Byzfunder N.Y. LLC v. Holy City Collision LLC
| Docket Number | Index No. 133632-2022 |
| Decision Date | 05 September 2023 |
| Parties | Byzfunder NY LLC, Plaintiff, v. Holy City Collision LLC D/B/A HOLY CITY COLLISION and CRAIG THOMAS YINGLING, Defendants. |
| Court | New York Supreme Court |
Unpublished Opinion
For Plaintiff- Ariel Bouskila, Esq., Berkovitch & Bouskila PLLC
For Defendants- Antranig Garibian, Esq., Garibian Law Offices P.C.
This is a merchant advance agreement case. Pending before the Court is Plaintiff's motion for summary judgment.
For the reasons set forth herein, Plaintiff's motion for summary judgment is GRANTED IN PART and DENIED IN PART, and the Court searches the record and GRANTS summary judgment to Defendants on the Default Fee.
The parties entered into an agreement on May 12, 2022. Plaintiff purchased future receivables of $139,000, and Defendant agreed to remit 6% of receivables and to have one bank account for ACH withdrawals. It is alleged that Plaintiff funded the amount, that Defendant initially met its obligations, but that Defendants subsequently stopped remitting Plaintiff's share of the receivables. A balance of $131,671.33 purportedly remains.
At the outset, the Court notes that Plaintiff takes issue with Defendants' purported failure to properly respond to the Statement of Undisputed Facts. As the Court's local rules have long provided, such Statements are not required by the Seventh Judicial District Commercial Division. Accordingly Plaintiff's argument in this regard does not provide a basis to grant summary judgment. [1]
Plaintiff also seeks summary judgment on the merits. A party seeking summary judgment "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact."; Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 (1986). "Failure to make such a prima facie showing requires a denial of the motion regardless of the sufficiency of the opposing papers."; Id. See also, Christopher P. v. Kathleen M.B., 174 A.D.3d 1460 (4th Dept. 2019). "Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action."; Alvarez, 68 N.Y.2d at 324.
Here, through the Affidavit of Marshall Rosenblum, manager of Plaintiff, Plaintiff establishes prima facie entitlement to summary judgment. Plaintiff establishes the existence of the Agreement, Plaintiff's performance, Defendants' breach, and resulting damages.
Defendants oppose the motion for summary judgment in several respects. Defendants claim the Agreement constitutes a usurious loan. In New York, usurious contracts can be harshly voided, reflecting the State's "condemnation of the 'evils of usury.'" Adar Bays, LLC v. GeneSYS ID, Inc., 37 N.Y.3d 320, 332 (2021). "The statutory authority, coupled with the legislative intent behind the 1965 amendment, requires the conclusion that the legislature intended for criminally usurious loans made to corporate borrowers to be void when a successful usury defense, based on the criminal usury rate, is raised." Id. at 333. Violators of the civil usury standards likewise face voided loans. Id. "Thus, loans proven to violate the criminal usury statute are subject to the same consequence as any other usurious loans: complete invalidity of the loan instrument." Id. Usury must be demonstrated with "clear and convincing evidence." Ujeta v. Euro-Quest Corp., 29 A.D.3d 895, 895-96 (2nd Dept. 2006).
The "substance- not form" of a transaction is controlling. Adar Bays, LLC, 37 N.Y.3d at 334. "To determine whether a transaction constitutes a usurious loan, it 'must be considered in its totality and judged by its real character, rather than by the name, color, or form which the parties have seen fit to give it.'" LG Funding, LLC v. United Senior Properties of Olathe, LLC, 181 A.D.3d 664, 665 (2nd Dept. 2020) (citation omitted). Three factors are widely used to assess the true nature of a repayment obligation: "(1) whether there is a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3) whether there is any recourse should the merchant declare bankruptcy." Id. See also, Samson MCA LLC v. Joseph A. Russo M.D. P.C./IV Therapeutics PLLC, 2023 WL 5161995, at *2 (4th Dept. Aug. 11, 2023).
The provisions in the Agreement in the case at bar reveal that this transaction was not a loan. The Agreement contains mandatory reconciliation and adjustment provisions, has an indefinite term, and does not provide that a bankruptcy filing is an event of default. Defendants' contentions to the contrary are unavailing. Usury does not apply to the facts of this case.
Summary judgment is GRANTED to this extent.
Defendants also challenge the default fees and attorneys' fees sought as part of the award on summary judgment. Plaintiff alleges that it has incurred NSF fees in the sum of $100.00, a Default Fee in the sum of $2,500.00, and attorneys' fees in the sum of $29,785.69.
With respect to the Default Fee, the Court notes that "[a] contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation." Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 425 (1977). "If, however, the amount of actual damages that would be suffered upon a breach is readily ascertainable when the contract is entered, or the amount fixed as liquidated damages is conspicuously disproportionate to the foreseeable losses, the liquidated damages provision is unenforceable as a penalty." Cent. Irr. Supply v. Putnam Country Club Assocs., LLC, 57 A.D.3d 934, 935 (2nd Dept. 2008). "Where, however, a liquidated damages provision is found to be an unenforceable penalty, the recovery is limited to actual damages proven." Id.
Appendix A of the Agreement sets forth the fee structure and provides, in relevant part:
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