Factor King, LLC v. Block Builders, LLC
193 F. Supp. 3d 651
M.D. La.2016Background
- Block Builders (general contractor) subcontracted BMP to perform work on a parking garage; the subcontract required BMP to hold progress payments in trust for suppliers and allowed Builders to make joint checks to BMP and suppliers.
- BMP assigned its accounts (including Invoice #6 and Invoice #7) to Factor King under a factoring agreement; Factor notified Builders of the assignment and obtained a signed Invoice Letter from Builders for Invoice #7.
- For Invoice #6, Builders paid suppliers by joint check and paid Factor the remainder; Factor did not object. For Invoice #7, Builders later reduced the invoice amount, issued joint checks paying suppliers directly, but did not pay Factor; Factor recorded a lien for the full Invoice #7 amount.
- Factor sued Builders (and later added property owner Vintala) alleging breach of contract, detrimental reliance, wrongful payment, lien foreclosure, and open account; Builders counterclaimed for improper lien and sought recoupment.
- Parties submitted a stipulated set of facts and three agreed disputed legal questions focused on: (1) whether BMP could assign supplier portions of Invoice #7 to Factor; (2) whether Builders had to pay suppliers before Factor; and (3) whether Builders could unilaterally reduce Invoice #7.
- The court granted cross-motions for summary judgment in part: holding Factor entitled only to $25,702.47 from Invoice #7 (invoice total minus amounts paid to suppliers), entering judgment for Builders/Vintala on most of Factor’s claims, and for Factor on Builders’ improper-lien claim in reduced amount.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Factor is entitled to full Invoice #7 (including supplier portions) after BMP assigned receivables | Factor: Notices of assignment and signed Invoice Letter entitle it to full $215,077.82 | Builders: Subcontract (and joint pay agreements) require supplier amounts be paid first; assignee takes subject to those terms | Held: Assignee (Factor) is subject to subcontract and joint-pay modifications; Builders properly paid suppliers; Factor limited to remainder ($25,702.47) |
| Whether Builders had to pay suppliers before paying Factor | Factor: Invoice Letter obligates Builders to pay Factor on invoice due date | Builders: Subcontract trust clause and joint-pay agreements permit/require paying suppliers first | Held: Builders could pay suppliers first under subcontract and joint agreements; Factor not entitled to supplier payments |
| Whether Builders could unilaterally reduce Invoice #7 for incomplete work | Factor: Invoice Letter acknowledged invoice correctness; reduction not permitted without consent | Builders: Work incomplete; entitled to reduce invoice to reflect defective/unfinished work | Held: Builders failed to present evidence of damages/cost to complete; unilateral reduction unsupported — summary judgment for Factor on this issue (no valid reduction) |
| Validity/foreclosure of Factor's lien for full invoice amount | Factor: Lien for full invoice valid; seeks foreclosure | Builders/Vintala: Lien improper because Factor not entitled to supplier amounts; seek cancellation/damages | Held: Lien validly filed but cannot be enforced for full amount; Factor entitled only to reduced amount; Builders/Vintala failed to show they satisfied statutory cancellation prerequisites |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard for genuine dispute of material fact)
- Celotex Corp. v. Catrett, 477 U.S. 317 (party opposing summary judgment must show existence of essential element)
- Little v. Liquid Air Corp., 37 F.3d 1069 (nonmoving party cannot rely on conclusory allegations at summary judgment)
- Lillis v. Anderson, 21 So.2d 389 (contractor entitled to contract price absent owner proof of damages for partial default)
- Suire v. Lafayette City-Par., 907 So.2d 37 (elements of detrimental reliance)
- Frey Plumbing Co., Inc. v. Foster, 996 So.2d 969 (open account definition and analysis)