Irwin Funding LLC v Adrian Valdez Transp., LLC

[*1] Irwin Funding LLC v Adrian Valdez Transp., LLC 2023 NY Slip Op 50956(U) Decided on September 8, 2023 Supreme Court, New York County Lebovits, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 8, 2023
Supreme Court, New York County

Irwin Funding LLC, Plaintiff,

against

Adrian Valdez Transport, LLC and Adrian Valdez, Defendants.



Index No. 650638/2023



Gainey McKenna & Egleston, Paramus, NJ (Barry J. Gainey of counsel), for plaintiff.

No appearance for defendants.
Gerald Lebovits, J.

The following e-filed documents, listed by NYSCEF document number (Motion 001) 5, 6, 7, 8, 9 were read on this motion for DEFAULT JUDGMENT.

In this action on a merchant-cash-advance agreement and guarantee, plaintiff, Irwin Funding LLC, moves without opposition under CPLR 3215 for default judgment against defendant-merchant, Adrian Valdez Transport, LLC, and defendant-guarantor, Adrian Valdez. The motion is denied.

A plaintiff moving for default judgment must establish proper service on the defendants and the facts constituting plaintiff's claims against them. Plaintiff here has done neither.

1. The agreement contains a service clause that specifies acceptable methods of service beyond those appearing in the CPLR. (See NYSCEF No. 7 at 10 § 4.5.) Plaintiff may serve defendants (i) by "certified or registered mail, return receipt requested to the Mailing Address listed on this agreement"; or (ii) by "email to the Email Address listed on this Agreement." (Id.) Merchant's mailing address, as identified in the agreement, is 4837 W. Southern Ave., Phoenix, AZ, 855339. (Id. at 5.) An email address for merchant is given in the agreement but has been redacted in the motion papers before the court. (See id.)

The service by mail is insufficient in multiple respects. Plaintiff's affirmation of service states that plaintiff's counsel served defendants by regular mail—not certified or registered mail, [*2]return receipt requested—at 3722 E. Chipman Road, Phoenix, AZ, 85040. (NYSCEF No. 3 at 1.) And that address is listed in the agreement as merchant's physical, not mailing, address. (See NYSCEF No. 12 at 5.)

As noted above, the agreement does permit service solely by email. And the affirmation of service does state that plaintiff's counsel sent defendants the initiating papers in the action "via . . . email at the following . . . email address" under the terms of the agreement. (NYSCEF No. 3 at 1.) But no service email is given in the affirmation. (See id.) Nor, in any event, given the redaction of merchant's email, would this court be able to determine whether any emailed service satisfies the requirements of the agreement.[FN1] The point here is not necessarily that plaintiff failed to serve defendants properly, so as to require dismissal of the action for lack of personal jurisdiction; but that plaintiff has failed on this motion to establish proper service, as required to obtain default judgment.

Plaintiff also has not established that it complied with the additional-notice requirements of CPLR 3215 (g) (3) with respect to guarantor. That provision requires that when, as here, a plaintiff seeks a default judgment on a contract claim against a natural person based on nonappearance, the plaintiff must "mail[ ] a copy of the summons by first-class mail to the defendant at his place of residence in an envelope" that "bear[s] the legend 'personal and confidential' " and does not "indicat[e] on the outside of the envelope that the communication is from an attorney or concerns an alleged debt." The affirmation of additional mailing provided by plaintiff's counsel reflects mailing on guarantor at that same physical address of merchant, without establishing that merchant's physical address is also guarantor's place of residence; and the affirmation does not indicate whether CPLR 3215 (g) (3)'s requirements with respect to the appearance of the envelope were complied with. (See NYSCEF No. 4 at 1.) Plaintiff's noncompliance with CPLR 3215 (g) (3) would alone be sufficient to warrant denying this motion with respect to guarantor. (See 231st Riverdale LLC v 7 Star Home Furniture Inc., 198 AD3d 524, 525 [1st Dept 2021] [denying default-judgment motion because plaintiff did not satisfy the additional-notice requirements under CPLR 3215 [g] [3]].)

2. Additionally, plaintiff has not established the facts constituting its claim, as required by CPLR 3215 (f). A plaintiff may do so through a party affidavit or through a complaint verified by one with personal knowledge of the facts. Plaintiff's complaint was verified by counsel, based on counsel's review of the file in the action (see NYSCEF No. 2 at 7), which is not sufficient for CPLR 3215 (f) purposes. (See Beltre v Babu, 32 AD3d 722, 723 [1st Dept 2006].)

As a result, plaintiff must rely solely on the affidavit it provides from its principal. (See NYSCEF No. 7 at 1-3.) That affidavit, however, states at the outset that it is made partly based on the affiant's "personal knowledge of this matter based on [his] position" with plaintiff, and partly "based on the file that the company has relating to this matter."[FN2] (NYSCEF No. 7 at ¶ 1.) [*3]Crucially, the affidavit does not attach documentary evidence of defendants' default under the cash-advance agreement and guarantee (such as a ledger or the like) and the corresponding amounts owed—only the agreement and guarantee themselves.[FN3] And the paragraphs of the affidavit addressing the alleged defaults do not state that the representations in those paragraphs, in particular, are made on personal knowledge. (See id. at ¶¶ 5-7.) Those statements, therefore, are inadmissible hearsay that cannot support the grant of default judgment. (See Wells Fargo Bank, NA v Oziel, 196 AD3d 618, 621 [2d Dept 2021]; Bank of NY Mellon v Gordon, 171 AD3d 197, 205-206 [2d Dept 2019].)

Accordingly, it is

ORDERED that plaintiff's default-judgment motion is denied; and it is further

ORDERED that if plaintiff does not file a renewed default-judgment motion, supported by appropriate proof of service and documentation of plaintiff's claims, within 30 days of entry of this order, the action will be dismissed; and it is further

ORDERED that plaintiff shall serve a copy of this order with notice of its entry on defendants by certified mail, return receipt requested, directed to defendants' last-known mailing addresses.

Dated: September 8, 2023
Hon. Gerald Lebovits
J.S.C. Footnotes

Footnote 1:For this reason, the court cannot treat plaintiff's counsel's June 26, 2023, emailing of additional notice to defendant-merchant as constituting, in effect, the original service on merchant. Such service would also be untimely under CPLR 306-b, regardless.

Footnote 2:To the extent that the affiant is representing that his affidavit is made on "personal knowledge of this matter . . . based on the file that the company has relating to this matter" (NYSCEF No. 7 at ¶ 1), that representation would be a contradiction in terms that could not serve as the factual support for a default judgment.

Footnote 3:The court notes for the parties' reference going forward that $19,355.50 of the total amount claimed of $46,365.50 comprises contractual default and collection fees. (See NYSCEF No. 7.) Plaintiff has not established (or attempted to establish) that these fees constitute a reasonable advance estimate of difficult-to-calculate damages, as required for the fees to be collectible liquidated damages, rather than impermissible penalties. (See Forever Funding LLC v S.F. Meats, Inc., 2022 NY Slip Op 513056[U], at *2-3 [Sup Ct, NY County Dec. 22, 2022]; Irwin Funding, LLC v Dexter Young Cattle Feeding, 2022 NY Slip Op 51035[U], at *2 n 1 [Sup Ct, NY County Oct. 21, 2022].)