H.J. Scheirich Co., In re, 92-5428
| Decision Date | 05 January 1993 |
| Docket Number | No. 92-5428,92-5428 |
| Parties | Bankr. L. Rep. P 75,059 In re: H.J. SCHEIRICH COMPANY, Debtor. Thomas A. DUDDY, Trustee for the Estate of H.J. Scheirich Company, Plaintiff-Appellee, v. KITCHEN & BATH DISTRIBUTORS, INC.; Glen N. Garner; Susan N. Garner; Ernest Negrin; Jean T. Negrin, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Judith B. Hoge (argued), [COR NTC ret], Mark J. Sandlin, Jr. (briefed), [COR NTC ret], Morgan & Pottinger, Louisville, KY, for plaintiff-appellee.
David M. Cantor (argued and briefed), [COR NTC ret], Seiller & Handmaker, Louisville, KY, for defendants-appellants.
Before KEITH and NELSON, Circuit Judges; and LIVELY, Senior Circuit Judge.
This is an appeal from an order of the district court affirming the bankruptcy court's entry of judgment for the trustee and its dismissal of the creditor's counterclaim. Appellee Thomas Duddy, trustee in bankruptcy for H.J. Scheirich Company filed a complaint in an adversary proceeding in the U.S. Bankruptcy Court on November 8, 1990, for payment of money past due and owing for goods ordered by and delivered to appellant, Kitchen & Bath Distributors Inc. Kitchen & Bath stipulated the trustee's case and conceded that it owed $30,603.81, but filed affirmative defenses of failure of consideration, set-off and estoppel and a counterclaim for breach of contract.
The bankruptcy court found that Kitchen & Bath failed to sustain its burden of establishing its claims by a preponderance of the evidence, and dismissed the counterclaim. The district court affirmed, finding no clear error in the bankruptcy court's findings of fact or its determination not to credit the testimony of Kitchen & Bath's president.
Beginning in 1987, H.J. Scheirich Company, a Louisville, Kentucky manufacturer of cabinets for kitchens and bathrooms began supplying inventory to Kitchen & Bath Distributors, Inc., a Virginia corporation doing business in Fredericksburg, Virginia. Kitchen & Bath was primarily a wholesale distributor to builders, although it very occasionally supplied cabinets to homeowners. In September 1988, when Kitchen & Bath's total inventory was between $65,000 and $85,000, Scheirich and Kitchen & Bath entered into a "Key Distributor Agreement" wherein Kitchen & Bath agreed to carry only the Scheirich line of cabinets and to purchase at least "one of everything." There was testimony that after the agreement, Kitchen & Bath at one point maintained approximately $300,000 of Scheirich inventory.
Scheirich petitioned the bankruptcy court for relief under Chapter 11 on February 20, 1990. In the period thereafter, Scheirich in newsletters encouraged its customers to continue to buy its products and assured them that the reorganization was progressing satisfactorily. Kitchen & Bath alleges it was in frequent contact with Scheirich for the first few months after the petition was filed and received assurances that Scheirich would continue to fill orders. Kitchen & Bath ordered a total of over $95,000 worth of inventory from Scheirich subsequent to Scheirich's filing the petition under Chapter 11. Following conversion of Scheirich's case to a Chapter 7 proceeding, Thomas Duddy was appointed trustee. The unpaid balance of these orders was the subject of Duddy's complaint.
On July 17, 1990, Kitchen & Bath placed two orders totalling $50,000. Scheirich failed to deliver either of these shipments, whereupon Kitchen & Bath on September 20, 1990, notified Scheirich by letter that it was holding Scheirich in breach and intended to "cover" in order to mitigate its losses. The non-delivery of the July 17 orders was the primary subject of the counterclaim. Kitchen & Bath maintained that the orders were for pre-sold jobs and it risked losing important accounts had it failed to deliver the cabinets to its customers. Kitchen & Bath contends it covered, buying replacement goods on the open market at considerable expense. In addition, when Scheirich failed to deliver on a July 26, 1990 order pre-sold to its customer Dobyns, Kitchen & Bath claimed it lost the sale.
Moreover, Kitchen & Bath asserted that pursuant to a separate oral agreement, Scheirich, unable to deliver a new inexpensive line of cabinets, instructed Kitchen & Bath to use a higher priced existing inventory for the job and Scheirich would rebate to Kitchen & Bath the difference between the cost of the more expensive cabinets and the cost of the cheaper line. Scheirich never rebated the price difference. Finally, Kitchen & Bath claimed that due to Scheirich's failure to supply cabinets, it was left with "dead inventory" of approximately $100,000 now virtually worthless because the inventory constituted only partial units, of no use without the additional shipments. The total amount counterclaimed was $175,097.19.
After hearing testimony of the only witness, Glen Garner, President of Kitchen & Bath, the court ruled that Kitchen & Bath failed to sustain its burden of showing by a preponderance of the evidence that non-delivery caused it loss. The court held that the newsletters from Scheirich assuring its customers of its stability fell short of misrepresentation. The court found it difficult to believe that the $95,000 worth of goods ordered post-petition were all incomplete cabinets and no full sets, given that Kitchen & Bath's entire inventory when it signed the "Key Distributor Agreement" was less than $95,000.
The bankruptcy court ruled that Kitchen & Bath's account was past due when it ordered the cabinets for the Dobyns job, thus Scheirich was justified in not making that delivery. Finally, the court said that Kitchen & Bath's evidence of specific losses fell short of proof sufficient to sustain a claim, as Garner repeatedly used words like "approximately," "about" and "estimated."
On appeal, the district court affirmed the bankruptcy court's ruling, finding that Kitchen & Bath failed to substantiate the existence of pre-sold jobs. While it did present receipts from other wholesalers for goods it claimed were necessary to cover the pre-sold jobs, there was no evidence the goods were pre-sold. The court deferred to the bankruptcy court which had heard the testimony, observed witness demeanor, reviewed the documents and chosen to not believe the testimony. The court found no evidence that the findings were clearly erroneous.
The district court also found no clear error in the court's determination that Scheirich made no misrepresentation in its newsletters. Kitchen & Bath provided no documentation supporting its claim that it filed requests for rebates with Scheirich. Although Kitchen & Bath offered documents showing sales of goods to builders, it provided no evidence substantiating an agreement with Scheirich for Scheirich to rebate the difference in price between goods in stock and less expensive goods Scheirich was unable to deliver. Thus, the district court concluded that the bankruptcy court, having the opportunity to hear evidence, observe the demeanor of the witness and review documents, chose to disbelieve the testimony of Garner. Without more, the factual findings could not be held to be clearly erroneous.
We consider briefly the parties' arguments before this court and recite familiar law relating to appellate review under the "clearly erroneous" standard.
Kitchen & Bath argues that the bankruptcy court's findings were clearly erroneous because it was not refuted that (1) appellant continued to order goods from Scheirich based on Scheirich's representations that it would deliver on the orders, (2) most of the appellant's orders were to satisfy pre-sold jobs, and (3) appellant suffered damages from Scheirich's failure to deliver the goods. In addition to detailing legal arguments for relief under the Uniform Commercial Code (UCC) for seller's breach and buyer's damages, Kitchen & Bath seeks damages for Scheirich's failure to reimburse Kitchen & Bath for the cost difference between Kitchen & Bath's inventory and the new line Scheirich could not deliver and for Scheirich's failure to deliver goods, which rendered appellant's inventory worthless. Finally, Kitchen & Bath argues that Scheirich is estopped from seeking payment of the past due bill because of its misrepresentations that it would be able to deliver goods and appellant's detrimental reliance on those representations. Kitchen & Bath, alternatively, asks that the two parties' damages be set-off.
The trustee asserts that the district court was correct in holding that the bankruptcy court's decision was not clearly erroneous but was reasonable and supported by the court's discretion to observe the demeanor of the witnesses, the absence of documentary evidence that the losses on specific orders were for "pre-sold jobs," and the absence of documentary evidence of Scheirich's agreement to reimburse Kitchen & Bath on the less expensive line of cabinets. Because Kitchen & Bath has pointed to nothing showing the court was clearly erroneous, Duddy contends that the decision should be affirmed.
A district court reviewing a bankruptcy court's decision in a "core proceeding" functions as an appellate court, applying the standards of review normally applied by federal appellate courts. According to Fed.R. of Bankr.P. 8013, the bankruptcy court is the factfinder and
[f]indings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the Bankruptcy Court to judge the credibility of witnesses.
This rule mirrors Fed.R.Civ.P. 52(a), which sets forth the standard of review for courts of appeal reviewing findings of fact by district courts.
In Anderson v. City of Bessemer, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985), the Supreme Court said in regard to a federal appellate court's review of a district court: "a 'finding...
To continue reading
Request your trial
-
Teter v. United States Tr. (In re Teter)
... ... 28 U.S.C. §§ ... 157(b)(1) and 158(a)(1); In re H.J. Scheirich Co ., ... 982 F.2d 945, 949 (6th Cir. 1993) ... Under 28 ... ...
-
In re Tml, Inc.
... ... upon this payment history, and the assertion that Word and TML were "co-obligors" on the loading dock and renewal notes, the Trustee claims that ... Kitchen & Bath Distribs., Inc. (In re H.J. Scheirich Co.), 982 F.2d 945, 949 (6th Cir.1993) ... 43. Suwyn is the President ... ...
-
Pittington v. Great Smoky Mountain Lumberjack Feud, LLC
... ... 1996) (citing Gafford v. Gen. Elec. Co. , 997 F.2d 150, 171 (6th Cir. 1993) ) (discussing Rule 59(a) ). "An ... See Duddy v. Kitchen & Bath Distribs., Inc. (In re H.J. Scheirich Co.) , 982 F.2d 945, 949 (6th Cir. 1993) (citing Bose Corp. v. Consumers ... ...
-
In re Forbes
... ... See Stevenson v. J.C. Bradford & Co. (In re Cannon), 277 F.3d 838, 849 (6th Cir.2002) (citations omitted) ... 1504; Duddy v. Kitchen & Bath Distribs., Inc. (In re H.J. Scheirich Co.), 982 F.2d 945, 949 (6th Cir.1993); Haskell v. Washington Twp., 864 ... ...