This case concerns a "Merchant Cash Advance," an alternative and arguably extreme form of financing for small businesses with very few financing options at their disposal. At bar is a Motion for Summary Judgment brought by Plaintiff, a financial services company, against defendant, a construction contractor —the merchant. The allegation is breach of contract. Underlying the case is an agreement whereby the Plaintiff purchased Defendant's Accounts Receivables approximating $131,000 for $98,000 less transaction fees. Defendant agreed to receive an immediate advance of approximately $54,000, and then to make weekly payments of $2850, which was calculated at 7.9% of the merchant's weekly receivables. The payments were to be automatic withdrawals from the merchant's bank account. Defendant stopped paying Plaintiff after having paid back $34,000. According to Plaintiff, the merchant's gross revenues during this period approximated $1.6 million. Plaintiff now moves for Summary Judgment for failure to abide by the contract. Defendant essentially cross moves for "reverse summary judgment," arguing that no default has occurred.

At the outset, it must be stated that the papers reference a prior agreement between the parties which —like the current agreement—reference a "reconciliation" provision i.e. if the parties wish to renegotiate or adjust the terms of the transaction. Nevertheless, the prior agreement is not part of the Record, and indeed, neither counsel at oral argument were even aware of the prior agreement.

Next, although there is no nexus to Erie County, the Revenue Purchase Agreement at [*2]issue—a boilerplate form drafted by plaintiff— stipulates that jurisdiction for any lawsuit shall be in any New York State Supreme Court in New York State. Thus, plaintiff filed the matter at bar in Erie County. There has been no objection.

The agreement explicitly emphasizes that the transaction is not a "loan" which would bring with it the applicability of usury laws, amongst other things. It should be noted that the current transaction is somewhat startling because the imputed interest rate (APR) is in excess of 31%.

As plaintiff notes, it is well settled in New York that in order to obtain summary judgment, the moving party must make a prima facie showing of entitlement to judgment as a matter of law (Zuckerman v. New York, 49 NY2d 557 [1980]). Furthermore, where there is no issue of triable fact, summary judgment is granted as a matter of law. For plaintiff to establish a prima facie showing of entitlement in a breach of contract, a plaintiff must show that the defendant breached a binding agreement between the parties which damaged the plaintiff (Stonehill Capital Management LLC v. Bank of the W, 28 NY3d 439 [2016]).

In the instant case, plaintiff has met this burden. Plaintiff has conclusively established the existence of a binding agreement and established performance under the agreement, until defendant's non-performance. Both parties acknowledge that the weekly payments stopped after approximately 12 weeks in the concluding months of 2024.

Furthermore, according to Zuckerman, supra, once a moving party has made prima facie a showing of entitlement to summary judgment as a matter of law, the non-moving party must "demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action." At bar, there is no showing of any relevant question of fact requiring a trial. Defendants do not dispute that they entered into the agreement. The defendants do not dispute that plaintiff performed its obligations. The defendants do not dispute that they ceased making remittances to plaintiff pursuant to the agreement. The defendants do not dispute the calculation of damages presented by plaintiff. The defendant's Affirmation of Facts makes reference to his unsuccessful attempt at "reconciliation," i.e. renegotiation or adjustment of terms in the agreement, but that is not a disputation of the Plaintiff's factual allegations and is more of a conclusory excuse for failing to abide by the agreement. Moreover, Defendant's attempt at reconciliation is not one of the grounds of the defendant's Memorandum of Law, denominated as an Attorney "Affirmation in Opposition."

Defendant's arguments are premised upon three grounds: first, that Plaintiff's Notice to Admit goes beyond uncontroverted questions of fact, and therefore does not require a response, thus it is ineffective and does not impel any admissions against defendant's interest; second, that the plaintiff's affidavit and evidence prove that the defendant did not breach the contract; and third, that the transaction is unenforceable because it is in actuality a loan and criminally usurious.

First, the Court does not rely on plaintiff's Notice to Admit. Defendants did file a response and are correct that the law is unambiguous concerning Notices to Admit. Miller v. Hilman Kelly Co. (177 AD2d 1036 [4th dept 1991]), and Meadowbrook- Richman Inc v. Cicchiello ( 273 AD2d 6 [1st dept 2000]), hold that a Notice to Admit is to be used only for disposing of uncontroverted questions of facts or those that are easily provable, not for the purpose of compelling admission of fundamental and material issues or ultimate facts that can only be resolved after a full trial. At bar the Notice to Admit may or may not go beyond the strictures of the caselaw and CPLR 3123, but the uncontroverted Affirmation of Plaintiff [*3]manager Marshall Rosenblum and Statement of Material Facts by Attorney Ariel Bouskila spell out the necessary and compelling facts relied upon by the Court.

Second, defendant's attorney affidavit indicates that the plaintiff's evidence shows only that a single transaction occurred on Tuesday December 10th which was a date not designated pursuant to the contract for the weekly withdrawals, and that that transaction was not for the weekly withdrawal amount but a charge for a stop order on the account. This is a specious argument in view of the fact that Defendant withdrew authorization for the weekly withdrawals by Plaintiff from the account.

Finally, defendant makes the allegation that the transaction was a loan, and therefore because it equates to 31% APR, it is in excess of the legal cap of 25% interest per annum (PL 190.40). Whether a financial agreement is a loan or a financial transaction with a security interest is determined in New York by a 3-factor test: (1) whether there is a reconciliation (I.e. adjustment) provision; (2) whether the agreement has an indefinite term; and (3) whether the plaintiff has any recourse should the merchant declare bankruptcy (Principis Capital, LLC V. I Do, Inc. at al., 201 AD3d 752 [2d Dept. 2022]; LG Funding, LLC V United Senior Properties of Olathe, LLC at al., 181 AD3d 664 [2d Dept. 2020]; K9 BYTES, Inc. et al. v. Arch Capital Funding, LLC et al., 6 Misc 3d 807 [2017]). Applying this law to the facts at bar, (1) Indeed there was a reconciliation provision. Defendant Derek Reid Mullins in his Affirmation of Facts referenced a prior agreement with the Plaintiff that triggered a reconciliation which led to the agreement at bar. Mullins then utilized the same reconciliation provision to make a further adjustment, however, it is evident that Plaintiff had made all the adjustments it was willing to make. But the fact remains, there was a reconciliation provision. Defendant's Affirmation makes no reference as to whether he followed the protocol for reconciliation on page two of the agreement, i.e. sending an e-mail or regular mail; and following an admittedly convoluted protocol to supply financial information. However, even if the Plaintiff's refusal to adjust the terms further resulted in an interpretation that there was no such provision, the other two requirements to qualify the arrangement as a loan were not satisfied. First, the arrangement was not for a finite term, but an indefinite term, and second, in the event of the merchant defendant's bankruptcy, such an event under the terms of the agreement would not extinguish the arrangement.

Defendant cites to the case of Crystal Springs Capital, Inc. v. Big Thicket Coin, LLC et al. (220 AD3d 745 [2d Dept 2023]), but that case generally supports plaintiff's position. The reason for citation is that in that case the court considered the arrangement to be a loan. However, in that case unlike the matter at bar, plaintiff was under no obligation to reconcile payments to a percentage of sales rather than a fixed daily amount and furthermore, in the event of a bankruptcy, there would be no rescission of the financial arrangement. At bar, there was a reconciliation provision and no finite term; although bankruptcy did not vitiate the agreement. In sum, the arrangement at bar did not qualify as a loan.

In conclusion, there are no questions of fact to justify a denial of plaintiff's motion for summary judgment. The financial arrangement may have been extreme or even arguably predatory, however pursuant to law, plaintiff has shown defendant to have breached a legally binding contract.

Plaintiff's motion for summary judgment is therefore granted.

Accordingly, it is

ORDERED, that Plaintiff's motion for summary judgment against the defendants, [*4]MULLINS RENOVATION & CONSTRUCTION LLC D/B/A MULLINS RENOVATION & CONSTRUCTION and DEREK REID MULLINS for breach of contract is GRANTED; it is further

ORDERED, that Defendants' request for reverse summary judgment against the Plaintiff, BYZFUNDER NY LLC D/B/A BYZFUNDER is DENIED; it is further

ORDERED, that counsel shall appear at a scheduling conference to discuss plaintiff's application for damages on July 21, 2025, at 9:30 a.m. via a Teams link to be provided by the Court.