Reference no: EM132159118
Vetements, Inc. Inc. is a technology company that designs, manufactures, and ships clothing to retail store, Belle Boutique, on credit terms pursuant to which Belle Boutique has 180 days after delivery of the clothing to pay the purchase price. Not surprisingly, Vêtements, Inc. often has cash-flow problems.
On February 1, Vêtements, Inc. entered into a transaction with MoneyCentre, a Finance Company, pursuant to which Vêtements, Inc. sold to the Finance Company all of Vêtements, Inc.’s outstanding rights to be paid by Belle Boutique for clothing. The transaction was memorialized in a signed writing that described in detail the payment rights that were being sold. The Finance Company paid Vêtements, Inc. the agreed price for these rights that day but did not file a financing statement.
On March 15, Vêtements, Inc. borrowed money from First Commercial Bank, a Bank. Pursuant to the terms of the loan agreement, which was signed by both parties, Vêtements, Inc. granted the Bank a security interest in all of Vêtements, Inc.’s “present and future accounts” to secure Vêtements, Inc.’s obligation to repay the loan. On the same day, the Bank filed a properly completed financing statement in the appropriate filing office. The financing statement listed Vêtements, Inc. as debtor and the Bank as secured party. The collateral was indicated as “all of Vêtements, Inc.’s present and future accounts.”
There are no other filed financing statements that list Vêtements, Inc. as debtor.
On May 25, Vêtements, Inc. defaulted on its repayment obligation to the Bank. Shortly thereafter, the Bank sent a signed letter to Belle Boutique to which Vêtements, Inc. sold clothing on credit. The letter instructed Bell Boutique to pay to the Bank any amounts that the store owed to Vêtements, Inc. for clothing purchased on credit. The letter explained that Vêtements, Inc. had defaulted on its obligation to the
Bank and that the Bank was exercising its rights as a secured party.
The Finance Company recently learned about the Bank’s actions. The Finance Company informed the Bank that the Finance Company had purchased some of the rights to payment being claimed by the Bank. The Finance Company demanded that the Bank cease its efforts to collect on those rights to payment.
Meanwhile, Belle Boutique responded to the Bank’s letters by refusing to pay the Bank. The store contend that it has no obligations to the Bank and that payment to Vêtements, Inc. will discharge their payment obligations.
1. As between the Bank, First Commercial Bank and the Finance Company, MoneyCentre, which (if either) has a superior right to the claims against the Belle Boutique for the money the Belle Boutique owe Vêtements, Inc. for clothing they bought on credit before February 1? Explain.
2. Is Belle Boutique correct that it has no obligations to the Bank and that paying Vêtements, Inc. will discharge their payment obligations? Explain
BUSINESS LAW SUBJECT