The opinion
RS E Orange LLC v Proudliving Cos., LLC
2024 NY Slip Op 31451(U)
April 19, 2024
Supreme Court, New York County
Docket Number: Index No. 655013/2023
Judge: Margaret A. Chan
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
State and local government sources, including the New
York State Unified Court System's eCourts Service.
This opinion is uncorrected and not selected for official
publication.
INDEX NO. 655013/2023
NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/15/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49M
--------------------X
RS E ORANGE LLC, INDEX NO. 655013/2023
Plaintiff,
MOTION DATE 11/03/2023
-v-
MOTION SEQ. NO. MS 001
PROUDLIVING COMPANIES, LLC, and ANDREW
BROWN
DECISION+ ORDER ON
Defendants. MOTION
--------------------X
HON. MARGARET A. CHAN:
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 13, 14, 15
were read on this motion to/for JUDGMENT - SUMMARY IN LIEU OF COMPLAINT
In this action, plaintiff RS E Orange LLC afkla Red Starr ("Red Starr" or
plaintiffj moves for summary judgment in lieu of complaint pursuant to CPLR 3213,
seeking to recover $3,999,272.00 plus late fees, costs, expenses, and reasonable
attorneys' fees allegedly owed by non·party PLA Six Portfolio JV LLC ("the
Company") under the Company's operating agreement and personally guaranteed
by defendants Proudliving Companies LLC ("PL") and Andrew Brown (together
with PL "defendants") pursuant to a guaranty agreement. The motion is unopposed.
However, for the reasons below, plaintiffs motion is denied.
BACKGROUND
On March 19, 2021, plaintiff Red Starr invested $6 million with the Company
(NYSCEF # 10, Plaintiffs Memo of Law, at 1). Pursuant to the Company's
Operating Agreement ("Agreement"), the Company was to make monthly payments
to plaintiff in certain amounts (id at 2; see NYSCEF # 5, Company Operating
Agreement, at 12 [definition of "preferred return"]).
The Company's Operating Agreement and Guaranty Agreement
Under the Agreement, if the Company committed any "Material Default"-
defined in the Agreement as, among other things, failure to pay or the commission
of a "Bad Act"-then the Company would be required to "redeem all of [plaintiffs]
Interest in the Company at the Full Redemption Price" (NYSCEF # 10 at 2, quoting
NYSCEF # 5 at 28 [§ 6.4(a)]; see also NYSCEF # 5 at 8 [definition of "Material
Default"]). The "Full Redemption Price" is the sum of.
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Motion No. 001
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NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/15/2024
(A) all accrued but undistributed Priority Preferred Return; (B) all
accrued but undistributed Enhanced Preferred Return; (C) all accrued
but undistributed Accrued Preferred Return; (D) all accrued but
undistributed Current Pay Return; (D) all accrued but undistributed
Standby Fees; (E) the full amount of all unreturned [plaintiff] Capital
Contributions, including, without limitation, all Additional RS
Contributions funded by [plaintiff] in accordance with Section 5.l(a)
and all additional Capital Contributions funded by [plaintiff] in
accordance with Section 5. l(c) hereof, (F) all costs and expenses
incurred by [plaintiff] in the enforcement of its right to redemption
pursuant to the terms of this Agreement, if any; and (G) any other
amounts [plaintiff] is entitled to under the terms of this Agreement.
(NSYCEF # 10 at 2-3, quoting NYSCEF # 5 at 27 [§ 6.3(e)(ii)]). Each capitalized
term within that definition is further defined in the Agreement, usually as some
sort of equation or obligation to pay (see NYSCEF # 5 at 1, 4, 6, 12, 14). Nowhere
does the Agreement require the Company to pay a specific amount of money upon a
Material Default, instead providing only the equations necessary to calculate the
Full Redemption Price.
These obligations to pay are secured by the Guaranty Agreement ("the
Guaranty"), which requires defendants PL and Brown to act as guarantors for the
"Guaranteed Obligations" (NYSCEF # 10 at 3). The Guaranteed Obligations are
defined as:
(a) payment and performance by the Company of the Investment to
[plaintiff] as, and to the extent required, pursuant to the [Agreement],
plus (b) the Preferred Return, the Enhanced Preferred Return, and the
Priority Preferred Return, as applicable, due and payable with respect
to the Investment, plus (c) all costs, including, without limitation, all
attorney's fees and expenses incurred by Red Starr in connection with
the collection and enforcement of the Guaranteed Obligations.
(NYSCEF # 6, Guaranty Agreement, ,r 2). Plaintiff alleges that these include "[a]ll
of the foregoing payment obligations" mentioned by plaintiff about the Agreement
(NYSCEF # 10 at 3).
The Guaranty further provides that if the Company fails to pay at any time,
the defendants will immediately pay plaintiff "in full without notice or demand, and
it shall not be necessary for [plaintiff] in order to enforce such payment by
[defendants], first to institute suit or exhaust its remedies against the Company or
others" (NYSCEF # 6 ,I 4). The Guaranty also contains language indicating that it is
unconditional and that defendants waive any defenses, counterclaims, or prompt,
diligent notice of default (id ,i,i 3, 9). Much like the Agreement itself, the Guaranty
does not stipulate any specific amount of money defendants must pay.
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Motion No. 001
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NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/15/2024
The Company Materially Defaults
Although the Company met all its obligations through 2022, beginning in
2023, plaintiff alleges a series of Material Defaults that activated the Guaranty (see
NYSCEF # 10 at 2, 4). First, the Company stopped making monthly payments
starting January 2023 (id at 4; NYSCEF # 3, Starr Aff,, 7). Throughout the next
month, plaintiff allegedly discovered more unspecified "Bad Acts" and Material
Defaults by the Company, which together caused the Company to owe the Full
Redemption Price (NYSCEF # 10 at 4; NYSCEF # 3 1 17). On March 7, 2023,
plaintiff sent both the Company and the defendants notice of the Material
Defaults/Bad Acts and demanded that defendants pay $3,439,231 in satisfaction of
the Guaranty (NYSCEF # 10 at 4•5; NYSCEF # 31118·19; NYSCEF # 7, March 7,
2023 Letter). Defendants did not make that payment (NYSCEF # 3119). The
Company then failed to contribute its pro rata share of a Capital Call initiated by
plaintiff, which amount to roughly $1,804,040.45 (NYSCEF # 10 at 5; NYSCEF # 3
, , 20·22; NYSCEF # 8, Capital Call Notice, at *1).
In response to plaintiffs March 7 demands, plaintiff and the Company agreed
to enter discussions to try to resolve plaintiffs issues (see NYSCEF # 9, Discussion
Agreement). Plaintiff and the Company even signed a "discussion agreement" on
August 17, 2023, dictating the terms of the discussion itself (id). Pursuant to the
discussion agreement, the Company admitted the following:
You [the Company and defendants] acknowledge and agree,
without reservation of any kind, that the Events of Defaults and
Material Defaults arising out of [defendant] PL's failure to cause
PLA Six Portfolio JV LLC (the 'Company") and/or [defendant]
PL's failure as manager of the Company to pay [plaintiff]
amounts due pursuant to [plaintiffs] Current Pay Preferred
Return beyond any cure period and/or [defendant] PL's failure to
pay the capital call described in the Removal Event Notice,
among other things (collectively the "Enforcement Events"),
occurred as described in the Exercise Notice, Removal Event
Notice, and as a result, [plaintiff] is authorized by the PE
Documents and fully entitled to take all immediately proceed
with all rights, remedies and legal causes or actions provided by
the PE Documents, which You acknowledge are in full force and
effect and are binding upon You in accordance with their term ...
(NYSCEF # 10 at 5, quoting NYSCEF # 9 1 3).
Plaintiff does not make any allegations about what occurred in those
discussions. Plaintiff instead concludes on the above allegations that "there can be
no factual dispute of any kind concerning the Events of Default, Mandatory
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Motion No. 001
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NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 04/15/2024
Redemption and Guarantors' obligations to pay Plaintiff the entire $3,999,272.00
that is currently due and owing" (NYSCEF # 10 at 5; NYSCEF # 3 ,I 25).
Plaintiff brought this action October 16, 2023, filing a motion for summary
judgment in lieu of complaint (see NYSCEF # 1, Summons and Notice of Motion).
Plaintiff also filed affidavits of service confirming that defendant Brown was served
October 19, 2023, and that defendant PL was served November 7, 2023 (NYSCEF
#s 13, 15).
DISCUSSION
CPLR 3213 permits "actions based upon an instrument for the payment of
money only to be commenced with a motion for summary judgment rather than a
complaint" (Banco Popular N. Am. v Wctory Taxi Mgt., Inc., I NY3d 381, 383
[2004]). To establish prim a facie entitlement to summary judgment in lieu of
complaint on a promissory note, a plaintiff must show that the instrument sued
upon contains "an unconditional promise to pay a sum certain ... due on demand or
at a definite time" ( Weissman v Sinorm Deli, Inc., 88 NY2d 437, 444 [1996]). To
establish such entitlement on a guaranty, the plaintiff must show that the sum
certain is "readily ascertainable," whether or not it appears directly on the face of
the guaranty (see Bank ofAm., N.A. v Lightstone Holdings, LLC, 32 Misc 3d
1244(A), *4 [Sup Ct, NY County, 2011], citing Manufacturers Hanover Tr. Co. v
Green, 95 AD2d 737, 737 [1st Dept 1983]).
An instrument does not qualify for CPLR 3213 treatment "if outside proof is
needed, other than simple proof of nonpayment or a similar de minimis deviation
from the face of the document" ( Weissman, 88 NY2d at 444; see Maglich v Saxe,
Bacon & Bolan, P.C., 97 AD2d 19, 21 [1st Dept 1983] ["(w)here proof outside the
instrument is necessary to establish the underlying obligation, the CPLR 3213
procedure does not apply"]). CPLR 3213 treatment is not available where plaintiff
relies exclusively on conclusory allegations to explain how the amount due was
calculated (HSBC Bank USA v IPO, LLC, 290 AD2d 246, 246 [1st Dept 2002]).
Here, the amount specified by plaintiff ($3,999,272.00) is not "readily
ascertainable" on the face of the Guaranty or the Agreement. For instance, nowhere
in the documents is there a specific stipulation that defendant owes $3,999,272.00
(see, e.g., Bank ofAm., NA. v Solow, 59 AD3d 304, 305 [1st Dept 2009] [guaranty
stipulated to sum of $15,910,000]) or a cap on recovery that would be applicable to
these facts (see, e.g., Lightstone Holdings, 32 Misc 3d at *4 [guarantor liability on
$1.8 billion loan was capped at $100 million]). All of plaintiffs statements about the
$3,999,272.00 owed are conclusory, with nothing in the record showing how the
amount due was calculated (see HSBC, 290 AD2d at 246 ["the prima facie case for
such relief [under CPLR 3213] requires documentary evidence or an explanation of
how the indebtedness is calculated, other than in the form of mere conclusory
allegations"]). The only places this amount is mentioned is in plaintiffs
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memorandum of law and in the very last paragraph of the Starr affidavit (see
NYSCEF # 3 if 25).
It is also unclear what the amount represents as plaintiff does not specify if
that is the current Full Redemption Price or some other amount owed. If it is the
Full Redemption Price, plaintiff has not established that the Guaranty applies. The
definition of "Guaranteed Obligations" does not expressly include the phrase "Full
Redemption Price" (see NYSCEF # 6 ,r 2), nor is it obviously implied. Because
plaintiff does not explain how the $3,999,272.00 amount was calculated, "an
excursion outside the four corners of the agreement" is required to find the amount
due (Kerin v Kaufman, 296 AD2d 336, 337 [1st Dept 2002]). Thus, plaintiff is not
entitled to summary judgment in lieu of complaint.
CONCLUSION
Based on the foregoing, it is
ORDERED that plaintiff RS E Orange LLC's motion for summary judgment
in lieu of complaint against defendants Proudliving Companies, LLC and Andrew
Brown is denied; and it is further
ORDERED that this proceeding is converted into a plenary action and
defendant shall have 30 days from the date of this order to file an answer to the
complaint; and it is further
ORDERED that plaintiff RS E Orange LLC shall serve defendants a copy
this Order within 10 days upon defendants; and it is further
ORDERED that a preliminary conference shall be held via Microsoft Teams
on May 29, 2024, at 10:30 a.m. or at such other time that the parties shall set with
the court's law clerk.
This constitutes the Decision and Order of the court.
4/19/2024
DATE
~ §
CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION
GRANTED 0 DENIED GRANTED IN PART □ OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
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