Campanella v. Commerce Exchange Bank

• Citation: 137 F.3d 885
• Decision Date: 25 February 1998
• Docket Number: No. 96-4074,96-4074
• Parties: 42 Cont.Cas.Fed. (CCH) P 77,259, 35 UCC Rep.Serv.2d 652 Robert P. CAMPANELLA, Robert P. Campanella & Associates, Plaintiffs-Appellants, v. COMMERCE EXCHANGE BANK, United States Small Business Administration, Defendants-Appellees, McKean Machinery Sales, Inc., Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 885

137 F.3d 885

42 Cont.Cas.Fed. (CCH) P 77,259, 35 UCC

Rep.Serv.2d 652

Robert P. CAMPANELLA, Robert P. Campanella & Associates Plaintiffs-Appellants, v. COMMERCE EXCHANGE BANK, United States Small Business Administration, Defendants-Appellees McKean Machinery Sales, Inc., Defendant.

No. 96-4074.

United States Court of Appeals, Sixth Circuit.

Argued Oct. 27, 1997.

Decided Feb. 25, 1998.

Timothy N. Toma (argued and briefed), Timothy N. Toma Company, Euclid, OH, for Plaintiffs-Appellants.

Kirk W. Roessler (argued and briefed), William R. Strachan (briefed), Strachan, Green, Miller & Olender, Cleveland, OH, for Defendant-Appellee Commerce Exchange Bank.

Arthur I. Harris, Asst. U.S. Attorney (argued and briefed), Paul Kukuca (briefed), Office of the U.S. Attorney, Cleveland, OH, for Defendant-Appellee U.S. Small Business Administration.

Before: RYAN, BATCHELDER, and CLAY, Circuit Judges.

OPINION

RYAN, Circuit Judge.

The plaintiffs, Robert P. Campanella and Robert P. Campanella & Associates, filed this suit against the Commerce Exchange Bank and the United States Small Business Administration (SBA), advancing six theories of recovery. The district court, in a magistrate-judge adjudication pursuant to 28 U.S.C. § 636(c), dismissed two contract claims for lack of subject-matter jurisdiction and granted summary judgment on the merits with respect to the remaining four claims. The plaintiffs filed this appeal, arguing that the district court erred in concluding (1) that the Contract Disputes Act of 1978, 41 U.S.C. § 601-613, divested it of subject-matter jurisdiction over the plaintiffs' contract claims (2) that the defendants had no obligation to pay storage and brokerage expenses; and (3) that the defendants had no duty to Campanella to dispose of the property in a commercially reasonable manner and turn over the proceeds to Campanella as payment for administrative expenses.

We will affirm in part, but reverse in part and remand to allow the district court to decide whether it wishes to exercise supplemental jurisdiction over the contract claims brought against Commerce Exchange, the non-governmental defendant.

I.

In June 1991, a manufacturer of carbide tooling known as U.S. Carbide Company, of which defendant Robert Campanella was owner and president, sold its assets to U.S. Carbide Manufacturing Company, which was owned and operated by Steven Dawson, not a party to this suit. As part of the purchase agreement, Carbide-Dawson gave Carbide-Campanella a promissory note in the amount of $80,000, for which the assets of Carbide-Dawson served as security. Defendant Commerce Exchange Bank, however, had provided a $230,000 loan to Carbide-Dawson, for which it received a superior security interest in the same assets. Defendant SBA guaranteed 85% of the loan from Commerce Exchange to Carbide-Dawson.

At the same time as it acquired Carbide-Campanella's assets, Carbide-Dawson entered into a lease in which it rented from Campanella & Associates the premises in Independence, Ohio where the Carbide business was located. In July 1993, the lease was amended to operate on a month-to-month basis, for a rent of $4000 per month.

Carbide-Dawson failed to pay the Commerce Exchange/SBA loan amount when it was due, causing Commerce Exchange to accelerate the note and then, in mid-September 1993, to institute an action in state court to enforce payment. On October 11, 1993, Dawson informed the SBA, Commerce Exchange, and Campanella that Carbide-Dawson was moving the business and virtually all of the assets to another location. The lease with Campanella & Associates was formally terminated effective October 15, 1993.

Five days later, Dawson and Campanella met at the premises for a walk-through, and Campanella discovered that the premises were dirty and in disrepair. In addition, Campanella learned that Dawson planned to leave behind some 17 pieces of equipment as well as some raw material. Dawson gave Campanella the keys to the premises.

Campanella then contacted C. Robert Green, who was the Special Assets Manager for Commerce Exchange and was responsible for administering the loan to Carbide-Dawson. Campanella told Green of Carbide-Dawson's exodus and of the presence of the equipment, and further told Green that he intended to sell the equipment and use the proceeds to offset money that Carbide-Dawson owed. Green objected to this on the ground that Commerce Exchange had a superior lien on the assets, and told Campanella "to make no attempt to dispose of the equipment."

Campanella then met at the premises, on October 28, with Green and with Deborah Callen, a loan officer for the SBA, in order to inspect the equipment left by Dawson. When the three left the premises, Campanella retained the keys. There is no question that neither Commerce Exchange nor the SBA had any access to the premises except with Campanella's cooperation.

Carbide-Dawson filed for Chapter 11 bankruptcy on November 3, 1993, and represented in its petition that the equipment belonged to the SBA. Commerce Exchange moved for relief from the automatic stay on November 23, 1993, requesting permission to take possession of and sell the equipment. At around this period, Carbide-Dawson and Commerce Exchange entered into an agreement in which Carbide-Dawson agreed to pay $3000 per month as "adequate protection payments," and further agreed that Carbide-Dawson would not object to any disposal of the equipment.

Callen had the abandoned equipment appraised, and was told that the liquidation value was $5800. She then contacted some prospective buyers, whose names had been provided by Campanella, and in December 1993, Campanella, Callen, and prospective buyers met at the premises in order to inspect the equipment.

On February 16, 1994, Callen wrote a letter to Dawson, notifying him that a sale of the collateral had been negotiated for the price of $5,655. On February 22, 1994, the bankruptcy court approved the above-mentioned agreement between Commerce Exchange and Dawson--relating to the protection payments and Dawson's non-objection to disposal of the equipment--and the defendants then had the equipment removed from the premises.

In late March 1994, Campanella then wrote a letter to Green and Callen, claiming that he was due $4000 per month rent between October and March, and for brokerage services, due $75 per hour for 28 hours, for a total of $26,100. Writing for the SBA, Callen responded that Campanella was entitled to no storage fees. With regard to the brokerage fees, Callen wrote:

With respect to compensation you claim to have earned, as you know, neither SBA nor Commerce Exchange Bank has formally agreed to pay you any compensation whatsoever. However we did indicate, in general terms, that we believed some agreement could be reached.

Callen then alluded to some "negative" actions that Campanella took that "resulted in a smaller recovery than what we otherwise could have expected," which actions are not specified in the record; in any event, Callen offered Campanella compensation of 15% of the approximately $6000 sale, or roughly $900.

Campanella was not satisfied, and in July 1994, he brought suit in federal district court against Commerce Exchange, the SBA, and a third party, McKean Machinery Sales, which party was later dismissed. Campanella asserted six claims for relief: two straight contract claims; one quantum meruit claim; and three tort claims.

The SBA filed a motion to dismiss in November 1995, arguing that exclusive jurisdiction over the plaintiffs' contract claims was in the Claims Court, and that the tort claims failed because no administrative claim was ever filed before bringing suit, as is required by the Federal Tort Claims Act, 28 U.S.C. §§ 2671-2680. The SBA also joined with Commerce Exchange in a motion for summary judgment on the merits of the plaintiffs' claims.

In April 1996, however, the district court filed a memorandum opinion regarding the jurisdictional arguments, raising the applicability of the Contract Disputes Act of 1978, 41 U.S.C. § 601-613, and requesting supplemental briefing from the parties on that point. In July 1996, the district court then filed an opinion concluding that "the CDA preempts the exercise of jurisdiction over the first two claims for breach of contract found in the amended complaint, so that those claims are subject to dismissal." It is noteworthy, indeed, important to our ultimate disposition of this appeal, that the district court did not specifically address the plaintiffs' remedy with respect to Commerce Exchange, a non-governmental defendant to whom the CDA is not applicable. Apparently, the court instead simply assumed that if the breach of contract claims could not proceed against the SBA, they likewise could not proceed against Commerce Exchange. With respect to the third, unjust enrichment claim, the court concluded that "the CDA could not apply to claims which are quasi-contractual in nature, such as claims for unjust enrichment." The court declined, however, to dismiss the plaintiffs' tort claims, holding that the plaintiffs satisfied the requirements of the FTCA by providing sufficient written notice of their claims, so as to make the SBA "aware[ ] ... of the potential for tort liability."

Shortly thereafter, the district court issued its decision with respect to the defendants' motion for summary judgment. It concluded that Campanella's quantum meruit claim failed because Campanella did not confer a substantial benefit on the defendants since the defendants did not actually possess the equipment and thus had no duty to pay storage fees. Next, it addressed Campanella's claim that the defendants were obligated to apply the proceeds from the equipment sale first to the "administrative expenses" of the storage fees, and concluded that although Ohio law "imposes an obligation upon a secured party to apply proceeds from the sale of collateral to certain reasonable expenses...