Citicorp of N. Am., Inc. v. LIFESTYLE COMMUN. CORP., 4-91-CV-30343.
| Decision Date | 27 October 1993 |
| Docket Number | No. 4-91-CV-30343.,4-91-CV-30343. |
| Citation | 836 F. Supp. 644 |
| Parties | CITICORP OF NORTH AMERICA, INC., Plaintiff, v. LIFESTYLE COMMUNICATIONS CORPORATION and James McBride, Defendants. LIFESTYLE COMMUNICATIONS CORPORATION, Third-Party Plaintiff, v. HARRIS CORPORATION, BROADCAST DIVISION, Third-Party Defendant. |
| Court | U.S. District Court — Southern District of Iowa |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Steven L. Nelson of Davis, Hockenberg, Wine, Brown, Koehn & Shors, Des Moines, IA, for Citicorp.
Ken J. Winjum of Grefe & Sidney, Des Moines, IA, for Lifestyle and McBride.
Richard A. Malm of Dickinson, Throckmorton & Parker, Des Moines, IA, for Harris.
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUND 647
II. FINDINGS OF FACT 648
A. The Parties 648
B. Radio Equipment for KJJC-FM 648
C. Asher and Citicorp 650
D. The Lease Transaction 651
E. Lease Provisions 654
III. CONCLUSIONS OF LAW 655
A. Law to Be Applied 655
B. Citicorp's Claims Against Lifestyle 655
1. Hell or High Water Provision of the Master Lease 655
2. Waiver of Defense Clause 657
C. Lifestyle's Specific Defenses 658
1. The Close Connection Doctrine 658
2. Consideration 660
3. Title to the Transmitter 661
4. Condition Precedent 661
5. Risk of Loss 662
D. Lifestyle's Claims Against Harris 663
1. Breach of Contract 663
2. Conversion 664
3. Negligence 665
4. Contribution or Indemnity 666
a. Contribution 666
b. Indemnity 666
E. Harris' Claims Against Citicorp and Lifestyle 667
1. Claim Against Citicorp 667
2. Claim against Lifestyle 668
IV. CONCLUSION 668
V. ORDER FOR JUDGMENT 668
The circumstances of this case are regretful and "`concerns, in its essence, the question of which of three basically innocent parties shall be made to bear a loss occasioned by the wrongful conduct of a third party who, because of financial incapacity, is unable to respond in damages.'" International Harvester Credit Corp. v. Hill, 496 F.Supp. 329, 332 (M.D.Tenn.1979) (quoting Chemical Bank v. Penny Plate, Inc., 144 N.J.Super. 390, 365 A.2d 945, 951 (1976)).
In this civil action, Plaintiff Citicorp North America, Inc. ("Citicorp"), contends that Defendant Lifestyle Communications Corporation ("Lifestyle") has breached a lease agreement for a radio transmitter group and is liable for all payments due under the lease, plus interest and costs, including attorney fees. Citicorp further asserts that Defendant James McBride ("McBride"), Lifestyle's president, is also obligated for the lease payments due to a written guarantee.
Lifestyle and McBride, in turn, contend: that the lease transaction failed for lack of consideration; that the lease was subject to a condition precedent which did not occur; that title to the equipment which was the subject of the lease was voidable; that Citicorp acted in a commercially unreasonable manner in funding the lease thereby creating a risk of loss which precludes it from enforcing the lease; and that Citicorp was so closely connected to the lease's assignor that Citicorp should be precluded from enforcing the lease.
Third-Party Defendant Harris Corporation ("Harris"), the manufacturer of the radio transmitter which was the subject of the lease, contends that it is entitled to recover the balance due on a sales contract from Lifestyle.1 Alternatively, Harris asserts that it is entitled to recover from Citicorp on the basis of enforcement of its security interest in the radio equipment, or on the grounds of restitution.
A bench trial commenced on April 14, 1993, and concluded on April 15, 1993. Citicorp was represented by Steven L. Nelson of Davis, Hockenberg, Wine, Brown, Koehn & Shors, Des Moines, Iowa. Lifestyle and McBride were represented by Ken J. Winjum of Grefe & Sidney, Des Moines, Iowa. Harris was represented by Richard A. Malm of Dickinson, Throckmorton & Parker, Des Moines, Iowa. The parties were requested to submit post-trial briefs, and closing arguments were then held on June 3, 1993. This litigation, while confusing factually and complex legally, was very well tried and briefed by each counsel for the parties.2 The matter is now fully submitted.
Plaintiff Citicorp is a Delaware corporation with its principal place of business in the State of New York. Citicorp is a financial services business. Defendant Lifestyle is an Iowa corporation with its principal place of business in the State of Iowa. Lifestyle owns and operates radio station KJJC-FM in Osceola, Iowa. McBride is an officer, director and the majority shareholder of Lifestyle. He is a resident of Massachusetts. Third-party Defendant Harris Corporation is a Delaware corporation with its principal place of business in Florida.3 Jurisdiction in this court is due to diversity of citizenship. 28 U.S.C. § 1332.
In the summer of 1990, Lifestyle began to seek to secure a replacement transmitter and antenna for its radio station KJJC-FM in Osceola, Iowa. One of the manufacturers of such equipment contacted by Lifestyle was Harris. On July 2, 1990, Harris employee Fred Brown prepared a proposal for a transmitter and an antenna for KJJC-FM. On August 13, 1990, Brown prepared a revised proposal for a transmitter group and an antenna. The total price for the equipment was $71,135.00. The price of the antenna group was $9244.00 and the price of the transmitter group was $61,891.00. After giving Lifestyle a discount of $10,534.25, the total price of the equipment was $60,600.75. At approximately this time, McBride contacted Harris regarding leasing the Harris radio equipment.
Harris employee Christine Grimm gave McBride the name of Dana Leasing as a possible leasing company. Lifestyle subsequently made application with Dana Leasing concerning the leasing of the Harris equipment. On August 16, 1990, Grimm learned from Dennis Alexander at Dana Leasing that Lifestyle's application had been rejected by Dana Leasing because of Lifestyle's negative net worth, negative cash flow and consecutive years of loss. Grimm informed McBride about Dana Leasing's decision, and gave him the names of other leasing companies to contact.
McBride, who had seen a magazine advertisement for Exchange National Funding ("Exchange National"), made application with Exchange National about brokering a lease for the Harris radio equipment. On August 27, 1990, McBride informed Grimm that Lifestyle's application had been approved and that Exchange National was splitting Lifestyle's equipment purchase with two companies. Grimm told McBride that because of the difference in the costs of the two equipment groups Lifestyle's order could not be split. McBride replied that he didn't want to do anything wrong.
On August 28, 1990, Grimm contacted Chris Simpson at Exchange National regarding the Lifestyle sale. Simpson informed Grimm that Exchange National had already placed $25,000 of the Lifestyle purchase, and was working to secure financing for the other portion of the Lifestyle deal. In response, Grimm informed Simpson that Harris would not split the invoice for the Lifestyle purchase to indicate a sale of $24,000 for the antenna group and $29,000 for the transmitter group.4
On the Labor Day weekend in September of 1990, lightning struck KJJC-FM's antenna, severely damaging the radio station's transmitter and causing the station to be knocked off the air. On September 4, 1990, after being informed about the station being off the air, Grimm contacted Simpson at Exchange National regarding the financing of Lifestyle sale. Simpson again informed Grimm that only $25,000 of the transaction had been financed.5
A revised proposal was prepared by Fred Brown on September 4, 1990. The revised proposal was identical to the one Harris submitted to Lifestyle on August 13, 1990. On September 5, 1990, McBride signed the proposal in his capacity as President of Lifestyle.6 The proposal requested a shipment date of September 17, 1990, for the antenna, and the transmitter would be picked up on "Friday." The latter was a reference to Friday, September 7, 1990. The executed proposal stated that:
Lifestyle was anxious to pick up the new transmitter in order to...
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