The following papers numbered 1 to 14 were read on this motion by the plaintiff, A & N FOOD MARKET, INC, for an order directing that plaintiff be permitted to foreclose on all property, fixtures and accounts of defendant New K & S Supermarket pursuant to a perfected security interest; for an order directing that the lease held by defendant New K & S be reassigned to the plaintiff; for an order directing that original stock certificates be delivered to plaintiff; that plaintiff be permitted to re-enter and reassume the leased premises; and for a preliminary injunction restraining defendants from removing, disposing, transferring, assigning or altering the fixtures, inventory and collateral; directing the defendant to continue to operate the business in the ordinary course of business and to pay accounts payable and to maintain fire, casualty and liability insurance:

Papers

Numbered

Orders to Show Cause(2)-Affirmation-Exhibits-Service......1 - 8

Affirmation in Opposition-Exhibits........................9 - 11 [*2]

Reply Affirmation........................................12 - 14

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This is an action wherein the plaintiff, A & N FOOD MARKET, INC.("A & N"), seeks to foreclose on a mortgage and security interest and take possession of the defendant's supermarket business including all personal property, inventory, machinery, fixtures and balances of all monetary accounts and accounts receivable. Plaintiff also seeks to effect a reassignment of the lease and the premises back to the plaintiff as well as seeking a reversion of stock certificates.

According to the complaint, on January 2, 2008, plaintiff A & N, loaned New K & S Supermarket, Inc ("New K & S"), the sum of $1,8000,000.00 for the purpose of financing the purchase of the supermarket business from A & N. To evidence the debt, New K & S executed and delivered to plaintiff a Loan and Security Agreement and Master Promissory Note dated January 2, 2008, in the amount of $1,800,000.00. The term of the loan was from January 1, 2008 through January 31, 2011. As security and collateral for the loan the borrowers delivered a General Security Agreement together with a UCC-1 Financing Statement. Defendants TU-CHIN LIN, DE KUANG CHEN, FU-CHENG CHANG, XIA ZHU LIN, JIN CHUN CHEN and XUE YUN Li, the shareholders of New K & S, jointly and severally guaranteed payment and performance of the loan.

In addition to the loan, A & N, the owner of the property located at 41-79 Main Street, Flushing, NY leased the premises to New K & S as tenant. The ten year lease, with a monthly base rental of from $100,000 in 2008 to $130,000 per month after ten years, was also guaranteed by the individual defendants. On January 2, 2008, New K & S sublet the premises to New A & N Food Market. In July 2012, New A & N entered into a business Loan Agreement and Promissory Note with Amerasia Bank whereby Amerasia loaned New A & N the sum of $300,000 which was secured by a General Security Agreement and UCC-1 filing.

In its complaint, the plaintiff alleges that New K & S failed to comply with the terms, conditions, and obligations contained on the Loan Agreements by failing to make payments of monies due under the agreement. As a result, in March 2011, defendants signed confessions of judgment based upon a loan default. On August 13, 2013, plaintiff filed a confession of Judgment against defendants in the amount of $1,614,227.20. The plaintiff also contends that the defendants defaulted on their obligations under the lease. Plaintiff alleges that the defendant failed to pay the monthly rental charges in the total amount of [*3]$1,568,465.16 as of April 9, 2013.

Plaintiff commenced the within action by serving a summons and complaint on October 1, 2013. According to the complaint, the Loan Agreement contains a security agreement and as such conveyed to plaintiff a security interest in all collateral including personal property, machinery, and equipment of New K & S Supermarket. Plaintiff alleges that pursuant to Section 10 of the Loan and Security Agreement A & N has the right to effectuate the transfer of all stock to its own name and plaintiff is entitled to immediate possession of all collateral securing defendants' obligations under the Loan. Plaintiff also contends that under the terms of the lease, if the defendants defaulted in their monetary obligations under the lease, the lease automatically reverts and reassigns back to the Landlord without further instruments. Based upon the defendants alleged default in the payment of the loan and rent on the lease, the plaintiff's complaint asserts causes of action to foreclose on the security interest of K & S and granting plaintiff possession of the collateral; for reversion and reassignment of the lease and for an order granting plaintiff leave to re-enter and reassume the leased premises; and for transfer of all stock certificates and surrender of the irrevocable proxy to plaintiff.

Plaintiff now moves for an order permitting it to foreclose, prior to trial, on all personal property, machinery, furniture, and fixtures of defendant New K & S Supermarket, Inc. pursuant to its perfected security interest; for an order reassigning the lease entered into on January 2, 2008 between plaintiff as landlord and defendant as tenant for the business premises located at 41-79 Main Street, Flushing, New York; for an order directing the defendant to deliver all original stock certificates and an Irrevocable Proxy to the plaintiff and that the plaintiff be permitted to immediately re-enter and reassume the leased premises or in the alternative for an order enjoining the defendants from altering, destroying, transferring and conducting a secret sale or otherwise disposing of the collateral; from removing the collateral from the leased premises or pledging the collateral and to continue to operate the business in the ordinary course of business and not conduct a going out of business sale or auction of the collateral or inventory and to continue to pay accounts payable and vendors in the normal course of business as well as other related relief.

In support of the motion plaintiff's counsel, Stephen L. Brodsky, Esq. contends that defendants are in default under the [*4]Loan and Security Agreement and Master Promissory Note. Counsel also asserts that plaintiff has a perfected security interest in the defendant's collateral and that the loan agreement and General Security Agreement entitle the plaintiff to immediate possession of defendants' collateral and to exercise its right to effectuate the transfer of all stock to its own name as well as a reversion of the Proxy to the plaintiff. According to the affirmation of Andrew Huang, the President of plaintiff, A & N Food Market, the defendant has failed to comply with the terms and conditions of the Loan Agreement and failed to pay the monthly rental and has also failed to pay the past due real estate taxes as of April 9, 2013. Huang states that his Company feels that the defendants intend to destroy the fixtures of the supermarket to take or destroy the inventory and not pay vendors for amounts owed. He also states that New K & S is moving assets to open another supermarket in the nearby area as well as moving inventory to that location. He states that plaintiff desires to enter the premises peacefully to take over the supermarket in accordance with its right.

In a second order to show cause, dated September 5, 2013, A & N seeks an order granting plaintiff the right to take immediate possession of the inventory, lease, and business premises of New K & S; for an order finding that the defendant violated the temporary restraining order contained in the prior order to show cause, and seeking an order requiring the defendant to post a bond in the amount of two million dollars pending the determination of the complaint. In support of the second order to show cause, Mr. Huang submits a second affidavit stating that on August 30, 2013, the plaintiff attempted to peaceably repossess the inventory lease and premises of 41-79 Main Street. He states, however, that the police permitted the defendants to remain in the premises pending the determination of the motions. Huang states that he believes the defendants are transferring and selling inventory not in the ordinary course of business and that unless the plaintiff recovers immediate possession of the premises its interests will be irreparably harmed. Plaintiff also requests that the defendants be required to post a performance bond so that the plaintiffs may recover damages due to defendants actions.

In opposition, counsel for the defendants, David Yan Esq. submits a verified answer and counterclaim alleging that the plaintiffs committed fraud and misrepresented and materially omitted facts to induce the defendants to enter into the loan for the business and the lease. Defendants contend that the plaintiffs knew that a competing supermarket was soon to open immediately across the street from the defendant's supermarket [*5]and intentionally withheld that information. Defendants state that they would not have purchased the supermarket had they known that a another supermarket was going to open eight months later right across the street in direct competition with them. Defendants alleges that when the new supermarket opened in 2008 defendants supermarket drastically lost its business due to severe price competition. Accordingly, on the basis of fraud the defendants oppose the plaintiff's motion and seek a judgment over and against the plaintiffs to rescind all agreements entered between plaintiff and defendant and seek an order restoring the parties to their pre-contract positions. Defendant states that it paid the plaintiff $1,8000,000 at the closing and took an additional loan of $980,000. Defendants assert counterclaims for breach of contract, fraud, negligence, and breach of fiduciary duty and seek a return of all sums paid by them. In addition, the defendants allege that on August 30, 1013, plaintiff attempted to forcibly evict the defendant while at the same time taking merchandise valued at $200,000.

To establish entitlement to a preliminary injunction, a movant must establish (1) a likelihood or probability of success on the merits, (2) irreparable harm in the absence of an injunction, and (3) a balance of the equities in favor of granting the injunction" (Stockley v Gorelik, 24 AD3d 535 {2d Dept. 2005]; (see Matter of Advanced Digital Sec. Solutions, Inc. v Samsung Techwin Co., Ltd., 53 AD3d 612 [2d Dept. 2008]; Montauk-Star Is. Realty Group v Deep Sea Yacht & Racquet Club, 111 AD2d 909 [2d Dept. 1985]). "A court evaluating a motion for a preliminary injunction must be mindful that the purpose of a preliminary injunction is to maintain the status quo, not to determine the ultimate rights of the parties (Masjid Usman, Inc. v Beech 140, LLC, 68 AD3d 942 [2d Dept. 2009]; also see Matter of Wheaton/TMW Fourth Ave., LP v New York City Dept. of Bldgs., 65 AD3d 1051 [2d Dept. 2009]; Coinmach Corp. v Alley Pond Owners Corp., 25 AD3d 642 [2d Dept. 2006]). Further, "a party seeking the drastic remedy of a preliminary injunction must establish a clear right to that relief under the law and the undisputed facts" (Omakaze Sushi Rest., Inc. v Ngan Kam Lee, 57 AD3d 497, 497[2d Dept. 2008];also see Peterson v Corbin, 275 AD2d 35[2d Dept. 2000]).

Here, this court finds that the plaintiff has failed to show a likelihood of ultimate success on the merits by clear and convincing evidence (see Gluck v Hoary, 55 AD3d at 668 [2d Dept. 2008]; Apa Sec., Inc. v Apa, 37 AD3d 502 [2d Dept. 2002]). The defendants have raised a material issue of fact as to whether there was fraud committed by the plaintiff at the time the loan was procured. In addition, as stated in this court's prior [*6]decision dated October 31, 2013, there is a question of fact regarding whether Amerasia Bank has a superior security interest in the subject collateral and whether the plaintiff or Amerasia Bank is entitled to foreclose on its security agreement.

Furthermore, a balancing of the equities does not favor permitting the plaintiff to take immediate possession of the defendants' collateral and business premises. The plaintiff has not shown that any injury it is likely to sustain will be more burdensome to her than the harm likely to be caused to the defendant by the immediate takeover of the defendant's inventory and lease or the imposition of a two million dollar bond (see Copart of Connecticut, Inc. v. Long Island Auto Realty, LLC, 42 AD3d 420 [2d Dept. 2007]; Credit Index, L.L.C. v. RiskWise Int'l, L.L.C., 282 AD2d 246 [1st Dept. 2001]).

In addition, "absent extraordinary circumstances, a preliminary injunction will not issue where to do so would grant the movant the ultimate relief to which he or she would be entitled in a final judgment" (SHS Baisley, LLC v Res Land, Inc., 18 AD3d 727 [2d Dept. 2005]; see Village of Westhampton Beach v Cayea, 38 AD3d 760 [2d Dept. 2007]; St. Paul Fire & Mar. Ins. Co. v York Claims Serv., 308 AD2d 347 [1st Dept. 2003]). The plaintiff's request to take immediate possession of the defendants' inventory and to oust the defendant from possession of the premises and recover the lease and business premises is a branch of the ultimate relief to which they would be entitled in a final judgment(see Board of Mgrs. of Wharfside Condominium v Nehrich, 73 AD3d 822 [2d Dept. 2010]; SHS Baisley, LLC v Res Land, Inc., 18 AD3d 727 [2d Dept. 2005]; St. Paul Fire & Mar. Ins. Co. v York Claims Serv., supra).

However, in order to maintain the status quo, pending the trial of this matter, the defendants shall be enjoined and restrained from altering, destroying, transferring, selling or otherwise disposing of the collateral, fixtures, inventory or stock except in the ordinary course of business.

In all other respects the plaintiff's motions are denied.

Dated: November 8, 2013

Long Island City, NY

___________________ [*7]

ROBERT J. MCDONALD

J.S.C.