Opinion
Index No. E2022002498
08-01-2022
ROYAL BUSINESS GROUP, LLC, Plaintiff, v. THE CLOUD ACCOUNTANT LLC D/B/A THE CLOUD ACCOUNTANT, AAA VENDING & CATERING LLC, BUZZARDS BAY HAULING LLC, KAOUD INVESTMENTS LLC and LIANA MARIE SIVE, Defendants.
Steven W. Wells, Esq., WELLS LAW P.C., for the Plaintiff. Amos Weinberg, Esq., for Defendants
Unpublished Opinion
Steven W. Wells, Esq., WELLS LAW P.C., for the Plaintiff.
Amos Weinberg, Esq., for Defendants
DECISION AND ORDER
Daniel J. Doyle, J.
Plaintiff initiated this action by the filing of a Summons and Complaint in April of 2022 alleging that the defendants breached a sale of a receivables agreement and seeking resultant damages and the awarding of attorneys' fees. Defendants The Cloud Accountant LLC d/b/a The Cloud Accountant, AAA Vending & Catering LLC, Buzzards Bay Hauling LLC, Kaoud Investments LLC and Liana Marie Sive (hereinafter "defendants") move pursuant to CPLR § 510(1) to change the place of trial in this matter, and pursuant to CPLR Rule 3211 dismissing the action.
Defendants' Notice of Motion and supporting papers (NYSCEF Docket #s 9-12); Defendants' Memorandum of Law (NYSCEF Docket # 13); Defendants' Memorandum of Law in Reply (NYSCEF Docket # 19); Plaintiffs Affirmation in Opposition and supporting exhibit (NYSCEF Docket # 16-17); Plaintiffs Memorandum of Law in Opposition (NYSCEF Docket # 18).
For the reasons set forth below, the motion to change venue is DENIED and the motion to dismiss is DENIED.
Motion to Change Venue
Defendants, all out-of-state residents, filed a demand to change venue to Albany County, the purported residence county of Plaintiff. Plaintiff responds by noting the Future Receivables Sale and Purchase Agreement, dated November 24, 2021 (hereinafter "Agreement") executed by the parties contains the following provision:
Demand for Change of Venue (NYSCEF Docket # 7).
43. Governing Law, Venue and Jurisdiction. This Agreement shall be governed by and construed exclusively in accordance with the laws of the State of New York, without regards to any applicable principles of conflicts of law. Any lawsuit, action or proceeding arising out of or in connection with this Agreement shall be instituted exclusively in any court sitting in New York State, (the "Acceptable Forums"). The parties agree that the Acceptable Forums are convenient, and submit to the jurisdiction of the Acceptable Forums and waive any and all objections to inconvenience of the jurisdiction or venue. . .".
Future Receivables Sale and Purchase Agreement, dated November 24, 2021, Exhibit A to Defendants' Motion (NYSCEF Docket # 11).
CPLR § 501 allows the parties to a contract to select a forum or forums for trial. Section 43 of the Agreement in this case clearly states that any lawsuit arising out of the Agreement "shall be instituted exclusively in any court sitting in New York State".
"'A contractual forum selection clause is prima facie valid and enforceable unless it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would be so gravely difficult that the challenging party would, for all practical purposes, be deprived of its day in court'" (KMK Safety Consulting, LLC v. Jeffrey M. Brown Assoc, Inc., 72 A.D.3d 650, 651, 897 N.Y.S.2d 649, quoting LSPA Enter., Inc. v. Jani-King of N.Y., Inc., 31 A.D.3d 394, 395, 817 N.Y.S.2d 657).(Molino v. Sagamore, 105 A.D.3d 922, 923 [2nd Dept. 2013].)
The Defendants herein do not argue that Section 43 is unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or that a trial in Monroe County would be so gravely difficult that they would be deprived of their day in court. Instead, citing Merch. Cash& Cap., LLC v. Laulainen (55 Misc.3d 349 [Sup. Ct. Nassau Cty. 2017]) the Defendants argue that Albany County (the Plaintiffs county of residence) is the proper venue. However, Merch. Cash& Cap., LLC v. Laulainen is inapposite.
Merck. Cash& Cap., LLC v. Laulainen involved a contractual agreement that established jurisdiction, not venue. Here, the parties' contractual agreement specifically stated that both jurisdiction and venue would be in any court sitting in New York State. Absent proof that this provision is unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or that a trial in Monroe County would be so gravely difficult that the defendants would be deprived of their day in court, it is enforceable. (Molino v. Sagamore, supra.).
"In reviewing the agreement attached to Plaintiffs opposing papers, Section 5.6 entitled "Governing Law and Consent to Jurisdiction: Service of Process" makes clear that the parties have agreed that either the State or Federal Courts in New York shall have jurisdiction over any dispute arising from the agreement. However, this clause does not specify that venue will be placed in Nassau County specifically." (Merch. Cash & Cap., LLC v. Laulainen, 55 Misc.3d 349, 351 [Sup. Ct. 2017].)
Thus, the motion to change venue to Albany County is DENIED.
"On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction (see, CPLR 3026). We accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (Morone v. Morone, 50 N.Y.2d 481, 484, 429 N.Y.S.2d 592, 413 N.E.2d 1154; Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 634, 389 N.Y.S.2d 314, 357 N.E.2d 970)." (Leon v. Martinez, 84 N.Y.2d 83, 87-88 [1994].)
The Defendants move, pre-answer, to dismiss the complaint arguing: (1) that the contract is void for vagueness and lack of mutual obligations, and (2) the contract terms result in an usurious contract that is void.
Defendants argue that several provisions in the contract outlining fees to be charged by the Plaintiff are vague, and that the contract lacked mutuality of obligation, and was thus enforceable. The Court disagrees.
As to the lack of mutuality, the Defendants argue that:
The funding agreement on which this action was based. . . had to first be fully signed and submitted to plaintiff, with all required financial information. It was then up to plaintiff to review the submission to determine if it wanted to fund the loan to the defendant borrowers. There was no space for plaintiff to sign and paragraph 37 had a No Liability clause, so there was no remedy for a borrower if plaintiff chose not to fund the loan.
Defendants' Affirmation (NYSCEF Docket # 10) at ¶ 9.
This argument ignores what followed. Upon receipt of the funding agreement "fully signed and submitted to plaintiff, with all required financial information" (i.e., the "offer") the Plaintiff accepted ("acceptance") and agreed to advance, and did advance, the purchase price ("consideration") in exchange for the right to collect future receivables ("consideration"). Both parties having committed and received consideration the contract was binding. Although some of the contract provisions provided Plaintiff with powers to determine fees that may have created a less than ideal contractual situation for Defendants, those powers do not void the contract.
Of course, the enforceability of agreements to arbitrate is governed by the rules applicable to contracts (Matter of Zimmerman v. Cohen, 236 N.Y. 15, 139 N.E. 764; Matter of General Silk Importing Co., Inc., 200 App.Div. 786, 194 N.Y.S. 15, affd 234 N.Y. 513, 138 N.E. 427), and as in any bilateral agreement both parties must be bound or neither is
bound. (Topken, Loring & Schwartz, Inc. v. Schwartz, 249 N.Y. 206,163 N.E. 735.) But, that does not mean that the mutual promises must create in each of the parties identical rights and obligations or that the parties must be bound in the exact same manner. As stated in Corbin on Contracts, Vol. 1A, s 161, p. 68:
'No court or writer has maintained that the validity of a contract depends upon an objective equality of advantages or values. Each promise made by one party does not have to be matched by an equivalent promise made by the other. Each right or power or privilege possessed by one party does not have to have its counterpart in the other.'
It is only where the 'want of mutuality would leave one party without a valid or available consideration for his promise', (9 N.Y.Jur. Contracts, s 10, p. 533) that the agreement is necessarily unenforceable. (L'Amoureux v. Gould, 7 N.Y. 349). States another way, 'it is consideration that is necessary, not mutuality of obligation.' (Vol. 1A, Corbin on Contracts, s 152, pp. 5-6; see Justice v. Lang, 42 N.Y. 493.)(Riccardi v. Mod. Silver Linen Supply Co., 45 A.D.2d 191,193-94 [1st Dept. 1974], affd, 36N.Y.2d945[i975].)
Additionally, Defendants' claims that the contract provisions regarding fees authorized to be charged by Plaintiff are vague are without merit. The provisions of the fee schedule set forth in "Rider 1" are not vague. Defendants misconstrue the provision under Rider 1, Paragraph 3O) when they argue it would require payment of $20,860.14 by Defendants to Plaintiff each month ("The average of all the payments received as a Specified Percentage during the month would have been the $993-34 daily installments ACH-debited by plaintiff each business day. There are 21 to 22 business days each month. 21 debits of the $993.34 daily payment = $20,860.14." [Defendants' Affirmation at *f 16]). Defendants fail to account for the term "average" in the provision, which would mean the monthly fee would be $1,193.34 (21 days X $993-34 = $20,860.14 / 21 = $993.34 + $200 = $1,193.34.)
"This monthly fee will equal the higher of the average of all the payments received as a "Specified Percentage" of the Merchants settlement amount for that Month and $200"
Additionally, Defendants argue that the contract terms result in an usurious interest rate, rendering the contract void. Resolution of this issue depends upon whether the contract was a loan agreement, or a merchant funding agreement.
To determine whether a transaction constitutes a usurious loan: "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" (LG Funding, LLC v United Senior Props. of Olathe, LLC, 181 A.D.3d at 665-666 [citations and internal quotation marks omitted]).(Principis Cap., LLC v. I Do, Inc., 201 A.D.3d 752, 754 [2nd Dept. 2022].)
The Agreement between Plaintiff and Defendants contained a mandatory right of reconciliation. The Agreement did not have a finite term and was subject to a "downturn" in Defendants' business. Finally, the Agreement did not make as a condition of default the Defendants filing for bankruptcy. Thus, the Agreement was not a loan contract, and it is not subject to the usury laws. (Principis Cap., LLC v. I Do, Inc., 201 A.D.3d 752 [2nd Dept. 2022].)
Defendants misconstrue the meaning of Paragraph 2i(x) of the Agreement (Defendants' Affirmation at •[ 22). That provision states that in situations in which the specific provisions of the Agreement require the Plaintiffs consent, that the Defendants agree that Plaintiff had absolute discretion in granting or withholding consent. As the reconciliation provision contained within Paragraphs 10 and 11 did not require Plaintiffs consent, this provision is irrelevant.
Based upon the foregoing, it is hereby ORDERED that Defendants' motion to change venue is DENIED; and it is further ORDERED that Defendants' motion to dismiss the complaint is DENIED; and it is further
ORDERED that Defendants shall file their Answer to the Complaint within thirty (30) days of service of notice of entry of this Order.