Bergen, Johnson and Olson v. Verco Mfg. Co.

• Citation: 690 S.W.2d 115
• Decision Date: 15 May 1985
• Docket Number: No. 08-84-00390-CV,08-84-00390-CV
• Parties: 41 UCC Rep.Serv. 570 BERGEN, JOHNSON AND OLSON, A Texas General Partnership, Appellant, v. VERCO MANUFACTURING COMPANY, Appellee.
• Court: Court of Appeals of Texas

Page 115

690 S.W.2d 115

41 UCC Rep.Serv. 570

BERGEN, JOHNSON AND OLSON, A Texas General Partnership, Appellant, v. VERCO MANUFACTURING COMPANY, Appellee.

No. 08-84-00390-CV.

Court of Appeals of Texas,

El Paso.

May 15, 1985.

Rehearing Denied June 12, 1985.

Joel Fry, Kemp, Smith, Duncan & Hammond, El Paso, for appellant.

Cory Haugland, Grambling & Mounce, El Paso, for appellee.

Before STEPHEN F. PRESLAR, C.J., and WARD and SCHULTE, JJ.

OPINION

WARD, Justice.

This is an appeal from a summary judgment granted the Plaintiff, Verco Manufacturing Company, against the Defendant, Bergen, Johnson and Olson, based on alleged violations of the Bulk Transfers Act, Tex.Bus. & Com.Code Ann. secs. 6.101, et seq. (Vernon 1968). We reverse and remand for trial.

In May and June of 1982, Verco sold goods on credit to Rio Grande Steel Company for a total of $40,202.55, and this debt was still owing to Verco when Bergen purchased Rio Grande's Canutillo, Texas, facility. Verco subsequently sued both Rio Grande and Bergen for the $40,202.55 debt, including in its petition an allegation that Bergen violated the Texas Bulk Transfer Act by its September 1, 1982, Asset Purchase Agreement and subsequent transfers from Rio Grande.

The Plaintiff's petition against Bergen alleged that it was a creditor of Rio Grande, which company was engaged in the business of manufacturing and selling steel products from its plant at Canutillo; that on September 15, 1982, Rio Grande transferred by a contract of sale a major part of the inventory and equipment which it maintained at the Canutillo plant to the Defendant Bergen in bulk and not in the ordinary course of business; and that the said Defendant failed to require Rio Grande to furnish a list of creditors and no notice of the transfer was given to the Plaintiff, all in violation of the Bulk Transfer Act. After Verco entered into a consent summary judgment against Rio Grande, whereby Rio Grande acknowledged the debt, Verco obtained a severance as to the cause of action against Bergen, and then moved for summary judgment as to its bulk transfer claim.

Verco's summary judgment proof consisted of: 1) their attorney's affidavit establishing attorney's fees and certifying to an attached copy of the Rio Grande Consent Judgment and an attached copy of the Asset Purchase Agreement; and (2) Bergen's Response to Request for Admissions and Written Interrogatories. By this summary judgment proof, the Plaintiff established that in September, 1982, Bergen purchased the assets of the Rio Grande Steel plant in Canutillo, Texas, at a total price of $3,600,000.00. This sale included the material, supplies, merchandise and inventory at Canutillo, with certain exceptions.

Bergen responded to the motion for summary judgment by freely admitting that it did not comply with the Bulk Transfer Act; asserting that a "bulk transfer" of assets had not occurred when it made the purchase from Rio Grande Steel; and arguing that the word "major" as used in the act required a transfer of in excess of fifty percent of the inventory of the enterprise before the act became operative as to a purchaser and that a disputed fact issue existed as to whether or not the transfer of inventory constituted a bulk transfer of a major part of the inventory in question. Attached to the response was a copy of an amendment to the Asset Purchase Agreement which stated that Rio Grande Steel as seller warranted that the inventory being sold in no event exceeded fifteen percent of Rio Grande's total inventory located within the State of Texas and that the said seller understood that this warranty was being relied on by the buyer as the reason for not complying with the bulk sales statute.

The summary judgment was then entered by the trial court decreeing Bergen liable to Verco for the $40,202.55, prejudgment interest of $5,384.43, attorney's fees of $5,000.00 and postjudgment interest at ten percent per annum, plus costs of court.

Bergen's sole point of error asserts trial court error in granting Verco's Motion for Summary Judgment since a genuine issue of material fact existed concerning whether a bulk transfer had occurred.

The applicable standards for reviewing a motion for summary judgment are the following:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. When a plaintiff moves for summary judgment, it must conclusively prove all of the elements of its cause of action as a matter of law.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Montgomery v. Kennedy, 669 S.W.2d 309 (Tex.1984); Wilcox v. St. Mary's University of San Antonio, Inc., 531 S.W.2d 589 (Tex.1975). See also : City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 (Tex.1979). Bergen argues that the movant Verco presented no evidence as to Rio Grande's total assets or inventory nor as to the percentage of inventory represented by Bergen's purchase of the Canutillo facility; therefore, Verco failed to prove as a matter of law that a major part of the materials, supplies, merchandise or other inventory of Rio Grande was transferred to Bergen.

The Bulk Transfers Chapter of the Texas Business and Commerce Code Annotated (Vernon 1968) was designed primarily to protect a merchant's unsecured creditors from a fraudulent disposition of inventory. See: Anderson & Clayton Co. v. Earnest, 610 S.W.2d 846, 848 (Tex.Civ.App. --Amarillo 1980, no writ); Bulk Transfers Act, sec. 6.101, official comments 2 and 4, supra. Nevertheless, in order to invoke the statute's protection and benefits, a plaintiff creditor has the burden of proof to show clearly that the questioned transfer...