In re George's Comet Motorcars, Ltd.
| Citation | 100 BR 403 |
| Decision Date | 26 May 1989 |
| Docket Number | Adv. No. 87 A 1165.,Bankruptcy No. 87 B 15714 |
| Parties | In re GEORGE'S COMET MOTORCARS, LTD., d/b/a George Isuzu, Debtor. AMERICAN ISUZU MOTORS, INC., Plaintiff, v. GEORGE'S COMET MOTORCARS, LTD., d/b/a George Isuzu, Defendant. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
David N. McBride, P.C., Donald C. Pasulka, Ross & Hardies, Chicago, Ill., for American Isuzu.
Denyse Heffner, Office of U.S. Trustee, Chicago, Ill., for U.S. trustee.
Donald C. Shine, Stephen G. Kehoe, Nisen & Elliott, Arthur G. Simon, Dannen, Crane, Heyman & Simon, Chicago, Ill., for debtor.
The Debtor, George's Comet Motorcars, Ltd., sells Isuzu vehicles pursuant to an offer to enter a dealership agreement with the plaintiff in this adversary proceeding, American Isuzu Motors, Inc., ("AIMI"). Under the terms of the offer, AIMI sold products to the Debtor for re-sale and the offer was to ripen into a contract if the Debtor complied with certain conditions. AIMI's two count complaint seeks 1) a declaration that the plaintiff's offer to enter into the dealership agreement was revoked before the Debtor filed its bankruptcy petition, and 2) rescission of the dealership agreement based on fraud. The plaintiff moves for summary judgment only on the rescission count, which alleges that the Debtor intentionally made false statements on an application upon which the plaintiff justifiably relied and which induced the plaintiff to enter the dealership arrangement with the Debtor.
In response to the summary judgment motion, the Debtor submitted two affidavits. AIMI contends that the affidavits contradict prior deposition testimony and must be disregarded. The Court, however, finds that there are genuine issues of material fact raised by one of the affidavits and concludes that the plaintiff is not entitled to rescission of the dealership agreement as a matter of law. The plaintiff's motion for summary judgment on count II of its complaint will be denied.
Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings in the bankruptcy court by Bankruptcy Rule 7056, provides that summary judgment will be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In 1986, the Supreme Court decided a trilogy of cases which encouraged the use of the summary judgment motion as a means to efficiently dispose of factually unsupported claims. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Electric Industrial Corp. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ().
The movant's initial burden is to show that there is no basis in the record for facts that might determine a result of the case in favor of the non-movant. See Anderson, 477 U.S. at 251, 106 S.Ct. at 2510, 91 L.Ed.2d at 214; Childress, A New Era for Summary Judgments: Recent Shifts at the Supreme Court, 116 F.R.D. 183, 190 (1986). Such a showing would satisfy the movant's burden under Rule 56(c) that there are no genuine issues as to any material facts.
The Supreme Court has now specifically rejected the view that summary judgment will not be granted if there is a scintilla of evidence supporting the nonmovant. "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co., 475 U.S. at 586, 106 S.Ct. at 1356, 89 L.Ed.2d at 552. Instead, once the movant's initial burden is met, the non-movant must show that there is a genuine dispute as to a material fact. Id. Of course, all evidence must still be viewed most favorably to the non-movant. Bartman v. Allis Chalmer Corp., 799 F.2d 311, 312 (7th Cir.1986), cert. denied, 479 U.S. 1092, 107 S.Ct. 1304, 94 L.Ed.2d 160 (1987).
Where resolution of a dispositive issue requires the court to determine a party's state of mind, summary judgment is generally inappropriate since much depends on the credibility of the witnesses and the trier of fact's observance of the witnesses' demeanor during direct and cross-examination. Braxton-Secret v. A.H. Robins Co., 769 F.2d 528, 531 (9th Cir.1985); Croley v. Matson Navigation Co., 434 F.2d 73, 77 (5th Cir.1970). Summary judgment is appropriate, however, even when issues of scienter are involved, if in response to a properly supported motion for summary judgment the non-movant offers no specific facts to show that there is a genuine issue for trial or simply relies on mere allegations or denials. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514 (libel action). Summary judgment on scienter issues is also appropriate where the facts are unambiguous and contrary inferences as to a party's intent are precluded. Braxton-Secret, 769 F.2d at 531 (defendant's summary judgment motion granted as to whether the plaintiff knew or should have known of her actionable injury after miscarriage); Arizona Laborers v. Conquer Cartage Co., 753 F.2d 1512, 1518 nt. 9 (9th Cir.1985) ( ); Hall v. Security Planning Services, 419 F.Supp. 405 (D.C.Ariz.1976) (). Accordingly, summary judgment is not precluded here merely because intent is an issue.
In September, 1986 the Debtor and Mr. George Chiarelli, the president and sole shareholder of the Debtor, submitted an application to purchase an Isuzu automobile dealership from Carr's Isuzu. AIMI requires that all purchasers of Isuzu dealerships submit an application for its prior approval. In response to the dealership application, AIMI delivered a letter to the Debtor, dated September 12, 1986, in which AIMI offered to enter into the dealership agreement with the Debtor. The offer was open for acceptance until December 12, 1988 and was to be deemed accepted if the Debtor performed certain specified obligations by that date.1 The offer was deemed automatically revoked if the obligations were not performed by that date. The offer was also expressly revokable on ninety days written notice.2
In accordance with the terms of the offer, on October 9, 1987, AIMI notified the Debtor in writing that it was revoking the offer effective in ninety days. The notice of revocation was in response to the Debtor's alleged failure to perform certain obligations specified in the offer. The Debtor denies that the revocation was effective.
On October 23, 1987, the Debtor filed a petition for relief under Chapter 11 of the Bankruptcy Code. On December 4, 1987, AIMI filed an adversary proceeding seeking a declaration from this Court that the offer to enter the dealership agreement was terminated pre-petition. During discovery for the adversary proceeding, AIMI found what it thought to be material misrepresentations in the dealership application which, it claims, induced it to make the offer to the Debtor. AIMI then filed an amended complaint adding a second count, for rescission of the agreement that allowed the Debtor to sell and service Isuzu products. The basis of AIMI's rescission count is fraud in the inducement. Count II of the amended complaint is the object of AIMI's motion for summary judgment, presently before the Court.
AIMI's success on the rescission count requires that it prove the following elements: 1) That a misrepresentation of material fact was made, 2) that the misrepresentation was made for the purpose of inducing AIMI to act, 3) that the Debtor, through Mr. Chiarelli, knew the misrepresentation was false or did not actually believe, on reasonable grounds, that it was true, 4) that AIMI reasonably believed the misrepresentation to be true, and 5) that AIMI relied on the misrepresentation to its detriment. See Century Universal Enterprises, Inc., v. Triana Development Corp., 158 Ill.App.3d 182, 110 Ill.Dec. 229, 510 N.E.2d 1260 (2d Dist.1987); Roda v. Berko, 401 Ill. 335, 339-40, 81 N.E.2d 912, 914 (1948).
AIMI alleges that the Debtor's dealership application falsely represents that no criminal or civil judgment had been entered against the Debtor or Mr. Chiarelli. Questions "D" and "E" of the dealership application asked whether the applicant ever had a criminal or civil judgment entered against him or whether the applicant had ever been a partner, officer, director or stockholder in a firm which had a civil or criminal judgment entered against it. Mr. Chiarelli, whose signature appears on the application, answered an unequivocal "no" to both questions "D" and "E". It is uncontested that the negative responses to the questions concerning past judgments were not accurate. In fact, AIMI alleges that nine judgments had been entered against the Debtor and Mr. Chiarelli.3
AIMI further alleges that the misrepresentations were made to induce it to enter a dealership agreement with the Debtor. In support of that allegation AIMI exhibits the dealership application, signed by Mr. Chiarelli, which states that all information in the application was true and was presented to induce AIMI to enter a dealership agreement with the Debtor.4 Moreover, AIMI submits the affidavits of Gordon C....
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