Court Opinion

ID: 9964088
Source: CourtListenerOpinion
Date Created: 2024-04-26 20:10:40.642853+00
Date Added: 2024-06-11T08:25:09.722484
License: Public Domain

Diesel Funding LLC v Build Retail Inc
               2024 NY Slip Op 31381(U)
                     April 18, 2024
             Supreme Court, Kings County
        Docket Number: Index No. 523957/2022
                Judge: Leon Ruchelsman
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.
  FILED: KINGS COUNTY CLERK 04/18/2024 12:08 PM                                                                INDEX NO. 523957/2022
  NYSCEF DOC. NO. 40                                                                                     RECEIVED NYSCEF: 04/18/2024

           SUPREME COU.RT OF THE STATE OF NEW YORK
           COUNTY OF KINGS: CIVIL TERM: COMMERCIAL PART 8
           --·-. --· ----- .. --· ·-· ---------- .--·------- --. -.x
           DIESEL FUNDING LLC 1
                                                                       Plaintiff,                    Decision and order

                                  - against -                                                     Index No. 523957 /2022

           BUILD RETAIL INC and AMES WESLEY CASHWEL,
                                         Defendant s,                                                    April 18, 2024
           - · - - - - - - - - - · - - - . - - - - .. ---. - - . - - - . . - - - - - - .· ·--·X
           PRESENT: HON. LEON RUCHELSMAN                                                                 Motion Seq. #1

                      The defendant s have moved seeking to vacate a clefault based

           upon a stipulatio n of settlemen t entered between the parties.

           They further seek to vacate a judgement obtained pursuant to the

           settlemen t and for summary judgeme~t pursuant to CPLR §3212

           dismissing the action..                        The plaintiff has opposed the motion.

           Papers were submitted by the parties and after reviewing all the

           arguments this court now makes the following determina tion.

                       On June 21, 2022, the plaintiff a merchant cash advance

           funding provider entered into a contract with defendant s who

           reside in North Carolina.                            Pursuant to the agreement the

           plaintiff purchased $1,274,150 of defendant 1 s future receivable

           for $850,000.                Tl"le defendant Cashwell guarantee d the agreement .

           The plaintiff asserts the defendant s stopped remittanc es in

           November 2023 and now owe $,214, 313. 65.                                      On August 22, 2022 the

           parties entered into a stipulatio n wherein it was agreed the

            defendant s owed $1,150,74 0.12 and could be paid back with various

            options enumerate d within the agreement .                                        The defendant s failed

            to make any payments and a default judgement was entered o'n May

                                                                      1 of 5
[* 1]
  FILED: KINGS COUNTY CLERK 04/18/2024 12:08 PM                                      INDEX NO. 523957/2022
  NYSCEF DOC. NO. 40                                                           RECEIVED NYSCEF: 04/18/2024

          ;;25., 2Q_2._).   'l'h_e plaintiff filed a -s.UJI1Ii1c;m_s with notice- arid the

           qefendants filed the wi1:hin tnqtion seeking essentially to vacate
           the judgement.         Iri order to va_cate the j1J.dgement the· defendants

          s_eek to vac9-te the settletrlent agre·ement and the, underlying·

           merchant cash agreement.            Further, the defendants ::seek injunctive

          -relie.f .staylng the enf·orcement of the judgement.               ~s not:E!_d, the·

          'IliOtion: .is opposed-.

                                       Conclusions of Law

                    I t is well :S$ttle:=d that a settlement is bind;Lng if. signed

           and stipulated by the partie-s or agreed to by the parties .in open,

           court (.CPLR "§2104 ). .     Thus, there is no ~fispute_ that .a set-t:lem1e"nt

           was fully reached. between the parties.               Therefore, absent .fraud.,

           collus.iori or mistake a stipulation that is fa-i·r- on- its f.ace wi.1.1
           b.e enf·orced      (Berghoff v. Berghof f, .8 A03.d 519., 77 9 NYS2d 2-15 [ 2-d

           bept., 2004l) .        In this. case, the defendants argue that,

           e.ssehti_ally, the stipulation was based up·on a fraui:L

           qpeci:l:ica,lly , the fraud consists o.f the fact the underlying

           merchant agreement was usurious and unlawfu1.                  Therefore,- a

           ·review of the underly;iti._g agreemeht. as w·ell as the law in this

           regard is necessary.

                   tn this cc:3-.~e, there are nq .ques.tion:s o_f fact the' ·a-greernent

           was a ca.~p ady~nce ag.reerti.ent and not a usurious and unenforceable

           loan.       The agreement contained a reconciliatio h provisi"ori which

                                                       2

                                                     2 of 5
[* 2]
  FILED: KINGS COUNTY CLERK 04/18/2024 12:08 PM                                         INDEX NO. 523957/2022
  NYSCEF DOC. NO. 40                                                              RECEIVED NYSCEF: 04/18/2024

          conclusively establish the agreeme:ri.t was l'l.otusuric;,:us (see, 92"·

          -Palm· Foods LLC v .• Fundamental Capital LLC, 80 M,isc3d. 1211 (A), .195

          NYS2d 636 [Supreme Court Suffolk County 2023]) .                   The defend.ants

          ar9ue. the r-e-concilia:ti· on provision in th~ contr?1ct was me.-rely
           illusory and thus not a true reconciliatio n provision, hence the

           corttract was· a loan and-. was usurious.

                 It is well settled that if the. patty that provided fhe fund;s

           is abs.oiute=ly entitled to repayment in all circumstarice s then a

           lea.tr e.xis:ts, however, i,f the provider i.s not absolutely ·en.titled

          to repayment then the transac:i:io:n is not a loan.                 The CQ_llrt must

          ,eKamine whether the pla,intiff is absolute.ly entitled. to repayment

           under all circu:m,stance ·s. Urtles-s a :i;irinc.i-pai sum advanced is

           repayable absolutely, the tran,saction is not a loan (LG Funding
          ·LtC, v .. United Senior Pr.operties of .Olathe. LLC, i8.1 AD3ci ··_664,

           122 NYS 3 d J0:.9 [ 2 d Dept. , 20 2 O] ) .       The coµrts have de-ve 1 oped three

          _criteria :evaluating whe,ther a particular arrangement is a loari or

           a merchant -ca_se advanc_e·..      Fir-st, whethe.r. there. is a

           r.ecOnc;iliat.io h p+:ovisioi;l.,. wh:et,her. t,he agreemer:i:t has an i.ndefinite

           teitn and la·stly, whether the ·funder has·· recours·e it the me·rchant

           declares ba-p.krupt.cy (Principis Cap.i:tal LLC, v. I Do. ·Inc., 201

           AD3d 752, 160 NYS3d 325 [2d Dept., 2022]).                   Thus, a

           re.conciliatio n provision o.emons-trate-s , witti.out a_ny evidence- to

           the. _contrary that th,.e £1.1nde.r is not "c;1.bsolutely entitled to

           repayment under all circumstances ." (NY Capital Asset Corp.! v. F

                                                         3

[* 3]                             ········--·· ·····-·····-
                                                3 of 5      ----------- ----------- ------
  FILED: KINGS COUNTY CLERK 04/18/2024 12:08 PM                             INDEX NO. 523957/2022
  NYSCEF DOC. NO. 40                                                  RECEIVED NYSCEF: 04/18/2024

           &   B Fuel Oil Co., Inc., 58 Misc3d 1229 (A) , 98 NYS3ci 501

           [Westchester County 2018]).     As the court there noted "when

          payment or enf·orcement rests on a contingency, therefore, the

           agreement is valid though i t provides for a return ih excess of

           the legal rate of interest" (id);       In this case the

           reconciliation provision is mandatory, supporting the simple

           conclusion the agreement is not a loan (see, Tender Loving Care

           Homes Inc., v. Reliable Fast Cash LLC, 76 Misc3d 314, 172 NYS3d

           335 [Supreme Court Richmond County 2022]).        Specifically, the

           reconciliation provision in this case states that "any Merchant

           may give written notice to DIESEL requesting that DIESEL conduct

           a reconciliation in order to ensure that the amount that DIESEL

           has collected equa.ls the Specified Percentage o.f Merchant ( s}' s

           Receivables under this Agreement" (see, Standard Merchant Cash

           Advance Agreement, c_n4 [NYSCEF Doc. No. 23]) .

                  In this case the reconciliation provision is rnandatory,

           supporting the simple conclusion the agreement is hot a loan.

           The provision does not state tl:lat any discretion is permitted by

           the plaintiff at all.     This is particularly trµe where the

           defendants have not alleged that reconciliation did not in

           actuality function as agreed or that they ''ever requesteci an

           adjustment of the amounts being collected in order to account for

           the actual amount of [their] daily receivables"       (see, Streamlined

           Consultants Inc .• et., at., v. EBF Holdings LLC, 2022 WL 4368114

                                               4

                                             4 of 5
[* 4]
  FILED: KINGS COUNTY CLERK 04/18/2024 12:08 PM                                 INDEX NO. 523957/2022
  NYSCEF DOC. NO. 40                                                      RECEIVED NYSCEF: 04/18/2024

            [S.D.N.Y~ 2022]).
                   Moreover, there is no basis to challenge the legitimacy of

           the agreement on the grounds the plaintiff committed fraud by

           misrepresenting its terms.        Indeed, the terms are all Clearly

           delineated in the agreement itself.           It is not the plaintiff's

            fault the defendants purchased receivables they could not pay

           back.       Thus, the inability of the defendant,c,; to return the funds

            given to them does not mean any fraud was committed.             The

           defendants ha~e not pointed to any specific statements made by

            the plaintiff that was not within the four corners of the

            agreement that could possibly constitute fraud.

                   Therefore, there is no basis upon whic:h to challenge the

            legality .of the merchant agreement.         Consequently, the merchant

           agreement was valid and likewise the settlement agreement was

            valid as well.       Therefore, the motion seeking to vacate the

            judgement and to vacate the settlement agreement is denied.

            Likewise the motion seeking an injunction is denied.             The

            defendants motion is·denied in .full.

                   so ordered.

                                          ENTER:

            DATED: April 18, 2024
                                                               v    \V./
                                                               i /\(\.

                   B'.rooklyh N. Y.            Hon.     Leon Ruchelsman
                                               JSC

                                                   5

                                               5 of 5
[* 5]