Calltrol Corp. v. DialConnection, L.L.C., Index No. 65994/2015, 05/10/16 (Scheinkman, J.)

Motion to Dismiss; Breach of Contract; Statute of Limitations; Tolling of Statute of Limitations; Uniform Commercial Code (UCC); CPLR 213(2).

By: Angela Cipolla | Staff Writer

Plaintiff, Calltrol Corporation, is an authorized distributor of software products and other third party products for C.T. Ventures, Inc. Defendant, DialConnection, LLC, sells software purchased from Plaintiff. The parties entered into a contract in which Defendant became a licensee of products which Plaintiff distributes (hereinafter “the first contract”). Later, the parties entered into a second contract and included “Article 7.1(a),” which stated that Defendant owed Plaintiff a balance of over four hundred thousand dollars from previous dealings, (hereinafter “the second contract”). Defendant made payments towards this balance of over forty thousand dollars. However, after Defendant failed to make further payments, Plaintiff commenced a lawsuit for breach of contract, seeking relief in the amount of over three hundred thousand dollars with interest and costs included.

Defendant moved to dismiss Plaintiff’s action as time-barred under CPLR 3211(a)(5) for failure to comply with the statute of limitations. Defendant argued that New York’s Uniform Commercial Code (“UCC”) period of four years applied, rather than the standard of six years following CPLR 213(2), on two bases: (1) that the second contract involved the “sale of goods” and; (2) that Article 7.1(a) related to the underlying transactions of the computer software or “goods,” and that the UCC would apply nonetheless because it governs “all transactions.”

In opposition, Plaintiff argued that the six year statute of limitations under CPLR 213(2) applied, making their action timely, because the contracts did not involve “goods” under the UCC. Specifically, Plaintiff asserted this argument on two bases: (1) that the debt was not for an actual “good” like computer software, nor for an underlying transaction involving goods, but instead for a licensing fee which accrued each time Defendant made a sale and (2) that Article 7.1(a) was akin to a promissory note which was “divorced from the underlying transactions,” and financial in nature.

After considering both arguments, the court denied Defendant’s motion to dismiss on the bases that (1) Defendant failed to meet its prima facie burden of demonstrating that Plaintiff’s cause of action was untimely and (2) Plaintiff successfully raised questions of fact regarding whether the statute of limitations was tolled or inapplicable. First, the court analyzed the date of the breach to determine when the statute of limitations commenced. Here, the court concluded that breach occurred prior to the second contract. Second, the court acknowledged two ways the statute of limitations may be tolled. Plaintiff provided evidence of both: (1) through partial payment of a debt, so long as payment was a portion of admitted debt, and (2) through the debtor signing a written acknowledgment of an existing debt without inconsistencies regarding the intention to pay. Plaintiff provided evidence of both methods in its opposition. The court concluded that signing the second contract demonstrated Defendant’s admitted debt and intention to pay, and that previous payments suggested the time period may have been tolled. The court thereby found an issue of fact as whether the statute of limitations could be tolled and if the UCC was applicable.

Consequently, the court denied Defendant’s motion ot dismiss because there were questions of fact.

Calltrol Corp. v. DialConnection, L.L.C., Index No. 65994/2015, 05/10/16 (Scheinkman, J.).

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