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IV. Hedrick urged to see Flexibility credit as loan, hence illegal in Tennessee; will he join in fraud on court?

Judge Kyle Hedrick serves Hamilton County circuit court. He is supporting and upholding on a technicality a fraudulent criminal contract sought to be enforced by a New York loan shark, Flexibility Capital, when he lacks subject matter jurisdiction. (Photo Kyle Hedrick election website)

This post is from my efforts to free myself from claims of a New York loan shark, Flexibility Capital, extending illegal loans in Tennessee dressed up as advance purchases of future receivables. The case Flexibility Capital vs. Cupelli and Tulis, heard first in Hamilton County circuit court under Judge Kyle Hedrick, illustrates the obstacles to free one’s self from unconscionable and illegal contracts. It took is months to realize our true situation, as victims of illegal acts that are misdemeanors in Tennessee and felonies in New York. In this brief, I change position, arguing no longer that the funds extended to my radio station are an advance purchase of future receivables, but an illegal loan. — DJT

The court is asked to reconsider its grant of plaintiff’s motion for summary judgment on grounds that a ruling against accused approves plaintiff actions that violate state law and abrogate New York’s ban on usury and involve the court — as intended by plaintiffs — in fraud on the court and an abuse of judicial machinery.

Flexibility and Cheadle Law firm confess the transaction is a loan with an absolute duty for repayment in an attempt to exact usurious interest.

Plaintiff admissions are as follows:

  1. “6. On February 6, 2020,  Sabatino Cupelli and David Jonathan Tulis, d/b/a Hot News Talk Radio, executed a future receivables sale and purchase agreement with Flexibility Capital. 7. Flexibility Capital loaned Sabatino Cupelli and David Jonathan Tulis, d/b/a Hot News Talk Radio, money.” 

Affidavit of Gina Monteforte, president of Flexibility Capital (emphasis added)

  1. “Defendants borrowed money from plaintiff and failed to pay as promised. This is a straight-forward collection case to recover the balance due on a loan.”

Plaintiff’s motion for summary judgment (emphasis added)

  1. “Plaintiff loaned defendants money. Defendants failed to pay the money back.                  

Plaintiff’s motion for summary judgment (emphasis added)

  1. “Plaintiff loaned defendants money.” 

Plaintiff’s brief in support of summary judgment (emphasis added)

  1. “Defendants executed the agreement. Plaintiff loaned defendants money.” 

Plaintiff’s brief in support of summary judgment (emphasis added)

  1. “Plaintiff loan[s] defendants money. Defendants failed to pay as promised. A balance remains due. There remains no genuine issue as to any material fact, and plaintiff is entitled to a judgment as a matter of 1aw.”

Plaintiff’s brief in support of summary judgment (emphasis added)

The president of Flexibility Mrs. Monteforte and company debt collectors Mary Cheadle and John Cheadle of Nashville describe the transaction in terms of lending money. 

These statements of material fact contradict the face of the contract. That document declares in numerous ways the contract is not a loan of money, but an advanced purchase of future receivables. 

The accused asks the court to view the plaintiff’s words about the contract — ones it has approved as controlling — as being a loan of money as statements against interest, ones sure to be trustworthy, credible and material as they tend to injure the claims of the declarants in face of law in two states forbidding usury.

Laws limit usury

TENNESSEE LAW. Tennessee recognizes purchases in advance of business receivables. ““Account purchase transaction” means an agreement under which a commercial entity sells accounts, instruments, documents, or chattel paper to another commercial entity subject to a discount or fee *** ” Tenn. Code Ann. § 47-14-102.

Tennessee bans interest in many types of loans beyond 10 percent per year § 47-14-103. Maximum rates. The law provides a defense against suit such as this one. “(a) A defendant sued for money may avoid the excess over lawful interest by pleading usury, setting forth the amount of such excess. (b) In order to sustain a defense of usury, the burden is on the party claiming usury” Tenn. Code Ann. § 47-14-110. 

Willful usury is a Class A misdemeanor. T.C.A. § 47-14-112.

To constitute usury, there must be a requirement that the money loaned be repayable absolutely;  if it is payable only upon some contingency, the transaction is not usurious. Lake Hiwassee Development Co., Inc. v. Pioneer Bank, 1976, 535 S.W.2d 323. Usury imports the existence of four elements: (1) A loan or forbearance, either express or implied; (2) an understanding between the parties that the principal shall be repayable absolutely; (3) the exaction of a greater profit than allowed by law; and (4) an intention to violate the law. Jenkins v. Dugger, 96 F.2d 727, 729 (6th Cir. 1938).

NEW YORK LAW.  New York law prohibits usury past 25 percent per year in two laws. First-degree usury is an act by someone with a criminal record. Second degree criminal usury lacks the criminal record element, and is as follows:

A person is guilty of criminal usury in the second degree when, not being authorized or permitted by law to do so, he knowingly charges, takes or receives any money or other property as interest on the loan or forbearance of any money or other property, at a rate exceeding twenty-five per centum per annum or the equivalent rate for a longer or shorter period.

Criminal usury in the second degree is a class E felony.

N.Y. Penal Law § 190.40 (McKinney)

Crime of criminal usury in the second degree requires proof only that defendant charged or received money or other property as interest on a usurious loan. McKinney’s Penal Law § 190.40. *** Finding that defendant received interest on usurious loan as part of a scheme or business of making or collecting usurious loans was supported by evidence that he made a loan of $2,000 for which he required interest payments at the rate of $100 per week, that he later twice renegotiated the loan, requiring interest at effective annual rates of 109.2% and 145.6%, and that he directly participated in collection efforts on two of the loans.

People v. Valentzas, 70 N.Y.2d 446, 517 N.E.2d 198 (1987)

Flexibility contract requires absolute repayment

The contract disputed in this case admits itself into the world of loans for money by having a personal guaranty section of the agreement that makes the funds repayable absolutely.

c. Buyer is not willing to enter into the Agreement unless Guarantor irrevocably, absolutely and unconditionally guarantees prompt and complete performance to Buyer of all the obligations of Merchant under the Agreement (collectively, “the Obligations”). 

(Contract, p. 11)

As an inducement to take risk, Flexibility requires the merchants to make absolute guarantee of repayment of the full amount to Flexibility.

2. Guaranty of Obligations. Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Buyer prompt, full, faithful and complete performance and observance of all Merchant’s Obligations; and Guarantor unconditionally covenants to Buyer that if default or breach shall at any time be made by Merchant in the Obligations, Guarantor shall well and truly pay or perform (or cause to be paid or performed) the Obligations and pay all damages and other amounts stipulated in the Agreement with respect to the nonperformance of the Obligations, or any of them. 

(Contract p. 11) (emphasis added)

The exchange for the purchased amount (of receivables) is “payment for an adequate consideration and is not intended to be treated as a loan or financial accommodation from Buyer to Merchant.” To cover its actions, plaintiff wins defendants’ “[acknowledgment]” that Flexibility is “not a lender, bank or credit card processor, and that Buyer has not offered any loans to Merchant, and Guarantor waives any claims or defenses of usury in any action arising out of this Guaranty” (p. 12, ¶ 5).

The accused incorporate by reference their motion for summary judgment and its supporting brief. These documents highlight the supervening impossibility of performance of the contract (Gov. Bill Lee shutdown of the entire state’s economy) and the contract’s original impossibility (accused are supposed to generate receipts from a failing business). The contract itself goes to great lengths to avoid appearances that the purchase for advance receivables is a loan at usury. 

Mary Cheadle of Cheadle Law in Nashville pursues debtors for loan sharks such as Flexibility Capital, as here in Hamilton County circuit court. (Photo David Tulis)

The “personal guaranty of performance” is on the face of the 14-page contract at pp. 11-13, its page numbers included on front-facing pages. This guarantee on the face of the contract — and not apart from it — makes the money absolutely repayable.

Accused remind the court that no one at Flexibility signed the contract, indicating a failure to have a meeting of the minds among the parties or a desire on the part of Flexibility staff to avoid personal responsibility for violating New York’s usury ban.


Usury is not presumed, but, on the contrary, there is a strong presumption against the finding of usury and in favor of legality of the transaction. Where usury is not determined by the court on the face of the instrument, it is determinable as a matter of law.

The parties agreeing to waives a claim of usury in the contract in no way makes the contract enforceable in Tennessee or in New York, the laws of which latter state control, contract p. 9, ¶ 37; also personal guaranty, p. 11, ¶ 6.

Accused have a right to raise the usury defense, and do so under accompanying affidavit. “Consent or cooperation of one paying usurious interest is immaterial; thus, fact that corporate borrower executed written waiver of defense of usury at time promissory note was signed did not preclude corporate borrower from raising defense of usury in action to recover on promissory note. T.C.A. §§ 47–14–104, 47–14–112, 48–402; Const. art. 11, § 7.” Aztec Properties, Inc. v. Union Planters Nat. Bank of Memphis, 530 S.W.2d 756 (Tenn. 1975).

The funds in the Flexibility contract are repayable absolutely under terms of the contract’s personal guaranty provisions, pp. 11-13. 

Accused at Hot News Talk Radio received $16,320 in a loan. The agreement requires it to pay $164.22 every weekday. The balance due at the beginning of the arrangement is $24,140, or $7,820 more than the money extended. It takes 147 weekdays to pay off the loan, or 29.4 weeks, slightly more than half a year. 

The rate of interest is 47.916 percent for the 29 week period, or nearly 100 percent per annum. 

In business, receivables vary widely day to day. The contract says the payments are an advance purchase of future receivables. But Flexibility’s payment schedule is the same number of dollars every weekday, as if there were no connection between receivables and repayment. Repayment is fixed daily upon a loan of money, as admitted in the finding of material fact.

Fraud on the court

It has taken this long for accused to realize they are victims of fraud of which this prosecution is a part. By this motion they take action forthwith and do not sit on their rights by remaining silent and not demanding relief. They declaim against fraud and by notice of this motion attempt to remove themselves from its taint and spare the court from being smeared in it.

Fraud on the court is a grievous matter involving attorneys and judges. The standard is set forth in Demjanjuk v. Petrovsky, 10 F.3d 338, 348 (6th Cir. 1993), with  

[T]he elements of fraud upon the court ***  consisting of conduct:

1. On the part of an officer of the court;

2. That is directed to the “judicial machinery” itself;

3. That is intentionally false, wilfully blind to the truth, or is in reckless disregard for the truth;

4. That is a positive averment or is concealment when one is under a duty to disclose;

5. That deceives the court.

The 10th Circuit defines fraud on the court as “‘Fraud on the court’ other than fraud as to jurisdiction, is fraud which is directed to judicial machinery itself and is not fraud between parties or fraudulent documents, false statements or perjury; it is thus fraud where court or member is corrupted or influenced or influence is attempted or where judge has not performed his judicial function so that impartial functions of court have been directly corrupted” Bulloch v. United States, 763 F.2d 1115 (10th Cir. 1985). “[F]raud upon the court has been found usually involved ‘ “the most egregious conduct involving a corruption of the judicial process itself.”’ *** In Livingston v. Livingston, 572 P.2d 79, 82 (Alaska 1977), we recognized that relief is not appropriate in cases in which the wrong ‘“was only between the parties in the case and involved no direct assault on the integrity of the judicial process. Nondisclosure by a party or his attorney has not been enough.”’” O’Link v. O’Link, 632 P.2d 225, 230 (Alaska 1981).

Fraud is defined as “[a]nything calculated to deceive, whether by a single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or innuendo, by speech or silence, word of mouth, or look or gesture.” Delahany v. First Pennsylvania Bank, N.A., 318 PaSupper. 90, 464 A.2d 1243, 1251. Black’s Law Dictionary, 6th Ed., p. 660.

Fraud by definition: “It is something said, done, or omitted by a person with the design of perpetrating what he knows to be a cheat or deception.” Black’s Law Dictionary, 6th Ed., p. 661. 

Actual fraud is an intentional and knowing misrepresentation of the truth or intentional and knowing concealment of a known fact (committed with actual knowledge) that constitutes common law fraud.

Flexibility and attorneys John and Mary Cheadle are suing to enforce a contract they call a loan for money that puts the entire action under the shadow of Tennessee’s usury ban. They have acted deceitfully and fraudulently upon the accused. They act deceitfully and dishonestly upon the court, knowingly and intentionally, as officers of the court, and induce the court to perform injustice against defendants, in violation of state law and Rule 8.

Relief sought

Accused demand relief as noted in the attached motion for reconsideration. Also attached, an affidavit attesting to defendant usury defense herein described.

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