Major’s Furniture Mart, Inc. v. Castle Credit Corp. Inc.
United States Court of Appeals for the Third Circuit
602 F.2d 538 (1979)
Major’s Furniture Mart, Inc. (Major’s) (plaintiff) was in the business of selling furniture for retail. Castle Credit Corp., Inc. (Castle) (defendant) was in the business of financing furniture dealers. Major’s and Castle entered into an agreement for the financing of Major’s accounts receivable. The agreement provided that Major’s would sell accounts receivable to Castle at a significant discount from the account’s face value. Castle had the ability to refuse to purchase any account, in Castle’s discretion. Also, Major’s was required to repurchase any account sold to Castle that was in default for more than 60 days for the full value of the account, plus any costs incurred by Castle. Over the course of the agreement, Major’s sold over 600 accounts to Castle. Major’s was required to repurchase 73 delinquent accounts. During the course of the agreement, Castle unilaterally changed the interest rate. Major’s eventually defaulted on the agreement. Major’s sued Castle, alleging that the agreement was actually a financing agreement that created a security interest in the accounts, rather than a true sale of the accounts. Major’s alleged that Castle collected a surplus of funds and was required to submit that surplus to Major’s. The district court granted summary judgment to Major’s on its claims. Castle appealed to the United States Court of Appeals for the Third Circuit.
Rule of Law
Holding and Reasoning (Garth, J.)
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