In re General Plastics Corp.
| Decision Date | 19 August 1993 |
| Docket Number | Adv. No. 91-0579-BKC-AJC-A.,Bankruptcy No. 91-12375-BKC-AJC |
| Citation | 158 BR 258 |
| Parties | In re GENERAL PLASTICS CORP., Debtor-in-Possession. CAPITAL FACTORS, INC., Plaintiff/Counterdefendant, v. HOMELINE CORPORATION, Arthur O. Knutson, and Hilda F. Knutson, Defendants. and General Plastics Corporation and First Union National Bank of Florida, Defendants/Counterplaintiffs. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
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Michael W. Ullman, Richard A. Warren, Ullman & Ullman, North Miami Beach, FL, for General Plastics.
Paul D. Friedman, Friedman Rodriguez & Ferraro, Miami, FL, for Capital Factors.
FINDINGS OF FACT AND CONCLUSIONS OF LAW CONCERNING LIABILITY ISSUES IN GENERAL PLASTICS CORPORATION'S COUNTERCLAIM AGAINST CAPITAL FACTORS, INC.
CONTENTS
Page
Introduction 262
FINDINGS OF FACT 263
I. The Parties 263
II. The Original Factoring Agreement 263
A. Assignment of Invoices to Capital Factors 265
B. Definition and Effect of Pre-Billing 266
C. Advancement of Funds Against Assigned Invoices 266
D. Computing Interest Charges and Factoring Commissions 268
E. Summary 270
III. Relevant Events from April 1986 through June 1990 270
A. Advances Starting in 1986 and Discovery of Pre-Billing in 1987 270
B. The 1988 Amendment to the Agreement 271
C. Capital Factors' June 1990 Reduction in the Advance Rate from 85% to
70% 272
IV. Relevant Events from June 1990 to March 1991 274
A. General Plastics' Shipments Via Its Own Trucks 274
B. General Plastics' Continuing Losses 274
C. The January 1991 Amendment to the Agreement 275
D. Events from January to March 1991 275
V. Capital Factors' Termination of the Factoring Relationship in March 1991 276
A. Discovery of Pre-Billing on March 14 276
B. Suspension of Funding on March 18 277
C. Termination of the Agreement on Tuesday, March 19 278
VI. Post-Termination Events 280
A. The Contractual Relationship Ends in April 1991 280
B. General Plastics' Creditors Make Competing Claims Against General
Plastics' Receivables After March 19 280
C. Payments by Capital Factors to General Plastics' Creditors in March
and April of 1991 282
D. Capital Factors' Interpleader Action 282
E. Summary 283
CONCLUSIONS OF LAW 283
Jurisdiction 283
I. Breach of Contract Claims 283
II. Bad Faith Claims 286
III. General Plastics' Tort Claims 287
A. Conversion and Civil Theft 287
B. Tortious Interference with Advantageous Business Relationships 288
IV. General Plastics' Request for Accounting 289
V. Remaining Issues 290
CONCLUSION 291
Capital Factors, Inc. formerly factored the accounts receivable of General Plastics, Inc. This proceeding originated out of an interpleader action instituted by Capital Factors in Florida state court on May 13, 1991, regarding a fund claimed by General Plastics and others. The defendants named were General Plastics Corporation, the Internal Revenue Service, and First Union National Bank of Florida. General Plastics removed the interpleader to this Court after it became a Debtor-in-Possession under Chapter 11 of the Bankruptcy Code. 11 U.S.C. § 1101, et seq. The interests of the Internal Revenue Service and the First Union Bank have since been resolved, and they were dismissed. There remains no fund in dispute under the interpleader.
However, Capital Factors and General Plastics remain in dispute here. General Plastics answered the interpleader and raised affirmative defenses, asserting that Capital Factors was not entitled to interpleader relief and that General Plastics was the only entity with a valid claim to the fund. General Plastics also filed an amended counterclaim against Capital Factors containing seven counts. That counterclaim, which seeks various relief including alleged extensive damages, is the basis for pending disputes.
Counts I, II, and VII allege that Capital Factors breached its factoring agreement with General Plastics. Specifically, General Plastics alleges in Count I that Capital Factors failed to make advances and payments as required under that agreement, and that it failed to pay General Plastics monies due when Capital Factors allegedly terminated that agreement. General Plastics alleges in Count II that Capital Factors failed to give proper notice of its supposed termination, that it failed to advance funds at a rate of 85% of the value of accounts receivable assigned to it by General Plastics, and that it "manipulated General Plastics to serve its own pecuniary interests and the interests of parties not a party to the Factoring Agreement." Counterclaim, ¶ 10. General Plastics alleges in Count VII that Capital Factors failed to make "purchase price" payments (a term defined and discussed in the Findings below) as required by the factoring agreement, and that it failed to make such payments when the factoring agreement was terminated.
In Count III, General Plastics alleges that Capital Factors committed "tortious interference with advantageous business relations". Capital Factors allegedly interfered with General Plastics' relations with its customers and suppliers by improperly withholding funds that were due to General Plastics thereby causing General Plastics to lose these valuable relationships.
In Count IV, General Plastics seeks an accounting for all accounts receivable that were administered and collected by Capital Factors under the factoring agreement. The prayer for relief in this Count rests on allegations that Capital Factors did not make payments or assess charges in accord with the factoring agreement.
In Count V, General Plastics alleges common law conversion. The basis for this claim is an allegation that, after Capital Factors supposedly stopped making payments to General Plastics, it held monies otherwise due to General Plastics for the benefit of itself and Capital Bank. This allegation is repeated in Count VI, to form the basis for an allegation of civil theft under Florida law.
Capital Factors has denied any liability under the counterclaim, and maintains that it was properly entitled to file its interpleader action.
By agreed order, the Court bifurcated the issues of liability arising out of General Plastics' affirmative defenses and counterclaim pursuant to Fed.R.Civ.P. 42(b) (Fed. R.Bankr.P. 7042). A bifurcated trial on liability issues was then held and the parties rested. Final argument was taken by Proposed Findings of Fact and Conclusions of Law filed by the parties. Having considered the exhibits, testimony, and arguments of counsel, the Court now makes and enters Findings of Fact and Conclusions of Law:
In these Findings and Conclusions, the original factoring agreement between the parties will be analyzed to resolve factual issues arising out of the interpretation of that document. Further, the course of conduct between the parties will be examined in order to resolve disputes over Capital Factors' calculation of interest and other charges as well as other technical issues. This discussion includes mechanics of the factoring relationship and events relevant to the counterplaintiff's allegations. Also discussed are two amendments to the factoring agreement and their effect on obligations of the parties. Further, events during and after March 1991 are examined to determine the effect of these parties' conduct on the factoring relationship and on their respective rights to accounts receivable collected during that period. The discussion here resolves all liability issues tried in the bifurcated trial.
1. General Plastics is a Florida corporation engaged in manufacturing newspaper bags, can liners, and plastic trash bags for sale to newspapers, supermarkets, and industrial and commercial users.
2. Capital Factors is a Florida Corporation engaged in the business of providing credit collection and accounts receivable management services through factoring relationships with its clients. Capital Factors also provides financing to some of its clients.
3. The Capital...
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