Airstream, Inc. v. CIT Financial Services, Inc.

• Decision Date: 15 July 1986
• Docket Number: No. 16125,16125
• Parties: , 2 UCC Rep.Serv.2d 816 AIRSTREAM, INC., Plaintiff-respondent, v. CIT FINANCIAL SERVICES, INC., Defendant-appellant.
• Court: Idaho Supreme Court

Page 851

723 P.2d 851

111 Idaho 307, 2 UCC Rep.Serv.2d 816

AIRSTREAM, INC., Plaintiff-respondent, v. CIT FINANCIAL SERVICES, INC., Defendant-appellant.

No. 16125.

Supreme Court of Idaho.

July 15, 1986.

Joseph M. Meier of Clemons, Cosho & Humphrey, Boise, for appellant.

Jeffrey A. Strother of Moffatt, Thomas, Barrett & Blanton, Boise, for respondent.

BAKES, Justice.

CIT Financial Services, Inc. (CIT), appeals from the district court's finding that CIT is responsible to Airstream for payment of two checks drawn by an Airstream recreational vehicle dealer who had a flooring arrangement with CIT. We reverse and remand for additional findings.

This dispute arose from the following facts. Kirk Shuler, doing business as Wheels Unlimited, was a dealer in recreational vehicles which he purchased from Airstream. Shuler had an arrangement with CIT to finance his purchase of recreational vehicles. Under this arrangement, known as a "flooring agreement," CIT would pay Airstream for recreational vehicles ordered by Shuler and hold title to the units until Shuler sold them to his customers, during the interim charging Shuler interest on the amounts CIT paid. However, not all vehicles purchased by Shuler were purchased under this flooring arrangement. Some vehicles were presold to the buyer or sent to Shuler c.o.d., and CIT would not be involved with financing these units.

In the spring of 1979 Shuler purchased two pre-sold travel trailers from Airstream, the first of these trailers for $15,704.84, the second for $21,711.50. Ultimately Airstream received two checks, drawn by Shuler, as payment for the trailers which also contained CIT's endorsement in blank on the back. When Airstream presented the checks to Idaho First National Bank for payment, the checks were dishonored. Subsequently, Airstream contacted CIT to demand that CIT cover the checks pursuant to its endorsement. CIT refused, claiming that the trailers had not been purchased under the flooring plan and that the company's endorsement on the checks was the result of a clerical error.

Airstream then filed suit against CIT, alleging that CIT was an accommodation party under I.C. § 28-3-415, ¹ and also alleging breach of contract in CIT's failure to pay for the two travel trailers pursuant to the floor plan arrangement. The case was submitted to the district court on a written stipulation providing that the decision would be based on submitted depositions and attached exhibits. Subsequently, pursuant to I.R.C.P. 52(a), the district court issued findings of fact and conclusions of law finding CIT liable for payment on the checks, both as an accommodation party and under a contract theory. Airstream was also awarded interest from the date of dishonor, collection costs and attorney fees. CIT now appeals.

I

The evidence consists exclusively of the depositions of employees of CIT, Airstream, and Kirk Shuler of Wheels Unlimited and exhibits which were submitted with the depositions. In his deposition, Shuler testified that Wheels Unlimited had a floor plan arrangement with CIT. Under this arrangement, CIT had to "pre-commit" to floor a vehicle. If CIT "pre-committed" to floor a vehicle, Wheels Unlimited would receive the vehicle and notify CIT of the receipt of the vehicle. CIT would then issue payment to the manufacturer in exchange for certain documents necessary for titling the units referred to as the manufacturer's statement of origin (MSO). CIT would retain the MSO's until payment was received from Wheels Unlimited, usually after the unit was sold to a customer.

Shuler also testified to a second method of purchasing trailers wherein he would receive vehicles c.o.d. directly from the manufacturer, giving the manufacturer his check upon delivery of a unit, and that CIT would not be involved.

According to Shuler, there was also a third method of purchasing units from a manufacturer. Under this method, the financing company would act as a go-between for the manufacturer and the dealer in a non-floored transaction, handling the exchange of the MSO which it would receive from the manufacturer and the check from the dealer. He stated that sometimes the check would be made out to the manufacturer, and sometimes to the finance company, in which case the finance company would then draft its own check and forward it to the manufacturer. This method of exchange, Shuler testified, was often used when the dealer was at his credit limit on the flooring plan and a pre-sold unit was ordered. Under this latter method, the dealer gained additional time before the manufacturer would deposit the dealer's check. During this time, the customer would take delivery of the unit and pay the dealer, thus enabling the dealer to "make good" on the payment to the manufacturer.

Shuler testified that in March and April of 1979, CIT had "frozen" Wheels Unlimited's floor plan because Wheels Unlimited had reached its flooring credit limit. Shuler stated that at that point in time he believed he was only ordering pre-sold units from the manufacturer. However, he did acknowledge that he may have ordered a unit or two to replace a stock unit which was sold.

Shuler remembered little about the specifics of the two transactions which led to this dispute. However, Shuler believed that, while these were not floored units, CIT had agreed to handle the exchange of paper work on these transactions, using the above mentioned third method of purchasing units. Shuler based this belief on the following: (1) that the two checks were drawn on his account, and not drawn by CIT; (2) that his floor plan was "frozen" at that time by CIT; and (3) that Shuler remembered two customers pre-selecting two units like the two units at issue here.

On cross examination, Shuler admitted that Airstream may not have authorized this third payment method, and that these transactions represent the only time this payment method was used to purchase an Airstream unit. Shuler also acknowledged that at the time of the purchase of these trailers he had an outstanding parts account payable with Airstream for over $30,000.

John Buzan, branch manager of CIT at the time of the transaction, testified in his deposition as to the flooring arrangement which existed between Wheels Unlimited and CIT. Buzan explained that under the flooring arrangement the manufacturer would contact CIT to determine if CIT would floor a particular item which had been ordered. If the dealer's flooring credit limit had not been exceeded, Buzan would confirm the order and send an approval confirming the flooring arrangement.

In this case, Buzan testified that he wrote "pre-sold" and "not to be floored" on the CIT confirmation forms and mailed them to Airstream. (Copies of these confirmation forms are included as exhibits in the record.) ² Buzan testified that, based upon the notations, which were in his handwriting, the units were pre-sold and not to be floored. Although Buzan admitted that other branches of CIT had floored pre-sold units before, he stated that his branch had never floored a pre-sold unit. He did, however, state that he had handled the paper work on some pre-sold units for dealers before. These units were generally paid for either with dealers' checks made payable solely to the manufacturer or by checks payable jointly to CIT and the manufacturer, in which case CIT would merely endorse the check and forward it to the manufacturer. He stated that he believed the dealers made some checks payable to both CIT and the manufacturer in order to keep their records straight. He also stated that CIT never endorsed such checks with the intent of guaranteeing payment on the check.

Buzan admitted that sometime after mailing the "confirmation forms" to Airstream, which stated that the units were not to be floored, he received invoices from Airstream on the two units. He stated that upon receipt of the Airstream invoices he telephoned Shuler and informed him that he had received the invoices. As far as the CIT endorsement on the back of Wheels Unlimited's check, Buzan testified that he would never have authorized such an endorsement because CIT was not listed as a payee on the check, and since the units had not been floored, CIT was not guaranteeing payment.

Kristin Haustveit, was also employed by the Boise office of CIT at the time of these transactions. Kristin admitted that she had stamped the CIT endorsement on the back of the checks. Although she did not recall the specifics of either transaction, she testified that it was her signature which appeared under the CIT endorsement. She testified that she believed that the endorsement was a clerical error since she could not recall ever being instructed to place CIT's endorsement on any check on which CIT was not listed as a payee. She stated that she only had authority to place CIT's endorsement on dealers' checks which were made out to both CIT and the manufacturer before transmitting the check to the manufacturer.

Sharon Lescowitch, a former billing clerk at Airstream, also testified by deposition. She stated that all units were either floor planned or shipped c.o.d. She denied any knowledge of a third financing arrangement. Although Sharon's recall of these particular transactions was sketchy, she examined the shipping and billing instructions and acknowledged that she must have worked on the transactions, since some of the handwritten notations on the forms were in her handwriting. The shipping and billing instructions form is an internal Airstream document generated by a sales coordinator at the time an order is taken. (The record contains no testimony from the salesman who initially filled out these forms.) At the time when Sharon, as billing clerk, received the shipping and billing instructions for the first unit, it indicated that the unit was to be floor planned. However, written instructions next to this indication stated, "CIT tell them it's sold unit." From the record it is unclear...