Major's Furniture Mart, Inc. v. Castle Credit Corp. Inc.
United States Court of Appeals for the Third Circuit
602 F.2d 538 (1979)
Major's Furniture Mart (plaintiff) and Castle Credit Corp (defendant) entered an agreement for Castle to purchase Major's accounts receivable at a discount, with Castle able to refuse any account at its discretion but Major's required to repurchase any account in default for over 60 days at full value plus Castle's costs; over the agreement's life, Major's sold over 600 accounts and had to repurchase 73 delinquent ones, and Castle unilaterally changed the interest rate during the arrangement. After Major's defaulted, it sued Castle, arguing the arrangement was actually a secured financing transaction rather than a true sale of accounts, meaning Castle owed Major's any surplus it collected; the district court granted Major's summary judgment, and Castle appealed.
Whether, under the UCC, a transaction establishing legal rights and economic consequences more similar to a financing transaction than a sale creates a security interest.