Marcus G. Carter and Commerce Alliance, Inc. v. Four Seasons Funding Corporation

Summary

The Supreme Court of Arkansas affirmed a judgment arising from agreements under which Four Seasons Funding Corporation purchased accounts receivable from Commerce Alliance, Inc. The court held that the transactions were bona fide factoring sales rather than disguised usurious loans, and upheld the contractual recourse provisions and damages award. The court also upheld the imposition of a constructive trust over accounts receivable and proceeds.

Holdings

1. The transactions were bona fide sales of accounts receivable rather than loans, and appellants failed to prove by clear and convincing evidence that the arrangement was a subterfuge for usury.
2. The Addendum's requirement that Four Seasons remit non-factored proceeds without a factor fee did not eliminate or alter Four Seasons' security interest in all of Commerce Alliance's accounts and proceeds after Commerce Alliance breached the ninety-day collectability warranty.
3. The circuit court properly awarded Four Seasons the face value of the unpaid factored accounts, rather than limiting damages to the contract's discount amount.
4. A constructive trust was an appropriate remedy because Carter and his companies wrongfully controlled or disposed of proceeds belonging to Four Seasons and would be unjustly enriched if permitted to retain them.
5. The court declined to decide the capacity issue because it was insufficiently developed factually and legally in the circuit court and on appeal.

Questions Presented

1. Whether the parties' factoring transactions were bona fide sales of accounts receivable or disguised usurious loans.
2. Whether the Addendum prevented Four Seasons from using non-factored proceeds pursuant to its security interest after Commerce Alliance breached its warranty that factored accounts would be collectible within ninety days.
3. Whether the circuit court properly awarded Four Seasons the face value of the outstanding factored accounts as damages.
4. Whether imposition of a constructive trust was proper despite Four Seasons' alleged adequate remedy at law.
5. Whether Commerce Alliance's alleged loss or revocation of its corporate charter deprived it of capacity to pursue the appeal.

Disposition

affirmed