Barwell, Inc. v. First of America Bank-LaPorte

• Citation: 768 F. Supp. 1312
• Decision Date: 26 July 1991
• Docket Number: No. S90-492.,S90-492.
• Parties: BARWELL, INC., Plaintiff, v. FIRST OF AMERICA BANK-LaPORTE, N.A., Defendant.
• Court: U.S. District Court — Northern District of Indiana

768 F. Supp. 1312

BARWELL, INC., Plaintiff, v. FIRST OF AMERICA BANK-LaPORTE, N.A., Defendant.

No. S90-492.

United States District Court, N.D. Indiana, South Bend Division.

July 26, 1991.

Nickolas P. Andreeff and James R. King of Amer Cunningham Brennan Co., L.P.A., Akron, Ohio, Patricia E. Primmer of May, Oberfell & Lorber, South Bend, Ind., for plaintiff.

Lewis C. Laderer, Jr. and Rebecca Hoyt Fischer of Kramer, Butler, Simeri, Konopa & Laderer, South Bend, Ind., for defendant.

MEMORANDUM AND ORDER

ROBIN D. PIERCE, United States Magistrate Judge.^*

This case is before the court on the parties' cross-motions for summary judgment. In February, 1989, plaintiff, Barwell, Inc., delivered a machine to McMann Golf Ball Company, Inc. Barwell did not file a financing statement to perfect its interest in the equipment. McMann immediately implemented the machine in its manufacturing operations. In March, 1989, defendant First of America Bank-LaPorte, N.A., loaned McMann $350,000 to purchase equipment for its business and perfected a security interest in McMann's equipment. Later that year, McMann filed for bankruptcy under Chapter 11. Cross-motions for summary judgment filed by Barwell and First of America require the court to decide, on essentially undisputed facts, whether the machine delivered by Barwell was the subject of a bailment or a sale. If it was a bailment, Barwell prevails. If it was a sale, First of America's perfected security interest entitles it to priority, and thus to all proceeds from the sale. The court concludes that the machine was the subject of a sale. Therefore, since the material facts in the case are not in dispute, First of America's motion for summary judgment must be granted and Barwell's motion must be denied. Following a detailed discussion of the factual background of the case and the summary judgment standard, the court will spell out the reasoning underlying its decision.

Background

On January 3, 1989, Barwell, Inc. submitted a quotation to McMann Golf Ball Company, Inc. for the price of a Rebuilt Barwell Precision Preformer to be used in McMann's golf ball manufacturing operations. Barwell's quoted price for the Preformer was $52,650. (Plaintiff's Exhibit 4, Defendant's Exhibit E). In a letter attached to the quotation, Barwell's President, Dean Reusser, also informed McMann that the monthly rate for a five-year lease of the equipment would be $1,226 per month. In addition, Reusser quoted a figure of $1,750 per month for a three-year lease. At the end of the lease period, McMann would have the option to buy the machine for $1.00. (Plaintiff's Exhibit 4).

On January 16, 1989, McMann issued a purchase order for the Preformer. The total price of the unit and its accessories came to $55,184.58. The following day McMann wrote a check for $3,000 as a "deposit" on the equipment. (Plaintiff's Exhibit 5, Defendant's Exhibit F). McMann's former President, Peter Mandich, characterizes the $3,000 deposit as a "down payment" on the Preformer. (Mandich Affidavit, p. 2). Dean Reusser, Barwell's president, attests that a 50 percent deposit is normally required under Barwell's credit terms for a sale. Further, he states that he was not willing to sell the Preformer to McMann under these terms. (Reusser Affidavit, p. 2). Ronald Cordeau, McMann's former vice-president, testifies that he does not believe that Reusser informed him of Barwell's requirement of a 50 percent deposit as a condition of sale. He does say that Reusser told him that Barwell's ordinary credit terms required the balance on a purchase to be paid within 30 days of the delivery of the equipment. (Cordeau Deposition, p. 120).

Cordeau does not recall offering to pay Barwell directly for the Preformer. He states that the parties understood that he would attempt to locate a leasing company who would then purchase the equipment from Barwell and lease it back to McMann. (Cordeau Deposition, pp. 108, 110; Cordeau Affidavit, p. 1). Cordeau, however, also states that it was McMann's original intention upon receiving the quote from Barwell to purchase the Preformer. Further, he agreed with the proposition that whether McMann obtained the Preformer through a direct purchase or ultimately from a leasing company, "one way or the other, McMann was buying this equipment." (Cordeau Deposition, pp. 50-51).

Dean Reusser, Barwell's president, says that he never agreed to sell the Preformer directly to McMann, and that McMann never offered to pay the purchase price of the Preformer. Further, he states that all of his discussions with Cordeau centered around a leasing arrangement, whereby Barwell would sell the Preformer to a leasing company. (Reusser Affidavit, p. 2). Nevertheless, on January 20, 1989, Barwell issued an acknowledgment of McMann's purchase order for the Preformer. Following a heading marked "Terms," Barwell typed "50% deposit with official order, balance net 30 days." The total price on the transaction was listed as $55,184.58, with a $3,000 deposit credited to McMann, leaving a balance due of $52,184.58. (Defendant's Exhibit H).

Barwell shipped the Preformer to McMann on February 20, 1989. On February 21, Barwell sent McMann an invoice stating a balance due on the Preformer of $52,150.38. (Defendant's Exhibit I, p. 1.) At no time did Barwell file U.C.C. financing statements with respect to the Preformer. Immediately afterward, McMann began using the machine in its golf ball manufacturing processes. (Mandich Affidavit, p. 3). On March 1, 1989, McMann and First of America Bank entered into a loan agreement providing McMann with $350,000 to purchase equipment to be used in its business. In conjunction with the loan agreement, McMann signed a security agreement giving First of America rights in its presently owned and after-acquired property.

First of America perfected its security interest in McMann's equipment by timely filing a U.C.C. financing statement with the Indiana Secretary of State on March 2, 1989, and with the Recorder of LaPorte County on March 3. First of America's Senior Vice President, Thomas H. Edwards, states that the $3,000 which McMann advanced to Barwell as a deposit on the Preformer was reimbursed from the proceeds of the term loan which First of America extended to McMann. (Edwards Affidavit, p. 2.).

Throughout the month of March, McMann continued to use the Preformer in its daily operations, but made no further payment on its account with Barwell. On March 30, 1989, Barwell's Controller, Nancy DeGroff, sent a letter to McMann directed to the attention of "Accounts Payable." This letter showed a balance due of $52,187.93 on McMann's account with Barwell. (Defendant's Exhibit K). When McMann failed to make payment, Barwell sent additional letters on June 23, 1989 and August 2, 1989, demanding full payment of the balance due on the account. (Defendant's Exhibits L and M). McMann continued to offer no remuneration to Barwell.

On August 23, 1989, McMann filed a bankruptcy petition under Chapter 11 of the United States Bankruptcy Code. On September 19, 1989, Barwell sent a letter to McMann demanding the return of its equipment, because of its failure to make an "arrangement with a leasing company who would take title and make payment in full to Barwell." (Plaintiff's Exhibit 6). On November 22, 1989, Barwell and First of America executed a written agreement for relief from stay and abandonment of the Preformer, with the condition that the proceeds from the sale of the equipment be deposited in an interest bearing escrow account with First Source Bank. The proceeds from the sale of the Preformer were $54,000. Ultimately, on September 17, 1990, the Bankruptcy Court determined that the abandonment of the Preformer from the bankruptcy estate deprived it of jurisdiction to decide whether Barwell or First of America was entitled to the proceeds from the sale.

On October 4, 1990, Barwell filed a complaint for declaratory judgment in this court. First of America filed a motion for summary judgment on January 3, 1991. Barwell filed its own motion for summary judgment on January 16, 1991. For the reasons below, the court concludes that defendant First of America's motion for summary judgment should be granted and that the motion of plaintiff Barwell should be denied.

Summary Judgment Standard

In a summary judgment motion, the movant must first demonstrate, by way of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, that (1) no genuine issues of material fact exist for trial, and (2) the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Munson v. Friske, 754 F.2d 683 (7th Cir.1985). If the motion's opponent would bear the burden of proof at trial on the matter that forms the basis of the summary judgment motion, the burden of proof shifts to the motion's opponent if the movant makes its initial showing, and the motion's opponent must come forth and produce affidavits, depositions, or other admissible documentation to show what facts are actually in dispute. Celotex, 477 U.S. 317, 106 S.Ct. 2548; Valentine v. Joliet Township High Sch. Dist. No. 204, 802 F.2d 981 (7th Cir.1986); Klein v. Trustees of Indiana University, 766 F.2d 275, 283 (7th Cir.1985). Summary judgment should be granted only if no reasonable jury could return a verdict for the motion's opponent. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Federal Deposit Ins. Corp. v. Meyer, 781 F.2d 1260 (7th Cir.1986); Munson, 754 F.2d at 690; Weit v. Continental Illinois National Bank & Trust Co., 641 F.2d 457, 461 (7th Cir.1981), cert. denied, 455 U.S. 988, 102 S.Ct. 1610, 71 L.Ed.2d 847 (1982).

When the parties do not dispute the factual basis of a motion for summary judgment, the reviewing court's only inquiry is whether judgment should issue as a matter of law....