The following papers were read on this motion: Plaintiff’s Notice of Motion, Affidavit and Affirmation in Support, Exhibits and Memorandum of Law in Support 1 Affidavit in Opposition, Exhibits and Memorandum of Law 2 Reply Memorandum of Law 3 Upon the foregoing papers, the motion by plaintiff TopRock Funding LLC (“TopRock”) for an Order: (1) pursuant to CPLR §3212 directing the Clerk to enter judgment against defendants, jointly and severally; (2) enjoining defendants from transferring, dissipating, assigning, conveying, encumbering or otherwise disposing of the properties, or any assets of the entity defendants; (3) pursuant to CPLR §6220 directing defendants to execute and provide any documents necessary to effect payment of the judgment to TopRock; and (4) awarding TopRock costs, disbursements and attorney’s fees, is determined as hereinafter provided. In this action, plaintiff seeks to recover from defendants for alleged breach of a Revenue Purchase Agreement (commonly referred to as a “merchant cash advance” agreement) entered into between plaintiff and defendants on February 10, 2020 (the “RPA”). Pursuant to the terms of the RPA, TopRock purchased $624,252.18 (“Purchased Amount”) of defendant Simon Land Development LLC’s (“Simon LLC”) future receipts, for the sum of $446,213.14 (“Purchase Price”) paid by TopRock. Pursuant to the RPA, Simon LLC agreed to provide daily payments (Monday through Friday) in the amount of $5,000.00, estimated to be 25 percent of Simon LLC’s daily receipts, by ACH-debit from its bank account until TopRock received the full Purchased Amount of $624,252.18. The RPA further provided that in the event of a default, the full uncollected Purchased Amount would become immediately due and payable. Defendant Fawzi R. Simon executed a guaranty under which he personally guaranteed performance of Simon LLC’s obligations under the RPA. In its complaint, plaintiff asserts four (4) causes of action: breach of contract, account stated, breach of guaranty, and for attorney’s fees and costs. In support of its motion, plaintiff submits the affidavit of Menachem Silber, who states that he is the Proprietor for plaintiff TopRock. Mr. Silber attests that plaintiff paid Simon LLC the Purchase Price pursuant to the RPA, and that on March 18, 2020, Simon LLC breached the RPA by not paying the daily remittance of $5,000.00 due under the RPA. Mr. Silber states further that Simon LLC further breached the RPA by, inter alia, failing to deposit its revenue into the bank account designated for that purpose and by breaching the non-stacking provision of the RPA by taking funding from another finance/factoring company after entering into the RPA with TopRock. TopRock asserts that of the $624,252.18 Purchased Amount, Simon LLC delivered a total of $37,750.00 prior to defaulting, leaving a Purchased Amount balance of $586,502.18. In addition to said balance, Toprock asserts that it is entitled to collect certain fees pursuant to the RPA totalling $114,951.52 itemized as follows: Stacking Fee of $62,425.21 (10 percent of the Purchased Amount), Blocked Account Fee of $5,000.00, Non-Sufficient Fund (NSF) Fees of $2,905.00 and a Default Fee of $44,621.31 (10 percent of the funded amount i.e. the Purchase Price). Plaintiff asserts that the total amount due is the remaining unpaid Purchase Price balance of $586,502.18, plus fees in the amount of $114,951.52, for a total amount due of $701,453.70, plus costs, attorney’s fees and interest from March 18, 2020. In opposition to the motion, defendants submit the affidavit of Fawzi R. Simon, who states that he is the owner and operator of Simon LLC. Defendants argue, in sum and substance, that regardless of the RPA’s form and wording, the transaction between the parties was a loan, and had no relationship to the purchase of receivables or receipts. Defendants assert that plaintiff had zero risk under the terms of the RPA, as it had, in essence, the absolute right to draw $5,000.00 from Simon LLC’s account every day, with nothing under the RPA enabling Simon LLC to stop the debit until TopRock repaid itself the full Purchased Amount of $624,252.18. Defendants argue that when viewed in its true nature, the transaction is a criminally usurious loan, with an annual interest rate of 81 percent, computed as follows: Under the RPA, the total paid to Simon LLC was $446,213.14, for which it had to pay back $624,252.18, by making daily payments of $5,000.00. The difference between the Purchased Amount of $624,252.18 and the Purchase Price of $446,213.14 is $178,039.04, which defendants contend is the interest to be paid on the $446,213.14. The RPA required payment of $5,000.00 per day, which meant 125 payments of $5,000.00 each, or 125 days in order to pay the $624,252.18. Since the RPA provided that the debits would take place on weekdays, and taking into account banking holidays, this meant that the 125 payments of $5,000.00 each were going to take 175 days total. Payment of $178,039.04 in interest on $446,213.14, over a 175 day period equates to an annual interest rate of approximately 81 percent. (See Defendants Amended Answer, paragraphs 7 and 15). Defendants cite to the Security Agreement provided for in the RPA in support of its argument that plaintiff could maintain or acquire control of all of defendants’ assets and cash flow, at any time for any reason or no reason at all. They contend that, although the RPA had a Reconciliation provision it was worthless because upon any reconciliation request, TopRock would learn that Simon LLC was in financial distress and could then exercise its unfettered right under the Security Agreement to obtain all of defendants’ assets and cash flow. Defendants argue that these and other provisions of the RPA removed all semblance of risk from TopRock, and that regardless of its wording, under the RPA, the fixed daily payment was required regardless of any receipts. Defendants served and filed, on NYSECF a notice to admit, document demand, and demand for bill of particulars, on August 3, 2020. Defendants state that plaintiff has failed to serve any responses to the notices and demands. The Court also notes that a preliminary conference has not yet been held in this matter. It is well established that a proponent of a summary judgment motion must make a prima facie case of entitlement to judgment as a matter of law when there are no material issues of fact (Alvarez v. Prospect Hosp., 68 NY2d 320 [1986]). Summary judgment is a drastic remedy that is awarded only when it is clear that no triable issue of fact exists. (Id. at 325; Andre v. Pomeroy, 35 NY2d 361). Summary judgment is the procedural equivalent of a trial (Museums at Stony Brook v. Village of Patchogue Fire Dept., 146 AD2d 572 [2d Dept 1989]). Thus, the burden falls upon the moving party to demonstrate that, on the facts, it is entitled to judgment as a matter of law (see, Whelen v. G.T.E. Sylvania Inc., 182 AD2d 446 [1st Dept 1992]). The court’s role is issue finding rather than issue determination (see, e.g., Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957]; Gervasio v. Di Napoli, 134 AD2d 235, 236 [2d Dept 1987]; Assing v. United Rubber Supply Co., 126 AD2d 590 [2d Dept 1987]). In deciding a summary judgment motion the court must draw all reasonable inferences in favor of the nonmoving party (Nicklas v. Tedlen Realty Corp., 305 AD2d 385 [2d Dept 2003]), and the evidence must be construed in a light most favorable to the party opposing the motion (Benincasa v. Garrubbo, 141 AD2d 618 [2d Dept 1988)]). “[E]ven the color of a triable issue forecloses the remedy”. (Rudnitsky v. Rabbins, 191 AD2d 488, 489 [2d Dept 1993]. Furthermore, the credibility of the parties is not an appropriate consideration for the Court. (See S.J. Capelin Assoc., Inc. v. Globe Mfg. Corp., 34 NY2d 338 [1974]). In LG Funding, LLC v. United Senior Properties of Olathe, LLC, 181 AD3d 664 [2d Dept 2020], involving a merchant cash advance agreement, the Supreme Court had denied plaintiff’s motion for summary judgment and to dismiss defendants’ affirmative defense that the transaction was a criminally usurious loan. The Second Department held: 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’ ” (Abir v. Malky, Inc., 59 A.D.3d at 649, 873 N.Y.S.2d 350, quoting Ujueta v. Euro-Quest Corp., 29 A.D.3d 895, 895, 814 N.Y.S.2d 551 [internal quotation marks omitted] ). The court must examine whether the plaintiff “is absolutely entitled to repayment under all circumstances” (K9 Bytes, Inc. v. Arch Capital Funding, LLC, 56 Misc.3d 807, 816, 57 N.Y.S.3d 625 [Sup. Ct. Westchester County]). Unless a principal sum advanced is repayable absolutely, the transaction is not a loan (see Rubenstein v. Small, 273 App.Div. 102, 75 N.Y.S.2d 483). In its analysis, the Court weighed three factors when determining whether repayment is absolute or contingent: (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 (see K9 Bytes, Inc. v. Arch Capital Funding, LLC, 56 Misc.3d at 816-819, 57 N.Y.S.3d 625; see also Funding Metrics, LLC v. D & v. Hospitality, Inc., 62 Misc.3d 966, 91 N.Y.S.3d 678, 970 [Sup. Ct. Westchester County]). Upon careful review and consideration of the papers submitted by the parties in this matter, the Court finds this case analogous to LG Funding, LLC v. United Senior Properties of Olathe, LLC, supra in that triable issues of fact exist as to whether the subject transaction was a usurious loan. In this instant case, the agreement suggests that the obligation to repay was absolute that the security interest may be exercised by TopRock without notice or a demand. In addition, plaintiff has failed to establish, prima facie, that Simon LLC breached the non-stacking provisions of the RPA. In that regard, plaintiff has only submitted a listing of UCC filings. Plaintiff provides no documents or proof in admissible form showing any actual purchase of, a loan against, assignment, transfer, factoring or other transaction involving Simon LLC’s future receipts. Accordingly, plaintiff’s motion for summary judgment is DENIED, with leave to renew upon completion of discovery. It is further ORDERED that a Preliminary Conference shall be held in this matter on July 27, 2021, virtually. Prior to the scheduled conference date, counsel shall confer and complete a proposed Preliminary Conference Stipulation and Order, which is available on the Court’s website together with instructions on how to complete it and how to return it to the Court, at http://ww2.nycourts.gov/COURTS/10JD/nassau/cicgeneralforms.shtml. Any other relief sought herein but not specifically ruled upon is DENIED. This constitutes the Decision and Order of the Court. Dated: July 2, 2021
