Diesel Funding LLC v. Build Retail Inc

2024 NY Slip Op 31381(U)

• Court: New York Supreme Court, Kings County
• Decided: April 18, 2024
• Status: Unpublished

Opinion

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

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;;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

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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

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& 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

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[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

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