Have the receipts?
FVCBank v. Transform Holdco LLC (Fairfax April 16, 2021)
A bank loans an energy company $8 million. In exchange, the energy company grants the bank a security interest in the energy company’s assets, including its accounts receivable. The energy company later contracts with subsidiaries of a holding company. After the energy company defaults on its loan, the bank then sues the holding company to collect on unpaid invoices. Can the bank collect from the holding company?
In a nutshell, the bank loses because, the court concludes, the bank does not prove its case. The does not have a contract between the energy company and the holding company. And while the bank has invoices from the energy company that list the holding company as a customer, the bank offers them without corroborating testimony, declaration, or affidavit. In contrast, the holding company offers testimony that it did not contract with the energy company and does not owe it anything. Consequently, because the bank has failed to prove a legal obligation of the holding company to the energy company, the bank cannot recover from the holding company.
Bottom line: If you’re going to bring a breach of contract claim, be prepared to prove it.