Court Opinion

ID: 9916477
Source: CourtListenerOpinion
Date Created: 2024-01-10 01:07:35.06213+00
Date Added: 2024-06-11T13:25:29.562727
License: Public Domain

Global Merchant Cash, Inc. v Mainland Ins. Agency
                           Inc.
               2024 NY Slip Op 30033(U)
                     January 3, 2024
           Supreme Court, New York County
        Docket Number: Index No. 451332/2022
                Judge: Verna L. Saunders
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                     INDEX NO. 451332/2022
 NYSCEF DOC. NO. 50                                                                                            RECEIVED NYSCEF: 01/05/2024

                                 SUPREME COURT OF THE STATE OF NEW YORK
                                           NEW YORK COUNTY
           PRESENT:            HON. VERNAL. SAUNDERS, JSC                                          PART                            36
                                                                                      Justice
           ---------------------------------------------------------------------------------X      INDEX NO.         451332/2022
            GLOBAL MERCHANT CASH, INC.,
                                  Plaintiff,                                                       MOTION SEQ. NO.       001

                                                - V-
                                                                                                     DECISION+ ORDER ON
            MAINLAND INSURANCE AGENCY INC. d/b/a MAINLAND
            INSURANCE AGENCY and ERFAN NAGI,
                                                                                                           MOTION
                                   Defendants.
           ---------------------------------------------------------------------------------X

           The following e-filed documents, listed by NYSCEF document number (Motion 001) 31, 32, 33, 34, 35, 36, 37, 38,
           39,40,41,42,43,44,45,46,47,48,49
           were read on this motion to/for                                                      SUMMARY JUDGMENT

                   The relevant facts of this case are set forth in the decision and order dated April 15, 2022
           (NYSCEF Doc. No. 26, notice of entry). In that decision and order, the Kings County Supreme Court
           granted that branch of defendants' motion to dismiss seeking dismissal of plaintiffs third and fourth
           causes of action for unjust enrichment and conversion, and that branch of defendants' motion seeking a
           change in venue. That court also found that the parties' transaction at issue is a merchant cash advance
           agreement. In summary, this action, sounding in breach of contract and personal guaranty, concerns the
           alleged non-payment of a portion of future receivables pursuant to a written cash advance agreement
           between the parties.

                   Plaintiff now moves, pursuant to CPLR 3212, for an order granting summary judgment in its
           favor and against defendants for breach of contract and enforcement of the guaranty and for an order
           directing the Clerk of the Court to enter judgment in favor of plaintiff and against defendants in the
           principal amount of $31,606.16, plus pre-judgment interest at the statutory rate from December 21,
           2020. Plaintiff also seeks attorneys' fees and costs against defendants.

                    Plaintiff argues that pursuant to the Agreement for the Purchase and Sale of Future Receipts
           ("agreement") between plaintiff and Mainland Insurance Agency ("Mainland") and a personal guaranty
           executed by defendant Erfan Nagi ("Nagi"), both dated November 8, 2019, plaintiff was entitled to
           unobstructed access to ACH debit Mainland's account, and copies of its bank statements upon request
           (NYSCEF Doc. No. 44,plaintiff's memo of/aw, pg. 14). In support of the motion, plaintiff submits a
           Statement of Material Facts detailing the amount owed and sought (NYSCEF Doc. No. 43, Statement of
           Material Facts) and furnishes an affidavit from Jay Keller, its CEO, explaining the calculation of the
           amounts sought (NYSCEF Doc. No. 32, Keller affidavit). Plaintiff also submits a copy of e-mail
           communications wherein the parties purportedly attempted to discuss reduced weekly payments in light
           of the alleged negative effects of COVID-19 on Mainland's business (NYSCEF Doc. No. 39, e-mail
           communication between the parties). Plaintiff contends that it has performed under the agreement by
           tendering the full purchase price of $50,000.00 ("Purchase Price") in exchange for $69,500.00 of
           Mainland's future receivables ("Purchased Amount") to be paid to plaintiff from ten (10%) percent of
           Mainland's future receivables each business day ("Specified Percentage"). Mainland allegedly breached

            451332/2022 GLOBAL MERCHANT CASH, INC., vs. MAINLAND INSURANCE AGENCY INC.                               Page 1 of 4
            D/B/A MAINLAND INSURANCE AGENCY ET AL
            Motion No. 001

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 NYSCEF DOC. NO. 50                                                                          RECEIVED NYSCEF: 01/05/2024

           the agreement by failing to make weekly remittance since March 26, 2020; refusing to provide bank
           statements requested on July 31, 2020, August 10, 2020, September 8, 2020, and January 25, 2021; and
           repeatedly blocking plaintifrs ACH debit attempts. Plaintiff further argues that defendants have failed
           to tender the reduced payments that Mainland was required to make since December 21, 2020 (id., at pg.
           16; NYSCEF Doc. No. 39, e-mails between the parties). Plaintiff asserts that, upon Mainland's default,
           Nagi is liable for the full amount due since he guaranteed Mainland's performance under the agreement.
           Hence, plaintiff claims to be damaged by defendants' breach of their obligations under the agreement
           and the guaranty in the amount of $31,606.16. Plaintiff further articulates that it is entitled to attorneys'
           fees and costs pursuant to article 16.2 of the agreement. Additionally, plaintiff argues that defendants'
           usury defenses (second, third, fourth, fifth, and eighth affirmative defenses), which assert the agreement
           is usurious, illegal, fraudulent, unconscionable or a disguised loan agreement, should be dismissed since
           the decision and order dated April 15, 2022, found that the agreement is not usurious. Lastly,
           concerning defendants' sixth and seventh affirmative defenses (the COVID defenses), claiming
           impossibility, impracticability or frustration of purpose as a result of the COVID-19 pandemic, plaintiff
           argues that same should be dismissed because defendants did not provide company financial documents
           (such as bank statements, tax returns, receivables reports, profit/loss statements or other financial
           records) demonstrating a complete cessation of receivables since the pandemic, as claimed.

                   In opposition, defendants contend that the agreement is usurious because the imputed interest on
           the purchase was 33.90% and hence, summary judgment should be denied because issues of fact exist,
           and discovery remains outstanding. According to defendants, the dividing line between usurious loans
           and legitimate purchases is based on the real character of the transaction, not its form. Defendants posit
           that discovery is needed to ascertain whether the purchase was a legitimate purchase of future receipts or
           an illegitimate usurious loan. In furtherance of this point, defendants maintain that plaintiff did not
           comply with the agreement's reconciliation provision by failing to cease withdrawing of money from
           defendants' account once defendants represented that their receivables had stopped during the COVID-
           19 shutdown. According to the agreement's reconciliation clause, "[ s]ell er may request that Buyer
           adjust the Weekly Amount to more closely reflect the Seller's actual Future Receipts times the Specified
           Percentage. Seller agrees to provide Buyer any information requested by Buyer to assist in this
           reconciliation" (NYSCEF Doc. No. 5, ~2 of the agreement). According to defendants, plaintiff did not
           comply with the reconciliation clause because despite their repeated explanation that they had no
           receipts that would justify payments, plaintiff nonetheless demanded payments. Defendants assert that
           they explained to plaintiff that, as the trustee over client funds, they could not simply give plaintiff
           access to withdraw funds from the account which may result in the misuse of client funds, and that they
           even agreed to send plaintiff wire transfers at their own expense to illustrate extreme good faith to keep
           up with the payments (which were not required). Thus, defendants argue that, at the very least, the
           factual record shows there is a triable issue of fact as to whether the reconciliation clause was illusory
           because, when exercised, plaintiff behaved like a creditor. According to defendants, plaintiff behaved
           like an entity seeking to collect a usurious loan rather than treat defendants as business partners from
           whom it could collect only when defendants had receivables. (NYSCEF Doc. No. 4 7, defs' opposition).

                    In reply, plaintiff argues that summary judgment should be granted because no issue of material
           fact exists as defendants failed to furnish an affidavit from an individual with knowledge disputing
           plaintiffs contentions. According to plaintiff, without an affidavit from an individual with knowledge,
           defendants' assertion that they had no receipts that would justify any payment to plaintiff during the
           COVID-19 pandemic, and that they could not simply give plaintiff access to withdraw funds from the
           account which could result in the misuse of client funds, lack merits. Therefore, plaintiff contends that
           defendants' assertion that they cooperated in providing information required to determine the fair

            451332/2022 GLOBAL MERCHANT CASH, INC., vs. MAINLAND INSURANCE AGENCY INC.                Page 2 of 4
            D/8/A MAINLAND INSURANCE AGENCY ET AL
            Motion No. 001

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           amount of daily/weekly withdrawals under the agreement, but that plaintiff treated the agreement as a
           usurious loan, is demonstrably false and fails to create an issue of fact precluding summary judgment.
           Concerning its Statement of Material Facts pursuant to 22 NYCRR § 202.8-g(c), plaintiff sets forth that
           defendants' failure to submit a response to same should be deemed as an admission of plaintiffs key
           allegations asserted therein. Lastly, plaintiff disputes defendants' claim that summary judgment is
           premature because discovery is outstanding, articulating that defendants have failed to demonstrate that
           any discovery is exclusively in plaintiffs possession pursuant to CPLR 32 l 2(t) (NYSCEF Doc. No. 45,
           reply).

                   It is well-settled that the proponent of a summary judgment motion 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 (see Wine grad v New York Univ. Med. Ctr., 64 NY2d 851, 853
           [1985]; Zuckerman v City ofNew York, 49 NY2d 557, 562 [1980].) Once this showing has been made,
           the burden shifts to the party opposing the motion to produce evidentiary proof in admissible form
           sufficient to establish the existence of material issues of fact which require a trial of the action or show
           that "facts essential to justify opposition may exist but cannot [now] be stated" (CPLR 3212 [fJ; see
           Zuckerman, 49 NY2d at 562).

                   Here, plaintiff met its prima facie entitlement to summary judgment by submitting a copy of the
           uncontroverted agreement and guaranty. There is no dispute that plaintiff performed by tendering to
           defendants the purchase price of $50,000.00, as evidenced by the Merchant Statement Report and Jay
           Keller's affidavit. As the burden shifts, defendants fail to raise a triable issue of fact precluding
           summary judgment. In its April 15, 2022 decision and order, the court found that the agreement is not a
           loan but rather a merchant agreement (NYSCEF Doc. No. 26, notice of entry, pg. 7). That decision is
           not to be disturbed here. Moreover, despite defendants' claim that the reconciliation clause in the
           agreement was illusory, and that the contract is usurious and entirely unenforceable, the available proof
           evinces that plaintiff attempted to adjust payment amount insofar as it offered Mainland reduced
           payments as interim pandemic relief from the weekly amount, requested copies of Mainland's bank
           statements for the months of June, July, August and September of 2020, and in contravention of 12 of
           the agreement, defendants did not submit the requested documents (NYSCEF Docs. No. 35, 39,
           agreement; e-mails between the parties). The agreement reads in pertinent part that "seller [Mainland]
           agrees to provide Buyer [plaintiff] any information requested by Buyer [plaintiff] to assist in this
           reconciliation." Despite defendants' argument that discovery remains outstanding, "they failed to
           identify what information is in the exclusive control of plaintiff that would raise a material issue of fact
           such that CPLR 3212(t) would warrant denial of the motion" (Erkan v McDonald's Corp., 146 AD3d
           466, 467 [ I st Dept 2017]). It has been ably held that, where, as here, "[t ]he mere hope that evidence
           sufficient to defeat a motion for summary judgment may be uncovered during the discovery process is
           insufficient to deny such a motion" (Guerrero v Milla, 135 AD3d 635, 636 [1st Dept 2016]). Therefore,
           the court grants that portion of plaintiffs motion for summary judgment seeking $31,606.16 in its favor
           as against defendants.

                   Plaintiff also seeks dismissal of the remaining affirmative defenses of impossibility/frustration
           of purpose, arguing that they are conclusory. This court agrees. Insofar as defendants have not
           addressed that branch of plaintiffs motion seeking dismissal of those affirmative defenses, they are
           deemed abandoned (see Wing Hon Precision Indus. Ltd. v Diamond Quasar Jewelry, Inc., 154 AD3d
           550, 551 [1st Dept 2017]; Carey & Assoc. LLC v 521 F(fih Ave. Partners, LLC, 130 AD3d 469, 470 [I st
           Dept 2017]). Specifically, the First Department has declared that the "invocation of the pandemic as
           grounds for application of the doctrines of frustration of purpose or impossibility is an approach this
                                  I

            451332/2022 GLOBAL MERCHANT CASH, INC., vs. MAINLAND INSURANCE AGENCY INC.                Page 3 of 4
            D/8/A MAINLAND INSURANCE AGENCY ET AL
            Motion No. 001

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  NYSCEF DOC. NO. 50                                                                          RECEIVED NYSCEF: 01/05/2024

           Court has squarely rejected - even, at times, where the business of the party seeking application of such
           doctrines was temporarily suspended" (Pentagon Fed. Credit Union v Popovic, 217 AD3d 480, 481 [l st
           Dept 2023]). Based on the foregoing, defendants' affirmative defenses are dismissed.

                    Turning next to that branch of the motion seeking attorneys' fees and expenses, "[ u]nder the
           [general] rule, attorney's fees are incidents of litigation, and a prevailing party may not collect them
           from the loser unless an award is authorized by agreement between the parties, statute or court rule"
           (Sage Sys., Inc. v Liss, 39 NY3d 27, 30-31 [2022], quoting Hooper Assoc. v AGS Computers., 74 NY2d
           487,491 [1989]). Here, article 16.2 provides for plaintiffs recovery of attorney's fees and costs
           (NYSCEF Doc. No. 35, agreement, iJl6.2). Thus, the issue with respect to attorney's fees shall be
           determined by a special referee. All other arguments have been considered and are either without merit
           or need not be addressed. Accordingly, it is hereby

                    ORDERED that plaintiffs motion for summary judgment against defendants is granted; and it
           is further

                    ORDERED and ADJUDGED that the Clerk of the Court shall enter judgment in favor of
           plaintiff and against defendants, jointly and severally, in the amount of $31,606.16, plus prejudgment
           interest at the statutory rate from December 21, 2020, together with costs and disbursements; and it is
           further                   !

                  ORDERED that that branch of plaintiffs motion seeking dismissal of defendants' affirmative
           defenses is granted; and it is further

                   ORDERED that that branch of plaintiffs motion seeking attorney fees is granted and shall be
           referred to a special referee to hear and determine; and it is further

                   ORDERED that, within twenty (20) days after this decision and order is uploaded to NYSCEF,
           counsel for plaintiff shall serve a copy of this decision and order, with notice of entry, upon defendants,
           as well as upon the Clerk of the Court, who shall enter judgment accordingly; and it is further

                   ORDERED that service upon the Clerk of the Court and the Special Referee Clerk shall be
           made in accordance with the procedures set forth in the Protocol on Courthouse and County Clerk
           Procedures/or Electronically Filed Cases (accessible at the "E-Filing" page on the court's website at
           the address www.nycourts.gov/supctmanh).

                   This constitutes the decision and order of this court.

               January 3, 2024

            CHECK ONE:                    CASE DISPOSED                     NON-FINAL DISPOSITION

                                          GRANTED          □ DENIED         GRANTED IN PART           □ OTHER
            APPLICATION:                  SETTLE ORDER                      SUBMIT ORDER
            CHECK IF APPROPRIATE:         INCLUDES TRANSFER/REASSIGN        FIDUCIARY APPOINTMENT     0    REFERENCE

            451332/2022 GLOBAL MERCHANT CASH, INC., vs. MAINLAND INSURANCE AGENCY INC.               Page 4 of 4
            D/B/A MAINLAND INSURANCE AGENCY ET AL
            Motion No. 001

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