On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-3579-09.
The opinion of the court was delivered by: Espinosa, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman, Yannotti and Espinosa.
The opinion of the court was delivered by ESPINOSA, J.A.D.
This action presents the competing interests of two secured creditors in the accounts receivable of a debtor. Defendant Universal Funding LLP (Universal) is a factoring company that purchased accounts receivable from D'Lusso Transport Services, Inc. (D'Lusso). Plaintiff Pascack Community Bank (Pascack) issued a line of credit (LOC) to D'Lusso that was secured, in part, by D'Lusso's accounts receivable. After D'Lusso defaulted, Pascack sought judgment against Universal for the amount due and owing to it under the terms of the LOC, claiming that Universal collected proceeds of accounts after Pascack had perfected its security interest. Universal appeals from the order granting summary judgment to Pascack and entering judgment against Universal for $144,569.71. For the reasons that follow, we reverse.
The record here is sparse, consisting of the certifications of Dominic L. Jengo, Universal's principal, and George M. Pangis, Esq., counsel for Pascack,*fn1 that were submitted to the court in support of a motion and cross-motion for summary judgment. In addition, the court was provided with a copy of the factoring agreement and two pages from the security agreement between Pascack and D'Lusso.
D'Lusso was a corporation incorporated in Delaware and located in New Jersey. Universal is a partnership engaged in the business of providing factoring services to other businesses by purchasing their accounts receivable for the face amount of the invoices less its fee. The factoring agreement, dated April 9, 2001, provided: for and in consideration of a factoring fee of two and one half percent (.025%) for a period of 30 days from date accepted by Universal Funding LLP, and two and one half percent (.025%) for every 30 days thereafter not to exceed 60 days, To be paid and satisfied as hereinafter mentioned, agrees to advance funds to D'LUSSO TRANSPORT SERVICES INC. under the following conditions:
1. UNIVERSAL FUNDING LLP will, within one working day after receipt of D'LUSSO TRANSPORT SERVICES INC. invoices to their clients, advance monies equal to 85% of the invoices presented for factoring.
2. UNIVERSAL FUNDING LLP will bear the responsibility of posting all invoices presented for factoring to the party as noted on the invoice. All original invoices must be presented to UNIVERSAL FUNDING LLP in duplicate with supporting documentation as may be required by the payer of the invoices.
3. In addition, a letter from D'LUSSO TRANSPORT SERVICES INC. will be supplied to UNIVERSAL FUNDING LLP on D'LUSSO TRANSPORT SERVICES INC., letterhead indicating that the invoices have been sold to UNIVERSAL FUNDING LLP. UNIVERSAL FUNDING LLP will then note the invoices as follows:
THIS INVOICE HAS BEEN SOLD AND ASSIGNED TO UNIVERSAL FUNDING LLP.
PAY TO AND ONLY TO UNIVERSAL FUNDING LLP A/C OF D'LUSSO TRANSPORT SERVICES INC. P.O. BOX 740 MAYWOOD, NJ 07607-0740 201-342-5641
4. UNIVERSAL FUNDING LLP will forward the second payment for the balance of the factored invoices, less the factor fee, 60 days after the start of the program, and thereafter the second payment will be on a 30-day schedule.
7. If, after a period of the agreed upon factoring time, D'LUSSO TRANSPORT SERVICES INC., invoice payment has not yet been received, UNIVERSAL FUNDING LLP will charge-back to D'LUSSO TRANSPORT SERVICES INC., the monies advanced on those invoice(s) including the factor fee or upon request from D'LUSSO TRANSPORT SERVICES INC., will re-factor the unpaid invoices for an additional fee and time period originally agreed to.
8. Under this agreement, D'LUSSO TRANSPORT SERVICES INC. relinquishes all claims to monies represented by the factored invoices until such time as the invoices have been charged-back to them.
Universal did not file any financing statements or ever conduct any inquiries to determine whether any other creditors asserted a lien on the accounts receivable.
According to the Pangis certification, Pascack established an LOC for D'Lusso on or about March 21, 2007. Pursuant to their security agreement,*fn2 D'Lusso granted Pascack a security interest "in all of the Property described below that I own or have sufficient rights in which to transfer an interest now or in the future, wherever the Property is or will be located, and all proceeds and products of the Property." The agreement stated that it granted a "[f]irst security interest in all business assets of D'Lusso Transport, Inc., UCC-1 ...