Bradley Factor, Inc. v. U.S.

• Decision Date: 08 February 2000
• Docket Number: No. 95-1147-CIV-T-17E.,95-1147-CIV-T-17E.
• Citation: 86 F.Supp.2d 1140
• Parties: The BRADLEY FACTOR, INC., Plaintiff, v. UNITED STATES of America, Department of Treasury, Internal Revenue Service, Joseph A. Spicola, as Trustee for Medical Resources International, Inc., a dissolved Florida corporation, and Southern Commerce Bank, Defendants.
• Court: U.S. District Court — Middle District of Florida

86 F.Supp.2d 1140

The BRADLEY FACTOR, INC., Plaintiff, v. UNITED STATES of America, Department of Treasury, Internal Revenue Service, Joseph A. Spicola, as Trustee for Medical Resources International, Inc., a dissolved Florida corporation, and Southern Commerce Bank, Defendants.

No. 95-1147-CIV-T-17E.

United States District Court, M.D. Florida, Tampa Division.

February 8, 2000.

COPYRIGHT MATERIAL OMITTED

Peter L. Pollock, Jr., Akerman, Senterfitt & Eidson, P.A., Orlando, FL, Catherine Peek McEwen, Akerman, Senterfitt & Eidson, P.A., Tampa, FL, for Bradley Factor Inc., plaintiff.

Susan R. Waldron, U.S. Attorney's Office, Tampa, FL, John A. Galotto, U.S. Dept. of Justice, Tax Div., Washington, DC, for U.S., defendant.

Hale A. Sandridge, Fowler, White, Gillen, Boggs, Villareal & Banker, P.A., Tampa, FL, for Joseph A. Spicola, as Trustee for Medical Resources Intern., Inc., a dissolved Florida corp., defendant.

Ronald Henry Trybus, Kass, Shuler, Solomon, Spector, Foyle & Singer, P.A., Tampa, FL, for Southern Commerce Bank, defendant.

ORDER ON DEFENDANT SOUTHERN COMMERCE BANK'S MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

KOVACHEVICH, Chief Judge.

This cause is before the Court on the Motion for Summary Judgment of Defendant Southern Commerce Bank as to Count III of Plaintiffs Complaint (Dkt.54), Memorandum of Law (Dkt.55), and Plaintiff's Opposition (Dkt.65). The Court also has for consideration Plaintiff's Motion for Partial Summary Judgment as to Count II of the Complaint (Dkt.58).

FACTUAL BACKGROUND

On or about December 19, 1988, Defendant, SOUTHERN COMMERCE BANK (hereinafter "SCB"), made a loan to Defendant, MEDICAL RESOURCES INTERNATIONAL (hereinafter "MRI"), in the amount of $275,000.00. In order to secure the debt to SCB, MRI executed and delivered a Security Agreement and UCC-1 Financing Statement which granted SCB a blanket lien on MRI's assets and existing and after-acquired equipment. Subsequently, MRI executed and delivered a series of renewal and consolidation notes, the last of which was executed on August 21, 1992 in the sum of $157,880.57.

At the time of the August 21, 1992 Renewal Note, MRI's debt was secured by SCB's perfected lien on all of MRI's existing and after-acquired equipment, including one medical latex glove making machine. Because MRI believed SCB was adequately secured with collateral for its outstanding debt, MRI requested that SCB agree not to include a second glove making machine MRI had purchased in June of 1992 in the blanket lien. On August 25, 1992, SCB's President, Tom Wilson, sent a letter to MRI agreeing to exclude the second glove making machine from the Security Agreement.

On or about March 10, 1993, the Internal Revenue Service (hereinafter "the IRS") filed a Notice of Federal Tax Lien with the Secretary of State of Florida against MRI claiming an interest in all of MRI's equipment, including the second glove making machine.

On November 12, 1993, SCB assigned to Plaintiff, THE BRADLEY FACTOR, INC. (hereinafter "BFI") all of its interest in MRI, including but not limited to, the August 21, 1992 Renewal Note and the related loan documents granting security interest in MRI's assets and equipment. Prior to BFI's purchase of the SCB's loan to MRI, the President of BFI, William Campbell, requested from SCB copies of SCB's entire file regarding its loans to MRI. SCB forwarded copies of the file to BFI and both Mr. Campbell and BFI's attorney, Michael Sharp, reviewed the file. The August 25, 1992 letter from SCB to MRI releasing SCB's interest in the second glove making machine was not included with the file. Both Mr. Campbell and Mr. Sharp stated in affidavits that they had no knowledge of the letter's existence or of its content. Following review of the SCB's file and the results of a UCC search, BFI concluded that SCB had a perfected security interest in all of the assets and equipment of MRI, including the second glove making machine. BFI then acquired all of SCB's interest in MRI's loan for $195,000.00.

Following the Assignment of the Notes, Security Agreement and collateral from SCB to BFI, MRI defaulted. Subsequently, the IRS informed BFI of its interest in the second glove making machine pursuant to the tax lien filed in March of 1993 and SCB's letter of August 25, 1992 excluding the machine from the Security Agreement and releasing SCB's interest.

On June 15, 1995, BFI filed a three-count Complaint in the State Court of Hillsborough County, Florida against SCB, the IRS and MRI (Dkt.2). The IRS removed this action to this Court on July 17, 1995 (Dkt.1). Count I of BFI's Complaint requests this Court to declare BFI's rights in the second glove making machine. Count II of the Complaint alleges that SCB materially breached its warranty that it had not further modified or amended the loan documents. In Count III of its Complaint, BFI alleges that SCB fraudulently induced BFI into executing the contract by affirmatively representing to BFI that it had perfected security interest in all of MRI's equipment, including the second glove making machine.

On May 22, 1996, the IRS filed its Motion for Judgment on the Pleadings asserting that, as a matter of law, its interest in the second glove making machine was superior to all competing interests. (Dkt.14). MRI later joined the IRS' Motion. On November 26, 1996, this Court entered an Order Granting the IRS' Motion for Judgment on the Pleadings and on April 1, 1999, Final Judgment was entered in favor of the IRS as to Count I of BFI's Complaint. (Dkt.48). Discovery resumed as to Counts II and III and depositions were taken of Mr. Campbell and SCB's President, Thomas Wilson, regarding BFI's allegations of SCB's breach of warranty and fraud.

STANDARD OF REVIEW

Summary judgment should only be entered where there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P.Rule 56(c). The evidence is viewed in the light most favorable to the non-movant. Sweat v. Miller Brewing Co., 708 F.2d 655, 656 (11th Cir.1983). Issues of fact are genuine only if a reasonable jury, considering the evidence presented, could find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Facts are material only if they will affect the outcome of the trial under governing law. Id. at 248, 106 S.Ct. 2505. Hence, the substantive law of the case determines which facts are material and which are irrelevant. Id.

The United States Supreme Court held in Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) that the plain language of Federal Rule of Civil Procedure 56(c) mandates summary judgment after "adequate time for discovery and upon motion, against a party who fails to establish the existence of an essential element to the party's case, and on which the party will bear the burden at trial." The Court also held that Rule 56(e) requires the non-moving party to go beyond the pleadings in establishing whether there are specific facts showing a genuine issue for trial. Id. at 324, 106 S.Ct. 2548.

In determining whether to grant summary judgment, the district court acknowledges that "credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Anderson, 477 U.S. at 255, 106 S.Ct. 2505.

DISCUSSION

This Court will first address Defendant's Motion for Summary Judgment as to Count III, and Plaintiff's memorandum in opposition. Defendant, SCB, contends that the fraud alleged in Count III is inseparable from Plaintiff's breach of warranty claim in Count II, and is thus barred as an independent claim by Florida's economic loss rule. However, Plaintiff, BFI, asserts that the fraud claim in Count III amounts to an independent tort of fraud in the inducement and is not barred pursuant to the economic loss rule.

Florida's economic loss rule bars independent tort claims stemming from a contractual breach that only result in economic loss. See AFM Corp. v. Southern Bell Tel. & Tel. Co., 515 So.2d 180 (Fla. 1987). However, this rule does not apply to causes of action based upon negligent or intentional torts considered independent of the contractual breach even though a breach of contract action exists. See HTP, Ltd. v. Lineas Aereas Costarricenses, S.A., 685 So.2d 1238 (Fla.1996). Facts surrounding the tort claim of fraud are deemed interwoven with the facts surrounding the breach of contract claim if the factual inquiry needed to prove both allegations is essentially the same. See Dantzler Lumber & Export Co. v. Bullington Lumber Co., Inc., 968 F.Supp. 1543, 1547 (M.D.Fla.1997). The fact that the compensatory damages sought in both counts are the same has no bearing on the independence of the two claims. See La Pesca Grande Charters, Inc. v. Moran, 704 So.2d 710 (Fla. 5th DCA 1998).

Defendant argues that Plaintiff's claim of fraudulent inducement is indistinguishable from the claim for breach of warranty because the fraud claim concerns the very essence of the contract. Defendant relies on the analysis set forth in Huron Tool and Engineering Co. v. Precision Consulting Services, Inc., 209 Mich.App. 365, 532 N.W.2d 541 (1995) which was approved by the Florida Supreme Court in HTP and cited by this Court in Dantzler. The court in Huron Tool adopted an exception to the economic loss rule for fraudulent inducement claims with one limitation, that the inducement claim is not "interwoven" with a breach of contract claim. The court stated that a fraudulent inducement claim is considered "interwoven" where the alleged misrepresentations concern the quality or character of the goods that are the subject of the contractual agreement. See id. at 544-45. Defendant cites to Florida cases that have adopted Huron's rationale. See Hotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So.2d...