In re Pre-Press Graphics Co., Inc.
| Decision Date | 22 June 2004 |
| Docket Number | Bankruptcy No. 02 B 08292.,Adversary No. 03 A 04400. |
| Citation | 310 B.R. 905 |
| Parties | In re PRE-PRESS GRAPHICS COMPANY, INC., d/b/a R & B Group, an Illinois Corp., Debtor. Pre-Press Graphics Company, Inc., d/b/a R & B Group, an Illinois Corp., Plaintiff and Counter-Defendant, v. Brides Noir, LLC, Dana Powell, and Shannon Bonner, Defendants and Counter-Plaintiffs. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Jeffrey C. Dan, Crane, Heyman, Simon, Welch & Clar, Chicago, IL, for Debtor/Plaintiff.
Darryl Tom, Burris, Wright, Slaughter & Tom, LLC, Chicago, IL, for Defendant.
These matters come before the Court on the complaint of Pre-Press Graphics Company, Inc. ("Pre-Press") for breach of contract and enforcement of guaranty against Brides Noir, LLC, Dana Powell, and Shannon Bonner (collectively, "Defendants") and on Defendants' counterclaim for breach of contract against Pre-Press. After conducting a bench trial, examining the admitted exhibits, and reviewing the testimony, the Court finds that the contract at issue is valid and enforceable, that Pre-Press satisfied its obligations under the agreement, and that Defendants failed to perform all of their contractual duties. Accordingly, the Court enters judgment in favor of Pre-Press, dismisses Defendants' counterclaim, and orders Defendants to pay Pre-Press the aggregate sum of $38,467.00, the amount due and owing under the relevant contractual agreement.
The Court has jurisdiction to entertain these matters pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. They are core proceedings under 28 U.S.C. § 157(b)(2)(A) and (O).
Pre-Press Graphics Company, Inc., doing business as R & B Group, operates a film imaging and printing business. On March 4, 2002, Pre-Press filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Compl. at ¶ 5. Subsequently, in July 2002, Dana Powell ("Powell") and Shannon Bonner ("Bonner") met with Pre-Press sales account representative Dana Kurth1 to discuss the publication of their inaugural issue of Brides Noir, a bridal magazine designed to address the needs and interests of African American women. Joint Pre-Trial Statement at p. 4. Brides Noir, LLC ("Brides Noir") is a limited liability corporation organized under the laws of the state of Illinois. Compl. at ¶ 7. Powell and Bonner are members and co-owners of Brides Noir and responsible for the operation and business affairs of the company. Id. at ¶ 8.
The parties acknowledge that they reached some sort of oral agreement prior to the signing of a written contract in October, although they dispute the precise terms of that oral arrangement. According to Defendants, the parties orally agreed that Defendants would remit three installment payments of $10,000.00 each, to be paid 60, 90, and 120 days of delivery, in exchange for 12,000 152-page magazines, which Pre-Press was to print, bind, and distribute to locations specified by Defendants by October 4, 2002. Joint Pre-Trial Statement at p. 4. In contrast, the recital portion of the subsequently executed written contract states that the parties orally agreed that the total cost for both printing and binding the magazines would be $43,304.00, payable in three installments of $14,434.67, $14,434.67, and $14,434.66 within 60, 90, and 120 days of distribution.2 Compl., Ex. A, Agreement, at p. 1.
On or around September 27, 2002, Pre-Press president Robert Beevers ("Beevers") called for a meeting with Powell and Bonner, at which time he asked for partial payment before completing the magazine production work. Defendants' Ex. & Witness List & Proposed Findings of Fact and Conclusions of Law at p. 3, ¶ 3. Shortly thereafter, on October 1, 2002, Beevers presented Defendants with a written Printing and Distribution Agreement (the "Agreement"), which differed from the prior oral arrangement in several ways. Id. at ¶ 4. Specifically, the Agreement provided that Pre-Press would print the magazine pages but that another firm, Booklet Binding, Inc. ("Booklet"), would do the binding:
Seller [(Pre-Press)] shall print, including prepress assemble and pagination from supplied keyline with high res images placed, one set of fiery proofs and one set of final proofs for approval, bindery trim, score, fold, perfect bound, blow in subscription card and carton, and deliver the Magazines no later than 1:00 p.m. on October 2, 2002, to Booklet Binding, Inc.....
Compl., Ex. A, Agreement, at p. 1.
In addition, the payment terms provided for under the Agreement deviated from those that the parties had allegedly agreed to orally. First, pursuant to the Agreement, Pre-Press was to receive $39,467.00 for printing the magazine pages. Id. at p. 2. Further, Defendants were required to remit a "good faith payment" of $1,000.00 upon the signing of the Agreement, with the balance to be paid in three installments of $12,822.34, $12,822.33, and $12,822.33 in 60, 90, and 120 days after delivery of the magazines to the binding company. Id. Finally, the Agreement indicated that the total cost for binding the magazines was $4,137.00, which Defendants were to pay directly to Booklet. Id.
As of or on October 2, 2002, the parties executed the contract, with Beevers and company vice president Michael Zienty signing for Pre-Press and Powell and Bonner signing on behalf of Brides Noir. Compl. at ¶ 9 & Ex. A, Agreement, at p. 4. On the same day, Powell and Bonner executed a personal guaranty (the "Guaranty"), which provided that each of them "guarantee[d] the obligations of Buyer [(Brides Noir)] under the foregoing Agreement, subject to any defenses available to Buyer." Compl., Ex. A, Guaranty, at p. 5. They also made a $1,000.00 deposit as required under the Agreement. Compl. at ¶ 13.
The parties dispute the events that occurred on October 2 and 3, 2002. Pre-Press contends that the magazines were printed and delivered to Booklet by 1:00 p.m. on October 2, 2002 as required pursuant the Agreement. Compl. at ¶ 12; Joint Pre-Trial Statement at p. 2. Defendants admit that the pages were delivered to the bindery on October 2 as promised; however, they claim that Pre-Press subsequently took the magazines back and redelivered them on October 3, 2002, only after Defendants had signed the contract. Defendants' Ex. & Witness List & Proposed Findings of Fact and Conclusions of Law at p. 3, ¶ 6; Joint PreTrial Statement at p. 5. They further allege that this delay in delivery caused the glue to set improperly and that, accordingly, all of the magazines were defectively bound and fell apart, resulting in lost subscription revenue, lost profits, and loss of goodwill. Defendants' Ex. & Witness List & Proposed Findings of Fact and Conclusions of Law at p. 3, ¶ 7. Both parties agree that Defendants never paid the balance due to Pre-Press under the written Agreement. Answer at ¶ 15. According to Defendants, their distributors expected 10,000 copies of the magazine by October 4, 2002 for national distribution; the remaining two thousand were needed for purposes of promotion at Defendants' launch party on the same day, as well as for subscription fulfillment. Defendants' Ex. & Witness List & Proposed Findings of Fact and Conclusions of Law at p. 2, ¶ 2. Despite the fulfillment requirement, Defendants assert that enough pages for only 11,756 magazines were delivered for binding, leaving them 244 books short. Id. at ¶ 8.
On October 24, 2003, Pre-Press filed a two-count complaint for breach of contract and enforcement of guaranty, seeking payment from Defendants of $38,467.00, the amount due and owing pursuant to the Agreement. Subsequently, on November 25, 2003, Defendants filed their answer, asserting three affirmative defenses.3 Almost two weeks later, on December 8, 2003, Defendants filed a counterclaim for breach of contract against Pre-Press. They contend that Pre-Press breached the Agreement by failing to deliver to Booklet a sufficient number of pages for the binding of 12,000 magazines and by neglecting to immediately refund Defendants' $1,000.00 deposit. Counterclaim at ¶ 6. Defendants also suggest that Pre-Press failed to perform "in a good and workmanlike fashion consistent with customary standards of quality" as required under the Agreement. They claim that their damages exceed $40,000.00. Defendants' Ex. & Witness List & Proposed Findings of Fact and Conclusions of Law at pp. 3-4, ¶¶ 8-11. A trial was held before the Court on May 6, 2004.
State law determines the rules governing contractual disputes. N. Shore Gas Co. v. Salomon Inc., 152 F.3d 642, 652 (7th Cir.1998) (citations omitted). The Agreement in this matter expressly states that it is governed by the laws of the state of Illinois,4 and the parties do not contest that Illinois contract law controls.5 Thus, the Court looks to Illinois law in resolving the instant dispute. See Freund v. E.D. & F. Man Int'l, Inc., 199 F.3d 382, 383 (7th Cir.1999) ().
Pre-Press's complaint contends that the Agreement and Guaranty are valid contracts, which Defendants breached by failing to pay the amount owed for the magazine production work performed by Pre-Press. Under well-settled Illinois law, an action for breach of contract requires proof of four elements: (1) the existence of a valid and enforceable contract; (2) performance of the contract by the plaintiff; (3) breach by the defendant; and (4) a resulting injury to the plaintiff. Fabrica de Tejidos Imperial, S.A. v. Brandon Apparel Group, Inc., 218 F.Supp.2d 974, 976 (N.D.Ill.2002) (citing Priebe v. Autobarn, Ltd., 240 F.3d 584, 587 (7th Cir.2001)); Applied Indus. Materials Corp....
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