Opinion
Index No. E2022-2015
06-07-2023
KALAMATA CAPITAL GROUP, LLC, Plaintiff, v. ARECOSTA LLC D/B/A PRESTIGE HOME BUILDERS; PRESTIGE; PRESTIGE LITTLE LEAGUE INC and LUIS ALBERTO AREVALO, Defendants.
Ariel Bouskila, Esq. Berkovitch & Bouskila, PLLC Attorneys for Plaintiff Eytan M. Goldschein, Esq. Attorney for Defendants
Unpublished Opinion
Ariel Bouskila, Esq.
Berkovitch & Bouskila, PLLC
Attorneys for Plaintiff
Eytan M. Goldschein, Esq.
Attorney for Defendants
DECISION & ORDER
E. DANIELLE JOSE-DECKER, JUDGE
By way of a Notice of Motion filed on February 13, 2023, Plaintiff, Kalamata Capital Group, LLC (hereinafter "Kalamata") moves for summary judgment against the Defendants, Arecosta LLC d/b/a Prestige Home Builders, Prestige Little League Inc and Luis Alberto Arevalo (hereinafter collectively referred to as "Arecosta"). Arecosta has opposed the motion and Kalamata has filed a reply.
On October 28, 2022 a Summons and Verified Complaint was filed by Kalamata against Arecosta asserting breach of contract and personal guarantee. Issue was joined when Arecosta filed an Answer on or about December 12, 2022.
A review of Arecosta's Verified Answer indicates that the Attorney Verification submitted therewith affirms that Attorney Goldschein is the attorney for Defendants "Breewayy Transportation LLC d/b/a Breeway Transportation, Blue Butterfly Logistics LLC and Jermale James Clay."
The motion was returnable on May 23, 2023. The matter is deemed fully submitted for the Court's review and consideration.
The action is based on Arecosta's failure to pay monies due in accordance with a Revenue Purchase Agreement and Security Agreement and Guaranty issued by Kalamata and entered into with Arecosta on or about July 22, 2022. In support of its application for summary judgment, Plaintiff submits an Affidavit from Brandon Laks, a Manager for Kalamata. Mr. Laks avers that he has personal knowledge of and access to Kalamata's business records, maintained in the ordinary course of business, and access to Arecosta's business records kept by Kalamata. Laks also avers that Arecosta's account is in default for failure to pay Kalamata the full amount of $202,500.00 of Arecosta's purchased future receivables and sales proceeds in accordance with the Revenue Purchase Agreement and Security Agreement and Guaranty. Laks further avers that as of October 25, 2022, Kalamata was denied access to Arecosta's account for ACH debiting and deprived of the agreed upon 15% of Arecosta's weekly sales proceeds due to Kalamata under the Revenue Purchase Agreement. Laks claims that between July 22, 2022 until the present date. Arecosta has collected at least $1,350,000.00 in revenue. Laks notes that Arecosta only remitted $61,768.60 of the amount due and owing under the Agreement and withheld the remaining $140,731.40 due to Kalamata. Kalamata is also owed a default fee of $2,500.00 and NSF fees in the amount of $35.00, with a total balance owed to Kalamata of $143,266.40. Kalamata seeks pre-judgment interest at the statutory rate from October 25, 2022, costs taxed by the clerk and post-judgment interest at 9%.
This appears to be averred to based upon reference to a fact asserted in Plaintiffs Notice to Admit dated December 29, 2022 which was not opposed by Defendants.
Also submitted in support of Kalamata's application are the following documents: Statement of Material Facts dated February 13, 2023, Transaction History as of October 27, 2022, Summons, Complaint, Answer, Kalamata's Notice to Admit, Demand for Bill of Particulars, Demand for Discovery, and Proof of Funding (redacted).
In opposition, Arecosta submits an Attorney Affirmation and Memorandum of Law.Arecosta submits that the agreement entered into between Kalamata and Arecosta is a criminally usurious loan and not a contract. Specifically, Arecosta claims that the interest rate required by the agreement amounts to 25.92% and when calculated per annum, is 43.02%, in violation of New York Penal Law Section 190.40. Arecosta submits that Kalamata acts as a predatory lender, with a "boiler room" operation and "retains and/or outsources a team of brokers to repeatedly call and solicit these loans from unsuspecting small borrowers." ¶17 Affirmation of Attorney Goldschein. Arecosta further submits that Kalamata does not allow reconciliation, notwithstanding the clause contained in the Revenue Purchase Agreement. Arecosta argues that there are genuine material issues of fact in dispute, mainly whether or not Kalamata's conduct outside the four comers of the agreement renders the agreement a criminally usurious loan and secondly, whether Kalamata genuinely offered reconciliation to Arecosta as an available option, prior to Arecosta's default. Arecosta claims that discovery is needed to substantiate Arecosta's claims that the agreement is a criminally usurious loan.
Notably, no Affidavit from Arecosta's principal or manager and/or from Luis Alberto Arevalo that would presumably attest to first-hand knowledge of the facts have been submitted in opposition.
No interest rate is specified in the Revenue Purchase Agreement.
Analysis
On a motion for summary judgment, the movant must make a prima facie showing, by tendering evidentiary proof in admissible form, of its entitlement to judgment as a matter of law. See Zuckerman v. City of New York. 49 N.Y.2d 557, 562 (1980). After the movant has made this prima facie showing, the burden shifts to the opposing party to demonstrate the existence of a genuine material triable issue of fact. See Alvarez v. Prospect Hospital, 68 N.Y.2d 320, 324 (1986); Zuckerman. 49 N.Y.2d at 562.
A cause of action for breach of contract requires that plaintiff show the existence of a contract, the performance of its obligations under the contract, the failure of defendant to perform its obligations under the contract and damages resulting from defendant's breach. GRJH, Inc. 3680 Properties, Inc, 2020 NY Slip Op. 00015 (3rd Dept. 2020). For example, to establish a prima facie cause of action for breach of contract it is sufficient for Plaintiff to produce the parties' signed written contract along with various invoices which reflect that defendant failed to pay for services that Plaintiff provided. George S. May Intern, Co. v. Thirsty Moose, Inc., 796 N.Y.S.2d 196 (3rd Dept. 2005).
In the case at bar, Kalamata's performance is reflected in the executed Revenue Purchase Agreement, Security Agreement and Guaranty, proof of funding and Affidavit of Brandon Laks, a Manager for Kalamata, submitted with the motion. Arecosta's failure to perform is reflected in the lack of payments as per the terms of the Revenue Purchase Agreement as shown in the transaction history accounting statement, the statements contained in Mr. Laks' Affidavit and in the allegations contained within the Summons and Verified Complaint.
As Kalamata has presented a prima facie case for summary judgment, the burden now shifts to Arecosta to present a defense raising a material, genuine, triable issue of fact. Arecosta has failed to do so. In the Verified Answer, Defendants deny the allegations contained in the Verified Complaint and raise several affirmative defenses. Specifically, Arecosta invokes that the action is barred by documentary evidence, a criminal usurious loan, collection of an unlawful debt as defined by 18 U.S.C. 1962 (c), failure to state a claim on which relief can be granted, barring of claims due to arbitration and award, collateral estoppel, discharge in bankruptcy, payment, release, res judicata, statute of limitations, statute of frauds, equitable estoppel, collateral estoppel, acquiescence, laches, unclean hands and Kalamata's culpable conduct, lack of damages sustained, offset of any damages sustained, Kalamata's initial breach of contract, fraud due to material misrepresentation, unconscionable contract of adhesion, unconscionability, and failure to comply with the Agreement's reconciliation provision.
Notwithstanding the pleading of the aforementioned affirmative defenses asserted in this action, without any additional supporting evidence, same are "legally insufficient to preclude the imposition of summary judgment, as the mere possibility that a factual dispute may exist, without more, is not sufficient to overcome a convincing presentation by the moving party." Freedom Mortgage Corporation v. Barone, 2022 WL 267876 (EDNY 2022).
"To determine whether a revenue purchase agreement constitutes a usurious loan, the court must consider the agreement in its totality and not be swayed by the name, color, or form which the parties have seen fit to give it." Unique Funding Solutions LLC v. A-Z Imports Exports LLC, 183 N.Y.S.3d 727 (Nassau Cty Sup. Ct. 2023), (internal citations and quotations omitted). "The court must examine whether the plaintiff is absolutely entitled to repayment under all circumstances. Unless a principal sum advanced is repayable absolutely, the transaction is not a loan. Usually, courts weigh 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 Principis Capital, LLC v, 1 Do, Inc., 207 A.D.3d 752 (2nd Dept. 2022), citing LG Funding, LLC v. United Senior Properties Of Olathe, LLC. 181 A.D.3d 664 (2nd Dept. 2020).
In the case at bar, the Revenue Purchase Agreement, in pertinent part, provides as follows:
1.3 Reconciliation Provision
Every two calendar weeks from the date on page 1 of this Agreement, Seller shall submit its bank statements and financial information to Purchaser, to reconcile the amount due to Purchaser by either crediting or debiting the Seller's account so that the total amount of Remittances equals the Purchased Percent multiplied by the Seller's Future Receipts for the preceding two calendar weeks period. Purchaser retains the right to request additional documentation including but not limited to bank login or DecisionLogic access to view Seller's accounts. All such submissions shall be sent in writing to reconciliations@kalamatacapitalgroup.com. Seller shall have no right to a reconciliation if an Event Default, or other breach of this Agreement, has occurred. Failure to submit this information in accordance with this section shall be material breach of this Agreement; and Seller agrees and acknowledges that it shall have no further right to request any reconciliation thereafter. If all required materials have been delivered by Seller to Purchaser, then such reconciliation, shall be performed by Purchaser within 3 business days following its receipt of Seller's reconciliation E-mail. Seller shall not interfere with Purchaser's right and ability to debit Seller's Account for the Remittance Amount while the request is pending.
1.2 No Fixed Term of Agreement
This Agreement shall remain in full force and effect until the entire Purchased Amount and any costs, fees, or charges incurred are received by Purchaser as per the terms of this Agreement.
3.2 Bankruptcy Not Default
Notwithstanding any other provision of the Agreement, filing for bankruptcy, becoming insolvent, or winding up the Seller's business for financial reasons is not a breach of this Agreement or an Event of Default, so long as Seller complies with the other terms of this Agreement. These other terms include, for example, the continuing affirmative obligation to advise Purchaser of any material adverse change in Seller's financial condition, operation or ownership, as required by Section 2.1.
In its opposition, Arecosta has not set forth it affirmatively complied with the reconciliation provision of the Revenue Purchase Agreement, prior to its default, as no facts were attested to, other than the conclusory statements contained in Attorney Goldschein's Affirmation at ¶ 26-28:
"If borrowers attempt to contact Plaintiff they are informed that they should call the company rather than send an email. This is to ensure that there is no written record of the borrowers attempt to reconcile. Over the phone, they are summarily denied their request for lower payment amounts. They are not directed to the specific procedure required by the agreement: buried in small print."
Notably, Arecosta submits no proof that it emailed Kalamata requesting reconciliation, and no sworn statement attesting to dates and times of telephone calls with Kalamata wherein reconciliation was requested. Likewise, there is no competent proof submitted that substantiates that Kalamata is engaged in predatory lending practices or a "boiler room operation." It is not disputed that Arecosta is in default with respect to both the Revenue Purchase Agreement and the Security Agreement and Guaranty.
Based upon the four comers of the Revenue Purchase Agreement, the Court cannot reasonably conclude that same constitutes a loan as opposed to a contract. Specifically, the amount of monthly payments are subject to change upon a proper request, the Revenue Purchase Agreement is not a loan of finite duration, and there is no provision making a declaration of bankruptcy a default. See Unique Funding Solutions LLC v. A-Z Imports Exports LLC, 183 N.Y.S.3d 727 (Nassau Cty Sup. Ct. 2023); Principis Capital, LLC v. I Do, Inc., 207 A.D.3d 752 (2ndDept. 2022).
Kalamata has set forth a prima facie case entitling it to summary judgment based upon submission of the Revenue Purchase Agreement and Security Agreement and Guaranty, combined with admissible proof of funding in accordance with Kalamata's obligations under the contract, proof of Arecosta's breach of contract by failure to remit payment as of October 25, 2022 by denying access to Arecosta's account for ACH debiting, and Kalamata's damages sustained thereon based upon such breach. In opposition, Arecosta has not submitted competent evidence which raises a material, genuine, triable issue of fact. Therefore, Kalamata's motion for summary judgment is granted in its entirety.
Accordingly, based upon the foregoing, it is hereby
ORDERED, that Plaintiff, Kalamata Capital Group, LLC's, motion for summary judgment is granted and Plaintiff Kalamata Capital Group, LLC shall have judgment against Defendants, ARECOSTA LLC D/B/A PRESTIGE HOME BUILDERS; PRESTIGE; PRESTIGE LITTLE LEAGUE INC and LUIS ALBERTO AREVALO at 34064 County Road 239, San Benito, Texas 78586 in the amount of $143,266.40, plus pre-judgment interest at the statutory rate from October 25, 2022, costs taxed by the Sullivan County Clerk, and post judgment interest at 9%; and it is further
ORDERED, that Plaintiff s attorney is to submit a bill of costs, on notice, within 60 (sixty) days of the date of entry of this Decision and Order.
This shall constitute the Decision and Order of this Court. The original copy of this Decision and Order is being filed on the New York State Courts Electronic Filing (NYSCEF) system. Counsel are not relieved from the provisions of CPLR § 2220 regarding service with notice of entry.
Papers Considered:
1.) Notice of Motion dated February 13, 2023 by Ariel Bouskila, Esq.. Affidavit of Brandon Laks, Affirmation in Support of Ariel Bouskila. Statement of Material Facts. Exhibits A-E, Affirmation of Service
2.) Affirmation in Opposition to Motion for Summary Judgment dated April 26. 2023 by Eytan M. Goldschein, Esq., and Memorandum of Law
3.) Memorandum of Law in Further Support of Motion dated April 26. 2023 by Ariel Bouskila, Esq.