Dairyland Financial Corp. v. Federal Intermediate Credit Bank of St. Paul

• Decision Date: 14 July 1988
• Docket Number: No. 87-2700,87-2700
• Citation: 852 F.2d 242
• Parties: 6 UCC Rep.Serv.2d 622 DAIRYLAND FINANCIAL CORPORATION, Plaintiff-Appellant, v. FEDERAL INTERMEDIATE CREDIT BANK OF ST. PAUL, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 242

852 F.2d 242

6 UCC Rep.Serv.2d 622

DAIRYLAND FINANCIAL CORPORATION, Plaintiff-Appellant, v. FEDERAL INTERMEDIATE CREDIT BANK OF ST. PAUL, Defendant-Appellee.

No. 87-2700.

United States Court of Appeals, Seventh Circuit.

Argued April 12, 1988.

Decided July 14, 1988.

E. Campion Kersten, Kersten & McKinnon, Milwaukee, Wis., for plaintiff-appellant.

Roy L. Prange, Jr., Ross & Stevens, S.C., Madison, Wis., for defendant-appellee.

Before POSNER, COFFEY, and FLAUM, Circuit Judges.

FLAUM, Circuit Judge.

Dairyland Financial Corporation ("Dairyland") filed suit against the Federal Intermediate Credit Bank of St. Paul ("FICB") alleging that FICB breached an oral contract between the parties for the sale of a portfolio of agricultural loans. ¹ The district court granted summary judgment in favor of FICB on the ground that enforcement of the alleged agreement was barred by the applicable statute of frauds. We affirm.

I.

Dairyland alleges that it entered into an agreement with FICB to purchase an agricultural loan portfolio ("the loan portfolio") originated by the Farmers Credit Company ("FCC"). FCC made agricultural loans to farmers and farm enterprises. It obtained a substantial amount of its financing through direct loans from FICB and by discounting its customers' notes with FICB. FCC's obligations to FICB were secured by FCC's loan portfolio. The rights and interests of FICB and FCC in the portfolio and the other terms of the parties' lending agreement were set forth in "the General Financing Agreement" signed on August 8, 1974. In 1985 FCC sustained serious financial setbacks and was delinquent in its obligations to FICB. On January 3, 1986 FICB notified FCC that it was in default and demanded full payment under the terms of the General Financing Agreement.

During this same time period James Stopple, President of FCC, tried to organize a group of investors to purchase FICB's interest in FCC's loan portfolio. This investor group became Dairyland. On January 24, 1986 a FICB representative informed Stopple that on January 27, 1986 FICB would take physical possession of the files and documents related to FCC's loan portfolio. On January 25, 1986 Stopple called Thomas Sitz, an associate credit officer for FICB; Stopple and Sitz had previously discussed the proposed sale of the portfolio to Dairyland. Stopple claims that he told Sitz that FCC would not release the files to FICB until an agreement had been reached for the sale of the portfolio to Dairyland.

On January 27, 1986 Stopple again called Sitz to discuss the terms of the proposed sale. Dairyland contends that during this call an agreement was reached between Stopple (on behalf of Dairyland) and Sitz (on behalf of FICB). The principal terms of the alleged agreement were: (1) FCC would turn over the loan files to FICB immediately; (2) FICB would sell the loan portfolio to Dairyland for $3.8 million cash, the price to be adjusted up or down for loan payments received by FICB in the interim, administrative costs and interest; (3) Dairyland would have 45 days to close the transaction; and (4) FCC and FICB would exchange releases of legal liability.

Stopple made a second call to Sitz on January 27. This time James Fretty, an attorney and Dairyland investor, was also a party to the discussion. Pursuant to this conversation Fretty drafted a document entitled "Commitment to Sell Loans" ("the Fretty document") and forwarded it to FICB. Sitz also summarized these calls in a memorandum to his supervisor, Stuart Peterson, dated January 27, 1986. Sitz later prepared a second memo to Peterson, dated February 19, 1986, summarizing FCC's financial status and discussing the state of affairs between FICB and Dairyland. Although FCC turned over its files and documents related to the loan portfolio on January 27, 1986 allegedly in accordance with the first principal term of the asserted agreement, FICB rejected Dairyland's claims that an agreement had been reached. Dairyland never acquired the loan portfolio, and filed suit in the district court alleging breach of contract.

II.

A substantial obstacle to Dairyland's efforts to establish an enforceable contract between Dairyland and FICB is Sec. 401.206 of the Wisconsin Statutes. This section sets forth the statute of frauds applicable to "kinds of personal property not otherwise covered." See Wis.Stat. Sec. 401.206 Official UCC Comment ("Purposes: To fill the gap left by the Statute of Frauds provisions for goods, securities and security interests."). The parties agree that it governs the alleged sale of the loan portfolio. Section 401.206 provides in part:

(1) ... [A] contract for the sale of personal property for the price of $5,000 or more is not enforceable by way of action or defense unless there is some writing which indicates that a contract for sale has been made between the parties at a defined or stated price, reasonably identifies the subject matter, and is signed by the party against whom enforcement is sought or by his authorized agent.

* * *

(3) A contract which, but for sub. (1) would be enforceable, is enforceable:

(a) If the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under sub. (1) beyond the quantity or extent of personal property admitted....

FICB moved pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Dairyland's complaint for failure to state a claim on the grounds that Sec. 401.206 was not satisfied. While reviewing FICB's motion, the district court considered affidavits and other evidence submitted by Dairyland in addition to the pleadings. It therefore converted FICB's motion to dismiss into a motion for summary judgment and granted it.

Summary judgment should only be granted when the moving party has demonstrated, drawing all inferences in favor of the nonmoving party, that there are no issues of material fact and the moving party 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, 2553, 91 L.Ed.2d 265 (1986); Richardson v. Penfold, 839 F.2d 392, 394 (7th Cir.1988). "A court should grant summary judgment when it is persuaded that, on the same evidence, it would have to reverse a jury verdict in favor of the party opposing summary judgment." Barker v. Henderson, Franklin, Starnes & Holt, 797 F.2d 490, 496 (7th Cir.1986). On appeal, we must consider the entire record in the same light, Richardson, 839 F.2d at 394, and may affirm on any ground that finds support in the record. Wallace v. Greer, 821 F.2d 1274, 1277 (7th Cir.1987).

A.

Dairyland first contends that writings prepared by Sitz satisfy the statute of frauds. Section 401.206(1) requires that there be "some writing which indicates that a contract for sale has been made" between Dairyland and FICB and that the writing reasonably identify the subject matter of the sale, the loan portfolio, and that it be signed by an authorized representative of FICB. Dairyland argues that Sitz's January 27, 1986 and February 19, 1986 internal memoranda to Peterson satisfy these requirements.

The January 27, 1986 memo, dated the same day Stopple claims he reached an agreement with Sitz, stated in part that "Jim Stopple, the former President of [FCC], has come up with a proposal that he wants FICB to consider." The memo further states that "[w]e need to respond to this offer as they claim they are prepared to put it into writing." It then outlines the same basic terms that Dairyland claims compose the agreement, although it does not mention FCC's release of the loan file. Sitz concludes the memo: "I recommend that we stick to the $3.8 million figure and accept it if they can meet it." The district court found, and we agree, that this memo does not indicate that an agreement had been reached on January 27, 1986. Rather it demonstrates quite the opposite--that negotiations between the parties were in progress and that Dairyland had made an offer which Sitz believed FICB should consider.

The February 19, 1986 memo is similar. It provides in part:

A group of investors have offered to purchase the assets of the FCC for a cash settlement of $3.8 million.... But due to the Zeller lawsuit, any sale of the loan portfolio is prohibited. Thus, FICB will continue to employ [two FICB employees] to collect the loan portfolio. A certified registered letter has been sent to all borrowers indicating that payments are to be made direct to the FICB.

(emphasis added). Once again the word "offer" is used. The district court found that the memorandum read as if it was drafted by a subordinate advising his supervisor of the status of negotiations. We agree with this characterization.

Dairyland points out that in an earlier draft Sitz used the word "agreed" instead of "offered" and the phrase "may be complicated" instead of "prohibited." Even this prior draft, however, did not indicate that a contract for the sale of the loan portfolio had been reached. The phrase "[a] group of investors have agreed to purchase" can reasonably be read to indicate only that the terms were acceptable to the investors, not that FICB agreed to sell its interest in the loan portfolio on these terms. This reading is supported by the next sentence which indicates that because a lawsuit had been filed by a third party it would be difficult to make such a sale. The words "any sale" are used. If a contract had already been entered into, Sitz most likely would have said that the sales agreement would be complicated to execute because of the lawsuit. Finally, the phrase "any sale ... may be complicated" is followed by a statement which indicates that because of the perceived difficulty with successfully completing a sale, FICB had taken steps to directly collect the loans in the portfolio. We hold that none of these writings indicate that a contract was reached between Dairyland and FICB...