Glovis Ala., LLC v. Richway Transp. Servs. Inc.

• Decision Date: 03 July 2020
• Docket Number: CIVIL ACTION 18-00521-KD-N
• Parties: GLOVIS ALABAMA, LLC, Plaintiff/Counter-defendant, v. RICHWAY TRANSPORTATION SERVICES INC., Defendant/Counter-claimant. RICHARDSON ALABAMA EQUIPMENT LEASING, INC., Intervenor Defendant.
• Court: U.S. District Court — Southern District of Alabama

GLOVIS ALABAMA, LLC, Plaintiff/Counter-defendant, v. RICHWAY TRANSPORTATION SERVICES INC., Defendant/Counter-claimant.RICHARDSON ALABAMA EQUIPMENT LEASING, INC., Intervenor Defendant.

CIVIL ACTION 18-00521-KD-N

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

July 3, 2020

ORDER

This matter is before the Court on: 1) Plaintiff Glovis Alabama, LLC (Glovis)' motion for partial summary judgment on its breach of contract claim (Doc. 88); 2) Richway's cross-motion for partial summary judgment as to tax charges and attorneys' fees (Doc. 93); and 3) Richway and Intervenor Defendant Richardson Alabama Equipment Leasing, Inc. (RAEL)'s motion for partial summary judgment as to Glovis' claim of conversion and fraud (Doc. 102).

I. Procedural Background

On November 12, 2018, Plaintiff Glovis Alabama, LLC (Glovis) initiated this action against Richway Transportation Services, Inc. (Richway) in the Circuit Court of Mobile County, Alabama (Glovis Alabama, LLC v. Richway Transp. Servs., Inc., 02-CV-2018-902866). (Doc. 1-1). Based on Richway's indebtedness under a contract between Glovis and Richway for leased equipment (trailers), Glovis alleged breach of lease, replevin and unjust enrichment, and sought an order for the release of property and for monetary damages ($370,506), pre/post judgment interest, attorneys' fees, and costs.

On December 14, 2018, Richway removed this case on the basis of federal diversity subject matter jurisdiction. (Doc. 1). On December 21, 2018, Richway answered and counterclaimed against Glovis for claims stemming from a rail and transportation services contract. (Doc. 2). Specifically, Richway alleged counterclaims against Glovis for: "suit on sworn account pursuant to Ala. Code § 12-21-111," breach of contract, promissory estoppel, quantum meruit, and fraud. (Doc. 2). Richway seeks $474,524.65 in actual and liquidated damages, pre/post judgment interest, attorneys' fees, and costs. (Id.) Richway denies that it is in default and/or that it owed any payments to Glovis under the Glovis-Richway lease, "because such amounts were deducted" from Glovis' "outstanding payables owed to Richway."

On April 30, 2019, Richway moved to amend its answer/counterclaim, "to identify RAEL as the owner" of the equipment at issue (versus Glovis) because: "[r]eview of State of Alabama Certificates of Title confirm the majority -- and likely all -- of the Equipment is owned by...[RAEL]....which is not a party to the Lease Agreement...Alabama Department of Revenue license and registration receipts similarly identify RAEL as the owner...." (Doc. 33 at 3-4). Richway further sought to delete its prior assertions that the lease agreement was a finance contract for Richway's purchase of the equipment, and to add that RAEL is the proper title holder and owner of the equipment. (Id. at 4). While given the opportunity to respond (Doc. 34), Glovis did not. Richway's motion was granted (Doc. 36), and Richway filed its amended answer/counterclaims. (Doc. 37).

On May 24, 2019, Richardson Alabama Equipment Leasing, Inc. (RAEL) filed a Rule 24(a)(2) motion to intervene, supported by the Affidavit of RAEL representative Nolan Richardson. (Doc. 35; Doc. 35-1 (Aff. N.Richardson)). With same, RAEL asserted that it, not Glovis, is the true owner of the equipment, and sought intervention to protect its rights. Specifically, per RAEL:

....Plaintiff...neither owns nor maintains any possessory interest in the Equipment.... The Equipment was acquired by Intervenor directly from Transcraft Corporation in June and July of 2016, and thereafter registered and titled in Intervenor's name. [ ] The Equipment has remained under Intervenor's ownership and control since it was acquired. [ ]

...Plaintiff does not maintain any legal ownership, possessory, or security interest in any of the Equipment at issue. Intervenor has not transferred, granted, or otherwise conferred any ownership, possessory, or security interest in the Equipment to Plaintiff. [ ] Intervenorand Plaintiff have not entered into any agreements with respect to the Equipment. [ ] Plaintiff....has never even been in possession of the Equipment...

...Plaintiff contends that is it has contractual and legal rights to immediate possession of the Equipment...despite a complete and utter absence of same. Plaintiff contends it may repossess, sell, or release the Equipment, despite not having any legal ownership or possessory interest in any of the Equipment in issue....Plaintiff may not "repossess" property that it never possessed to begin with, and cannot "sell" what it does not own.

....Intervenor...maintains the only legal ownership and possessory interest in the Equipment...not Plaintiff....pursuant to State of Alabama Certificates of Title and Alabama Department of Revenue license and registration receipts.....

(Doc. 35 at 3-4 (footnotes omitted, emphasis in original)). Thus, the Richardson Affidavit asserts that in June/July 2016, RAEL acquired 12 trailers "directly from Transcraft[]" which have "remained under RAEL's ownership and subject to RAEL's control[,] "Glovis had never been in possession" of the trailers, and "RAEL has not transferred, granted or otherwise conferred any ownership, possessory, or security interest" in the trailers to Glovis. (Doc. 35-1 at 2 (Aff. N.Richardson)).

Glovis opposed the intervention, contending Richway is acting "surreptitious[ly]" and in bad faith with RAEL, to take Glovis' equipment without payment, when RAEL is not a necessary party. (Doc. 40). Glovis argued that RAEL "could not logically be the owner" of the equipment per Richway's own assertions, and that RAEL and Richway are related entities working together to avoid payment to Glovis.

This Court granted RAEL's motion to intervene, concluding (in part):

[T]he Court finds that RAEL has sufficiently asserted an interest in the equipment which is the subject of the action; that it is so situated that disposition of the action, as a practical matter, may impede or impair its ability to protect its interest; and that its interest is represented inadequately by the existing parties in the litigation. Indeed, RAEL's assertion is supported by its evidentiary submissions (Doc. 35-1 (including Affidavit and certificates of title)), which support its claim to ownership in the equipment. ..... "Under any reasonable construction," RAEL has sufficiently alleged a direct, substantial and legally protectable interest in the equipment. Id. RAEL's interest does not appear "speculative, indirect or ancillary" given the Affidavit and certificates of title to the equipment submitted to the Court. As such, the facts and circumstances satisfy the protectable interest requirement and support the conclusion that RAEL should have an opportunity to intervene. Id. Moreover, RAEL's claimed interest -- ownership of the equipment at issue -- would necessarily be inadequately represented by the existing parties (Glovis and Richway) as purported non-owners of said equipment......

(Doc. 41).

Thereafter, Glovis filed an amended complaint against RAEL and Richway alleging: 1) breach of the lease agreement (contract) by Richway (Count I); 2) replevin against Richway (Count II); 3) unjust enrichment against Richway and RAEL (Count III); 4) conversion against Richway and RAEL (Count IV); and 5) fraud against Richway and RAEL (Count V). (Doc. 58.) Richway answered and filed counterclaims against Glovis again alleging: 1) suit on sworn account (Ala. Code § 12-21-111); 2) breach of contract (rail/trucking services); 3) promissory estoppel; 4) quantum meruit; and 5) fraud. (Doc. 69 at 12-17). Through their answers, both Richway and RAEL deny the following: that Glovis is the Lessor under the contract; that the contract in question is a lease agreement; and that Glovis purchased the trailers from Transcraft, asserting instead that Glovis "financed RAEL's purchase and acquisition" of the trailers and Glovis "was aware of and consented to the issuance of the MSO's¹ in the name of RAEL." (Doc. 69 at 2-3, 5; Doc. 70 at 2, 5).

II. Findings of Fact²

An equipment lease agreement between Glovis and Richway -- the Glovis-Richway lease, is the genesis of this case. Specifically, from April 21-May 18, 2016, Glovis and Richway discussed obtaining trailers for Richway's use in the transportation services that it provided to Glovis. (Doc. 102-1 at 36 (Supp. Aff. Kim at 2)). According to Glovis, it agreed to purchase the trailers and lease them to Richway on a "rent to own" basis. (Id.) Richway contends that the agreement was a financing agreement not a lease.³

On June 23, 2016,⁴ Glovis (Lessor) and Richway (Lessee) executed an equipment lease agreement (the Glovis-Richway lease) for 12 trailers. (Doc. 88-1 at 7-19; Doc. 102-2 at 5, 7-8 (Dep. Shukla at 18, 27, 33); Doc. 103-1 at 10 (Dep. Kim at 149)). The lease provides that Richway will pay Glovis $10,930/month for 48 months and upon the 48th payment Richway would own the trailers with no obligation to return them. (Id.; Doc. 107-1 at 5 (Dep. Kim at 91); Doc. 92-2 at 15-16 (Dep. Kim at 41-42). Glovis then arranged to pay $451,436.32⁵ for 12 trailers from non-party Transcraft (also referenced as Wabash National/Benson),⁶ directed that the trailers be delivered to Richway, and paid $24,920.64 in state sales taxes for the purchase. (Doc. 106-5 at 6 (Dep. N.Richardson at 35 ("Glovis bought the trailers, yes[]"); Doc. 88-2 at 3 (Dep. Shukla⁷ at 15 ("[i]t was paid by Glovis[]"); Doc. 92-2 at 19 (Dep. Kim at53); (Doc. 102-1 at 36 (Supp. Aff. Kim at 2 (and Exs. C-D thereto); Doc. 102 at 60-61 (5/28/19 Glovis' payment); Doc. 102-1 at 118 (Glovis' payments 8/30/16, 10/18/16, 1/10/17, 2/7/17). RAEL did not pay Transcraft for the trailers. (Doc. 106-5 at 8 (Dep. N.Richardson Errata)). Per Kim (Glovis), RAEL had nothing to do with the purchase of the trailers. (Doc. 92-2 at 19 (Dep. Kim at 53)).

Glovis arranged for the trailers to be delivered from Transcraft to Richway at different times...