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Note: Through a Receivables Purchase Agreement (RPA), Newberry Bakers, Inc. (Account Creditor) agreed to sell its unpaid accounts receivable to Gulf Coast Bank and Trust Co. (Gulf Coast). Under the RPA, Account Creditor was obligated to send Gulf Coast within one business day of receipt, “any payment or proceeds that it may receive with respect to any Receivable Asset”. Account Creditor also granted a “continuing first priority security” in all of its accounts, chattel papers, equipment, inventory, investment property, letter of credit rights and proceeds therefrom as collateral for its RPA obligations. Additionally, as president of Account Creditor, Howard Anders (Guarantor) signed a limited guaranty agreeing to be solely liable for Account Creditor’s obligations under the RPA.

Subsequently, an account debtor made a receivables payment directly to Account Creditor instead of Gulf Coast and Guarantor otherwise failed to direct payment to Gulf Coast within one business day. Moreover, demands on some receivables purchased by Gulf Coast were rejected by their respective account debtors due to claims of offset or other defenses in violation of the warranty provisions of the RPA. Claiming breach of the RPA, Gulf Coast demanded performance by Guarantor on the limited guaranty. Guarantor refused. Alleging breach of the guaranty, Gulf Coast sued Guarantor. Thereafter, Gulf Coast filed an unopposed motion for summary judgment. The United States District Court for the Eastern District of Louisiana, Fallon, J., granted summary judgment in favor of Gulf Coast.

The Judge noted the factors Gulf Coast was required to demonstrate to prevail on its motion for summary judgment, namely: “(1) the existence and ownership of a guaranty contract; (2) the terms of the underlying contract by the holder; (3) the occurrence of the conditions upon which liability is based; and (4) the failure or refusal to perform by the guarantor.”

Finding all of the elements satisfied based on the pleadings as well as no genuine issue of material fact raised by the unopposed motion, the Judge granted summary judgment in favor of Gulf Coast. The opinion is silent as to the amount of damages sought by Gulf Coast.

[MJK]

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