Ifc Credit Corp. v. Bulk Petroleum Corp., 04-2096.
| Decision Date | 08 April 2005 |
| Docket Number | No. 04-2096.,04-2096. |
| Citation | 403 F.3d 869 |
| Parties | IFC CREDIT CORPORATION, Plaintiff-Appellant, v. BULK PETROLEUM CORPORATION and Darshan S. Dhaliwal, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Jordan B. Reich (argued), Kohner, Mann & Kailas, Milwaukee, WI, for Plaintiff-Appellant.
Bruce C. O'Neill (argued), Fox, O'Neill & Shannon, Milwaukee, WI, for Defendants-Appellees.
Before CUDAHY, KANNE and EVANS, Circuit Judges.
Plaintiff IFC Credit Corporation (IFC) brought suit alleging that Bulk Petroleum Corporation (Bulk) and its CEO, Darshan Dhaliwal, breached a lease agreement under which Bulk leased gasoline tanks and other equipment from IFC with an option to purchase them at the end of the lease. Bulk claims that the lease agreement has been concluded through an accord and satisfaction executed with the assignee of IFC's rights under the lease. The district court, through Magistrate Judge Aaron E. Goodstein, granted Bulk's motion for summary judgment, ruling that a valid accord and satisfaction had taken place. IFC now appeals that ruling, and we affirm.
On or about June 21, 1995, Bulk and IFC entered into a series of agreements by which Bulk leased gasoline tanks and equipment from IFC to be used at various gas stations operated by Bulk. Under the terms of the agreements, Bulk was given an option to purchase the equipment at the end of the 72-month lease term. The purchase price was to be the greater of the fair market value of the equipment and $31,419.40, together with all applicable taxes. The lease documents also provided for extension of the lease term at a rate of $2,820.52 per month. The documents further required that any notices regarding the purchase of the equipment were to be sent to IFC at a designated address. Concurrent with the execution of the lease, Bulk's CEO, Darshan Dhaliwal, executed a personal guaranty of the agreements.
Less than two weeks later, on or about June 30, 1995, the Bulk lease was assigned by IFC to Finova Capital Corporation (Finova), giving Finova full right, title and interest in the lease, including the initial scheduled payments under the lease. Bulk's payments were to be sent to a Finova lockbox.
Beginning in November 2000, IFC's Patrick Witowski and Bulk's John Gerth engaged in negotiations concerning the termination of the lease and purchase of the equipment by Bulk. However, the two parties could not agree on a purchase price. On January 23, 2001, while these negotiations were ongoing, Finova notified Bulk in writing that all further negotiations regarding the purchase option were to be conducted with IFC (and with Witowski specifically). Finova then promptly filed for bankruptcy on March 7, 2001.
On June 18, 2001, Dhaliwal, who to that point had apparently not been involved in negotiations, sent a letter to Finova and a check for $31,419.40, made out to Finova Capital Corporation. The invoice attached to the check read "pay off lease 5613500," and the endorsement area on the back of the check stated "payment in full of lease and purchase option # 5613500." (Plaintiff-Appellant Sep. Appx. at 43A-44A.) The accompanying letter from Dhaliwal stated that the check represented "payment in full of the lease and the purchase option" and that "[a]cceptance of this check represents full satisfaction of the obligation of Bulk Petroleum to Finova Capital Corporation." Id. at 42A. The letter concluded by stating that if Finova did not accept the check, then it should inform Bulk as to where it should ship the leased equipment back to Finova. Id.
The parties dispute the exact date upon which IFC, via Witowski, received a copy of Dhaliwal's letter. They also dispute whether the letter and the check were sent together or separately,1 and whether the check was sent to Finova's "automated lockbox" rather than to its office (though the letter does not appear to have been sent to a P.O. Box address). In any event, it is undisputed that Witowski (and hence IFC) received a copy of the letter and the check via fax from Bulk on June 22, 2001. .) The check was negotiated three days later by Finova on June 25, 2001. Following negotiation of the check, IFC did not return the tendered money or claim that Finova had negotiated the check in error. Instead, IFC retained the tendered money, claiming that it constituted only partial satisfaction of Bulk's outstanding obligations under the agreement (which IFC reckoned to be in excess of $200,000). Bulk refused to make further payments, contending that its contractual obligations under the lease had been fulfilled upon acceptance and negotiation of the $31,419.40 check to Finova.
IFC filed this action on December 15, 2002, seeking to recover $207,961.88 (plus holdover rent) that it claims is owed by Bulk due to the breach of the lease agreement. IFC also sued Dahliwal based upon the personal guaranty he executed contemporaneously with the lease. On October 22, 2003, Bulk and Dahliwal filed a motion for summary judgment, contending that IFC's claim was barred by a valid accord and satisfaction. The district court granted Bulk and Dahliwal's motion, ruling that there was no remaining question of fact that defendants had met all the requirements of an accord and satisfaction under the relevant Uniform Commercial Code (UCC) provisions and Illinois law, and there was no evidence that the check was tendered in bad faith. (4/5/2004 Order.) IFC's appeal now comes before this Court. Since Bulk's tender met all the requirements of a valid accord and satisfaction, and above all since IFC did not return the tendered money or attempt to "undo" the transaction, we affirm.
The district court had diversity jurisdiction over this suit pursuant to 28 U.S.C. § 1332(a). IFC is an Illinois corporation with its principal place of business in Illinois. Bulk Petroleum is a Delaware corporation with it principal place of business in Wisconsin. The amount in controversy in this suit is in excess of $75,000 (, $207,961.98 plus holdover rent). Both parties consented in writing to the jurisdiction of the magistrate judge. The district court granted Bulk Petroleum's motion for summary judgment in an order resolving all claims on April 5, 2004. (4/5/2004 Order.) IFC timely filed its notice of appeal on April 23, 2004. Accordingly, we now have jurisdiction pursuant to 28 U.S.C. § 1291, which provides for appellate review of final orders issued by the district courts.
In proceedings below, the district court granted Bulk's motion for summary judgment on the ground that a valid accord and satisfaction had occurred. We review rulings on motions for summary judgment de novo. Grayson v. City of Chicago, 317 F.3d 745, 749 (7th Cir.2003). Summary judgment is warranted when the evidence, when viewed in a light most favorable to the non-moving party, presents "no genuine issue as to any material fact" such that "the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
Under both Illinois law and the relevant provisions of the UCC,2 an accord and satisfaction occurs when the "person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument." 810 Ill. Comp. Stat. 5/3-311(a) (2004). Accord Saichek v. Lupa, 204 Ill.2d 127, 135, 272 Ill.Dec. 641, 787 N.E.2d 827, 832 (2003) ( ). Additionally, 810 Ill. Comp. Stat. 5/3-311(b) requires that "the instrument or an accompanying written communication contain[] a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim."
Clearly Bulk's tendered check and accompanying letter facially meet these criteria. The purchase price of the tanks was subject to a "bona fide dispute" (the parties could not agree on a price), the instrument and accompanying letter sent by Bulk contained highly "conspicuous statement[s]" that the check was tendered as full satisfaction of all obligations under the lease and purchase agreement, and Finova "obtained payment of the instrument" by negotiating the check on June 25, 2001. So far so good.
Paragraph (c) of section 5/3-311 adds a slight twist. It provides for an exception to these basic requirements which is designed to avoid inadvertent satisfaction of debts when a tender is sent to a large company. Under section (c), an otherwise valid tender to a claimant "organization" fails if "(i) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and (ii) the instrument or accompanying communication was not received by that designated person, office, or place." 810 Ill. Comp. Stat. 5/3-311(c) (emphasis added). This exception does not apply, however, if "within a reasonable time before collection of the instrument was initiated, the claimant or an agent of the claimant having direct responsibility with respect to the disputed obligation knew that the instrument was tendered in full satisfaction of the claim." 810 Ill. Comp. Stat. 5/3-311(d) (emphasis...
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