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Beaufort Capital Partners LLC v. Oxysure Systems, Inc.

United States District Court, S.D. New York

March 7, 2017

BEAUFORT CAPITAL PARTNERS LLC, Plaintiff,
v.
OXYSURE SYSTEMS, INC., Defendant.

          OPINION AND ORDER

          J. PAUL OETKEN United States District Judge

         Plaintiff Beaufort Capital Partners LLC (“Beaufort”) initiated this action on June 1, 2016, by filing a motion for summary judgment in lieu of complaint in New York Supreme Court. (Dkt. No. 1 at 1.) Beaufort seeks summary judgment to enforce amounts owed and interest on three promissory notes. Defendant Oxysure Systems, Inc. (“Oxysure”) removed the case to this Court on June 30, 2016. (Id.) For the reasons that follow, Beaufort's motion for summary judgment is granted.

         I. Background

         The following facts-which are undisputed unless otherwise noted-are taken from the record before the Court, including materials incorporated by reference therein. (See Dkt. Nos. 1, 15, 16, 17.) See also Beaufort Capital Partners LLC v. Oxysure Therapeutics, Inc., No. 652908/2016 (N.Y. Sup. Ct. 2016).

         Beaufort lent Oxysure a total of $330, 000 through three promissory notes. (Dkt. No. 1-1 at 7.) On February 10, 2016, Beaufort loaned Oxysure $150, 000 under the terms and conditions set forth in the February 10, 2016, Promissory Note, which provided for a maturity date of August 10, 2016. (Id.) See Beaufort, No. 652908/2016, Doc. No. 4 (“February Note”).[1] On March 10, 2016, Beaufort loaned Oxysure $30, 000 under the terms and conditions set forth in the March 10, 2016, Promissory Note, which provided for a maturity date of September 10, 2016. (Dkt. No. 1-1 at 7-8.) See Beaufort, No. 652908/2016, Doc. No. 5 (“March 10 Note”). And on March 17, 2016, Beaufort loaned Oxysure $150, 000 under the terms and conditions set forth in the March 16, 2016, Promissory Note, which provided for a maturity date of September 17, 2016. (Dkt. No. 1-1 at 8.) See Beaufort, No. 652908/2016, Doc. No. 6 (“March 16 Note”). Beaufort funded the purchase of each of the Promissory Notes. (Dkt. No. 1-1 at 9-10.)

         Each of the Promissory Notes provides that “[i]f any Event of Default occurs (unless such Event of Default is waived in writing by the Payee), the full principal amount of this Note shall become, at the Payee's election, immediately due and payable in cash.” (Dkt. No. 1-1 at 8.) See February Note ¶ 3(b); March 10 Note ¶ 3(b); March 16 Note ¶ 3(b). In the list of circumstances constituting an Event of Default, the Promissory Notes include: “Failure to complete the preparation and filing of the financial statements with the SEC. Beaufort MUST be notified 7 days ahead of failure to complete the preparation and filing of the financial statements with the SEC in a timely manner.” See February Note ¶ 3(a)(vii); March 10 Note ¶ 3(a)(vii); March 16 Note ¶ 3(a)(vii). The Notes also provide that default interest at the rate of 10% per year accrues beginning five days after an Event of Default. (Dkt. No. 1-1 at 8.) See February Note ¶ 3(b); March 10 Note ¶ 3(b); March 16 Note ¶ 3(b). They further provide for attorney's fees and costs in the event of an action to enforce the notes. (Dkt. No. 1-1 at 9.)

         On March 30, 2016, Oxysure filed SEC Form 12b-25, stating that it required additional time to file its financial statements; Oxysure did not provide prior notice to Beaufort of its delay. (Id. at 10.) On April 15, 2016, Oxysure filed SEC Form 15, indicating that it was terminating its registration of securities, and thereby its duty to file financial reports under Section 13(a) of the Exchange Act of 1934. (Id. at 10-11.) On April 18, 2016, Beaufort notified Oxysure that its failure to file a financial report and the termination of its ongoing duty to do so constituted an Event of Default under the Promissory Notes and demanded full payment of the Notes. (Id. at 11.)

         Beaufort initiated this action in New York State Supreme Court under New York's provision for summary judgment in lieu of complaint for actions to collect money on a debt instrument. See N.Y. C.P.L.R. § 3213. Oxysure removed the case to this Court on June 30, 2016. Jurisdiction is proper under this Court's diversity jurisdiction: Beaufort is a single-member LLC whose member is a citizen of New York; Oxysure is a Delaware corporation based in Texas; and the amount in controversy exceeds $75, 000. (Dkt. No. 1 at 2; Dkt. No. 9.) See 28 U.S.C. §§ 1332, 1441; see also Beaufort, No. 652908/2016, Doc. No. 3 ¶ 5 (“Marino Declaration”).

         II. Legal Standard

         Upon removal to federal court, a New York C.P.L.R. section 3213 motion for summary judgment in lieu of complaint is converted to a motion for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. See Tabatznik v. Turner, No. 14 Civ. 8135, 2016 WL 1267792, at *4 n.2 (S.D.N.Y. Mar. 30, 2016); Valley Nat'l Bank v. Oxygen Unlimited, LLC, No. 10 Civ. 5815, 2010 WL 5422508, at *2 (S.D.N.Y. Dec. 23, 2010).

         Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In considering a motion for summary judgment, a court must view the evidence “in the light most favorable to the non-moving party and draw all reasonable inferences in its favor.” Allen v. Coughlin, 64 F.3d 77, 79 (2d Cir. 1995).

         “Under New York law, to make out a prima facie case for recovery on a promissory note ‘a plaintiff must simply show proof of a note and failure to make payment.'” Tabatznik, 2016 WL 1267792, at *5 (quoting Camofi Master LDC v. Coll. P'ship, Inc., 452 F.Supp.2d 462, 470 (S.D.N.Y. 2006)). Where a noteholder has made out a prima facie case, the burden shifts to the payee to prove the existence of defense against the note creating a triable issue of fact. See id.

         III. Discussion

         Beaufort has adequately pleaded a prima facie case for recovery on summary judgment in lieu of complaint. See, e.g., Ahmad v. Luce, No. 2014-11464, 2017 WL 601352 (N.Y. A.D.2d Dep't Feb. 15, 2017) (“In this action to recover on a promissory note, commenced by motion for summary judgment in lieu of complaint pursuant to CPLR 3213, the plaintiffs made a prima facie showing of their entitlement to judgment as a matter of law by submitting the promissory note, which contained an unequivocal and unconditional obligation to pay, and proof of the defendants' failure to make payments on the note according to its terms.”). Beaufort has shown proof of the existence of the notes and it has alleged a breach by Oxysure. Oxysure's failure to notify Beaufort of its failure to complete required filings with the SEC, and of its intention ...


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