Equipment Finance Group, Inc. v. Traverse Computer Brokers

• Court: U.S. Court of Appeals — Fourth Circuit
• Writing for the Court: Before PHILLIPS, MURNAGHAN, and SPROUSE; SPROUSE
• Citation: Equipment Finance Group, Inc. v. Traverse Computer Brokers, 973 F.2d 345 (4th Cir. 1992)
• Decision Date: 10 September 1992
• Docket Number: No. 91-1691,91-1691
• Parties: 19 UCC Rep.Serv.2d 629 EQUIPMENT FINANCE GROUP, INCORPORATED, Plaintiff-Appellant, v. TRAVERSE COMPUTER BROKERS, Defendant-Appellee, and Synchronized Design and Development Company, Incorporated, Defendant.

Page 345

973 F.2d 345

19 UCC Rep.Serv.2d 629

EQUIPMENT FINANCE GROUP, INCORPORATED, Plaintiff-Appellant, v. TRAVERSE COMPUTER BROKERS, Defendant-Appellee and Synchronized Design and Development Company, Incorporated, Defendant.

No. 91-1691.

United States Court of Appeals Fourth Circuit.

Argued April 9, 1992.

Decided Aug. 20, 1992.

As Amended Sept. 10, 1992.

Michael Edward Geltner, Washington, D.C., argued for plaintiff-appellant.

Craig Crandall Reilly, Murphy, McGettigan & West, P.C., Alexandria, Va., argued for defendant-appellee.

Before PHILLIPS, MURNAGHAN, and SPROUSE, Circuit Judges.

OPINION

SPROUSE, Circuit Judge:

Equipment Finance Group, Inc., filed this diversity action against Traverse Computer Brokers and Synchronized Design and Development Company, claiming, inter alia, that Traverse breached its express warranty of clear title in the sale of computer equipment. Equipment Finance is a Virginia corporation specializing in financing equipment for acquisition by commercial businesses; Traverse is a Michigan corporation which acquires, brokers, and resells computer equipment; and Synchronized, also of Michigan, used computer equipment in its business. The district court granted Traverse's Rule 12(b)(6) motion to dismiss and Equipment Finance appeals. We affirm.

I

This case involves the acquisition, sale, financing, and eventual repossession of seventeen computer workstations. The computer equipment was initially purchased by Traverse in February 1990 to be part of its regular inventory for resale. Shortly thereafter, Synchronized agreed to buy the equipment from Traverse. In March 1990, anticipating that Synchronized would obtain the necessary financing to complete the transaction, Traverse delivered the computer equipment to Synchronized. The delivery terms specified that the workstations would not be installed or used until Synchronized paid for them.

In a financing arrangement which it described as typical, Equipment Finance agreed to buy the workstations from Traverse and to lease them to Synchronized with the understanding that Synchronized would take title when the last payment was made. Consequently, on June 20, 1990, Equipment Finance bought the equipment from Traverse for $56,700 and Traverse's promise to remarket the equipment if Synchronized defaulted. Traverse expressly warranted that it was the absolute owner of the equipment and that the property was free and clear of all liens and encumbrances. The next day, June 21, 1990, Equipment Finance sold the workstations to Synchronized. ¹ Three months later, on September 28, 1990, Equipment Finance filed a financing statement. ²

In a series of unrelated transactions predating the above described sales, the First of America Bank--Southeast Michigan, Synchronized's primary lender, lent Synchronized a total of $2,647,364.34 under an agreement that gave it a security interest in Synchronized's equipment. The agreement included an after-acquired property clause providing that any equipment Synchronized acquired after the date of the loans also became collateral for the bank's loans. The bank filed a timely financing statement covering these loans. In the Autumn of 1990, Synchronized failed to meet its loan obligations, and the bank began proceedings to repossess the computer equipment. Equipment Finance contested the bank's action in Michigan state court. That case, however, was dismissed on July 19, 1991, after Equipment Finance failed to post the bond necessary to halt the bank's repossession and sale of the equipment. The bank proceeded with the foreclosure sale.

In the meantime, in May 1991, Equipment Finance had filed this three-count diversity suit in the District Court for the Eastern District of Virginia against Traverse and Synchronized. The first count sought damages from Synchronized for the unpaid portion of the contract. Although Equipment Finance effected service of process through Virginia's long-arm statute, Va.Code Ann. § 8.01-329 (Michie Supp.1991), Synchronized did not appear or participate in the proceedings.

In counts two and three, Equipment Finance sought damages from Traverse for breach of warranty of title and for breach of the remarketing part of the contract. On August 8, 1991, Traverse moved to dismiss. The court considered affidavits submitted by both parties and under the conversion provision of Rule 12(b)(6) granted a summary judgment to Traverse. ³ Equipment Finance filed its notice of appeal on August 12, 1991; it neither applied for nor was granted a certificate under Rule 54(b) of the Federal Rules of Civil Procedure. Later, on October 15, 1991, the court granted Equipment Finance's motion for voluntary dismissal against the remaining defendant, Synchronized.

II

Traverse preliminarily contends that we lack jurisdiction because the district court's order of August 8, from which appeal was taken, was not a final judgment for purposes of 28 U.S.C. § 1291. It argues that because the order dismissed the action only against Traverse and not against Synchronized, it was not final and thus not appealable absent Rule 54(b) certification. Under the circumstances of this case, we do not agree.

Initially, we reject Equipment Finance's argument that Synchronized was not a party to the suit. In this connection, Equipment Finance argues that service on Synchronized was incomplete because the service of process, effected through the Secretary of the Commonwealth under Virginia's long-arm statute, was returned by the post office marked "undeliverable." In our view, however, service of process was sufficient under Virginia's long-arm statute. See Va.Code Ann. § 8.01-329(C). The plaintiff complied with the statutory provisions and the sufficiency of process was not affected by the failed delivery of notice from the Secretary to the putative defendant, Synchronized. See Steed v. Commonwealth, 11 Va.App. 175, 397 S.E.2d 281, 284 (1990).

Nonetheless, we think that the subsequent dismissal of Synchronized on the motion of Equipment Finance effectively satisfies the finality requirements of Rule 54(b). It seems to us that the procedural circumstances of this case warrant a practical approach to finality. See Gillespie v. United States Steel Corp., 379 U.S. 148, 152, 85 S.Ct. 308, 311, 13 L.Ed.2d 199 (1964). We recently applied a similar rationale in Harrison v. Edison Brothers Apparel Stores, Inc., 924 F.2d 530, 532 (4th Cir.1991). In that case, the district court had entered its Rule 54(b) certification after the notice of appeal was filed. We held that when the adverse party is not prejudiced, the late filing of a Rule 54(b) certification does not necessarily deprive us of jurisdiction.

The circumstances we consider here, of course, differ somewhat from those of Harrison. In this case, the district court granted Traverse's motion for summary judgment, Equipment Finance filed its appeal, then two months later the district court dismissed the claims against Synchronized. The result of this chain of events is, however, the same as that in Harrison--a final disposition of all claims before consideration of the appeal. Consequently, we join those circuits recognizing cumulative finality where all joint claims or all multiple parties are dismissed prior to the consideration of the appeal. See Sacks v. Rothberg 845 F.2d 1098, 1099 (D.C.Cir.1988); Alcorn County v. U.S. Interstate Supplies, Inc., 731 F.2d 1160, 1165-66 (5th Cir.1984); Cape May Greene, Inc. v. Warren, 698 F.2d 179, 184-85 (3d Cir.1983); Martin v. Campbell, 692 F.2d 112, 114 (11th Cir.1982); Pireno v. New York State Chiropractic Ass'n, 650 F.2d 387, 389 n. 4 (2d Cir.1981), aff'd sub nom. Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982); Anderson v. Allstate Ins. Co., 630 F.2d 677, 680-81 (9th Cir.1980); Merchants & Planters Bank v. Smith, 516 F.2d 355, 356 n. 3 (8th Cir.1975); Jetco Elec. Indus. v. Gardiner, 473 F.2d 1228, 1231, reh'g denied, 474 F.2d 1347 (5th Cir.1973).

We are particularly disposed to this view under the circumstances of this case. There is no indication that Traverse was prejudiced by the dismissal. In fact, Traverse neither objected to nor appealed the dismissal. Furthermore, we perceive no violence to the rationale underlying Rule 54(b). Synchronized neither appeared nor participated in the proceedings, and because the action against it was ultimately dismissed, it is not vulnerable to judgment. There are no overlapping claims or issues of joint liability, nor are there any outstanding motions. Cf. United States ex rel. Hudson v. Peerless Ins. Co., 374 F.2d 942, 944 (4th Cir.1967). Unfortunately for Equipment Finance, however, it gains little solace from this conclusion as we consider the merits of its appeal.

III

On the merits, we first consider Equipment Finance's appeal of the district court's ruling that Traverse did not violate its express warranty of clear title. Since the sale occurred in Michigan and the collateral is located there, we apply Michigan law. See Rawl's Auto Auction Sales, Inc. v. Dick Herriman Ford, Inc., 690 F.2d 422, 426 (4th Cir.1982); Va.Code Ann. §§ 8.1-105(1), 8.9-103(1)(b) (Michie 1991).

Equipment Finance argues that Traverse did not have clear title when it sold the workstations to Equipment Finance on June 20 because the bank's security interest in the equipment had attached in March, when Traverse delivered the equipment to Synchronized. We agree with the district court, however, that Traverse had clear title when it sold the workstations to Equipment Finance because the bank's security interest did not attach until Synchronized agreed to purchase the equipment on June 21.

Article Nine of Michigan's Commercial Code provides for the creation and perfection of security interests. The creditor's security interest in the debtor's goods becomes enforceable when it attaches. Mich.Comp. Laws Ann. § 440.9203 (West Supp.1991). Once the creditor's security interest has...