Imagepoint, Inc. v. BFS Retail & Commercial Operations, LLC.
| Decision Date | 19 December 2014 |
| Docket Number | Case No: 13 C 4339 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | IMAGEPOINT, INC. by JAMES R. MARTIN, SECURED CREDITOR, Plaintiff, v. BFS RETAIL & COMMERCIAL OPERATIONS, LLC., Defendant. |
ORDER
For the reasons provided, defendant BFS Retail & commercial Operations, LLC's motion for summary judgment on ImagePoint, Inc.'s breach of contract count is denied [59]. ImagePoint's motion for partial summary judgment is granted in part and denied in part [64], and BFS' motion for partial summary judgment is granted in part and denied in part [61].
This action was originally brought in bankruptcy court to recover debts owed following an involuntary bankruptcy petition under Chapter 7 of the Bankruptcy Code. The present action is brought by James R. Martin on behalf of ImagePoint, LLC. Martin was the president of ImagePoint from 1986 until 2006, and then acted as its CEO until it abruptly closed its doors in 2009. Martin is a secured creditor of ImagePoint and was substituted as the plaintiff because he has the contractual right to collect on ImagePoint's accounts receivable.1
Defendant, BFS Retail & Commercial Operations, LLC, was a customer, having enteredinto an agreement with Imagepoint for the repair, replacement and installation of "Firestone Complete Auto Care stores" signage. When ImagePoint filed for bankruptcy, there were unpaid invoices owed by BFS, and also unfinished work by ImagePoint (that BFS ultimately paid certain subcontractors to complete).
The parties have not completed discovery but, instead, filed a limited consent to proceed before Magistrate Judge Cox for a ruling on certain legal issues.2 Now before us is BFS' motion for summary judgment on Count I of ImagePoint's complaint for breach of contract for failure to pay invoices. Also before us are the parties' cross motions for summary judgment on a few discrete issues: (1) whether BFS is entitled to attorney fees and expenses it incurred when it dealt directly with ImagePoint's subcontractors; (2) whether Martin can recover under the equitable theory of quantum meruit for certain unpaid invoices sent to BFS just prior to ImagePoint going into bankruptcy; and (3) whether BFS has valid set off claims for payments it made voluntarily to subcontractors whose lien rights had expired or were incapable of being perfected. For the reasons outlined, we find BFS' motion for summary judgment on Count I is denied [59]; ImagePoint's motion for partial summary judgment is hereby granted in part and denied in part [64], and; BFS' motion for partial summary judgment is granted in part and denied in part [61].
The basic history between the parties is relatively undisputed. The parties entered into a written Sign Maintenance Agreement on February 24, 2006 ("Agreement") that required ImagePoint to manufacture and install signage for BFS retail stores.3 When ImagePoint ceased business operations in January 2009, and sought protection under bankruptcy laws, there were several subcontractors that demanded payment from BFS directly. BFS explains that many of thesubcontractors asserted mechanics' liens - or threatened to do so - on the BFS properties. As the tenant at these locations, BFS was contractually obligated to clear all liens on the owner's title. BFS, therefore, negotiated and satisfied many of the claims of ImagePoint's subcontractors.4
ImagePoint's breach of contract claim alleges that ImagePoint invoiced BFS for $1,128,007.45 in products and services that BFS has not paid. ImagePoint also argues that BFS failed to dispute those invoices within the applicable time period under the Agreement. BFS argues that summary judgment is warranted on this count because ImagePoint's failure to perform its obligations - by ceasing business abruptly in 2009 - defeats its claim.
The essential elements of a breach-of-contract claim in Illinois are: (i) the existence of a valid and enforceable contract, (ii) substantial performance by the plaintiff, (iii) breach of the contract by the defendant, and (iv) injury to the plaintiff as a result of the breach.5 To survive summary judgment, ImagePoint must show sufficient evidence supports each of these elements.6 BFS' motion rests on the argument that ImagePoint cannot show substantial performance of the Agreement because it was obligated to provide the agreed upon products and services through December 2010, which it did not do.7 BFS explains that there were at least 18 locations where new signage was ready for installation but the subcontractors refused to proceed without guaranteed payment. Because BFS had to pay a substitute contractor to complete many of these projects, or pay ImagePoint's subcontractors directly, it argues that ImagePoint did not substantially perform on the Agreement.
ImagePoint argues two points in response: that the individual invoices are the relevantcontracts for purposes of its breach of contract count, not the Agreement, and; the issue of substantial performance is a question of fact, precluding summary judgment. We first address ImagePoint's argument that we must analyze this case much like those involving distribution agreements, where courts have found the purchase orders to be separate contracts. ImagePoint relies principally on Echo, Incorporated v. Whitson Company, Incorporated.8 There, applying the Illinois version of the Uniform Commercial Code,9 the court addressed the specific question of whether the particular distribution agreement between the parties expanded the right to set-off to include set-off against violations of the distribution agreement, not just a purchase order. This is analogous to our case in that BFS claims ImagePoint's violation of the Agreement (i.e., failure to complete performance through the contracted end-date) is sufficient to set-off its liability to ImagePoint for unpaid invoices. ImagePoint would like us to find that the individual invoices, however, "created [ImagePoint's] rights to the purchase price [of the services] that [BFS] accepted, and the [Agreement] bestowed [ImagePoint] with the rights upon which it counterclaims."10 This would mean that "[e]ach party's rights have their origins in different contracts..."11 This stems from the rule that parties to a contract do not have the right to refuse performance because the other has breached a separate contract between them.12
But ImagePoint does not refer to any language in the Agreement, or in any of the unpaid invoices, that would confirm these are separate contracts. The cases involving distribution agreements that were separate and apart from the purchase orders distinguish the two, noting the distribution agreement contemplates sales, and the purchase orders specify "the price, type, andquantity of goods sold."13 Here, however, the duration, price, and scope of the work is outlined in the Agreement. As BFS argues, the invoices appear to memorialize work performed pursuant to the Agreement.
Conversely, the common sense principle followed in Echo is that "a buyer must pay for the goods it accepts."14 There is no dispute that BFS accepted goods and services from ImagePoint, through its subcontractors, but failed to pay for those goods and services.15 And though the Agreement in this case outlines the price and type of goods and services being provided, indeed, only the specific invoices provide for the particular quantity, at any particular time or location, of the goods and services being provided.16 ImagePoint's right to payment is through the individual invoices, which confirm that a particular service or good was provided. We, therefore, find that the invoices can be viewed as separate contracts apart from the Agreement, and are the relevant contracts for purposes of ImagePoint's breach of contract claim. ImagePoint's alleged failure to "substantially perform" its obligations under the Agreement because it went into bankruptcy does not, then, preclude its breach of contract count. Summary judgment is denied on this count.
We now move to the parties' cross motions for partial summary judgment. Both parties seek summary judgment on Count II for quantum meruit,17 where ImagePoint claims that it should be paid for the value of work performed by subcontractors who have not been paid by ImagePoint. (ImagePoint alleges that BFS obtained a benefit from ImagePoint in the amount of$1,128,007.45, but has not paid it). This count is pleaded in the alternative to Count I, which alleges BFS breached the Agreement when it failed to pay these same invoices.
BFS argues that recovery under a theory of quantum meruit is limited to the value of the goods and services ImagePoint itself conveyed, together with the value of goods and services provided by subcontractors that have been paid by ImagePoint. BFS explains that because Martin was released from any claims by the ImagePoint estate when the underlying bankruptcy case was settled, none of Martin's recovery will be returned to the ImagePoint estate for distribution to the subcontractors. BFS argues, then, that under Count II Martin would receive an inequitable windfall because the subcontractors did the work, but Martin would get to keep the money.
Quantum meruit is based on the implied promise of a recipient of services, in this case BFS, to pay for those services that were of value to it, "'as otherwise the recipient would be unjustly enriched.'"18 In Illinois, a quantum meruit claim applies "where one party performs a service for another's benefit, the benefiting party accepts the benefit, and the circumstances surrounding the agreement indicate that the service was not intended to be gratuitous."19 But in quasi-contract claims like quantum meruit, there is no actual agreement between the parties.20 Rather, it is an implied duty to prevent injustice. To measure quantum meruit recovery, courts consider the lower of these two: "the economic...
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