The following papers were read on this motion:

Upon the foregoing papers, the motion filed by the Plaintiff, BYZFUNDER NY LLC ("Plaintiff"), for an Order pursuant to CPLR §3212 granting it summary judgment on the causes of action for breach of contract, personal guarantee, unjust enrichment; and attorneys' fees as set forth in its Verified Complaint; dismissing the affirmative defenses of the Defendants, OCTAGON CONSTRUCTORS, LLC D/B/A OCTAGON CONSTRUCTORS ["Merchant Defendant"] and STEPHEN FLOYD SMITH ["Guarantor Defendant" or "Smith"] [collectively, "Defendants"]; and awarding the Plaintiff costs, expenses and disbursements is determined as set forth herein.

This action was commenced to recover monies due pursuant to a Merchant Cash Agreement ["MCA"] entered into between the Plaintiff and the Merchant Defendant on April 15, 2022 ("Agreement"). The Plaintiff is a limited liability company organized and existing under the laws of the State of New York. The Merchant Defendant is a company organized and existing under the laws of the State of Washington. Defendant Smith is an individual residing in the State of Oregon. Pursuant to the Agreement, the Plaintiff advanced the Defendants the sum of $45,000.00 in exchange for 10% of the Merchant Defendant's future receivables generated during the course of its business for a total repayment amount of $60,750.00. The Agreement was personally guaranteed by Smith. The Agreement stipulated, inter alia, that the Plaintiff would receive its money via ACH debits from a specific bank account approved by the Plaintiff [the "Bank Account"], and that in the event of a default, the Defendants would pay the total amount outstanding plus an additional $2,500.00 for a default fee. In addition, the Defendants agreed to incur additional charges for Not Sufficient Fund ["NSF"] fees.

The Plaintiff contends that on or about September 28, 2022, the Merchant Defendant stopped remitting the purchased receivables to the Plaintiff from the Bank Account, closed its Bank Account without providing proper notice, and failed to provide the Plaintiff with proper financial disclosures or a written request for reconciliation, thereby breaching the agreement

Thereafter, the Plaintiff commenced this action by filing a Summons and Complaint to which the Defendants interposed an Answer with Counterclaims. The Plaintiff now brings the instant motion seeking summary judgment claiming there is no material issue of fact that the Defendants owe the Plaintiff damages in the amount of $36,102.50, with interest thereon from September 28, 2022, plus costs and disbursements.

The Plaintiff argues that it satisfies its prima facie entitlement to summary judgment by establishing the elements required to prove a breach of contract. To prove a breach of contract, four elements must exist, to wit: (1) a contract; (2) the Plaintiff's performance under the contract; (3) the Defendant's breach of its obligations under the contract; and (4) damages resulting from said breach. (Alliance Natl. Ins. Co. v. Absolut Facilities Mgt., LLC, 140 AD3d 810 [2d Dept 2016] [citations omitted]). Here, the Plaintiff contends that it undisputedly entered into the Agreement with the Defendant and that Smith guaranteed the Agreement. The Plaintiff avers that it performed under the Agreement by delivering to the Defendants the agreed upon price for the future receivables, but the Merchant Defendant breached its obligations by failing to remit payments. Defendant Smith, as guarantor, failed to cure said breach as he was required to. The [*2]Plaintiff claims that as a result of the breach, it suffered damages in the amount of $36,102.50, with interest thereon from September 28, 2022, plus costs and disbursements.

The Plaintiff's motion consists of a supporting affidavit from Marshall Rosenblum, a managing member of the Plaintiff, together with a business record affidavit from Mr. Rosenblum, with exhibits attached thereto. The Court finds that the Plaintiff established its prima facie entitlement to summary judgment on its breach of contract and personal guaranty causes of action. (Alvarez v. Prospect Hosp., 68 NY2d 320 [1986]).

The Court finds, however, that the Plaintiff is not entitled to the default fee of $2,500.00 or the NSF fee of $50 per occurrence. The rule is well established that a contractual provision fixing damages in the event of breach will be sustained only when the amount of damages bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation. (Truck Rent-A-Center Inc. v. Puritan Farms 2nd Inc., 41 NY2d 420 [1977]). If the amount fixed is plainly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced. (Equitable Lumber Corp. v IPA Land Dev. Corp, 38 NY2d 516 (1976]). Here, the Plaintiff failed to put forth evidence of any out of pocket expenses or losses for the default fee or insufficient check fee. Therefore, such fees are disproportionate to the loss and constitute unenforceable penalties. (Truck Rent-A-Center, supra).

The Defendants' opposition papers consist of an affirmation from their counsel, an affidavit from Defendant Stephen Smith, and a memorandum of law. The Defendants do not dispute that around September 27, 2022, they stopped making the daily remittance of $405.00 as agreed between the parties. Rather, Mr. Smith contends that he communicated a request to the Plaintiff for a reconciliation of the daily remittance amount, and soon after the Plaintiff informed Mr. Smith that the request was denied and that he must continue making the daily payments in the exact amount or else be in default. Mr. Smith and Defendants' counsel argue that the subject Agreement is a usurious loan and that the reconciliation provision of the agreement is an empty provision with no practical meaning.

The Court finds that the Defendants' opposition papers fail to raise a triable issue of fact in opposition to the Plaintiff's prima facie showing. While Defendant Smith contends that he requested a reconciliation and his request was denied, Defendant Smith offers no proof that such a reconciliation was requested, other than a self-serving, conclusory statement, and no proof that the procedures required for a reconciliation were followed including, inter alia, that the Defendants provided the Plaintiff with financial documentation evidencing a slowdown in the receivables.

Additionally, while the Defendants argue in conclusory terms that the subject Agreement is a usurious loan and not an agreement for the purchase of future receivables, the Plaintiff established that the Agreement is not a usurious loan, based on the three determinative factors: 1) the Agreement's mandatory reconciliation provision; 2) the Agreement's indefinite term for repayment; and 3) the Agreement's bankruptcy protection for the Defendants. (LG Funding, LLC v United Senior Properties of Olathe, LLC, 181 AD3d 664 [2d Dept 2020] [citations omitted]).

As the Plaintiff established entitlement to summary judgment on its breach of contract and personal guaranty causes of action, and the Defendants failed to raise a triable issue of fact in opposition thereto, the Plaintiff's motion for summary judgment shall be GRANTED to the extent of granting the Plaintiff's summary judgment on their breach of contract and personal guaranty causes of action in the amount of $32,202.50 [i.e., the $36,102.50 amount demanded in the Complaint, minus $2,500.00 Default Fee and $1,400.00 NSF fee], with statutory interest [*3]thereon from September 28, 2022, plus costs and disbursements. Additionally, the Plaintiffs established entitlement to dismissal of the Defendants' affirmative defenses, and the Defendants again failed to raise an issue of fact in opposition thereto.

Accordingly, it is hereby,

ORDERED, that the Plaintiff's motion for an Order pursuant to CPLR 3212 [Seq. 001] is GRANTED to the extent of dismissing the Defendants' affirmative defenses and granting the Plaintiff summary judgment in its favor and against the Defendants in the amount of $32,202.50, with statutory interest thereon from September 28, 2022, plus costs and disbursements thereon, consistent with the foregoing; and it is further,

ORDERED, that the Plaintiff's motion for an Order pursuant to CPLR 3212 [Seq. 001] is DENIED to the limited extent that the Plaintiff seeks a default fee totaling $2,500.00 and NSF fee of $50.00 per occurrence totaling $1,400.00; and it is further,

ORDERED, that the Plaintiff is hereby directed to submit a proposed judgment on notice to the Defendants, and to submit a copy of this Decision and Order together when submitting its proposed judgment to the Court; and it is further,

ORDERED, that requests for relief not specifically addressed herein shall be deemed DENIED.

This constitutes the Decision and Order of this Court.

Settle judgment on notice.