Opinion
Index No. E2022-1778
06-27-2023
Kalamata Capital Group, LLC, Plaintiff, v. A Plus Remodeling and Restoration, LLC, D/B/A A+ REMODELING AND RESTORATION, and TYLER JAY KIVI, Defendants.
Ariel Bouskila, Esq. Berkovitch & Bouskila, PLLC For Plaintiff Dominick R. Dale, Esq. Law Office of Dominick Dale, Esq. For Defendants
Unpublished Opinion
Ariel Bouskila, Esq.
Berkovitch & Bouskila, PLLC
For Plaintiff
Dominick R. Dale, Esq.
Law Office of Dominick Dale, Esq.
For Defendants
Meagan K. Galligan, J.
This action stems from a contract pursuant to which plaintiff alleges that it purchased $87,000 of future receivables of defendant A Plus Remodeling and Restoration, LLC d/b/a A+ Remodeling and Restoration ("A Plus"), guaranteed by defendant Tyler Jay Kivi, in exchange for $57,301 in net funding . Pursuant to the terms of the contract, the defendant was to remit 15% of its future receipts , contemplated to be remitted at the rate of $2,417 per week, until it paid to the plaintiff the $87,000.00. By complaint, plaintiff alleges that defendant A Plus remitted just $12,085 to plaintiff and "ceased remitting" receivables thereafter.
$2,699 in fees was deducted from the purchase price by plaintiff pursuant to the contract. NYSCEF 62.
"Future receipts," by the contract, include "all payments made by cash, check, electronic transfer or other form of monetary payment deposited into A Plus's bank account for the payments to A Plus as a result of A Plus's sale of goods and/or services. NYSCEF 62.
By the instant motion, plaintiff avers A Plus denied it access to the bank account from which it was agreed plaintiff would withdraw remittances on August 29, 2023. NYSCEF 59. A transaction history submitted by plaintiff in support of the instant motion reveals a last remittance date of August 22, 2023. NYSCEF 63.
Plaintiff now moves for summary judgment against defendants in the amount of $77,450, which includes (i) the balance owing, (ii) a "default fee" of $2,500 and (iii) an "NSF fee" of $35, plus pre-judgment interest at the rate of 9 percent from the date of defendants' breach to the date of entry of judgment, post-judgment interest from the date of entry of judgment until it is satisfied, and costs and disbursements. Defendants oppose.
Plaintiff, by affidavit of its manager and by transaction history, alleges that between July 25, 2022, and August 22, 2022, A Plus remitted $12,085 of the $87,000 in receivables purchased by plaintiff pursuant to the contract. Plaintiff further avers that A Plus ceased remitting receivables to plaintiff on August 29, 2022, by denying it access to the account from which plaintiff had been debiting weekly remittances. Plaintiff further affirms that, in response to its discovery demands, A Plus produced bank statements showing that, from November 1, 2022, to February 28, 2023, A Plus had deposits of $510,382.04. Plaintiff further seeks judgment including a contractual default fee in the amount of $2,500 and NSF fees in the amount of $35.00, for a total money judgment sought of $77,450, plus interest, costs and disbursements.
Plaintiff is not entitled to summary judgment for the "default fee," which constitutes an unenforceable penalty and is not recoverable as liquidated damages. Truck Rent-A-Center Inc. v Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 425 [1977]; SEABROOK FUNDING, INC. v BEHAVIORAL SERVICES OF NEVADA, LLC and MARILYNHANLEY, 2023 NY Misc. Lexis 1649 [Sup Ct Kings Co 2023].
Defendants oppose the motion, arguing that plaintiff has failed to make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence to demonstrate the absence of any material issues of fact. See, e.g., Bill Birds, Inc. v Stein Law Firm, P.C., 35 N.Y.3d 173, 186 [2020]. "This burden is a heavy one and on a motion for summary judgment, facts must be viewed in the light most favorable to the non-moving party." William J. Jenack Estate Appraisers & Auctioneers, Inc. v Rabizadeh, 22 N.Y.3d 470, 475 [2013].
In support of this argument, defendants first argue that plaintiff illegally purchased defendants' business. The terms of the contract do not entitled plaintiff to determine defendant's customers, employees, hours, location of operation, or make any other business or operation decisions for or instead of defendants; instead, by the contract, defendants made certain representations and warranties in connection with their sale of 15% of A Plus's "future receipts" until $87,000 of the same were remitted to plaintiff. That portion of defendant's opposition to the motion fails.
Defendant Kivi, by affidavit, avers that plaintiff "has an unlawful and unauthorized ownership interest in [his] company. [Plaintiff] has a 100% interest in [his] receivables and not the negotiated percentage. As such, [plaintiff] controls [his] business and can shut [him] down at any time." NYSCEF 77, Paragraph 5. Neither Kivi nor counsel explains the basis of plaintiff's purported 100% interest in the receivables of A Plus.
Defendants further argue that plaintiff has failed to demonstrate the formation of a contract. By the motion, plaintiff has established that the parties executed a written contract, a copy of which is offered by plaintiff in support of the instant motion. By attorney affirmation and affidavit of defendant Kivi, defendants allege that FUNDMERICA offered defendants a loan funded by plaintiff, yet nothing on the face of the contract suggests that FUNDMERICA had authority to make an offer on plaintiff's behalf. Defendant Kivi avers that his "broker," FUNDMERICA, assured him "that if [he] had difficulty repaying the loan, [he] could also consolidate it into a single payment." Kivi further affirms that he believed that he was entering into an agreement with FUNDMERICA, not plaintiff or any agent of plaintiff. NYSCEF 77.
Kivi alleges that FUNDMERICA misrepresented the nature of the contract, indicating that he understood it to be a loan rather than the sale of future receivables. On the question of whether the agreement is a loan, the court is bound by the rulings of higher courts . See Principis Capital, LLC v I Do, Inc., 201 A.D.3d 752 [2d Dept 2022]. As to the alleged misstatement of FUNDMERICA about consolidation, while the court might analyze that representation within the context of a procedural unconscionability argument, defendant has not raised such an argument; further, no additional claims of procedural unconscionability have been raised which would substantiate further analysis on that issue. See, e.g., Matter of Lawrence, 24 N.Y.3d 320 [2014], Matter of Conifer Reality LLC, 106 A.D.3d 1251 [3d Dept 2013].
Defendants' contentions further include a purported breach by plaintiff of a covenant of good faith and fair dealing. Van Valkenburgh, Nooger & Neville, Inc. v. Hayden Publ'g Co, 30 N.Y.2d 34 [1972]. Defendants contend that plaintiff was required to determine whether defendant could afford to remit payments in accordance with the contract; however, defendants cite no authority requiring one party to verify the financial viability of another's performance before a contract is validly formed. Defendants further allege that plaintiff breached its fiduciary duty to them by filing this suit and by filing UCC liens upon A Plus's customers. While the contractual provision providing plaintiff power of attorney may reveal it to be inconsistent with defendants' best interest (see Matter of Ferrara, 7 N.Y.3d 244 [2006]), defendants do not allege that plaintiff used its power of attorney to initiate this suit or to file UCC liens, either of which could have been undertaken by plaintiff with or without a power of attorney. Therefore, this argument is inapposite to the instant motion.
Nonetheless, the face of the contract reflects that it exists between plaintiff and A Plus. While defendants argue that no contract was formed because Kivi spoke to a representative of FUNDMERICA and not directly to a representative of plaintiff with authority to enter into the contract, the language of the contract is clear and unequivocal in establishing the existence of a contract between plaintiff and defendants. That portion of defendants' argument in opposition to the motion fails.
Defendants further argue that plaintiff has failed to establish that A Plus failed to remit 15% of its receivables to plaintiff. Defendant Kivi, by affidavit, avers that he did not deny plaintiff access to the account designated by the contract, and further avers that no actionable receivables were deposited into that account, which he states was overdrawn. Kivi states: "[Plaintiff] needs to show that my business generated a sufficient amount of future receivables to remit the weekly payment of $2417.00. [Plaintiff's manager] cannot show that my business produced this amount of receivables to remit this payment." NYSCEF 77.
Defendants submit the affidavit of Seth Kimble, a professional bookkeeper and business consultant, in support of this argument. Kimble alleges plaintiff's manager reviewed only bank statements in concluding that A Plus generated "receivables" subject to remittal to plaintiff pursuant to the contract. Kimble avers that bank records alone are insufficient "to make a complete determination of the operating activity and revenue generated by a business." NYSCEF 78. Kimble disputes that A Plus generated gross revenue of $580,000 after it ceased remitting any payments to plaintiff, noting that, in his opinion, no documentation has been offered to substantiate this claim.
The contract uses the term future receipts, not receivables; the court need not and does not now address whether those terms are equivalent.
Plaintiff replies to this argument by referring to its discovery demands, noting that it requested from defendants the very documents Kimble avers are missing from plaintiff's analysis. Plaintiff's demands, as filed, requested all monthly bank statements for any account into which monies for the benefit of A Plus were deposited, A Plus's invoices and copies of its ledgers. Defendants objected to plaintiff's demands as "palpably improper, overbroad, unduly burdensome and beyond the scope of discovery," arguing that the items demanded are "evidentiary in nature," "beyond the scope of discovery," and an attempt to "harass the defendants." NYSCEF 29.
"There shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof by a party, or the officer, director, members, agent or employee of a party." NY CPLR § 3101(a)(1). "The words, material and necessary, are to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial." Harmon v Diocese of Albany, 204 A.D.3d 1270, 1271 [3d Dept 2022] (internal quotation marks and citations omitted). "[If] there is any possibility that the information is sought in good faith for possible use as evidence-in-chief or in rebuttal or for cross-examination, it should be considered 'evidence material * * * in the prosecution or defense'." Allen v Crowell-Collier Publ. Co., 21 N.Y.2d 403, 407 [1968] (internal quotation marks and citations omitted).
Defendants may not wield their own refusal to provide requested, relevant and discoverable documents as a shield from plaintiff's motion for summary judgment. The evidentiary material demanded is discoverable pursuant to statute and defendants' objections to producing the materials demanded are misplaced and hereby overruled.
Accordingly, it is hereby
ORDERED that the court's final determination on the instant motion is reserved pending completion of discovery; and it is further
ORDERED that defendants shall fully respond to plaintiff's discovery demands as contained at NYSCEF filings 18 and 19 within ten days hereof; and it is further
ORDERED that, upon defendants' compliance with its aforesaid discovery obligations with full responses to NYSCEF filings 18 and 19 within ten days hereof, plaintiff shall have ten days after receipt thereof to supplement its motion for summary judgment and defendants may submit any supplemental opposition papers within five days of the receipt of plaintiff's supplemental motion and plaintiff may submit a reply thereto within three days of receipt of defendants' supplemental opposition, if any; and it is further
ORDERED that defendants' failure to fully respond to plaintiff's discovery demands as contained at NYSCEF filings 18 and 19 within ten days hereof shall be deemed an admission that all monies indicated to have been deposited as reflected by those statements at NYSCEF filing 67 constitute receipts subject to the contract at issue, as that term is defined by NYSCEF filing 2; and it is further
ORDERED that plaintiff's motion for summary judgment on the default fee is denied.
The foregoing constitutes the Decision and Order of the Court. The signing of this decision and order shall not constitute entry or filing under CPLR § 2220. Counsel is not relieved from the applicable provisions of that rule regarding notice of entry.