Holley Equipment Co. v. Credit Alliance Corp.

• Decision Date: 20 July 1987
• Docket Number: No. 86-7469,86-7469
• Citation: 821 F.2d 1531
• Parties: HOLLEY EQUIPMENT COMPANY, a corporation, Plaintiff-Appellant, v. CREDIT ALLIANCE CORPORATION, a corporation, Defendant-Appellee,
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1531

821 F.2d 1531

HOLLEY EQUIPMENT COMPANY, a corporation, Plaintiff-Appellant, v. CREDIT ALLIANCE CORPORATION, a corporation, Defendant-Appellee,

No. 86-7469.

United States Court of Appeals Eleventh Circuit.

July 20, 1987.

Thomas R. Elliott, Jr., London, Yancey, Clark, & Allen, Birmingham, Ala., for plaintiff-appellant.

Alan W. Heldman, Johnston, Barton, Proctor, Swedlaw & Naff, Michael L. Hall, David K. Tinkler, Birmingham, Ala., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before FAY and KRAVITCH, Circuit Judges, and MORGAN, Senior Circuit Judge.

PER CURIAM:

This appeal challenges an order dismissing a diversity action for lack of subject matter jurisdiction. Holley Equipment Company (hereinafter Holley) brought suit against Credit Alliance Corporation (hereinafter Credit Alliance) seeking compensatory and exemplary damages for breach of contract and fraud. The District Court for the Northern District of Alabama dismissed the action finding the amount in controversy inadequate to confer jurisdiction under 28 U.S.C. Sec. 1332 (1982). In the alternative, the district court granted summary judgment in favor of Credit Alliance. For the reasons that follow, we reverse the district court's dismissal of the action for lack of subject matter jurisdiction and reverse the portion of the district court's order granting summary judgment with respect to Holley's claim for compensatory damages based upon fraudulent misrepresentation.

BACKGROUND

Holley is an Alabama corporation engaged in sales of construction equipment in Birmingham, Alabama. In April, 1984, one of Holley's customers expressed an interest in buying a crane. On April 19, 1984, Holley's Store Manager, Wayne Hudson, contacted the Birmingham representative of Credit Alliance--a California corporation with its principal place of business in New York. Hudson had been informed of the possibility that Credit Alliance had repossessed According to Hudson, Credit Alliance represented that the repossession was complete except for some "paperwork." According to Credit Alliance, David Chopp, the corporation's Louisiana Branch Manager, informed Hudson that any sale of the crane was expressly conditioned upon the execution and notarization of a dation en paiement ¹ between Credit Alliance and J & L Riggers--the construction firm from whom the crane was being repossessed.

a crane that would satisfy the needs of Holley's customer. The representative from Credit Alliance informed Hudson that Credit Alliance was in the process of repossessing a Link Belt LS-318 crane in Louisiana.

Holley's prospective customer inspected the crane in late April, 1984. ² Representatives of Holley and Credit Alliance negotiated a purchase price of $150,000 and scheduled May 2, 1984 as the expected date of delivery. On the morning of May 3, 1984, Chopp contacted Hudson and reported that Credit Alliance had been unable to get the dation en paiement notarized. Meanwhile, Holley had already dispatched the trucks to transport the crane from Louisiana to Alabama. When the trucks arrived, the Holley employees were not permitted to load the crane.

The dation en paiement was finally notarized on May 15, 1984. After the notarization, Credit Alliance informed Hudson that they were ready, willing and able to deliver the crane. Holley refused to purchase it because Holley alleged that they lost their potential customer. Credit Alliance sold the crane for $145,000 approximately seven months later.

In a complaint filed June 18, 1984, Holley brought suit against Credit Alliance seeking damages for breach of contract and fraud. Credit Alliance denied making any fraudulent representations, denied the existence of a contract and asserted as an affirmative defense the applicable statute of frauds. Credit Alliance filed a motion for summary judgment on May 1, 1985. The district court granted this motion in an order entered August 27, 1985. After considering Holley's motion to set aside this order, the district court dismissed the case for lack of subject matter jurisdiction on June 3, 1986, and in the alternative, granted Credit Alliance's motion for summary judgment dismissing all of the claims. Holley filed a notice of appeal on July 1, 1986.

DISCUSSION

The district court, on its own motion, analyzed the merits of Holley's claims and determined to a legal certainty that Holley could not recover a sum in excess of $10,000--the amount in controversy necessary to invoke diversity jurisdiction pursuant to 28 U.S.C. Sec. 1332. In order to assess the propriety of this determination, the district court's analysis of each of Holley's claims must be examined and evaluated.

Breach of Contract

Holley alleges that Credit Alliance entered into an agreement to sell the crane for $150,000 and deliver title and possession on May 1, 1984. The terms of this purported contract were not reduced to a writing. Holley contends that as a result In diversity actions, state law governs substantive issues. See Caster v. Hennessey, 781 F.2d 1569, 1570 (11th Cir.1986). Ala.Code Sec. 7-2-201(1) (1984) states in pertinent part "a contract for the sale of goods for the price of $500.00 or more is not enforceable by way of an action or defense unless there is some writing sufficient to indicate that a contract for sale has been made...." It is beyond question that a contract for the sale of a crane qualifies as a contract for the sale of "goods." See Ala.Code Sec. 7-2-201(1). Thus, unless one of the three exceptions listed in Sec. 7-2-201(1) exempts Holley's action from the general provisions of Sec. 7-2-201(1), the Alabama Statute of Frauds pertaining to sales of goods renders Holley's claim unenforceable.

of Credit Alliance's breach of the alleged oral agreement, Holley suffered pecuniary damages including $20,000 lost profits which would have been realized had Holley been able to take delivery and resell the crane, and $2,382.29 representing the expenses incurred inspecting the crane and dispatching the trucks to take delivery. The district court found that Holley's breach of contract claims were not recoverable to a legal certainty. After reviewing the record and the applicable law, we agree.

Holley contends that Sec. 7-2-201(3)(b) is an applicable exception. We disagree. That section provides that a contract not evidenced by a writing but valid in other respects is enforceable "[i]f the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made...." Ala.Code Sec. 7-2-201(3)(b) (emphasis added). This exception codifies the general estoppel principle that parties cannot admit to the existence and substance of an oral agreement and then attempt to bar its enforcement due to the lack of a writing. See Dean v. Myers, 466 So.2d 952, 955 (Ala.1985); Conway v. Andrews, 286 Ala. 28, 236 So.2d 687, 692 (1970); Campbell v. Campbell, 371 So.2d 55, 59-60 (Ala.Civ.App.1979). By admitting that a contract for sale was made, a party waives the ability to invoke the statute of frauds. See e.g., Dean, 466 So.2d at 955.

In this case, Credit Alliance has never admitted, through pleadings or otherwise, that a valid and binding contract was entered into. The averments and assertions by Credit Alliance categorically deny any unconditional assent to the terms of Holley's offer to purchase the crane for $150,000 and take possession on May 2, 1984. Although Credit Alliance admittedly answered inquiries concerning the crane, allowed Holley to inspect it, and negotiated a purchase price applicable in the event that Credit Alliance acquired the right to sell it, these acts are insufficient to constitute an admission. ³ The pleadings and testimony of Credit Alliance representatives clearly indicated that Credit Alliance's offer to sell the crane was expressly conditioned upon the completion of the dation en paiement between Credit Alliance and J & L Riggers.

The purpose of a statute of frauds is to "prevent fraud and perjury in actions brought on contracts." Campbell, 371 So.2d at 60; see Dean, 466 So.2d at 955; Cox v. Cox, 292 Ala. 106, 289 So.2d 609, 612 (1974). There is obviously "little danger of fraud or perjury where both parties admit to the substance of the contract." Campbell, 371 So.2d at 60. Thus, the judicial admissions exception to the statute of frauds permits enforcement of an unwritten agreement when the existence and the terms of the oral contract are as certain as if they were reduced to a writing. See Cox, 289 So.2d at 612. Here, however, there is a complete disagreement concerning the existence of a contract because of a substantial discrepancy in the terms of the alleged agreement. As one court facing a similar situation observed [t]o allow [the testimony of the party seeking to enforce the contract] to avert the bar of the statute of frauds would place this Court in the undesirable position of determining which party is correctly stating the agreed upon terms of the sale. The statute of frauds was designed to prevent such a swearing match.

Allen v. Harris Truck & Trailer Sales, Inc., 490 F.Supp. 488, 490 (E.D.Mo.1980).

After reviewing the record, we find as a matter of law that Credit Alliance has not admitted facts sufficient to establish an unconditional assent to a contract for sale according to the terms alleged by Holley. "Conditional" admissions are insufficient to vitiate an otherwise valid statute of frauds defense. ⁴ At best, Sec. 7-2-201(3)(b) would allow Holley to enforce the contract for sale as conditioned on the completion of the dation en paiement. Credit Alliance, however, has not breached the contract under these terms. Summary judgment in favor of the defendant based upon the statute of frauds was proper. Using such a conclusion, however, to determine the absence of jurisdiction is error when the ruling is based upon an affirmative defense. We need not discuss...