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CapitalPlus Equity LLC v. Glenn Rieder Inc.

United States District Court, E.D. Wisconsin

January 3, 2018

GLENN RIEDER, INC., Defendant and Third-Party Plaintiff, THE ESPINOSA GROUP, INC., Third-Party Defendant.


          J.P. Stadtmueller, U.S. District Judge

         This case arises from payments allegedly remitted to the wrong entity. Specifically, CapitalPlus Equity, LLC (“CapitalPlus”) claims that it purchased accounts receivable owed by Glenn Rieder, Inc. (“Glenn Rieder”) to The Espinosa Group, Inc. (the “Espinosa Group”). Despite receiving notice of the sale, Glenn Rieder remitted several payments, totaling almost $200, 000, to the Espinosa Group. CapitalPlus has sued Glenn Rieder for breach of the contract, and Glenn Rieder has joined the Espinosa Group as a third-party defendant, arguing that it is liable for any mistaken payments. Before the Court are the primary parties' competing requests for summary judgment. For the reasons stated below, the Court is unable to grant judgment as a matter of law to either side.

         1. LEGAL STANDARD

         Federal Rule of Civil Procedure 56 provides that the court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Boss v. Castro, 816 F.3d 910, 916 (7th Cir. 2016). A fact is “material” if it “might affect the outcome of the suit” under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of fact is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. The court construes all facts and reasonable inferences in the light most favorable to the non-movant. Bridge v. New Holland Logansport, Inc., 815 F.3d 356, 360 (7th Cir. 2016). The court must not weigh the evidence presented or determine credibility of witnesses; the Seventh Circuit instructs that “we leave those tasks to factfinders.” Berry v. Chicago Transit Auth., 618 F.3d 688, 691 (7th Cir. 2010).

         2. RELEVANT FACTS

         Glenn Rieder used the Espinosa Group as a subcontractor for several building projects. It owed money to the Espinosa Group in the form of accounts receivable. The Espinosa Group thereafter entered into a financing agreement, also called a “factoring agreement, ” with CapitalPlus. The agreement provided two financing alternatives. First, the Espinosa Group could “factor, ” or assign, its accounts receivable to CapitalPlus. Second, it could obtain payroll advances.

         CapitalPlus alleges that the Espinosa Group sold it two Glenn Rieder accounts in October 2016. It relies on a declaration signed by Michael Espinosa (“Espinosa”), President and CEO of the Espinosa Group, on July 24, 2017. (Docket #19-1). In the declaration, Espinosa averred that while some accounts sold to CapitalPlus were identified in written schedules, others were identified and agreed to through e-mails and other informal communications between the companies. Id. ¶ 4. He further stated that the two Glenn Rieder accounts at issue here “[were] sold and assigned to CapitalPlus by [the Espinosa Group] pursuant to the Factoring Agreement on or about October 1, 2016.” Id. ¶ 7.

         Glenn Rieder disagrees, noting that at Espinosa's October 30, 2017 deposition-which occurred after CapitalPlus filed its motion for summary judgment-he recanted his averments. At the deposition, Espinosa testified that any account assigned to CapitalPlus was always documented on written schedules executed weekly between the Espinosa Group and CapitalPlus. He rejected the notion that the parties used informal methods such as e-mail to identify accounts that were sold. His view is corroborated by the factoring agreement itself, which provides that accounts sold must be recorded in a bill of sale. The agreement states, in pertinent part:

Purchased Accounts. [The Espinosa Group] from time to time may offer Accounts to [CapitalPlus] for purchase. [The Espinosa Group] shall sign and submit to [CapitalPlus] a Schedule of Purchased Accounts form which constitutes a Bill of Sale for the invoices representing the Accounts offered for purchase by [CapitalPlus] and agreed to be considered Acceptable Accounts by [CapitalPlus]. [CapitalPlus] may also require other supporting documentation for such invoices as special circumstance arise. [CapitalPlus] may purchase from [the Espinosa Group] such Acceptable Accounts as [CapitalPlus] elects. All purchases shall be subject to the terms and conditions of this Agreement.

(Docket #23-1 ¶ 2). No bill of sale memorializes the sale of any Glenn Rieder account.

         Furthermore, Espinosa testified that there are several instances of the Espinosa Group receiving payroll advances from CapitalPlus under the factoring agreement, and it used two checks from Glenn Rieder to help pay back those advances. According to him, the Espinosa Group sent frequent e-mails to CapitalPlus requesting payroll advances, and some of those payroll advances mention the two projects the Espinosa Group worked on for Glenn Rieder. But he maintains that mere mention of the accounts in emails did not amount to assignment, which had to be formalized.

         Espinosa thus testified that the facts set forth in his July 24, 2017 declaration are incorrect, that he did not read the declaration prior to signing it, and he never would have signed the declaration if he had read it. Espinosa signed the declaration as it was sent to him by Scott Applegate (“Applegate”) of CapitalPlus, after a lunch meeting in New York City. At that meeting, Applegate told Espinosa that this case had settled, and that Applegate was going to send Espinosa a document for him to sign as part of that settlement, so that the unions could get paid. When Applegate sent the proposed declaration to Espinosa, it had no exhibits attached to it. Espinosa signed it without reading it and sent it back to Applegate. Espinosa did not attach any exhibits to the declaration before sending it back to Applegate.

         In reply, CapitalPlus contends that whether Espinosa's affidavit or deposition testimony is believed, it is uncontroverted that the factoring agreement gave it a security interest in the Glenn Rieder accounts. (Docket #23-1 ¶ 13). Pursuant to the agreement, the Espinosa Group granted CapitalPlus a security interest in “all assets” of the company. Id. These assets specifically included “all Accounts” of the Espinosa Group. Id.; (Docket #23-3 ¶ 1). This, in CapitalPlus' view, included the Glenn Rieder accounts. CapitalPlus contends its security interest is enforceable in the same manner and degree as an outright assignment.

         On October 13, 2016, CapitalPlus and the Espinosa Group jointly sent a notice of assignment to Glenn Rieder, notifying it that the Espinosa Group had assigned all present and future accounts of Glenn Rieder to CapitalPlus and that all payments due to the Espinosa Group now or in the future must be made directly to CapitalPlus. However, Glenn Rieder says that the notice was false. In support, Glenn Rieder observes that the notice was a generic form that was signed in blank by Espinosa. The Notice is not addressed to Glenn Rieder, but instead is addressed to “Dear Accounts Payable Manager.” (Docket # 19-5). Espinosa testified that he had no advance knowledge that CapitalPlus ...

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