ET Barwick Industries v. Walter E. Heller & Co.

• Decision Date: 22 December 1987
• Docket Number: C83-278R.,Civ. A. No. C83-77R
• Citation: 692 F. Supp. 1331
• Parties: E.T. BARWICK INDUSTRIES, INC., a corporation, and E.T. Barwick, an individual, Plaintiffs, v. WALTER E. HELLER AND CO., a corporation, Franklin Cole, and Tom Henderson, individuals, Defendants. WALTER E. HELLER & CO., a corporation, Plaintiff, v. E.T. BARWICK INDUSTRIES, INC., a corporation, Defendant.
• Court: U.S. District Court — Northern District of Georgia

692 F. Supp. 1331

E.T. BARWICK INDUSTRIES, INC., a corporation, and E.T. Barwick, an individual, Plaintiffs, v. WALTER E. HELLER AND CO., a corporation, Franklin Cole, and Tom Henderson, individuals, Defendants.

WALTER E. HELLER & CO., a corporation, Plaintiff, v. E.T. BARWICK INDUSTRIES, INC., a corporation, Defendant.

Civ. A. Nos. C83-77R, C83-278R.

United States District Court N.D. Georgia, Rome Division.

December 22, 1987.

COPYRIGHT MATERIAL OMITTED

Philip R. Russ, Russ & Clark, Amarillo, Tex., W. Baer Endictor, Atlanta, Ga., William J. Cade, Cade & Saunders, Albany, N.Y., Bobby Lee Cook, Summerville, Ga., for plaintiffs.

Richard M. Kirby, Hansell & Post, Atlanta, Ga., for Ernst & Whinney.

Rene A. Torrado, Jr., Dan K. Webb, Winston & Strawn, Chicago, Ill., William E. Davidson, Jr., Rome, Ga., David G. Ross & John Marshall, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for defendants.

Peter J. Kilchenmann, Chicago, Ill., for First Nat. Bank of Chicago (motion to quash subpoena only).

ORDER

HAROLD L. MURPHY, District Judge.

Presently before the Court are defendants' motion for summary judgment with regard to the claims brought by plaintiffs and defendant Heller's motion for partial summary judgment with regard to certain defenses raised by plaintiffs in response to defendant Heller's Counterclaim. For the reasons stated below, defendants' motion for summary judgment is GRANTED on every issue except the issues relating to plaintiffs' claims with respect to the application of funds to the April 1979 note which was guaranteed by E.T. Barwick. The Court desires to hold an oral hearing as to these remaining issues. Likewise, the Court determines it best to hold an oral hearing with regard to defendant Heller's motion for partial summary judgment on the defenses raised by plaintiffs to Heller's Counterclaim.

THE PARTIES

Plaintiff E.T. Barwick Industries, Inc. ("Industries") was a Georgia corporation engaged in the manufacture and sale of carpet. Industries ceased manufacturing no later than January of 1980. Plaintiff E.T. Barwick was the Chief Executive Officer and President of Industries on September 29, 1978, and at all pertinent times thereafter. Defendant Heller Financial, Inc. ("Heller"), formerly known as Walter E. Heller & Company, is a Chicago-based corporation incorporated in the State of Delaware. Heller, a wholly-owned subsidiary of Heller International Corporation, is involved in the commercial finance industry which includes secured lending, asset-based lending and factoring.¹ At all pertinent times, defendant Franklin Cole was Chairman of the Board of Heller, and defendant Thomas Henderson was Vice-President in charge of Heller's Central Factoring Division.

THE PARTIES' BUSINESS RELATIONSHIP

As of September 1978, Industries was indebted to a consortium of banks and insurance companies in the amount of $46,340,000.00. It was also indebted to Heller in the amount of $13,559,000.00 on account of factoring and loan transactions.²

On September 29, 1978, Industries and Heller entered into a series of agreements. The first was a "Secured Loan Agreement," which provided that Industries' indebtedness would be restructured. That agreement provided that Heller would lend Industries $17.5 million. The proceeds of this loan would be used first to pay off all of Industries' outstanding indebtedness to the consortium of lenders. Loan proceeds remaining after the payments to the creditors would be used by the carpet manufacturer as working capital.

The Secured Loan Agreement also provided for the restructuring of Industries' indebtedness of $13,559,000.00 to Heller in the following manner:

(a) Industries' indebtedness was reduced by $4,403,571.11 through Industries' transfer of $4,403,571.11 in outstanding accounts receivable to Heller;

(b) Industries' indebtedness was further reduced when it directed that $5,138,560.86 in its factoring reserve be transferred to Heller; and

(c) Industries' remaining indebtedness ($4,056,917.39) was restructured when Heller accepted promissory notes from Industries in the amounts of $3,465,905.23 and $591,012.16.

Also on September 29, 1978, Industries and Heller entered into a "Maturity Factoring Agreement." This agreement provided that Heller would be Industries' sole factor and that Heller would advance money to the carpet manufacturer in amounts up to 90% of the face value of accounts receivable factored at "Heller risk."

Subsequent to the above described debt restructuring, Industries continued to lose approximately $2 million per month. In April 1979, Industries requested and obtained an additional loan of $3.5 million from Heller. This additional loan was represented by a promissory note executed by Industries' representatives on April 9, 1979. The parties agreed that the principal balance of the loan could be repaid by applying specified percentages of amounts received by Heller in payment of Industries' factored receivables. The agreement specified that 10% of the payments received during the period from April 9 to April 30 were to be applied to the debt; 12.5% during the period from May 1 through May 31, 1979; and 15% for payments after May 31, 1979. Heller also obtained Barwick's personal guaranty of the $3.5 million loan.

On June 30, 1979, Industries failed to pay the quarterly interest then due on its outstanding indebtedness to Heller. Defendants allege that in July 1979, Heller and Industries reached an agreement concerning the payment of the overdue interest. They allegedly agreed that Heller would suspend the application of a percentage of funds received on account of factored receivables to reduce the April 9, 1979, loan indebtedness and instead apply those amounts to pay the interest that had become due on July 1, 1979. The suspension of the application of a percentage of the funds due on Industries' factored receivables in order to satisfy the overdue interest obligation continued through August 1979. Once the overdue interest obligation was satisfied, the application of the specified percentage of payments on factored invoices to reduce the principal balance of the April 1979 loan was resumed.

Although Industries was in default on its indebtedness to Heller as of January 1980, Heller waited until early 1983 before notifying Industries that it intended to commence foreclosure proceedings.

On February 18, 1983, Barwick and Industries filed the present action. On February 22, 1983, Heller instituted foreclosure proceedings in the Superior Court of DeKalb County, Georgia. After the state court granted Heller a writ of possession, the action was removed to this Court and consolidated with the instant action.

Heller maintains that as of December 31, 1986, the total amount of Industries unpaid indebtedness was $51,050,608.77. Of this amount, it is alleged that $1,771,374.84 remains due and owing on the April 9, 1979, note which was personally guaranteed by E.T. Barwick.

By Order dated June 27, 1986, the Court attempted to set out the remaining issues in this case. Those issues include whether defendants violated any antitrust, RICO, tort or contract law. Defendants now move for summary judgment on all issues that relate to defendants' liability to plaintiffs. Heller also moves for summary judgment on plaintiffs' contract defenses to Heller's claim for recovery of plaintiffs' indebtedness to Heller.

Fed.R.Civ.P. 56(c) authorizes summary judgment when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." The party seeking summary judgment bears the burden of demonstrating that no dispute as to any material fact exists. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Bingham, Ltd. v. United States, 724 F.2d 921, 924 (11th Cir. 1984). The moving party's burden is discharged merely by "`showing' — that is, pointing out to the District Court — that there is an absence of evidence to support an essential element of the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 324-326, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265, 275 (1986). In assessing whether the movant has met this burden, the evidence and all factual inferences should be viewed in the light most favorable to the party opposing the motion. See Bradbury v. Wainwright, 718 F.2d 1538, 1543 (11th Cir.1983). Once the moving party has adequately supported his motion, the nonmovant then has the burden to show that summary judgment is improper, coming forward with specific facts showing a genuine dispute. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 584-588, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538, 552 (1986). And in deciding a motion for summary judgment, it is no part of the court's function to decide issues of genuine material fact but solely to determine whether there is such an issue to be tried. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986); Warrior Tombigbee Transportation Co. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir.1983). A District Court "can only grant summary judgment `if everything in the record ... demonstrates that no genuine issue of material fact exists.'" Tippens v. Celotex Corp., 805 F.2d 949, 952 (11th Cir.1986), quoting Keiser v. Coliseum Properties, Inc., 614 F.2d 406, 410 (5th Cir.1980) (emphasis in original).

Genuine disputes are those by which the evidence is such that a reasonable jury could return a verdict for the nonmovant. Anderson, 477 U.S. at 247-249, 106 S.Ct. at 2510, 91 L.Ed.2d at 211-12. Moreover, for factual issues to be "genuine" they must have a real basis in the record. Matsushita, 475 U.S. at 584-588, 106 S.Ct. at 1356, 89 L.Ed.2d at 552. The nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record as a whole could not lead a rational trier of fact to find for the nonmoving party, there...