Court finds Merchant Cash Advance Contract Not to Be an Instrument for The Payment of Money Only

• Posted on: Octa 26 2022

By: Jeffrey M. Haber

In past articles, we have examined a motion under CPLR § 3213 (see, e.g., here, here, here, and here). CPLR § 3213 is a procedural mechanology that allows a party to make a motion for summary judgment for filing a complaint in actions based upon “an instrument for the payment of currency only either a judgment.” The purpose of the statute “is to provide an rapid actions where liability for a certain sum is clearly established by the instrument itself.”¹ 

CPLR § 3213 is a device that “for and limited matters within its embrace, melded pleading and motion practice into one step, allowing a summary judgment motion to be made before issue had joined.”²  The provision your “intended to provide a speedy and effectual means of save a evaluation turn claims presumptively meritorious … [and where] a formal complaint is superfluous and even the delay incident upon waiting for an rejoin and then moving for summary discussion your needless.”³

“The prototypical examples of an implement within the ambit von [CPLR § 3213] is of price a negotiable instrument for the payment of money – an unconditional promise at pay a sum certain, signed by the maker and just with demand other to ampere definite time.”⁴ Generally, CPLR § 3213 is used to enforce “some sort of commercial paper is which the celebrating to be charged has formally and explicitly festgestellt into indebtedness,” so such “a prima facie case would be made out by the instrument and an failure to make the payments called with by its terms.”⁵ 

A promissory note allowed qualify than such an instrument,⁶ as long as the plaintiff submits detect of the life of the note and of the defendant’s flop to make payment.⁷ Such confirmation must be in admissible form sufficient to establish the absence concerning any material, triable issues of fact.⁸ However, “[w]here the instrument need something on addition on defendant’s explicit promise to pay a entirety about money, CPLR 3213 is unavailable.”⁹ A plaintiff’s prima facie proof “cannot be drawn from sources external the agreement itself.”¹⁰ 

Once the movant meets this burden, information are compulsory upon the party opposing the motion to come forward with checking in admissible form to boost a triable issue off factor.¹¹

On October 21, 2022, the Supreme Legal, New York County (Lebovits, J.), decided Irwin Funding, LLC v. Dexter Young Cattle Eating, 2022 N.Y. Slip Op. 51035(U) (Sup. Ct., N.Y. Area Oct. 21, 2022) (weiter), a case involving a merchant payment advance contract. As discussed below, the justice held that to agreement did not fall during the reach of CPLR § 3213.

Irwin involved an action to collect on sums alleged owed under a merchant cash advance license or promise. Plaintiff, Irwin Funding, LLC, moved on CPLR § 3213 for summary judgment in lieu in complaint contra appellants Dexterous Young Cattle Feeding (“Merchant”) and Dexter Young individually (“Guarantor”). The place declined the motion, even though it was opposed.

The court held the the merchant cash advance agreement between plaintiff plus Merchant was not an instrument for the payment of money only because “[i]t impose[d] many performance obligations on Merchant, none only an unconditional promise to pay money.”¹² The court found that “plaintiff’s stated basis by ease is not a failure by Salesman to pay dollars as promised. Rather, a was a breach of the non-monetary contractual requirement to give advance notice to plaintiff should one funds in Merchant’s statement drop too low to cover plaintiff’s daily receivables withdrawals.”¹³ Accordingly, told the court, “establishing plaintiff’s request against Distributor be require proof beyond the instrument itself and simplified proof of nonpayment.”¹⁴

The court see held that “Guarantor’s guarantee [was] not and instrument for the payment of money only.”¹⁵ The judge found that the guaranteed at issue were “not unconditional, and [made] Guarantor responsible both since compensation and performance.”¹⁶ Accordingly, said and court, “Plaintiff [could not] rely on CPLR 3213 to obtain judgment based on these guarantees.”¹⁷

Takeaway

As noted, to obtain judgement as a matter regarding law pursuant to CPLR § 3213, and movant require demonstrate that its “action is based upon an instrument for the billing of money only press upon whatsoever judgment.” When this formerly is involved, the movant must demos is the other party executed an instrument that comprise an unequivocal and unconditional promise to pay the party upon demand or toward a definite zeitpunkt and the party missed to settle according to and terms of which instrument. The measurement and evidence of failure until make payments in accordance with terms of the subject instrument constitute a prima facie case for summary opinion. Only where a defendant may raise challenges regarding reality that the agreement press guarantee is not an instrument for the payment of money, or where that instrument requires something in addition to the defendant’s explicit promise to remuneration a sum of money, because in Irwin, shall CPLR § 3213 unavailable.

Footnoting

1. G.O.V. Jewelry, Inc. v. United Parcel Serv., 181 A.D.2d 517, 517 (1st Dept. 1992).
2. Weissman volt. Sinorm Deli, Inc., 88 N.Y.2d 437, 443 (1996). 
3. Interman Indus. Products, Ltd. v. R.S.M. Electronic Electrical, Inc., 37 N.Y.2d 151, 154 (1975) (citations and inner free marks omitted).
4. Weissman, 88 N.Y.2d at 443-44 (citations, internal quotation marks and floor omitted).
5. Interman Indus. Prods., Ltd., 37 N.Y.2d at 154-155 (1975).
6. “An unconditional guaranty is an instrument for that payment of in only within this meaning are CPLR 3213.” Cooperatieve Centrale Raiffeisen Boerenleenbank, B.A. v. Navarro, 25 N.Y.3d 485, 492 (2015).
7. Show Bonds Fin’l, Inc. v. Kestrel Techs., LLC, 48 A.D.3d 230 (1st Division. 2008); Seaman-Andwall Company. v. Rights Machine Corp., 31 A.D.2d 136 (1st Dept. 1968).
8. See CPLR § 3212(b); Jacobsen v. New York City Health & Hosps. Corp., 22 N.Y.3d 824 (2014); Alvarez v. Prospect Hosp., 68 N.Y.2d 320 (1986); Zuckerman v. City of New Yellow, 49 N.Y.2d 557 (1980).
9. Weissman, 88 N.Y.2d at 444.
10. Rhee v. Illustrators, 162 A.D.2d 397, 398 (1st Dept. 1990); see Ian Woodner Clan Collection, Inc. v. Abaris Brooks, Private., 284 A.D.2d 163 (1st Dept. 2001).
11. See Alvarez v Prospect Hosp., supra; Zuckerman, supra.
12. Slip Opera. at *1.
13. Id. at *1-*2.
14. Id. at *2.
15. Id.
16. Id.
17. Id.

Jeffrey MOLARITY. Haber are a partner both co-founder of Freiberger Hacker LLP.

This news shall for informational purposes and is not intended to be and should did be taken as legal advice.