Singletary & Weathers Home Improvement, LLC v. Infinity Capital Funding, LLC
| Decision Date | 22 September 2022 |
| Docket Number | 617-2021 |
| Court | Court of Special Appeals of Maryland |
| Parties | SINGLETARY & WEATHERS HOME IMPROVEMENT, LLC, ET AL. v. INFINITY CAPITAL FUNDING, LLC |
Circuit Court for Baltimore City Case No. 24-C-20-002841
OPINION [*]
This appeal arises from a claim for breach of an agreement. In the Circuit Court for Baltimore City, Infinity Capital Funding LLC ("Infinity"), appellee,[1] filed suit against appellants, Singletary & Weathers Home Improvement, LLC ("S&W") and Robert Singletary, its owner and operator, for breach of contract or, alternatively, for unjust enrichment or quantum meruit. Infinity moved for summary judgment. The court held a hearing and entered judgment against S&W and Mr. Singletary for breach of contract, awarding damages, pre-judgment interest, and attorneys' fees. S&W and Mr. Singletary moved to revise the judgment to reduce the damages in conformity with the court's bench ruling, to eliminate or reduce the amount of pre-judgment interest, and to eliminate the award of attorneys' fees against Mr. Singletary. The court granted the motion to revise, in part, and entered a revised judgment.
S&W and Mr. Singletary appeal from the revised judgment, presenting four questions,[2] which we condense and rephrase as two:
For the following reasons, we answer the first question in the negative and the second question in the affirmative and shall reverse the judgment.
On or about July 18, 2018, S&W, a Maryland limited liability company owned and operated by Mr. Singletary, and Infinity, a California limited liability company, executed an "Agreement for the Purchase and Sale of Future Receipts" ("Agreement"). Under this arrangement, Infinity provided a fixed, up-front capital infusion in return for a percentage share of S&W's future accounts receivable.[3]
Infinity, as "Buyer," agreed to pay S&W $30,000 ("Purchase Price") in exchange for a promise by S&W, as "Seller," to pay Infinity $42,000 ("Purchased Amount") from its future receipts[4] by means of direct withdrawals from its bank account every business day. The Agreement set an "Initial Daily Amount" of $285.71, which was calculated by multiplying S&W's average monthly sales ($42,000) by an agreed specified percentage (14.29%) divided by the average number of business days in a calendar month.
A clause titled, "Seller May Request Changes to the Daily Amount (IMPORTANT PROTECTION FOR SELLER)," empowered S&W to request adjustments to the Daily Amount, no more than once per month, if its actual future receipts were not consistent with the forecasted receipts and no "Event of Default," as defined in the Agreement infra, had occurred. If S&W exercised its right to request a change, it was obligated to provide information requested by Infinity to "assist in this reconciliation." "Upon reasonable verification of such information," Infinity was required to "adjust the Daily Amount on a going-forward basis to more closely reflect [S&W's] actual Future Receipts times the Specified Percentage."
Paragraph 2 of the Agreement titled, "Nonrecourse Sale of Future Receipts (THIS IS NOT A LOAN)," provided, in part:
[S&W] is selling a portion of a future revenue stream to [Infinity] at a discount, not borrowing money from [Infinity]. There is no interest rate or payment schedule and no time period during which the Purchased Amount must be collected by [Infinity]. If Future Receipts are remitted more slowly than [Infinity] may have anticipated or projected because [S&W]'s business has slowed down, or if the full Purchased Amount is never remitted because [S&W]'s business went bankrupt or otherwise ceased operations in the ordinary course of business, and [S&W] has not breached this Agreement, [S&W] would not owe anything to [Infinity] and would not be in breach of or default under this Agreement. [Infinity] is buying the Purchased Amount of Future Receipts knowing the risks that [S&W]'s business may slow down or fail, and [Infinity] assumes these risks . . .
Paragraph 13.1 defined an "Event of Default" as "the occurrence of any of the following events":
(a) [S&W] interferes with [Infinity]'s right to collect the Daily Amount; (b) [S&W] violates any term of covenant in this Agreement; (c) [S&W] uses multiple depository accounts without the prior written consent of [Infinity]; (d) [S&W] changes its depositing account or its payment card processor without the prior written consent of [Infinity]; (e) [S&W] defaults under any other agreement with [Infinity], or breaches any of the terms, covenants and conditions of any other agreement with [Infinity], or (f) [S&W] fails to provide timely notice to [Infinity] such that in any given calendar month there are four or more ACH transactions attempted by [Infinity] that are rejected by [S&W]'s bank.
Paragraph 14.1, the "Remedies" provision, provided that upon an Event of Default, the specified percentage automatically increased to 100% of S&W's future receipts, and Infinity was entitled to collect the "full undelivered Purchased Amount," plus fees, charges, and all reasonable attorneys' fees and costs.
The Agreement was to be governed by California law.
Appendix A to the Agreement set out a list of fees and charges that S&W would be "liable for" in addition to the Purchased Amount. The fees included the $350 origination fee, a $35 fee "each time [S&W] fails to notify [Infinity] in a timely manner that the Daily Amount will not be available in the Account"; all costs to collect under the Agreement, including attorneys' fees "related to the enforcement of any other remedies available to [Infinity] if [S&W] defaults"; and a "Default Fee of $2,500 charged upon the occurrence of any Event of Default" after written notice to S&W.
Simultaneously with the execution of the Agreement, Mr. Singletary signed a "Personal Guaranty of Performance" ("Guaranty"), "irrevocably, absolutely and unconditionally" guaranteeing "prompt and complete performance" of the terms of the Agreement. The Guaranty likewise was to be governed by California law.
On June 29, 2020, Infinity filed suit against S&W and Mr. Singletary. It set out certain terms of the Agreement and alleged that S&W and Mr. Singletary "failed to remit the full Purchase[d] Amount pursuant to the Agreement"; that Infinity demanded payment, but none was received; and that "the outstanding Purchase[d] Amount due and owing [was $30,225.19]." Count I asserted a claim for breach of contract against S&W and Mr. Singletary, restating the same facts and adding that the "failure to provide payment pursuant to the Agreement is a material breach of the contract[.]" Counts II and III asserted, in the alternative, claims against S&W for unjust enrichment (Count II) and quantum meruit (Count III).[5] In each count, Infinity sought recovery of the principal amount of $30,225.19, pre-judgment interest, post-judgment interest, and court costs. Count I also sought contractual attorneys' fees. S&W and Mr. Singletary answered the complaint, denying liability and asserting ten defenses, including illegality and usury.
On July 24, 2020, within a month after filing the complaint, Infinity moved for summary judgment based on the above stated facts. It sought judgment for the unpaid principal amount of $30,225.19, $1,586.82 in pre-judgment interest, and $6,362.40 in attorneys' fees, for a total of $38,174.41. Infinity supported its motion with an affidavit made by Isaiah Kenigsberg, Infinity's controller and custodian of records, attaching five exhibits: (1) the Agreement, (2) the Guaranty, (3) an account statement maintained by Infinity for S&W ("Account Statement"),[6] (4) a pre-judgment interest worksheet, and (5) an affidavit of attorneys' fees with exhibits.
In paragraph 2 of his affidavit, Mr. Kenigsberg averred that "the allegations in the Motion for Summary Judgment and Memorandum in Support of Summary Judgment are true and accurate to the best of [his] personal knowledge and belief." In paragraph 3, Mr. Kenigsberg affirmed that the first three exhibits (the Agreement, Guaranty, and Account Statement) "were exact duplicates of records that (a) were made at or near the time of the occurrence of the matters set forth herein by, (or from information transmitted by) a person with knowledge of those matters, (b) were made and kept in the cour[se] of regularly conducted business activity of the business, and (c) were made and kept as a regular practice of [Infinity]'s business." In paragraphs 4 through 13, Mr. Kenigsberg stated the facts set forth in the memorandum in support of summary judgment, which mirrored the facts set forth in the complaint. Mr. Kenigsberg concluded the affidavit with the following affirmation, "I do solemnly affirm under the penalties of perjury and upon personal knowledge that the contents of the foregoing paper are true."
S&W and Mr. Singletary opposed the motion for summary judgment on three grounds. First, they argued that under California law it was impermissible for Infinity to pursue mutually inconsistent contract claims and quasi-contractual claims simultaneously. Second, they asserted that Mr. Kenigsberg's affidavit was insufficient under Rule 2-501 because of his averment in paragraph 2 that the allegations of the motion for summary judgment were based...
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