Summary Judgment on a Personal Guaranty Requires Proof of the Specific “Guaranteed Obligations” in a Revenue Purchase Agreement

Case: EBF Holdings, LLC v Defiant Arms, L.L.C. (2026 NY Slip Op 04563, 4th Dept July 24, 2026)
Court: Appellate Division, Fourth Department

1. Introduction

This appeal arises from a business-funding dispute framed as a breach of contract action. Plaintiff EBF Holdings, LLC (doing business as Everest Business Funding) alleged that it entered into a “revenue purchase agreement” with Defendant Defiant Arms L.L.C., under which plaintiff advanced funds in exchange for 15% of Defiant Arms’s weekly receivables, collected via ACH withdrawals. Defendant Dwayne Edmond Favors executed a personal guaranty tied to Defiant Arms’s performance.

After payments stopped, plaintiff sought summary judgment. Defendants opposed and cross-moved to dismiss, arguing (i) the agreement was actually a usurious loan (and therefore void), (ii) it was procured by fraud, and (iii) the guaranty did not cover the claimed payment obligations.

The Fourth Department’s majority largely endorsed the agreement’s characterization as a receivables purchase (not a loan) and upheld summary judgment against Defiant Arms for breach, but it vacated the judgment because plaintiff failed to establish—on its own moving papers—its entitlement to summary judgment on the guaranty claim against Favors. A dissent would have denied summary judgment in full.

2. Summary of the Opinion

Majority holding

• Not a usurious loan (on this record): Applying the “absolute entitlement to repayment” framework used in merchant cash advance (MCA) litigation, the court rejected the contention that the agreement was a loan.
• Defiant Arms—breach claim: Plaintiff met its prima facie burden on summary judgment that Defiant Arms breached the agreement by allegedly denying plaintiff access to the designated account, and defendants did not raise a triable issue of fact.
• Favors—guaranty claim: Plaintiff failed to establish that the amounts it sought fell within the contractually defined “Guaranteed Obligations”. Under Winegrad, that failure required denial of summary judgment on the second cause of action regardless of opposition. The court therefore vacated the judgment and modified the order to deny summary judgment as to the guaranty claim.

Dissent

Two justices would have denied plaintiff’s motion entirely, reasoning that plaintiff did not supply adequate documentary proof of Defiant Arms’s default (e.g., statements for the designated ACH-debit account), and that defendants raised triable issues regarding both breach (bank “fraud hold” allegedly caused by a third party) and whether the deal was a usurious loan under First Department authority.

3. Analysis

A. Precedents Cited

1) The MCA “loan vs. receivables purchase” framework

The majority anchored its illegality/usury analysis in a familiar MCA test: a transaction is a “loan” only if the funder is absolutely entitled to repayment under all circumstances.

• Samson MCA LLC v Joseph A. Russo M.D. P.C./IV Therapeutics PLLC [appeal No. 2] (219 AD3d 1126 [4th Dept 2023]) supplied the controlling Fourth Department formulation: “Unless a principal sum advanced is repayable absolutely, the transaction is not a loan.” The court also relied on Samson for the significance of reconciliation, lack of a definite term, and bankruptcy non-recourse language.
• LG Funding, LLC v United Senior Props. of Olathe, LLC (181 AD3d 664 [2d Dept 2020]) was cited for the commonly used three-factor inquiry: (1) reconciliation, (2) finite term, and (3) bankruptcy recourse—used as practical indicators of whether repayment is contingent.
• Principis Capital, LLC v I Do, Inc. (201 AD3d 752 [2d Dept 2022]) reinforced the same analytic structure in another Department’s MCA jurisprudence, underscoring its broad adoption statewide.

Applying those authorities, the majority emphasized three contractual features: (i) a reconciliation clause (“Changes to the Weekly Payment”), (ii) no definite term (“no payment schedule and no time period”), and (iii) bankruptcy not constituting breach “in and of itself.” Collectively, these provisions supported the conclusion that plaintiff was not absolutely entitled to repayment.

2) Elements of breach and summary judgment proof

• 34-06 73, LLC v Seneca Ins. Co. (39 NY3d 44 [2022]) provided the Court of Appeals’ modern statement of the elements of breach of contract (contract, performance, breach, damages).
• Bridge Funding Cap LLC v SimonExpress Pizza, LLC [appeal No. 2] (240 AD3d 1186 [4th Dept 2025]) served as a Fourth Department application in a similar funding/contract posture, supporting the court’s approach to evidentiary sufficiency on summary judgment.
• WM. Schutt & Assoc. Eng'g & Land Surveying P.C. v St. Bonaventure Univ. (151 AD3d 1634 [4th Dept 2017], amended on rearg 153 AD3d 1676 [4th Dept 2017]) was cited for the movant’s burden and the opponent’s obligation to raise a triable issue once a prima facie showing is made.

3) The “movant must win on its own papers” rule for summary judgment

• Winegrad v New York Univ. Med. Ctr. (64 NY2d 851 [1985]) was pivotal to the disposition of the guaranty claim: failure to make a prima facie showing requires denial “regardless of the sufficiency of the opposing papers.” The majority used Winegrad to deny summary judgment against Favors because plaintiff did not establish that the sums sought were within the defined “Guaranteed Obligations.”

4) Dissent’s reliance on First Department MCA/usury authority

• Kapitus Servicing, Inc. v Ragtime Gourmet Corp./Joe-Le Holding Corp. (242 AD3d 638 [1st Dept 2025]) was cited by the dissent for a “totality of the circumstances” approach and for scrutinizing whether payment rates reflect a good-faith estimate of receivables.
• Davis v Richmond Capital Group, LLC (194 AD3d 516 [1st Dept 2021]) was cited by the dissent as an example where provisions effectively shifting risk back to the merchant (including guaranty and bankruptcy-related triggers) may support a finding that an MCA is functionally a loan.

B. Legal Reasoning

1) Usury/illegality defense rejected by the majority

New York’s usury doctrine generally applies to “loans” or “forbearances,” not true purchases of receivables. The majority’s reasoning followed a risk-allocation premise: if the purchaser bears meaningful risk that it will not be repaid (because repayment depends on actual receivables), the arrangement is less likely to be treated as a loan.

Here, the contract’s reconciliation clause, absence of a fixed term, and bankruptcy non-default language were treated as strong signals that repayment was not “absolute.” The majority therefore declined to void the agreement as a usurious loan.

2) Breach by Defiant Arms: “denied access” as interference

The agreement required Defiant Arms to deposit receivables into a designated account and permitted plaintiff to collect by ACH. Plaintiff’s manager asserted that Defiant Arms denied access to the account, depriving plaintiff of the weekly receivables. The majority held that this sufficed for plaintiff’s prima facie breach showing and that defendants did not rebut it with evidence creating a triable dispute.

3) Guaranty claim against Favors: limitation to “Guaranteed Obligations”

The most concrete doctrinal move in the decision is the majority’s insistence that summary judgment on a guaranty requires the movant to tether the claimed amounts to the guaranty’s defined scope.

Plaintiff argued that a payment breach by Defiant Arms automatically triggered Favors’s liability. The majority rejected that approach because the agreement did not impose a blanket guaranty of “all performance obligations.” Instead, it limited liability to enumerated “Guaranteed Obligations.” Because plaintiff failed to demonstrate that the alleged default and amounts sought fell within those obligations, summary judgment against the guarantor had to be denied under Winegrad.

C. Impact

1) Drafting and litigation strategy for funders (MCA/revenue purchase)

• Guaranty drafting: If funders intend a broad payment guaranty, this case spotlights the risk of narrower “Guaranteed Obligations” definitions. Precision (and internal consistency between default provisions, remedies, and guaranty language) will be outcome-determinative at the summary judgment stage.
• Motion practice: Plaintiffs seeking summary judgment should affirmatively map facts and damages to each defined guaranteed obligation, attaching the agreement sections and evidentiary proof showing why the guaranty is triggered.

2) Evidentiary expectations in ACH-interference defaults

The dissent signals that future panels (or trial courts) may demand more granular banking proof—designated-account statements, ACH return codes, bank notices of holds, and correspondence—especially where defendants offer a plausible third-party explanation (e.g., bank fraud hold) inconsistent with “intentional interference.”

3) Continued doctrinal convergence on MCA “three factors,” but with inter-Department nuance

The majority’s reliance on LG Funding, LLC v United Senior Props. of Olathe, LLC and Principis Capital, LLC v I Do, Inc. reflects statewide convergence on the “reconciliation/term/bankruptcy” indicators. Yet the dissent’s invocation of Kapitus Servicing, Inc. v Ragtime Gourmet Corp./Joe-Le Holding Corp. and Davis v Richmond Capital Group, LLC underscores that “totality of the circumstances” scrutiny—especially of how risk is practically allocated—remains a live and potentially outcome-shaping inquiry.

4. Complex Concepts Simplified

• Revenue purchase agreement / MCA: A funder “buys” a percentage of future receivables, typically collected daily or weekly. If it is a true purchase, repayment depends on business performance.
• Usurious loan: A loan charging interest above statutory limits can be void (depending on civil vs. criminal usury and the borrower’s status). Usury generally requires an obligation to repay a principal sum absolutely.
• Reconciliation provision: A clause allowing the periodic payment to be adjusted up or down to reflect actual receivables—supporting the argument that payments are contingent, not fixed debt service.
• Finite term: A set end date by which a fixed amount must be repaid. Lack of a term supports “purchase” characterization; a fixed term can suggest a disguised loan.
• Bankruptcy recourse: If bankruptcy triggers default and accelerates payment or allows collection regardless of receivables, that may indicate the funder is insulated from risk—more loan-like.
• ACH: An electronic network used for bank-to-bank transfers. In these contracts, funders often debit the merchant’s account automatically for weekly/daily amounts.
• Winegrad rule: On summary judgment, the movant must establish entitlement as a matter of law on its own evidence; if it fails, the motion is denied even if the opponent’s papers are weak.

5. Conclusion

EBF Holdings, LLC v Defiant Arms, L.L.C. delivers two practical lessons with doctrinal bite. First, the Fourth Department reaffirmed that a properly structured receivables purchase—featuring reconciliation, no fixed term, and bankruptcy non-default language—may defeat a usury-based illegality attack because repayment is not “absolute.” Second, and more pointedly, the court insisted that summary judgment on a personal guaranty turns on the guaranty’s actual text: where liability is limited to defined “Guaranteed Obligations,” a plaintiff must prove that the claimed amounts fall within that scope. The decision therefore strengthens text-based guaranty defenses in MCA litigation and raises the stakes for precise drafting and careful, obligation-by-obligation proof on summary judgment.