Credit Alliance Corp. v. David O. Crump Sand & Fill

• Decision Date: 23 April 1979
• Docket Number: No. 78 Civ. 535 (CHT).,78 Civ. 535 (CHT).
• Citation: 470 F. Supp. 489
• Parties: CREDIT ALLIANCE CORPORATION, Plaintiff, v. DAVID O. CRUMP SAND & FILL CO., David O. Crump and Dennis Nuckols, Defendants and Third-Party Plaintiffs, v. SEMCO SERVICES COMPANY, INC. and Bubba Lee, Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

470 F. Supp. 489

CREDIT ALLIANCE CORPORATION, Plaintiff, v. DAVID O. CRUMP SAND & FILL CO., David O. Crump and Dennis Nuckols, Defendants and Third-Party Plaintiffs, v. SEMCO SERVICES COMPANY, INC. and Bubba Lee, Third-Party Defendants.

No. 78 Civ. 535 (CHT).

United States District Court, S. D. New York.

April 23, 1979.

Sol D. Bromberg, New York City, for Credit Alliance Corp.

Lynton, Klein, Rosenberg, Opton & Handler, New York City, for David O. Crump Sand & Fill Co., David O. Crump and Dennis Nuckols; Herbert Feiler, Paul M. Godlin, New York City, of counsel.

OPINION

TENNEY, District Judge.

In this diversity action, Credit Alliance Corporation ("Credit"), assignee of a contract for the sale of dump trucks, sues David O. Crump Sand & Fill Co. ("Sand & Fill"), buyer of those trucks, and David O. Crump and Dennis Nuckols, guarantors of the contract, for the difference between the amount due on the contract and the amount realized by Credit at a public sale of those trucks. In the defendants' answer, Sand & Fill counterclaimed against Credit for impeding the former's business. One day later, all three defendants joined in a third-party complaint against Semco Services Company, Inc. ("Semco"), seller of the trucks and assignor of the contract, and Bubba Lee, Semco's alleged president. Credit moves for summary judgment, and the defendants cross-move for transfer of venue. For the reasons given below, summary judgment is granted in favor of Credit, and the third-party action is transferred to the Southern District of Texas, Galveston Division.

Background

The allegations in the parties' papers differ markedly, but the facts can be stated in broad outline as follows. On July 29, 1977 Semco and Sand & Fill entered a Conditional Sale Contract Note ("Contract") by which Semco sold Sand & Fill ten dump trucks. As part of the financing arrangement, Semco assigned the Contract on the same date to Credit; Sand & Fill executed a Delivery/Installation Certificate ("Delivery Certificate"); and Crump and Nuckols signed Guarantees of Sand & Fill's obligations to Credit. In the Delivery Certificate, Sand & Fill acknowledged complete and satisfactory delivery of the trucks; acknowledged notice of Semco's intention to sell the agreement to Credit; and waived any claims, defenses, or offsets against Credit in exchange for Credit's purchasing the Contract.¹ In the Guarantees that Crump and Nuckols executed, they agreed to direct, joint, and several liability and waived any claims, defenses or offsets.² Credit subsequently wrote Sand & Fill requesting the latter to file within thirty days a statement indicating any complaints, objections, claims, or defenses to the goods covered by the Contract. Credit did not receive a reply.

Sand & Fill subsequently defaulted on the payments due under the Contract. It alleges that it returned the trucks; Credit alleges that it repossessed them from Sand & Fill. Credit thereafter advertised a sale of the trucks, sent notice to the defendants, which the defendants alleged they did not receive prior to the sale, and held the sale, at which it put in the highest bid. It subsequently commenced this action for an alleged deficiency of $135,088.57.

In opposing Credit's motion for summary judgment, the defendants reiterate and rely on their eight affirmative defenses. The first and second defenses address venue. In the third defense, defendants contend that they did not waive their claims and defenses, that the trucks were defective and otherwise not in compliance with the Contract, that Credit had knowledge of these claims and defenses, and that it cannot argue otherwise because the Delivery Certificate was signed before the trucks were delivered. In its fourth defense, the defendants allege that they returned the trucks to Credit, with Credit's agreement, in full satisfaction of the Contract. Fifth and Sixth, they argue that the Contract is unenforceable because it allegedly violates the usury laws of New York and Texas. Seventh, they contend that the sale of the trucks was not commercially reasonable within the meaning of the Uniform Commercial Code and that they are therefore relieved of their obligations to pay. And, finally, they counterclaim for failure to deliver trucks in good and serviceable condition.

Credit contends that the case presents only three issues: waiver, usury, and the commercial reasonableness of the public sale. It argues that the defendants waived their claims and defenses in the Certificate of Delivery, in the Guarantees, and by Sand & Fill's failure to respond to Credit's request for a statement of claims and defenses; that the defense of usury is unavailable in either New York or Texas because of the "time-price doctrine"; and that the sale was commercially reasonable because Credit gave proper notice to the defendants and because the sale was properly advertised and conducted. In responding to the defendants' allegations, Credit denies knowledge of defects in the trucks and argues that any statement by Semco to the effect that Credit had such knowledge cannot bind Credit because Semco is not Credit's agent. As to any alleged discharge of the defendants' obligations under the Contract, Credit argues that the Contract could be modified only by written agreement and that no such modification was executed.

Discussion

Waiver

N.Y.U.C.C. § 9-206(1) (McKinney's 1964) provides in pertinent part:

An agreement by a buyer or lessee that he will not assert against an assignee any claim or defense which he may have against the seller or lessor is enforceable by an assignee who takes his assignment for value, in good faith and without notice of a claim or defense, except as to defenses of a type which may be asserted against a holder in due course of a negotiable instrument under the Article on Commercial Paper (Article 3).

In this case, Sand & Fill, by Crump signing as "President," executed a Delivery Certificate, by which it waived any claims, defenses, or offsets against Credit. See note 1 supra. Defendants Crump and Nuckols executed similar waivers in individual Guarantees. See note 2 supra. Defendants contend that, in spite of the Delivery Certificate, Sand & Fill never made such a waiver. They offer in support of their position the fact that Semco struck the waiver language from the Contract, attached as Exh. A to Credit's Complaint. It is unclear why the waiver language was struck from the Contract, on the one hand, while, on the other, Crump signed the Delivery Certificate containing a waiver in clear and certain terms. The Court need not speculate: this appearance of conflict is not of a type to render the waiver uncertain or in any sense ambiguous. The terms of the waiver, as expressed and assented to in the Delivery Certificate, are clear, simple, and susceptible of only one meaning: Sand & Fill waived any claims, defenses, and offsets against Credit.³

Defendants also argue that Credit may not rely on section 9-206(1) because Credit allegedly took the assignment before delivery of the trucks and with notice of defenses, namely that the trucks were allegedly defective and otherwise not in compliance with the Contract. These allegations, however, fly directly in the face of Sand & Fill's unequivocal acknowledgement of complete and satisfactory delivery of the trucks. See note 1 supra. The specific allegations concerning noncompliance and defects support the conclusion that Semco and its president, Bubba Lee, had notice of them, see Affidavit of David O. Crump, sworn to July 24, 1978, at 5-7 ("Crump Affidavit"), but are not probative of Credit's knowledge. That Bubba Lee, who was trying to sell the trucks, allegedly indicated that Credit knew that the trucks had the wrong size buckets, see id. at 7, fails, in the absence of an agency between Credit and Semco and in the face of the defendants' acknowledgment of complete and satisfactory delivery of the trucks, to raise a genuine issue of material fact as to Credit's alleged knowledge of defenses. Finally, even if Credit took the assignment before the trucks were actually delivered, the waiver would still be effective. Credit Alliance Corp. v. Successful Creations, Inc., No. 7295/78 (Sup.Ct.N.Y. July 11, 1978).

Other reasons support upholding the waiver in the instant action. It cannot be said that these defendants are unwary victims of a merchant's sharp practices. They are business people dealing in their own area of business. The transaction was aboveboard — the defendants knew that the Contract was going to be assigned to Credit, and the language of assignment and waiver was explicit and clear. They must be assumed to have understood the consequences of their acts, and the Court can only conclude that they read and understood the provisions in the Contract, Delivery Certificate, and Guarantees. Accord, B. W. Acceptance Corp. v. Richmond, 46 Misc.2d 447, 259 N.Y.S.2d 965 (Sup.Ct.1965).

Discharge

Defendants also contend that Credit accepted the return of the trucks in full satisfaction and discharge of their obligations under the Contract. They allege that Paul Sinsheimer, Credit's local manager, told the defendants to return the trucks to Semco and that after such delivery Credit would make no further claim against them. Mr. Sinsheimer flatly denies this allegation. Affidavit of Paul Sinsheimer, sworn to Aug. 7, 1978, ¶ 12 ("Sinsheimer Affidavit"). The writings in this case spare the Court the need to determine whether defendants' allegation is true: the Contract provides that "this contract note contains the entire agreement of the parties and may not be modified except in writing," Exh. A to Summons and Complaint, and the Guarantees specify that they "cannot be changed orally," id., Exhs. B1 & B2. Because the alleged discharge and satisfaction was not in writing and because Credit has indicated no intention to waive this writing requirement, defendants' allegation cannot discharge its obligations to...