Court Opinion

ID: 9964075
Source: CourtListenerOpinion
Date Created: 2024-04-26 20:10:04.952326+00
Date Added: 2024-06-11T08:25:09.717513
License: Public Domain

RS E Orange LLC v Proudliving Cos., LLC
               2024 NY Slip Op 31451(U)
                     April 19, 2024
           Supreme Court, New York County
        Docket Number: Index No. 655013/2023
                Judge: Margaret A. Chan
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
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                       publication.
                                                                                                 INDEX NO. 655013/2023
  NYSCEF DOC. NO. 16                                                                      RECEIVED NYSCEF: 04/15/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49M
            --------------------X
             RS E ORANGE LLC,                                               INDEX NO.           655013/2023

                                             Plaintiff,
                                                                            MOTION DATE          11/03/2023
                                      -v-
                                                                            MOTION SEQ. NO.        MS 001
             PROUDLIVING COMPANIES, LLC, and ANDREW
             BROWN
                                                                                DECISION+ ORDER ON
                                             Defendants.                              MOTION
            --------------------X

            HON. MARGARET A. CHAN:

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 13, 14, 15
            were read on this motion to/for              JUDGMENT - SUMMARY IN LIEU OF COMPLAINT

                   In this action, plaintiff RS E Orange LLC afkla Red Starr ("Red Starr" or
            plaintiffj moves for summary judgment in lieu of complaint pursuant to CPLR 3213,
            seeking to recover $3,999,272.00 plus late fees, costs, expenses, and reasonable
            attorneys' fees allegedly owed by non·party PLA Six Portfolio JV LLC ("the
            Company") under the Company's operating agreement and personally guaranteed
            by defendants Proudliving Companies LLC ("PL") and Andrew Brown (together
            with PL "defendants") pursuant to a guaranty agreement. The motion is unopposed.
            However, for the reasons below, plaintiffs motion is denied.

                                                      BACKGROUND
                   On March 19, 2021, plaintiff Red Starr invested $6 million with the Company
            (NYSCEF # 10, Plaintiffs Memo of Law, at 1). Pursuant to the Company's
            Operating Agreement ("Agreement"), the Company was to make monthly payments
            to plaintiff in certain amounts (id at 2; see NYSCEF # 5, Company Operating
            Agreement, at 12 [definition of "preferred return"]).

                   The Company's Operating Agreement and Guaranty Agreement

                   Under the Agreement, if the Company committed any "Material Default"-
            defined in the Agreement as, among other things, failure to pay or the commission
            of a "Bad Act"-then the Company would be required to "redeem all of [plaintiffs]
            Interest in the Company at the Full Redemption Price" (NYSCEF # 10 at 2, quoting
            NYSCEF # 5 at 28 [§ 6.4(a)]; see also NYSCEF # 5 at 8 [definition of "Material
            Default"]). The "Full Redemption Price" is the sum of.

             655013/2023 RS E ORANGE LLC vs. PROUDLIVING COMPANIES, LLC ET AL                     Page 1 of 5
             Motion No. 001

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                                                                                       INDEX NO. 655013/2023
  NYSCEF DOC. NO. 16                                                             RECEIVED NYSCEF: 04/15/2024

                           (A) all accrued but undistributed Priority Preferred Return; (B) all
                           accrued but undistributed Enhanced Preferred Return; (C) all accrued
                           but undistributed Accrued Preferred Return; (D) all accrued but
                           undistributed Current Pay Return; (D) all accrued but undistributed
                           Standby Fees; (E) the full amount of all unreturned [plaintiff] Capital
                           Contributions, including, without limitation, all Additional RS
                           Contributions funded by [plaintiff] in accordance with Section 5.l(a)
                           and all additional Capital Contributions funded by [plaintiff] in
                           accordance with Section 5. l(c) hereof, (F) all costs and expenses
                           incurred by [plaintiff] in the enforcement of its right to redemption
                           pursuant to the terms of this Agreement, if any; and (G) any other
                           amounts [plaintiff] is entitled to under the terms of this Agreement.

            (NSYCEF # 10 at 2-3, quoting NYSCEF # 5 at 27 [§ 6.3(e)(ii)]). Each capitalized
            term within that definition is further defined in the Agreement, usually as some
            sort of equation or obligation to pay (see NYSCEF # 5 at 1, 4, 6, 12, 14). Nowhere
            does the Agreement require the Company to pay a specific amount of money upon a
            Material Default, instead providing only the equations necessary to calculate the
            Full Redemption Price.

                  These obligations to pay are secured by the Guaranty Agreement ("the
            Guaranty"), which requires defendants PL and Brown to act as guarantors for the
            "Guaranteed Obligations" (NYSCEF # 10 at 3). The Guaranteed Obligations are
            defined as:

                           (a) payment and performance by the Company of the Investment to
                           [plaintiff] as, and to the extent required, pursuant to the [Agreement],
                           plus (b) the Preferred Return, the Enhanced Preferred Return, and the
                           Priority Preferred Return, as applicable, due and payable with respect
                           to the Investment, plus (c) all costs, including, without limitation, all
                           attorney's fees and expenses incurred by Red Starr in connection with
                           the collection and enforcement of the Guaranteed Obligations.

            (NYSCEF # 6, Guaranty Agreement, ,r 2). Plaintiff alleges that these include "[a]ll
            of the foregoing payment obligations" mentioned by plaintiff about the Agreement
            (NYSCEF # 10 at 3).

                   The Guaranty further provides that if the Company fails to pay at any time,
            the defendants will immediately pay plaintiff "in full without notice or demand, and
            it shall not be necessary for [plaintiff] in order to enforce such payment by
            [defendants], first to institute suit or exhaust its remedies against the Company or
            others" (NYSCEF # 6 ,I 4). The Guaranty also contains language indicating that it is
            unconditional and that defendants waive any defenses, counterclaims, or prompt,
            diligent notice of default (id ,i,i 3, 9). Much like the Agreement itself, the Guaranty
            does not stipulate any specific amount of money defendants must pay.
             655013/2023 RS E ORANGE LLC vs. PROUDLIVING COMPANIES, LLC ET AL           Page 2 of 5
             Motion No. 001

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                                                                                      INDEX NO. 655013/2023
  NYSCEF DOC. NO. 16                                                            RECEIVED NYSCEF: 04/15/2024

                  The Company Materially Defaults

                  Although the Company met all its obligations through 2022, beginning in
           2023, plaintiff alleges a series of Material Defaults that activated the Guaranty (see
           NYSCEF # 10 at 2, 4). First, the Company stopped making monthly payments
           starting January 2023 (id at 4; NYSCEF # 3, Starr Aff,, 7). Throughout the next
           month, plaintiff allegedly discovered more unspecified "Bad Acts" and Material
           Defaults by the Company, which together caused the Company to owe the Full
           Redemption Price (NYSCEF # 10 at 4; NYSCEF # 3 1 17). On March 7, 2023,
           plaintiff sent both the Company and the defendants notice of the Material
           Defaults/Bad Acts and demanded that defendants pay $3,439,231 in satisfaction of
           the Guaranty (NYSCEF # 10 at 4•5; NYSCEF # 31118·19; NYSCEF # 7, March 7,
           2023 Letter). Defendants did not make that payment (NYSCEF # 3119). The
           Company then failed to contribute its pro rata share of a Capital Call initiated by
           plaintiff, which amount to roughly $1,804,040.45 (NYSCEF # 10 at 5; NYSCEF # 3
           , , 20·22; NYSCEF # 8, Capital Call Notice, at *1).

                  In response to plaintiffs March 7 demands, plaintiff and the Company agreed
           to enter discussions to try to resolve plaintiffs issues (see NYSCEF # 9, Discussion
           Agreement). Plaintiff and the Company even signed a "discussion agreement" on
           August 17, 2023, dictating the terms of the discussion itself (id). Pursuant to the
           discussion agreement, the Company admitted the following:

                          You [the Company and defendants] acknowledge and agree,
                          without reservation of any kind, that the Events of Defaults and
                          Material Defaults arising out of [defendant] PL's failure to cause
                          PLA Six Portfolio JV LLC (the 'Company") and/or [defendant]
                          PL's failure as manager of the Company to pay [plaintiff]
                          amounts due pursuant to [plaintiffs] Current Pay Preferred
                          Return beyond any cure period and/or [defendant] PL's failure to
                          pay the capital call described in the Removal Event Notice,
                          among other things (collectively the "Enforcement Events"),
                          occurred as described in the Exercise Notice, Removal Event
                          Notice, and as a result, [plaintiff] is authorized by the PE
                          Documents and fully entitled to take all immediately proceed
                          with all rights, remedies and legal causes or actions provided by
                          the PE Documents, which You acknowledge are in full force and
                          effect and are binding upon You in accordance with their term ...

            (NYSCEF # 10 at 5, quoting NYSCEF # 9 1 3).

                 Plaintiff does not make any allegations about what occurred in those
           discussions. Plaintiff instead concludes on the above allegations that "there can be
           no factual dispute of any kind concerning the Events of Default, Mandatory

            655013/2023 RS E ORANGE LLC vs. PROUDLIVING COMPANIES, LLC ET AL           Page 3 of 5
            Motion No. 001

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                                                                                     INDEX NO. 655013/2023
  NYSCEF DOC. NO. 16                                                           RECEIVED NYSCEF: 04/15/2024

           Redemption and Guarantors' obligations to pay Plaintiff the entire $3,999,272.00
           that is currently due and owing" (NYSCEF # 10 at 5; NYSCEF # 3 ,I 25).

                  Plaintiff brought this action October 16, 2023, filing a motion for summary
           judgment in lieu of complaint (see NYSCEF # 1, Summons and Notice of Motion).
           Plaintiff also filed affidavits of service confirming that defendant Brown was served
           October 19, 2023, and that defendant PL was served November 7, 2023 (NYSCEF
           #s 13, 15).

                                                     DISCUSSION

                  CPLR 3213 permits "actions based upon an instrument for the payment of
           money only to be commenced with a motion for summary judgment rather than a
           complaint" (Banco Popular N. Am. v Wctory Taxi Mgt., Inc., I NY3d 381, 383
           [2004]). To establish prim a facie entitlement to summary judgment in lieu of
           complaint on a promissory note, a plaintiff must show that the instrument sued
           upon contains "an unconditional promise to pay a sum certain ... due on demand or
           at a definite time" ( Weissman v Sinorm Deli, Inc., 88 NY2d 437, 444 [1996]). To
           establish such entitlement on a guaranty, the plaintiff must show that the sum
           certain is "readily ascertainable," whether or not it appears directly on the face of
           the guaranty (see Bank ofAm., N.A. v Lightstone Holdings, LLC, 32 Misc 3d
           1244(A), *4 [Sup Ct, NY County, 2011], citing Manufacturers Hanover Tr. Co. v
           Green, 95 AD2d 737, 737 [1st Dept 1983]).

                  An instrument does not qualify for CPLR 3213 treatment "if outside proof is
           needed, other than simple proof of nonpayment or a similar de minimis deviation
           from the face of the document" ( Weissman, 88 NY2d at 444; see Maglich v Saxe,
           Bacon & Bolan, P.C., 97 AD2d 19, 21 [1st Dept 1983] ["(w)here proof outside the
           instrument is necessary to establish the underlying obligation, the CPLR 3213
           procedure does not apply"]). CPLR 3213 treatment is not available where plaintiff
           relies exclusively on conclusory allegations to explain how the amount due was
           calculated (HSBC Bank USA v IPO, LLC, 290 AD2d 246, 246 [1st Dept 2002]).

                   Here, the amount specified by plaintiff ($3,999,272.00) is not "readily
           ascertainable" on the face of the Guaranty or the Agreement. For instance, nowhere
           in the documents is there a specific stipulation that defendant owes $3,999,272.00
           (see, e.g., Bank ofAm., NA. v Solow, 59 AD3d 304, 305 [1st Dept 2009] [guaranty
           stipulated to sum of $15,910,000]) or a cap on recovery that would be applicable to
           these facts (see, e.g., Lightstone Holdings, 32 Misc 3d at *4 [guarantor liability on
           $1.8 billion loan was capped at $100 million]). All of plaintiffs statements about the
           $3,999,272.00 owed are conclusory, with nothing in the record showing how the
           amount due was calculated (see HSBC, 290 AD2d at 246 ["the prima facie case for
           such relief [under CPLR 3213] requires documentary evidence or an explanation of
           how the indebtedness is calculated, other than in the form of mere conclusory
           allegations"]). The only places this amount is mentioned is in plaintiffs
            655013/2023 RS E ORANGE LLC vs. PROUDLIVING COMPANIES, LLC ET AL         Page4of 5
            Motion No. 001

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                                                                                                 INDEX NO. 655013/2023
  NYSCEF DOC. NO. 16                                                                        RECEIVED NYSCEF: 04/15/2024

            memorandum of law and in the very last paragraph of the Starr affidavit (see
            NYSCEF # 3 if 25).

                   It is also unclear what the amount represents as plaintiff does not specify if
            that is the current Full Redemption Price or some other amount owed. If it is the
            Full Redemption Price, plaintiff has not established that the Guaranty applies. The
            definition of "Guaranteed Obligations" does not expressly include the phrase "Full
            Redemption Price" (see NYSCEF # 6 ,r 2), nor is it obviously implied. Because
            plaintiff does not explain how the $3,999,272.00 amount was calculated, "an
            excursion outside the four corners of the agreement" is required to find the amount
            due (Kerin v Kaufman, 296 AD2d 336, 337 [1st Dept 2002]). Thus, plaintiff is not
            entitled to summary judgment in lieu of complaint.

                                                        CONCLUSION
                    Based on the foregoing, it is

                   ORDERED that plaintiff RS E Orange LLC's motion for summary judgment
            in lieu of complaint against defendants Proudliving Companies, LLC and Andrew
            Brown is denied; and it is further

                  ORDERED that this proceeding is converted into a plenary action and
            defendant shall have 30 days from the date of this order to file an answer to the
            complaint; and it is further

                  ORDERED that plaintiff RS E Orange LLC shall serve defendants a copy
            this Order within 10 days upon defendants; and it is further

                  ORDERED that a preliminary conference shall be held via Microsoft Teams
            on May 29, 2024, at 10:30 a.m. or at such other time that the parties shall set with
            the court's law clerk.

                    This constitutes the Decision and Order of the court.

                    4/19/2024
                      DATE

                                     ~                                 §
             CHECK ONE:                  CASE DISPOSED                   NON-FINAL DISPOSITION

                                         GRANTED         0    DENIED     GRANTED IN PART         □ OTHER
             APPLICATION:                SETTLE ORDER                    SUBMIT ORDER

             CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN      FIDUCIARY APPOINTMENT       REFERENCE

             655013/2023 RS E ORANGE LLC vs. PROUDLIVING COMPANIES, LLC ET AL                      Page 5 of 5
             Motion No. 001

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