In Re Michael F. Montagne
| Decision Date | 24 May 2010 |
| Docket Number | Bankruptcy No. 08-10916.,Adversary No. 08-1024. |
| Court | U.S. Bankruptcy Court — District of Vermont |
| Parties | In re Michael F. MONTAGNE, Debtor.Bourdeau Brothers, Inc., Plaintiff,v.Michael F. Montagne, Diane Montagne, and Montagne Heifers, Inc., Defendants. |
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James W. Spink, Esq., Mary N. Peterson, Esq., George E. Spear, II, Esq., for Bourdeau Brothers, Inc.
John R. Harrington, Esq., For Michael F. Montagne, Lisa Chalidze, Esq., for Diane Montagne.
Tavian M. Mayer, Esq., for the Chapter 12 Trustee.
Granting Judgment in Favor of Plaintiff Bourdeau Brothers, Inc. Against Defendants Michael F. Montagne and Diane Montagne, Denying Judgment against Defendant Montagne Heifers, Inc., Overruling Objections to Claim, and Denying Motion to Dismiss
On April 27, 2009, Bourdeau Brothers, Inc. (“BBI”) filed a second amended complaint (doc. # 263) 1 seeking payment for feed, grain, and other farm supplies sold to Michael F. Montagne (the “Debtor”), Diane Montagne (“Mrs. Montagne”) (collectively, the “Montagnes”), and Montagne Heifers, Inc. (“MHI”) (collectively, the “Defendants”) for use in their farming operations on four open accounts (Counts I, II, and III), and seeking judgment in the alternative on a claim for unjust enrichment based upon the benefit conferred by BBI's delivery, and the Defendants' use, of said goods in connection with the Defendants' dairy farm operations (Count IV). Mrs. Montagne filed an answer on May 5, 2009, in which she asserted fifteen affirmative defenses and interposed eight counterclaims against BBI (doc. # 268). On May 7, 2009, the Debtor filed an answer asserting sixteen affirmative defenses and interposing seven counterclaims against BBI, including an objection to claim (doc. # 270). 2 The Chapter 12 Trustee (the “Trustee”) filed an objection to the allowance of BBI's proof of claim, Claim # 23 (# 08-10916, doc. # 175). 3 The Court conducted a trial on the complaint, objection to claim, answers, counterclaims, and affirmative defenses on February 16, 2010.
On March 8, 2010, the Montagnes filed post-trial motions to dismiss pursuant to Federal Rule of Civil Procedure 52(c), as made applicable by Federal Rule of Bankruptcy Procedure 7052 (doc. 358, 359). The parties presented oral arguments on the motions to dismiss on March 23, 2010, at which time the Debtor withdrew his motion to dismiss.
Based upon the entire record, including the pleadings filed, the evidence and arguments presented at the trial, and all post-trial oral arguments and briefing, and for the reasons set forth below, judgment in favor of BBI is granted against the Montagnes on BBI's claim for recovery on the open accounts, denied against MHI, and denied on BBI's claim for unjust enrichment the objections to Claim # 23 are overruled, and the motion to dismiss is denied.
This Court has jurisdiction over this adversary proceeding and the Trustee's objection to claim pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(B) and (C), and the parties' stipulation to this Court's entry of a final judgment on the causes of action relating to this title 11 case (doc. # 205, pp. 2-3). State law must guide this Court's analysis and determination of the issues relating to state law causes of action. See Butner v. United States, 440 U.S. 48, 54, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979).
The Debtor and Mrs. Montagne purchased a dairy farm in 1978. A few years later, BBI began supplying fertilizer, seed, and grain for use on the farm. Over approximately twenty-five years, the relationship between BBI and the Montagnes grew to encompass additional farm properties. In December 2007, shortly after a failed attempt at refinancing, BBI commenced an action against the Montagnes in state court. On October 2, 2008, the Debtor sought protection under Chapter 12 of the Bankruptcy Code, and filed a notice of removal of the BBI state court lawsuit to this Court (doc. 1, 10). On February 6, 2009, BBI filed a proof of claim in the Debtor's bankruptcy case (# 08-10916, Claim # 23), asserting a claim for goods delivered in the amount of $1,024,436.80, including interest in the amount of $280,631.75. In support of its claim, BBI attached the last page of ledger cards related to four open accounts.
The Court will first consider BBI's cause of action seeking recovery of amounts due on four open accounts, referred to as Account # 203, Account # 204, Account # 205, and the Fertilizer Account. The Fertilizer Account is an account associated with Account 203 and 205, and along with Account # 203, forms the basis for Count III of BBI's second amended complaint (doc. # 263 ¶¶ 16-23). The Court notes that at trial, the Debtor and Mrs. Montagne stipulated to the principal and pre-judgment interest due upon the Fertilizer Account, while preserving the right to object to post-petition interest. (Trial Tr. 18:16-20:25, February 16, 2010.) Accordingly, the Court will only address the Fertilizer Account in its discussion on recovery of interest on the open accounts ( see § II infra ).
The salient facts surrounding the parties' relationship are not disputed. BBI is a supplier of seed, fertilizer, and grain in northern Vermont and northern New York. (Trial Tr. 4:7-8.) In the early- to mid-1980s, BBI established a business relationship with the Montagnes that lasted approximately twenty-five years. (Trial Tr. 5:2-7, 117:24-118:5, 119:2-120:6.) Initially, the Montagnes co-owned and operated a home farm, but they later acquired and operated a parcel known as the Bourbeau farm. (Trial Tr. 80:11-14.) During the course of their business relationship, BBI delivered goods to the Montagnes at both the home farm and the Bourbeau farm. (Trial Tr. 16:9-14.) BBI considered the Debtor and Mrs. Montagne to be the customers on the three open accounts at issue. (Trial Tr. 5:5-7, 6:7-17.)
Remi Bourdeau (“Mr. Bourdeau”), co-owner of BBI, provided credible testimony at trial regarding the establishment of the three open accounts and the evolution of the accounts over time. Initially, BBI did business with the Montagnes through an open account. The Debtor executed two promissory notes related to this account. (Trial Tr. 44:17-20.) After the balance due on the notes was paid, BBI continued to deliver goods to the Montagnes until 2004 under Account # 205. (Trial Tr. 27:19-25.) Account # 205 was utilized by the parties as an open account from 1996 through 2007 for goods BBI sold and delivered to the Montagnes at their home farm. (Trial Tr. 25:9-10.) The last charge for products against Account # 205 occurred in August 2004, and the balance due subsequently increased only because of the accumulation of interest. (Trial Tr. 27:19-23; Pl.'s Ex. 5, Bour584.) 4 BBI claims a principal amount due of $27,315.89 on Account # 205.5 Account # 203, the second open account, was open from 2004 through 2007, and essentially replaced Account # 205. BBI opened Account # 203 for the Montagnes following a meeting at which the Debtor requested that no additional charges be made to Account # 205. (Trial Tr. 29:17-30:7, 125:1-9.) BBI claims a principal amount due of $568,442.33 on Account # 203. Account # 204, the third open account, was open from 2001 through 2007, and was an open account for goods BBI sold and delivered to the Montagnes at the Bourbeau farm. BBI claims a principal amount due of $73,160.60 on Account # 204.
Generally, an open account is defined as: Black's Law Dictionary, account (8th ed.2004). To establish the elements of a cause of action based on an open account, a plaintiff must prove “that there was a sale and delivery of merchandise, that the prices were charged in accordance with an agreement or, in absence of an agreement, were usual, customary, and reasonable prices for merchandise, and that the account was not paid.” 1 Am.Jur.2d Accounts and Accounting § 8 (2010). As an action on open account is based in contract, the plaintiff's burden of persuasion is a preponderance of the evidence. See Lewis v. Cohen, 157 Vt. 564, 571, 603 A.2d 352, 355 (Vt.1991). “Ordinarily, an account is proved by proving each item, including the date, the correctness of each item contained in the account, the charge made, and the reasonableness of that charge, although this does not mean that, in order to support a suit on open account, each individual item must be specifically proved.” 1 Am.Jur.2d. Accounts and Accounting § 17 (2010). A creditor need not “prove the actual delivery of each item” in order to establish a prima facie case. Gardner & Beedon Co. v. Cooke, 267 Or. 7, 513 P.2d 758, 760 (1973) (quotation and citation omitted), and may rely upon oral testimony. Amer. Sec. Serv., Inc. v. Baumann, 32 Ohio App.2d 237, 289 N.E.2d 373, 378 (1972). Therefore, BBI must prove, by a preponderance of the evidence, the following elements to establish its prima facie case: (1) it sold and delivered the goods to the Defendants (2) its charges were reasonable; and (3) the balance the Defendants owe is unpaid.
A manager or supervisor with overall supervision of a business and knowledge of its routines may give competent testimony regarding delivery of goods. Gardner, 513 P.2d at 760 (...
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