The opinion of the court was delivered by: BECHTLE
Presently before the court are cross-motions for summary judgment. For the reasons stated herein, defendant's motion will be granted and plaintiff's motion will be denied.
After the contract between Transcontinental and plaintiff was executed, Transcontinental and Lincoln Bank ("bank"),
on February 19, 1982, entered into an accounts receivable financing arrangement. This arrangement was negotiated on behalf of Transcontinental by Paul Murray, President of NRG Enterprises, Inc. ("NRG"), and Jerome J. Kerwin, an officer and 50% shareholder of Transcontinental
and the sole shareholder of NRG. A. Gerard Cunningham, a Senior Vice-President of the bank, acted on behalf of the assignee bank.
On February 19, 1982, the bank placed the loan proceeds of $267,709.90 in a Certificate of Deposit ("CD") in the name of NRG. As additional security Transcontinental assigned the two Transcontinental invoices for the sale of the pipe to plaintiff.
The bank was required to release the loan proceeds from the CD to Transcontinental as plaintiff made the payments on the invoices.
Throughout the period of its relationship with Transcontinental, the bank has been a creditor with loans fully collateralized by CD's. The bank did not investigate the creditworthiness of Transcontinental, NRG, or the companies' principals, nor did the bank or its agents inspect the quality of the pipe sold by Transcontinental. Moreover, the bank never became involved in any way with the management of a decision-making process at Transcontinental.
After each invoice was assigned to the bank, the bank notified plaintiff of the assignment and of plaintiff's legal obligation to pay the amounts of the invoices to the bank. So notified, plaintiff paid the bank $174,423.23.
The pipe ultimately proved to be seriously defective and virtually worthless. Plaintiff did not discover the defect prior to making the payments to the bank because the defect was not visible to the naked eye and electronic inspection had not yet been completed.
Since the pipe was virtually worthless, plaintiff sued the bank to recover the funds which plaintiff paid to the bank. Plaintiff's theories of recovery are as follows: (1) Title 13 Pa. Cons. Stat.Ann. § 9318(a) provides that an assignee's rights are "subject to . . . any . . . claim" arising from the contract between the assignor and account debtor. Plaintiff argues that an account debtor can, therefore, assert any affirmative claims which it has against the assignor against the assignee. In this case, plaintiff asserts that it is entitled to recover payments made to the bank where the goods sold by Transcontinental are defective (plaintiff's "statutory theory"); and (2) under Pennsylvania law, plaintiff has a claim of restitution.
Both plaintiff and the bank move for summary judgment.
1. Plaintiff's 13 Pa.Cons.Stat.Ann. § 9318(a) Theory
Title 13 Pa.Cons. Stat.Ann. § 9318(a) provides:
Unless an account debtor has made an enforceable agreement not to assert defenses or claims arising out of a sale as provided in section 9206 (relating to agreement not to assert defenses against ...