Supreme Court, Kings County

Decided on June 15, 2026

Index No. 533763/2022

Francois A. Rivera, J.

[*1]

Recitation in accordance with CPLR 2219 (a) of the papers considered on the notice of motion filed on November 11, 2025, under motion sequence number one, by Madison Advance, LLC (hereinafter the plaintiff) for an order: (1) pursuant to CPLR 3212, granting summary judgment in favor of plaintiff in all respects as against the appearing defendant McGary G. Lafayette a/k/a Lafayette G McGary, and (2) for an order pursuant to CPLR 3215, granting default judgment as against the non-appearing defendant, Outreach Development Assoc LLC d/b/a Outreach Development Assoc, and (3) for such other and further relief as deemed appropriate by the Court, upon the ground that this action is based upon an instrument for the payment of money only which is now due and payable. The motion is unopposed.

Notice of motion

Affirmation in support

Affidavit in support

Exhibits 1-8

Memorandum of law in support

Exhibits 1-5^FN1

Statement of material facts

Exhibit 5^FN2

BACKGROUND

On November 7, 2022, the plaintiff commenced the instant action by filing a summons and verified complaint with the Kings County Clerk's office (KCCO). The verified complaint alleges nineteen allegations of facts in support of three denominated causes of action. The first cause of action is for breach of contract asserted against Outreach Development Assoc LLC d/b/a Outreach Development Assoc (hereinafter the LLC defendant). The second cause of action is for breach of a personal guaranty asserted against McGary G. Lafayette a/k/a Lafayette G. McGary (hereinafter the individual defendant). The third cause of action is for an account stated asserted against both the LLC and individual defendant.

The verified complaint alleges the following salient facts. On July 11, 2022, plaintiff and the LLC defendant entered a written contract (hereinafter the contract), whereby the LLC defendant sold to the plaintiff its future receipts having a value of $14,990.00 for the sum of $10,000.00. The receivables were to be paid to the plaintiff pursuant to a payment schedule set forth in the contract. The LLC defendant agreed that in the event of a default under the contract, the full uncollected receivables plus all fees due would become immediately due and payable in full to the plaintiff. The plaintiff paid the LLC defendant the purchase price.

On August 1, 2022, the LLC defendant allegedly breached the terms of the contract by causing the receivables to be deposited into a separate account not designated in the contract, blocked the payment due to the plaintiff and/or prevented the plaintiff from collecting the amount due to non-sufficient funds or otherwise failed to pay and/or prevented the plaintiff from collecting the amount due pursuant to the payment schedule in the contract and thereby defaulted. Based upon the foregoing, the plaintiff alleged that the LLC defendant owed a balance in the amount of $16,752.00 with interest thereon from August 1, 2022.

In addition, the plaintiff alleged that the individual defendant executed a personal guaranty of performance of all the obligations of the LLC defendant set forth in the contract. The plaintiff alleged that pursuant to the guaranty, the individual defendant was obliged to pay to the plaintiff the amount owed by the LLC defendant.

Following the defendants' aforesaid default, plaintiff presented the defendants with a statement of account setting forth the unpaid balance and demanded payment thereof. Plaintiff alleges that the defendants failed to dispute or object to the statement and that such failure to dispute or object within a reasonable time created an account stated for the amount shown on the invoice. Plaintiff contends that by reason of the foregoing, the defendants are liable to plaintiff.

On December 21, 2022, the individual defendant filed an answer on behalf of himself and the LLC defendant with the KCCO.

On November 11, 2025, the plaintiff filed a notice of rejection of the answer by the individual defendant with the KCCO. The rejection was only as to that part of the answer which was on behalf of [*2]the LLC defendant. The rejection was pursuant to CPLR 321 (a) since the LLC defendant is a business entity and was required to appear by counsel.

On March 25, 2026, the plaintiff filed a notice of discontinuance of the action as asserted against the LLC defendant with the KCCO.

Thereafter the plaintiff filed the instant motion.

By decision and order dated March 17, 2026, and filed on April 7, 2026, Justice Saul Stein denied that branch of the plaintiff's instant motion which sought a default judgment against the LLC defendant. Justice Stein referred the balance of the instant motion to an IAS Part which randomly assigned the matter to this Court.

On May 21, 2026, the plaintiff appeared to argue the instant motion.By decision and order dated May 21, 2026, and filed May 26, 2026 the court denied the plaintiff's motion for summary judgment against the individual defendant. The denial was based on the plaintiff's failure to demonstrate that the LLC defendant breached the contract. Consequently, the plaintiff did not demonstrate that the individual defendant's guaranty of the LLC defendant's performance under the contract was ever triggered.

MOTION PAPERS

The plaintiff's motion papers consist of a notice of motion, an affirmation of its counsel in support, an affidavit in support of plaintiff's Operations Manager Bianca Kunkel which references eight annexed exhibits labeled 1 through 8, a memorandum of law in support which references exhibits 1 through 5, and a statement of material facts which references exhibit 5. Exhibit 1 is a copy of the summons and verified complaint. Exhibit 2 is an affirmation of service. Exhibit 3 is the verified answer by "Outreach Development Asso. LLC d/b/a Lafayette G. McGary"^FN3 signed by Lafayette G. McGary. Exhibit 4 is a notice of rejection of the answer. Exhibit 5 is a document denominated as a "Revenue Purchase Agreement." Exhibit 6 is a screenshot of a document that purports to be proof of funding. Exhibit 7 is the certified bank records. Exhibit 8 is a document described as payment history.

LAW AND APPLICATION

Breach of a Guaranty

"The essential elements of a cause of action to recover damages for breach of contract are 'the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of its contractual obligations, and damages resulting from the breach'" (Cruz v Cruz, 213 AD3d 805, 807 [2d Dept 2023], citing Klein v Signature Bank, Inc., 204 AD3d 892, 895 [2d Dept 2022]).

As previously indicated the plaintiff did not demonstrate that the LLC defendant breached the contract. Consequently, the plaintiff did not demonstrate that individual defendant's guaranty of the LLC defendant's performance was ever triggered.

Account Stated

"An account stated is an agreement between parties to an account based upon prior transactions between them with respect to the correctness of the account items and balance due" (Coca-Cola Refreshments, USA, Inc. v Binghamton Giant Mkts., Inc., 127 AD3d 1319, 1320 [3d Dept 2015], citing Whiteman, Osterman & Hanna, LLP v Oppitz, 105 AD3d 1162, 1163 [3d Dept 2013]). "Although an account stated may be based on an express agreement between the parties as to the amount due, an agreement may be implied where a defendant retains bills without objecting to them within a reasonable period of time, or makes partial payment on the account" (Michael B. Shulman & Assocs., P.C. v Canzona, 201 AD3d 716, 717 [2d Dept 2022]).

Plaintiff's verified complaint does not plead a cause of action for an account stated. Furthermore, plaintiff's evidentiary submission did not make a prima facie showing that it had an agreement with the corporate defendant or with the individual defendant to an account based upon prior transactions between them with respect to the correctness of the account items and balance due account.

Default Fee

It is further noted that in computing the amount of damages allegedly due to the plaintiff by the LLC and individual defendant, the plaintiffs included a default fee of $5,000.00. "A liquidated damages clause is enforceable 'if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation'" (Schmuelian v Bichoupan, 225 AD3d 910, 913 [2d Dept 2024], citing Colacino v Colacino, 152 AD3d 486, 487 [2d Dept 2017]). That is not the case here. The agreement was for a purchase of $14,900.00 of the LLC defendant's future receivables for a purchase price of $10,000.00. The $5,000.00 default fee is exactly 50% of the purchase price and more than 33% of the face value of the future receivables. This is not a case where the plaintiff's damages by the defendants' alleged breach would be difficult to calculate. Therefore, the $5,000.00 default fee is an unenforceable penalty.

CONCLUSION

The branch of the motion by plaintiff Madison Advance, LLC for an order pursuant to CPLR 3215 granting default judgment as against the non-appearing defendant, Outreach Development Assoc LLC has been rendered moot by the plaintiff's discontinuance of the action as asserted against that defendant.

The branch of the motion by plaintiff Madison Advance, LLC for summary judgment against defendant Lafayette G McGary is denied. Moreover, the $5,000.00 default fees which the plaintiff used in calculating its alleged damages is an unenforceable penalty.

The matter is removed to civil court pursuant to CPLR 325 (d) for further proceedings due to the amount in controversy (CPLR 325 [d]; see Bess v Fordham Road Storage Partners, LLC, 195 Misc 2d 674, 676 [Sup Ct, Bronx County 2003]).

The foregoing constitutes the decision and order of this Court.

ENTER: