Judge: Peter A. Hernandez, Case: 23PSCV01588, Date: 2023-10-30 Tentative Ruling

Case Number: 23PSCV01588    Hearing Date: April 24, 2024    Dept: K

Plaintiff EBF Holdings, LLC dba Everest Business Funding’s Application for Default Judgment is DENIED without prejudice.

Background   

Plaintiff EBF Holdings, LLC dba Everest Business Funding (“Plaintiff”) alleges as follows:

On July 21, 2022, Plaintiff purchased $308,000.00 worth of Future Receipts from Topix Group US Corporation (“Company”) for $220,000.00 (“Purchase Price”). In consideration for the Purchase Price, Company executed a series of documents, including a Revenue Based Financing Agreement, an Agreement for Direct Deposits (ACH Credits) and Direct Collections (ACH Debits), an Addendum to the Agreement, and Bank Login Information (collectively, “Purchase Agreement”). Bradley Richard Mantha (‘Mantha”) executed a guaranty of the Purchase Agreement. As part of the Purchase Agreement, Company, through Mantha, represented in writing that (1) its monthly average sales for its business were $482,699.72 and its annual sales were $5,792,396.64 (2) Company was not insolvent (3) Company did not have any intention to close the business or cease operating (4) Company would use its best efforts to maintain and grow its business and (5) Company would use the funds from Plaintiff solely for business purposes.

Per the Purchase Agreement, Company authorized Plaintiff to debit from its bank account, by means of an automated clearing house (ACH) debit, 15% of Company’s accounts-receivable (the “Specified Percentage”), an initial fixed, agreed-upon amount from its bank account as a good faith approximation of the Specified Percentage (the “Initial Daily Installment”) until such time as the Purchase Amount of Future Receipts realized were remitted in full. Commencing October 20, 2022, Plaintiff began receiving NSF (“non-sufficient funds”) notifications from Company’s bank. Plaintiff received four NSF notifications. Plaintiff has demanded repayment of money paid under the Purchase Agreement, but Company refuses.

On May 26, 2023, Plaintiff filed a complaint, asserting cause of action against Company, Mantha and Does 1-10 for:

1.                  Breach of Revenue Based Financing Agreement

2.                  Fraud

3.                  Negligent Misrepresentation

4.                  Violation of UCL

5.                  Claim and Delivery

6.                  Breach of Guaranty

On July 14, 2023, Topix’s and Mantha’s defaults were entered.

A Case Management Conference is set for October 30, 2023.

Discussion

Plaintiff’s Application for Default Judgment is denied without prejudice. The following defects are noted:

The court queries how Plaintiff would be entitled to $142,656.29 and possession of the Future Receipts as set forth in the Purchase Agreement. (See Proposed Judgment, ¶¶ 6 and 7).

Plaintiff is requested to brief this issue in a subsequent application.