and existing pursuant to the laws of the State of California with a principal place of business at 958 East Holt Boulevard, Ontario, California First Home Bank is a Florida Banking Corporation with a principal place of business at 9190 Seminole Boulevard, Seminole, Florida Respondent NextGear Capital, Inc. is a corporation organized and existing pursuant to the laws of the State of Delaware with a principal place of business at 1320 City Center Drive, Suite 100, Carmel, Indiana Private Mortgage Investments LLC Series 3 is, upon information and belief, a limited liability company organized and existing pursuant to the laws of the State of Texas with a principal place of business at Autumn Forest Court, Magnolia, Texas US Capital Partners Inc. is a corporation organized and existing pursuant to the laws of the State of California with a principal place of business at 555 Montgomery Street, Suite 1501, San Francisco, California West Capital LLC is a limited liability company organized and existing pursuant to the laws of the State of Florida with a principal place of business at 1250 East Hallandale Beach Boulevard, Suite 903, Hallandale Beach, Florida Business Merchant Funding is, upon information and belief, a New York business entity with a principal place of business at 680 Central Avenue, Cedarhurst, New York of 19

3 10. Empire Funding is, upon information and belief, a New York business entity with a principal place of business at 1022 Avenue M, Brooklyn, New York World Global Capital, LLC d/b/a Yes Funding is a limited liability company organized and existing pursuant to the laws of the State of New York with a principal place of business at 30 Broad Street, 14 th Floor, New York, New York Yellowstone Capital West LLC is a limited liability company organized and existing pursuant to the laws of the State of New York with a principal place of business at 30 Broad Street, 14 th Floor, New York, New York GTR Source, LLC is a limited liability company organized and existing pursuant to the laws of the State of New Jersey with a principal place of business at 111 John Street, Suite 1210, New York, New York Ace Funding Source, LLC is a limited liability company organized and existing pursuant to the laws of the State of Florida with a principal place of business at 366 North Broadway, Jericho, New York Richard Pagnotta is an individual serving as New York City Marshal in the County of Kings, with a principal office at 6913 New Utrecht Avenue, Brooklyn, New York BACKGROUND 16. On or about November 23, 2016, Itria entered into two separate agreements (the November 2016 FRSAs ) with a California limited liability company known as Reliance Motors, LLC ( Reliance ), pursuant to which Itria agreed to purchase Reliance s future accounts receivable at a discount. Under the first agreement, Itria agreed to purchase Reliance s future accounts receivable valued at $384,000 for a purchase price of $300, of 19

4 Under the second agreement, Itria agreed to purchase Reliance s future accounts receivable valued at $256,000 for a purchase price of $200,000. Under the November 2016 FRSAs, Reliance was required to turn over to Itria the proceeds of such purchased receivables in periodic installments as set forth in the respective agreements. (A true and correct copy of the November 2016 FRSAs is annexed hereto as Exhibit A). 17. In connection with the November 2016 FRSAs, the principals of Reliance executed an affidavit in support of a confession of judgment on behalf of Reliance, to be held in escrow by Itria subject to a default under the November 2016 FRSA. 18. Subsequently, on or about November 9, 2017, Itria entered into an agreement to purchase the future receivables of Reliance (along with certain of affiliated entities) (the November 2017 FRSA ), pursuant to which Itria agreed to purchase Reliance s future accounts receivable valued at $650,000 for a purchase price of $500,000. Under the November 2017 FRSA, Reliance was required to turn over to Itria the proceeds of such purchased receivables in periodic installments as set forth in the agreement. (A true and correct copy of the November 2017 FRSA is annexed hereto as Exhibit B). 19. In connection with the November 2017 FRSA, the principals of Reliance executed an affidavit in support of a confession of judgment on behalf of Reliance, to be held in escrow by Itria subject to a default under the November 2017 FRSA. 20. Subsequently, on or about March 28, 2018, Itria entered into a fourth agreement to purchase the future receivables of Reliance (along with certain of affiliated entities) (the March 2018 FRSA ), pursuant to which Itria agreed to purchase Reliance s future accounts receivable valued at $750,000 for a purchase price of $600,000. Under the March 2018 FRSA, Reliance was required to turn over to Itria the proceeds of such purchased -4-4 of 19

5 receivables in periodic installments as set forth in the agreement. (A true and correct copy of the March 2018 FRSA is annexed hereto as Exhibit C). 21. In connection with the March 2018 FRSA, the principals of Reliance executed an affidavit in support of a confession of judgment on behalf of Reliance, to be held in escrow by Itria subject to a default under the March 2018 FRSA. 22. To evidence Itria s right to and interest in Reliance s future accounts receivable and to otherwise secure Reliance s obligations to turn over to Itria the proceeds of such future receivables as collected pursuant to the November 2016 FRSAs, the November 2017 FRSA, and the March 2018 FRSA, Reliance conveyed to Itria a security interest in all of Reliance s present and future accounts, deposit accounts, and the proceeds thereof, in addition to other tangible and intangible assets (and the proceeds thereof) (the Collateral ). To perfect its interest in the Collateral, Itria filed UCC-1 financing statements identifying the Collateral with the Secretary of State of California, UCC Division, on February 5, 2016, November 29, 2016, November 15, 2017, and March 29, (A true and correct copy of Itria s filed UCC- 1 financing statements is annexed hereto as Exhibit D). 23. Thereafter, in or about July 2018, Reliance defaulted under the November 2016 FRSAs, the November 2017 FRSA, and the March 2018 FRSA by failing to deliver the purchased percentage of receivables due to Itria as required thereunder. As a consequence thereof, Itria filed the affidavits in support of confessions of judgment against Reliance with the Supreme Court of New York, County of Richmond. On August 1, 2018, that Court entered judgment in favor of Itria and against Reliance (and others, where applicable) in the amount of: (a) $202, in connection with the first of the November 2016 FRSAs (Index No /2018); -5-5 of 19

6 (b) $85, in connection with the second of the November 2016 FRSAs (Index No /2018); (c) $311, in connection with the November 2017 FRSA (Index No /2018); and (d) $538, in connection with the March 2018 FRSA (Index No /2018). (Copies of the Judgments entered in favor of Itria and against Reliance are annexed hereto collectively as Exhibit E). 24. Pursuant to the foregoing judgments, Reliance owes Itria the sum of $1,137,349.42, plus accrued and accruing post-judgment interest. 25. Following the entry of the foregoing judgments, Itria took steps to enforce same against Reliance s assets, including funds maintained by Reliance in a deposit account at Chase Bank. On or about August 2, 2018, the New York City Marshal served a Levy and Demand (the Levy and Demand ) on Chase Bank in execution of each of Itria s judgments. (A true and correct copy of the Levy and Demand for each of the judgments is annexed hereto as Exhibit F). 26. Chase Bank has acknowledged receipt of each Levy and Demand, but has declined to turn over to the Marshal any funds maintained by Reliance in a deposit account at Chase Bank because another creditor has apparently levied on such funds as well. In addition to Itria, four creditors recently obtained judgments against Reliance, as follows: (a) on August 1, 2018, Ace Funding Source, LLC ( Ace ) obtained judgment against Reliance in the amount of $943,321.25; (b) on August 2, 2018, World Global Capital, LLC d/b/a Yes Funding ( Yes Funding ) obtained judgment against Reliance in the amount of $1,018,741.88; (c) on August 2, 2018, Yellowstone Capital, LLC ( Yellowstone ) obtained judgment against Reliance in the amount of $371,812.50; and -6-6 of 19

7 (d) on August 3, 2018, GTR Source, LLC ( GTR ) obtained judgment against Reliance in the amount of $1,472, (Copies of the judgments of Ace, Yes Funding, Yellowstone, and GTR are annexed hereto collectively as Exhibit G). 27. Itria believes that Ace, Yes Funding, Yellowstone, and/or GTR is the creditor which has also levied on the funds maintained by Reliance in its deposit account at Chase Bank. Upon further information and belief, the marshal who issued the levy on behalf of such other judgment creditor may be holding same, or Chase Bank or the marshal may have disbursed funds to such judgment creditor, notwithstanding Itria s priority as set forth below. Itria has been advised by Marshal Pagnotta in Kings County that he is holding the sum of approximately $15,000 pursuant to an execution on behalf of Ace. RELIEF REQUESTED AND GROUNDS THEREFOR 28. For the reasons set forth below, Itria s perfected security interests and liens hold priority over the liens of all other creditors with respect to the funds maintained by Reliance at Chase Bank. As a result, by this Petition Itria requests turnover of the funds as presently maintained by Reliance in the Chase Bank deposit account, or as held by the New York City marshal who executed on behalf of any subordinate judgment lien creditor, or as disbursed to such subordinate judgment lien creditor. 29. CPLR 5225 authorizes the turnover of property subject to a levy in execution of a judgment. That section provides in relevant part that: Upon a special proceeding commenced by the judgment creditor, against a person in possession or custody of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown that the judgment debtor is entitled to the possession of such -7-7 of 19

8 property or that the judgment creditor s rights to the property are superior to those of the transferee, the court shall require such person to pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any other personal property, or so much of it as is of sufficient value to satisfy the judgment, to a designated sheriff. CPLR 5225(b). That section also permits the Court to resolve competing claims to the funds in accordance with CPLR Id. 30. Generally speaking, the rights to an asset which is the subject of competing claims of judgment creditors is governed by the first in time doctrine. That is, a levying judgment creditor will take priority over a subsequent levying creditor. See CPLR 5234(b). However, that analysis changes when secured creditors are implicated. Under New York law, a levying judgment creditor is subordinate to the rights of a prior perfected secured creditor. See N.Y. UCC 9-317(a)(2)(B); General Motors Acceptance Corp. v. Stotsky, 60 Misc.2d 451 (Sup. Ct., Suffolk Cty., 1969); William Iselin & Co. v. Burgess & Leigh Ltd., 52 Misc.2d 821 (Sup. Ct., N.Y. Cty., 1967). 31. Section of the N.Y. UCC governs the priority of security interests in a deposit account, as that term is defined in N.Y. UCC 9-102(29). That section provides generally that a creditor holding a security interest perfected by control over a deposit account as that term is defined in N.Y. UCC will have priority over creditors with security interests not perfected by control. See N.Y. UCC 9-327; see also, Platte Valley Bank v. Tetra Fin. Group, LLC, 682 F.3d 1078, 1086 (8th Cir. 2012); Arvest Bank v. Spiritbank, N.A., 2008 Ok.Civ.App. 55 (Ok. App. 2008) ( The security interest of a party having control of a deposit account has priority over conflicting security interests of those -8-8 of 19

9 lacking such control. ); Kentucky Highland Investment Corp. v. Bank of Corbin, Inc., 217 S.W.3d 851 (Ky. App. 2006) Here, none of the creditors competing for priority with respect to Reliance s deposit account at Chase Bank has control over such account in accordance with N.Y. UCC 9-104, and thus the priorities set forth in N.Y. UCC are not applicable. However, that circumstance does not diminish the fact that Itria has a perfected security interest in the funds maintained in the Chase Bank account by way of other perfection mechanisms. 33. As duly noted above, Itria purchased Reliance s future accounts receivable pursuant to the November 2016 FRSAs, the November 2017 FRSA, and the March 2018 FRSA. Accounts receivable fall within the definition of payment intangible, i.e., a general intangible under which the account debtor's principal obligation is a monetary obligation, see N.Y. UCC 9-102(a)(61), and, therefore, lie within the scope of Article 9 of the UCC. Pascack Cmty. Bank v. Universal Funding, LLP, 419 N.J. Super. 279, 289 (App. Div. 2011) (citing N.J.S. 12A:9-109(a)(3)). As a buyer of receivables, Itria is therefore a secured party under Article 9 of the UCC. Id., at 290 (citing Comment 5 to N.J.S. 12A:9-109, section of New Jersey s enactment of the UCC). 34. The sale of a payment intangible is granted automatic perfection upon attachment, that is, when the security interest becomes enforceable against the debtor. Id.; see also, N.Y. UCC 9-309(3) and (4); James J. White and Robert S. Summers, UNIFORM 1 This Petition occasionally relies upon case law interpreting the Uniform Commercial Code from other jurisdictions. As the Court of Appeals for the Second Circuit acknowledged, [s]ince one of the major goals of the UCC is uniformity, interpretations of the UCC by the courts of other states serve as more than mere persuasive authority. In re Lou Levy & Sons Fashions, Inc., 988 F.2d 311, 316 n.5 (2d Cir. 1993) (citing A.J. Armstrong Co. v. Janburt Embroidery Corp., 97 N.J. Super. 246 (L. Div. 1967)); see also, Maxus Leasing Grp., Inc. v. Kobelco Am., Inc., 2007 U.S. Dist. LEXIS 13312, at *13 n.10 (N.D.N.Y. Feb. 26, 2007) of 19

10 COMMERCIAL CODE, 31-7 at 162 (6th ed. 2010); James J. White and Robert S. Summers, UNIFORM COMMERCIAL CODE, 21-1 at 34 (4th ed. 2000)). In an abundance of caution, however, Itria also filed a UCC-1 financing statements (identifying its interest in Reliance s accounts receivable and the proceeds thereof) with the appropriate filing offices in the state of California. Under Article 9 of the UCC, perfection of a security interest in the accounts of a registered organization, i.e., a corporation, requires the filing of a UCC-1 financing statement in the state where the entity is organized or incorporated. N.Y. UCC 9-301(1), 9-307(e); see also Donald J. Rapson, "Receivables" Financing Under Revised Article 9, 73 AM. BANKR. L.J. 133, (1999); Chase Manhattan Bank, N.A. v. Nemko, Inc., 136 B.R. 334, 339 (Bankr. E.D.N.Y. 1992) Pascack Cmty. Bank v. Universal Funding, LLP, supra, 419 N.J. Super. at 287. Inasmuch as Reliance was organized and formed in the State of California, Itria s interest in the accounts of Reliance was properly perfected as of the date of the filing of its first UCC-1 financing statement, February 5, As also duly noted above, Itria s security interest in Reliance s accounts receivable extends to the proceeds of such accounts receivable. N.Y. UCC 9-102(64) defines proceeds as [w]hatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral [and] whatever is collected on, or distributed on account of, collateral. More significantly, to the extent that proceeds of collateral take the form of 2 Case law overwhelmingly concludes that a UCC-1 filing with respect to an original secured debt obligation maintains the priority of that secured creditor with respect to subsequent advances provided that the original UCC-1 filing has not lapsed or been terminated, and it properly identifies the debtor, the secured party, and the collateral. See e.g., In re Oak Rock Fin., LLC, 527 B.R. 105, (Bankr. E.D.N.Y. 2015) ( Where the lender is paid in full and makes a new loan to the debtor, the UCC makes clear that the original financing statement perfects the lien regarding the new loan, so long as the financing statement covers the collateral pledged by the borrower. ); In re Bishop, 52 B.R. 470, 475 (Bankr. N.D. Ala. 1985) ( Even if the entire indebtedness had been paid off, FinanceAmerica would not have had to refile to establish its priority. ); In re Gilchrist Co., 403 F.Supp. 197, (E.D.Pa. 1975), aff'd, 535 F.2d 1246 (3d Cir.1976); In re Rivet, 299 F. Supp. 374 (E.D. Mich. 1969); In re Comprehensive Review Tech., Inc., 138 B.R. 195, 200 (Bankr. S.D. Ohio 1992); see also, N.Y. UCC 9-502, Official Comment of 19

11 cash, such proceeds expressly include deposit accounts as a matter of law. See N.Y. UCC 9-102(9) ( Cash proceeds means proceeds that are money, checks, deposit accounts, or the like. ) (emphasis added). Under N.Y. UCC 9-315(a)(2), a security interest in collateral automatically extends to the identifiable proceeds of such collateral, and pursuant to N.Y. UCC 9-315(c), [a] security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected. See also, In re Estate of Angiulli, 148 Misc. 2d 796, 801 (Sur. Ct., Oneida Cty., 1990). 36. Accordingly, by virtue of Itria s perfection of its interest in Reliance s accounts receivable, Itria s security interest in the proceeds of such accounts receivables is also properly perfected. N.Y. UCC 9-315(c). Furthermore, Itria s perfected security interest in the proceeds of Reliance s accounts receivable includes the identifiable cash proceeds of such accounts resident in any deposit account maintained by Reliance. See e.g., Aeronautics & Astronautics Servs. v. First Palm Beach Int'l Bank, 471 So. 2d 188 (Fl. 1985) (secured party with a perfected security interest in accounts receivable has a perfected security interest in cash proceeds in a deposit account as long as the cash proceeds are traceable to the collection of the accounts receivable). 37. The priority of Itria s security interest in the funds maintained in the Chase Bank account is governed by N.Y. UCC That section provides, in relevant part, that: (a) General priority rules. Except as otherwise provided in this section, priority among conflicting security interests in the same collateral is determined according to the following rules: (1) Conflicting perfected security interests rank according to priority in time of filing or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security interest is first perfected, if there is no period thereafter when there is neither filing nor perfection of 19

12 * * * (b) Time of perfection: proceeds and supporting obligations. For the purposes of subsection (a)(1): (1) the time of filing or perfection as to a security interest in collateral is also the time of filing or perfection as to a security interest in proceeds[.] N.Y. U.C.C. Law 9-322(a)(1), (b)(1). In other words, although Itria s perfected security interest in the traceable proceeds of Reliance s accounts maintained in any deposit account held by Reliance at Chase Bank may be subordinate to the interests of a secured creditor holding control over such deposit account pursuant to N.Y. UCC 9-327, it is superior to the security interests of all other creditors who perfected their security interests in the accounts or proceeds of the accounts of Reliance subsequent in time to that of Itria. N.Y. UCC 9-322(a)(1), (b)(1); see also, Citigroup Glob. Mkts. v. KLCC Invs., LLC, 2015 U.S. Dist. LEXIS , at *34 (S.D.N.Y. Sep. 25, 2015) ( Where two secured parties hold competing claims to the same collateral, their priority depends on perfection and timing. If both interests are perfected, the party that perfected or filed first in time has priority. ). 38. In addition, and as noted above, Itria s perfected security interest is superior to all subsequent judgment lien creditors. N.Y. UCC 9-317(a)(2)(B). The Court in William Iselin & Co. v. Burgess & Leigh Ltd., 52 Misc.2d 821 (Sup. Ct., N.Y. Cty., 1967), explained the matter as follows: The validity of the security agreement which secures both present and future advances and which covers both existing and afteracquired inventory is not controverted and accordingly petitioner's security interest attached to such inventory. Petitioner's security interest was perfected by proper filing in May, 1965, and thereupon petitioner's security interest took priority over all unfiled and unperfected interests, including the rights of judgment creditors who thereafter issued execution, of 19

13 since the liens of such creditors are perfected only by the issuance of execution pursuant to CPLR Id., at 823; see also, General Motors Acceptance Corp. v. Stotsky, 60 Misc.2d 451, 454 (Sup. Ct., Suffolk Cty., 1969) ( [T]he rights of a holder of a perfected secured interest are superior to those of a lien creditor. ). 39. Here, Itria perfected its security interest in the identifiable proceeds of Reliance s accounts on February 5, The date of Itria s judgment is of no consequence, because it relates back in time to the date of perfection of Itria s security interest by operation of New York law. See N.Y. UCC 9-601(e). None of the other interested creditors perfected their security interests or enforced their judgments prior to that time. According to a lien search conducted by Itria, the following creditors filed UCC-1 financing statements to perfect their security interests in the accounts of Reliance, but all post-dated the filing by Itria: (a) First Home Bank filed a UCC-1 financing statement on March 3, 2016; 2016; (b) NextGear Capital, Inc. filed a UCC-1 financing statement on June 22, (c) Private Mortgage Investments LLC Series 3 filed a UCC-1 financing statement on February 3, 2017; (d) US Capital Partners Inc. filed a UCC-1 financing statement on November 16, 2017; and (e) 1 West Capital LLC filed a UCC-1 financing statement on July 6, 2018; (f) Business Merchant Funding/Empire Funding filed a UCC-1 financing statement on August 1, (Copies of the foregoing UCC-1 financing statements are annexed hereto collectively as Exhibit H) of 19

14 40. In addition, none of Reliance s judgment creditors attempted to enforce their judgments liens against the Chase Bank account prior in time to the perfection of Itria s security interest therein because none held judgments prior to that time. As duly noted above: (a) Ace Funding Source, LLC obtained its judgment on August 1, 2018, after the perfection of Itria s security interest; (b) Yes Funding obtained its judgment against Reliance on August 2, 2018, after the perfection of Itria s security interest; (c) Yellowstone obtained its judgment against Reliance on August 2, 2018, after the perfection of Itria s security interest; and (d) GTR obtained its judgment against Reliance on August 3, 2018, after the perfection of Itria s security interest. 41. Based on the foregoing, Itria holds priority over the security interest and judgment liens of all of the foregoing parties with respect the funds maintained by Reliance at Chases Bank. Accordingly, a turnover of those funds to Itria, up to the amount of its judgment (plus accrued interest) is appropriate and warranted pursuant to CPLR To the extent that the funds held by Chase have already been disbursed to another creditor and applied to its judgment, this Court nonetheless has authority to order the turnover of such funds to Itria. See Herman v. Siegmund, 102 A.D.2d 810, 812 (2nd Dept. 1984) (reversing decision of the trial court that application under CPLR 5239 was untimely even though auction sale of personal property had been effected, and reversing sale under CPLR 5240). All of the potential levying creditors were on full notice of Itria s prior perfected security interest by virtue of the public record of its UCC-1 filing, and all potential levying creditors failed to properly notify Itria of their efforts to enforce a judgment against Itria s collateral. Inasmuch as Itria failed to receive notice of such creditors efforts or turnover petitions, Itria should not be penalized for any delay in bringing the instant petition, of 19

15 particularly since Itria s levy effected on August 2, 2018 is valid for 90 days, see CPLR 5232(a), and Itria has filed the instant Petition within that 90 day period. 43. There is further authority for the recovery of Itria s collateral from subordinate judgment creditors under a common law claim for conversion. See Hill v. Page, 108 A.D. 71 (3d Dept. 1905) (sheriff s sale of property in which a judgment debtor has no interest is an act of conversion); see also Weinstein, Korn & Miller, 11 NEW YORK CIVIL PRACTICE, (2018) ( If the proceeding is not commenced before the property or debt has been applied to satisfy the judgment, the claimant must resort to a common-law action, such as conversion, against the sheriff, the receiver, the distributee, or the purchaser at a judicial sale. ). A claim for conversion will lie where (i) plaintiff has a possessory right or interest in the property at issue; and (ii) defendant exercised dominion over the property or interference with it, in derogation of plaintiff's rights. Colavito v New York Organ Donor Network, Inc., 8 N.Y.3d 43, (2006); Pappas v. Tzolis, 20 N.Y.3d 228, 234 (2012). By executing on property over which Itria has prior rights, any such judgment creditors are properly held liable to Itria for conversion. 44. To the extent that this Court declines to direct the turnover of Itria s collateral because such collateral has already been disbursed to another judgment creditor, Itria respectfully requests that this special proceeding be converted to a plenary action pursuant to CPLR 103(c) 3 and that any such subordinate judgment creditors which may have received the funds formerly maintained by Reliance at Chase Bank be required to answer such claim and proceed to trial with respect thereto. 3 CPLR 103(c) permits the Court to convert a special proceeding to an action upon such terms as may be just if the court finds it appropriate in the interests of justice of 19

16 TEMPORARY RESTRAINTS ARE APPROPRIATE 45. Temporary restraints, precluding Chase, the Marshal, and any judgment creditors identified as a respondent herein, from transferring, dissipating, or disposing of the funds maintained (or formerly maintained) by Reliance in Chase Bank pending the return date of this Petition, is necessary and proper. 46. Although Itria s request herein is framed as a request for a temporary restraining order, the typical elements for the imposition of temporary restraints under CPLR 6313 (i.e., immediate and irreparable injury, loss or damages will result unless the defendant is restrained before a hearing can be had ) are not applicable here. Because Itria already holds judgment against Reliance, the pre-judgment remedy of temporary restraints under CPLR 6313 need not be considered. Rather, the operative rule for consideration is CPLR 5222, which permits restraints which preclude a judgment debtor or another party in possession of a judgment debtor s property from transferring or disposing of such property, so as to secure it for later transfer to the judgment creditor through a sheriff's execution or turnover proceeding. Cruz v. TD Bank, N.A., 22 N.Y.3d 61, 66 (2013); see also, Weinstein Korn, Miller, 11 NEW YORK CIVIL PRACTICE: CPLR (2017) ( The device in CPLR 5222, a restraining order, is like an injunction, because it restrains the person upon whom it is served from making any transfer of the judgment debtor s property. ). 47. A restraining order pursuant to CPLR 5222 can be used any time after the judgment is entered. Hampson v. Merchants Textile Co., 54 N.Y.S.2d 551 (N.Y.C. City Ct. New York County 1945). 48. Once served on a judgment debtor, the restraint pursuant to CPLR 5222 forbids the judgment debtor from selling, transferring or interfering with any property in of 19

17 which he has an interest, except as directed by the sheriff or the court, until the judgment on which the restraint is based is satisfied or vacated. CPLR 5222(b); see also Weinstein, Korn, Miller, 11 NEW YORK CIVIL PRACTICE: CPLR (2017). Similarly, once a served on a third party, the restraint pursuant to CPLR 5222 is effective against such person if he knows or has reason to believe that he is indebted to, or has property of, the judgment debtor, or the judgment creditor has stated in the notice that a specified debt is owed to the judgment debtor or that property in which the judgment debtor has an interest is in the possession or custody of the person served. See Burstin Investors, Inc. v. K.N. Investors, Ltd., 255 A.D.2d 478 (2d Dept. 1998); Metropolitan Assoc. Ltd. v. New York State Div. of Hous. & Cmty. Renewal, 195 A.D.2d 307 (1st Dep t 1993). 49. The invocation of the restraints pursuant to CPLR 5222 does not require a court order, although there is nothing contained in CPLR 5222 which precludes a judgment creditor from seeking an Order from the Court imposing such a restraint. Accordingly, by this application, Itria seeks the imposition of post-judgment restraints (a TRO) precluding Chase, the Marshal and any judgment creditor or lien holder from making any transfers of Reliance s property or funds pending the hearing and decision of the turnover relief sought herein. Clearly, this restraint would include any funds presently held by the Marshal in execution of any judgment held by any Respondent herein. 50. The approx. $800,000 disbursed by Compass to Pagnotta should be restrained and frozen as such. CONCLUSION 51. No prior request for the relief requested herein has been made to this or any other Court of 19

18 WHEREFORE, Itria respectfully requests entry of an Order, pursuant to CPLR 5225, directing Chase Bank, the Marshal, and/or any Respondent herein to turnover to Itria all funds maintained (or formerly maintained) by Reliance in any deposit account at Chase Bank up to the amount of Itria s judgment, plus accrued interest, and in the interim, pending the return date of this Petition, temporarily restraining Chase, the Marshal, or any Respondent herein from transferring, dissipating, or disposing of any such funds, pending further Order of the Court. Dated: September 14, 2018 SEIDMAN & PINCUS, LLC Co-Attorneys for Plaintiff By: /s/ Andrew Pincus Mitchell Seidman Andrew Pincus Attorneys at Law of the States of New York and New Jersey 777 Terrace Avenue, Suite 508 Hasbrouck Heights, New Jersey (201) and -- LAW OFFICES OF NICHOLAS PANZINI 1700 Great Neck Road, Suite 103A Copiague, New York (631) Co-Attorneys for Plaintiff of 19

19 VERIFICATION State of New York ) County of New York ) ) ss.: RAMIT ARORA, being duly sworn, deposes and says: I am the Presidêñt of Petitioner, Itria Ventures LLC and I am fully familiar with all of the facts and circumstances hereiñafter set forth. I have read the foregoing Petition and know the facts therein to be true based upon my own personal knowledge of the facts, and books and records maintained by Petitioner. This Verification is executed by me because I am the Presideñt of Petiticñer entity. As to matters alleged upon information and belief, I verily believe same to be true. Ramit Arora Sworn to before me this ay of September 2018 Notar Public NICOLE M KLINGLER NOTARY PUBLIC-STATE OF NEW YORK No.02KL Qualified in Bronx County My Commission Expiresot of 19