Prestige Capital Corp.. v. Mich. Gage

• Decision Date: 12 July 2010
• Docket Number: Case No. 09-11111.
• Citation: Prestige Capital Corp. v. Michigan Gage & Mfg. LLC, 722 F.Supp.2d 837 (E.D. Mich. 2010)
• Parties: PRESTIGE CAPITAL CORP., Plaintiff, v. MICHIGAN GAGE AND MANUFACTURING, LLC, Michael Porath, and Richard Mast, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

722 F.Supp.2d 837

PRESTIGE CAPITAL CORP., Plaintiff,

v.MICHIGAN GAGE AND MANUFACTURING, LLC, Michael Porath, and Richard Mast, Defendants.

Case No. 09-11111.

United States District Court, E.D. Michigan,Southern Division.

July 12, 2010.

Jonathan C. Myers, Jaffe, Raitt, Heuer & Weiss, P.C., Southfield, MI, for Plaintiff.

Jay S. Kalish, Farmington Hills, MI, for Defendants.

OPINION AND ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND SETTING CASE MANAGEMENT DEADLINES

DAVID M. LAWSON, District Judge.

Plaintiff Prestige Capital Corporation provides non-traditional financing to business ventures. In 2006, Prestige entered into an agreement to purchase the accounts receivable of a Michigan business with recourse, and also obtained the personal guarantees of the defendants as security for the potential recourse obligation. Prestige has brought suit against the guarantors alleging that some of the accounts it purchased were subject to charge backs, and the obligor has declared bankruptcy. Now before the Court is Prestige's motion for summary judgment, to which the defendants have failed to respond. Prestige's guarantees contain an explicit choice-of-law provision plainly designating the law of New Jersey as the governing rules of decision, but despite that choice, Prestige cited no New Jersey authority in support of its motion. The Court heard oral argument on the motion on April 20, 2010, at which time the Court advised the plaintiff of that deficiency and that the record was incomplete on the issues of the plaintiff's damages. The parties were given time to file supplemental materials. The plaintiff filed a supplemental brief and affidavit on May 4, 2010, which failed to fill the gap in the record on the damages issue. The Court now finds that the plaintiff is entitled to partial judgment as a matter of law on the issue of the defendants' liability. However, the plaintiff has not offered sufficient proof of damages. Therefore, the Court will grant the plaintiff's motion for summary judgment in part and schedule the matter for a trial on damages.

I.

Plaintiff Prestige Capital Corporation is a nationwide factoring firm that provides financing to small and mid-sized companies who cannot obtain traditional bank financing for any number of reasons. According to the record it presented in support of its motion for summary judgment, Prestige purchased the account receivable of Solar Stamping and Manufacturing, LLC, (Solar) through a Purchase and Sale Agreement (PSA) dated November 29, 2006. In that agreement, Solar agreed to sell to Prestige all of its rights in certain accounts receivable for 75% of their face value. The PSA included fourteen warranties that Solar made concerning the status of the accounts. In relevant part, this provision states as follows:

5. WARRANTIES, REPRESENTATION AND COVENANTS. As an inducement for Prestige's entering into this Agreement and with full knowledge that the truth and accuracy of the warranties, representations and covenants in this Agreement are being relied upon by Prestige, instead of the delay of a complete credit investigation, Seller warrants, represents and covenants that:

...

(d) Each Account is an accurate and undisputed statement of indebtedness from an account debtor for a sum certain, without offset or counterclaim and which is due and payable in ninety days or less;

...

The warranties, representations and covenants contained in this paragraph 5 shall be continuous and be deemed to be renewed each time Seller assigns Accounts to Prestige. Notwithstanding the provisions contained in paragraph 6 of this Agreement, Prestige shall have recourse against the Seller in the event that any of the warranties, representations and covenants set forth in this paragraph 5 are breached.

Mot. Summ. J., Ex. 1, PSA ¶ 5. According to Prestige, this warranty grants it the right to charge back the account in the event that it learns the account is subject to an offset or counterclaim. The charge-back privilege allows Prestige to seek a total refund from Solar of the amount paid for the specific account, without reassigning the account back to Solar. The PSA also specifically states that “[t]his Agreement ... shall be governed and construed in accordance with the laws of the State of New Jersey.” Id. ¶ 24.

Concurrently with the PSA, Prestige obtained personal guaranties from Michael Porath, Richard Mast, Richard Ignagni, and James Glasgow. The guaranties each state:

Each of the undersigned hereby personally guarantees and shall be jointly and severally liable for any damages suffered by Prestige Capital Corporation by virtue of the breach of any warranty, representation or covenant made by Seller in paragraph 5 above. Each of the undersigned also personally waives presentment for payment, demand, protest, notice of protest, notice of dishonor and notice of every nature whatsoever.

Mot. Summ. J., Ex. 1, 2, 4.

On February 26, 2007, Prestige obtained an additional guaranty by defendant Michigan Gage and Manufacturing, LLC, signed by Michael Porath as the President and CEO (the “Gage Guaranty”). That guaranty states:

Each of the undersigned hereby jointly and severally guarantees full, prompt and unconditional payment when due of each and every Liability of the Client to Prestige, now existing or hereafter incurred ... and the full, prompt, and unconditional performance of every term and condition of any transaction to be kept and performed by the Client. This Guaranty is a primary obligation of the undersigned and shall be a continuing inexhaustible Guaranty without limitation as to the amount or duration....

Upon the happening of any of the following events: the failure of Client to pay when due any Liability of the Client; ... or an adverse change in the financial condition of the Client or any aforesaid person; or suspension of business of the Client or any aforesaid person; ... or any proceeding being commenced by or against the Client or any aforesaid person under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt, receivership, liquidation or dissolution law or statute; or if an Order for Relief as to the Client or any aforesaid person is entered under the Bankruptcy Code; or if the Client or any aforesaid person is generally not paying their debts as they become due; ... then and in such event, and at any time thereafter, Prestige may, without notice to the Client or any aforesaid person, make the Liability of the Client immediately due and payable hereunder as to the undersigned, and Prestige shall be entitled to enforce the obligations of the undersigned hereunder.

...

All rights, powers and remedies of Prestige hereunder and under any agreement between the Client or any Guarantor and Prestige, now, or at any time hereafter in force, shall be cumulative and not alternative, and shall be in addition to all rights, powers and remedies given to Prestige by law. The Guarantors' liability hereunder shall be joint and several.

Mot. Summ. J., Ex. 2, Gage Guaranty. That guaranty includes a forum selection clause through which “[t]he Guarantors ... irrevocably consent[ ] to the nonexclusive jurisdiction of the Courts of the State of New Jersey or any Federal court in such State in connection with any action or proceeding arising out of or related to this Guaranty.” Ibid.

According to the plaintiff, several account debtors asserted offsets against a number of the accounts transferred to Prestige under the PSA with Solar. As a result, Prestige collected less from these accounts than it had expected. The plaintiff alleges that it attempted on several occasions to recover the amounts it had advanced to Solar, but was unable to do so. Eventually, Solar filed for bankruptcy on August 29, 2007. The plaintiff alleges that it asserted its rights in an adversary proceeding in the bankruptcy case but was unable to collect on these accounts through this process.

On January 30, 2008, Prestige and Michigan Gage entered into an additional agreement in which Michigan Gage acknowledged that it was liable to Prestige under the Gage Guaranty for $948,605.21, plus interest and attorney's fees (the “Agreement”). The Agreement specifically acknowledged that the Gage Guaranty remained in effect and established a payment schedule by which Michigan Gage could repay the debt. The schedule called for payments “at the rate of $5,000 per week, payable each successive Friday, commencing February 22, 2008 until August 22, 2008. Thereafter, the remaining open balance of the Indebtedness shall be due and payable in full on September 2, 2008.” Mot. Summ. J., Ex. 3, Agreement ¶ 2(a). As with the other documents in this case, the Agreement also included a choice of law clause designating the “laws of the State of New Jersey” at the rules of decision. Id. ¶ 7.

The plaintiff avers that Michigan Gage failed to make any of the payments required under the Agreement. On March 25, 2009, the plaintiff filed a complaint against defendants Michigan Gage and Manufacturing, LLC, Michael Porath, Richard Mast, Richard Ignagni, and James Glasgow. In early April 2010, the plaintiff reached a settlement with defendants Ignagni and Glasgow and the Court dismissed them from the case. On February 5, 2010, the plaintiff filed a motion for summary judgment against defendants Michigan Gage, Porath, and Mast. The defendants have not responded.

II.

A motion for summary judgment under Federal Rule of Civil Procedure 56 presumes the absence of a genuine issue of material fact for trial. The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party, and determine “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The “[s]ummary judgment...