Cramer & Anderson Partners Kent Mancini and William Franklin successfully defended a Connecticut housing authority sued by a factoring company for $2.2 million under the Uniform Commercial Code (UCC) for a purported wrongful payment over a notice of assignment.
The original lawsuit was filed in May 2017. Attorneys Mancini and Franklin won summary judgment in trial court in 2018 on behalf of the Housing Authority for the City of Meriden.
Factor King, the plaintiff, appealed and the case was argued before the Connecticut Appellate Court last Jan. 16.
In a May 26 decision, the Appellate Court affirmed the trial court’s decision to grant summary judgment in favor of the housing authority.
A petition followed for certification to appeal to the Connecticut Supreme Court, which was denied last summer.
“Many people aren’t familiar with how factoring companies attempt to use the UCC and this was a complex case, but we were always confident in the housing authority’s legal position in this case,” Attorney Mancini said. “It’s gratifying to have our position strongly affirmed by both the trial court and Appellate Court, and now to be able to tell the housing authority the case is finally over.”
As the trial court explained, “[f]actoring is a process wherein one business—a factoring firm, purchases accounts receivable from another business at a discounted price and in exchange, the factoring firm advances working capital.”
The underlying issue in Factor King, LLC v. Housing Authority for the City of Meriden et al was summarized in the Appellate Court decision.
On August 30, 2016, Factor King and a third party, AEG, entered into an agreement under which Factor King received the option to purchase any of AEG’s accounts receivable that it deemed to be eligible accounts, and received a security interest in all of AEG’s accounts receivable, purchased or unpurchased. The agreement provided that the plaintiff may, but was not required to, purchase any of those accounts that it deems eligible.
On November 9, 2016, the Appellate Court decision recounts, the housing authority paid $2,217,750 directly to AEG, not to Factor King, in response to an invoice sent by AEG for work it had performed for the housing authority. There was no dispute that Factor King had not, in fact, purchased any of these invoices.
Factor King claimed in its lawsuit that, pursuant to the UCC, the housing authority should have made the $2,217,750 payment to Factor King, despite Factor King having never purchased the underlying invoices from AEG.
The housing authority sought summary judgment on the basis that Factor King had no right to collect on unpurchased invoices. The trial court agreed, finding that since Factor King did not purchase the underlying accounts receivable from AEG simply by virtue of entering into the agreement, Factor King did not have the right to collect the $2,217,750 payment. The Appellate Court agreed.
“On appeal, [Factor King] argues that the court erred in ruling that (1) § 42a-9-406 applies only to invoices actually purchased by the party assigned an account, and (2) the [Factor King] is not considered an ‘‘assignee’’ of the account in question under the agreement such as to trigger the protection of § 42a-9-406,” the Appellate Court decision says. “… [Factor King] also challenges the court’s denial of its motion for summary judgment. In response, the [housing authority] argues that (1) § 42a-9-406 contemplates the purchase of specific invoices in order for those amounts to become collectible by the plaintiff, and (2) the plaintiff is not an ‘‘assignee’’ of the account in question for purposes of triggering § 42a-9-406 because the plaintiff had only been ‘‘assigned’’ a security interest in the account, and had not been assigned the specific amount due on the invoice sent to the defendant.”
“We agree with the defendant and, accordingly, affirm the judgment of the trial court,” the Appellate Court decision says, adding, “The trial court properly denied the plaintiff’s motion for summary judgment; the court determined that there was no genuine issue of material fact that the plaintiff had never been assigned a specific legal right to recover on the specific invoice related to the payment and, this court having determined that an actual assignment of the amount due or to become due is a precondition to collecting on an invoice pursuant to § 42a-9-406, agreed with the trial court that there was no genuine issue of material fact that the requisite assignment of the defendant’s invoice never occurred.”
About Attorney Mancini
Attorney Mancini represents individual, corporate and public sector clients in a wide range of Civil Litigation and Appellate Litigation cases, including the prosecution and defense of claims in contract, construction, property, collections, personal injury, zoning, tax appeal, foreclosure, eviction, insurance, and commercial disputes. He handles all phases of civil trial practice, including negotiation, pre-judgment remedies, discovery, mediation, arbitration, trial, appeals, and post-judgment proceedings. Attorney Mancini’s practice areas also include Land Use & Environmental Law, Municipal Law, and Residential & Commercial Real Estate Law.
About Attorney Franklin
Attorney Franklin has spent his entire career at Cramer & Anderson engaged in Civil Litigation and Appellate Litigation. He has broad experience in appellate advocacy, both in the Connecticut Supreme Court and the Connecticut Appellate Court, and has briefed and argued over 35 appeals on a broad range of legal issues, and from a wide variety of sources.
Working with Cramer & Anderson
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Attorneys are available as usual by phone or email, and connecting with clients using technology such as Zoom. For more information, see the firm’s website or call the flagship office in New Milford at (860) 355-2631. Other regional offices are located in Danbury, Ridgefield, Kent, Washington Depot, and Litchfield.