In this action on a merchant-cash-advance guarantee, plaintiff, Kapitus Servicing, Inc., moves without opposition under CPLR 3215 for default judgment against defendant Michael Evenson.

In June 2015, plaintiff entered into a merchant-cash-advance agreement with nonparty South Wall Builders Inc., under which plaintiff purchased $39,900 of South Wall's receivables for a purchase price of $30,000. (See NYSCEF No. 2 at 1.) South Wall's obligations under the agreement were guaranteed by Evenson, South Wall's owner. (See id. at 1, 4-5.) In March 2016, Kapitus's predecessor entity wrote to him, contending that South Wall had defaulted on its obligations under the agreement, and demanding payment of $31,373 in remaining unpaid [*2]receivables and default-related fees. (See NYSCEF No. 10.) He did not pay the demanded sum.

On November 4, 2021, plaintiff brought this action to collect on the $31,373 that Evenson allegedly owes under the cash-advance-agreement and his guarantee. (See NYSCEF No. 1.) Plaintiff now moves for default judgment. Evenson has not filed opposition. The motion is denied.

A plaintiff seeking default judgment must establish proper service, defendant's default, and the facts constituting plaintiff's claim. Plaintiff has demonstrated that it properly served Evenson under CPLR 308 (2) and CPLR 313. (See NYSCEF No. 4 [affidavit of service]; NYSCEF No. 2 at 3 § 4.5 [consenting to jurisdiction of New York courts].) Evenson has not appeared. But plaintiff has not established the facts constituting its claim.

Plaintiff relies on an affidavit of its vice president, David Wolfson. (See NYSCEF No. 6.) Wolfson represents that South Wall "stopped depositing all of the Receivables" to the depositing account designated under the agreement, from which plaintiff was to collect receivables through daily ACH debits. (Id. at ¶¶ 8, 9, 12.) Wolfson contends that this alleged halt to South Wall's use of the designated depositing account breached South Wall's obligations to (i) deposit its receivables into that account, and (ii) refrain from making changes to the depositing account without plaintiff's written consent. (Id. at ¶¶ 10-11.) To support this claim, the Wolfson affidavit attaches a balance sheet for South Wall. (See NYSCEF No. 11.) The balance sheet reflects repeated reversals of ACH debits from the depositing account due to insufficient funds. (See id. at 1-3.) Plaintiff contends, based on this evidence, that it is entitled to default judgment. (NYSCEF No. 8 at 4.) This court disagrees.

That the balance sheet reflects repeated reversals of ACH debits does not, standing alone, establish that South Wall changed the account into which it deposited its receivables. Those balance-sheet entries are equally consistent with South Wall not earning receivables that could be deposited into the account. And South Wall was not independently obliged under the agreement to bring in receivables through its operations. To the contrary, § 1.9 of the cash-advance agreement, under which plaintiff and South Wall agree that their transaction constitutes a receivables purchase rather than a loan, expressly provides that "[p]ayments made to [plaintiff] in respect to the full amount of the Receipts shall be conditioned upon Merchant's sale of products and services and the payment therefore by Merchant's customers." (NYSCEF No. 2 at 3.)

Wolfson does not provide any reason to believe that the lack of receivables in South Wall's depositing account stemmed from impermissible changes by South Wall to that account, as opposed to a business downturn. To be sure, one would expect that if South Wall was no longer making sales to customers that generated receivables, its business would be in serious financial trouble; and these financial difficulties might well trigger disclosure obligations to plaintiff under other provisions of the cash-advance agreement. But the Wolfson affidavit does not rely on those disclosure provisions, either.

Even assuming that repeated reversals of ACH debits due to insufficient funds were to constitute an event of default, plaintiff has not shown that this action was brought within six years of that default, as required by the governing statute of limitations. (See CPLR 213 [1] [statute of limitations for contract claims].) The cash-advance agreement contains a fee schedule (set out in an appendix) that provides that an NSF Fee may be charged "[u]p to FOUR TIMES [*3]ONLY before a default is declared." (NYSCEF No. 2, Appendix.) Here, the balance sheet submitted by plaintiff reflects that it repeatedly charged South Wall NSF-based fees in August, September, and October 2015—well before the February 2016 default date given in the Wolfson affidavit. (See NYSCEF No. 11 at 2-3.) Good reason exists on the face of the record, therefore, to believe that this action is time-barred. And neither the Wolfson affidavit nor plaintiff's memorandum of law address this timeliness issue. On this record, plaintiff has not established that it is entitled to the $31,373 that it claims.

Accordingly, it is

ORDERED that plaintiff's CPLR 3215 motion for default judgment is denied; and it is further

ORDERED that if plaintiff does not bring a renewed default-judgment motion within 30 days of entry of this order, the action will be dismissed; and it is further

ORDERED that plaintiff serve a copy of this order with notice of its entry on defendant by certified mail, return receipt requested, directed to his last-known address.