In re Quad-Cities Const., Inc.

• Decision Date: 01 September 2000
• Docket Number: No. 99-20666.,99-20666.
• Citation: 254 BR 459
• Parties: In re QUAD-CITIES CONSTRUCTION, INC. Debtor. Quad-Cities Construction, Inc., Plaintiff, v. Advanta Business Services, Corp., f/k/a Advanta Leasing Corp., Defendant.
• Court: U.S. Bankruptcy Court — District of Idaho

254 B.R. 459 (2000)

In re QUAD-CITIES CONSTRUCTION, INC. Debtor Quad-Cities Construction, Inc., Plaintiff, v. Advanta Business Services, Corp., f/k/a Advanta Leasing Corp., Defendant.

No. 99-20666.

United States Bankruptcy Court, D. Idaho.

September 1, 2000.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

David E. Eash and Irving "Buddy" Paul, Huppin, Ewing, Anderson & Paul, Coeur d'Alene, Idaho, for Plaintiff.

Ford Elsaesser, Elsaesser, Jarzabek, Anderson, Marks & Elliott, Sandpoint, Idaho and Michael L. Temin, Wolf, Block, Schorr, & Solis-Cohen, Philadelphia, Pennsylvania, for Defendant.

MEMORANDUM OF DECISION

TERRY MYERS, Bankruptcy Judge.

I. INTRODUCTION

Plaintiff Quad-Cities Construction, Inc., ("Plaintiff") is a chapter 11 debtor in possession. On February 3, 2000, it brought suit against Advanta Business Services ("Defendant") upon several theories. Defendant answered two counts of the Complaint. In regard to the other two counts, Defendant moved the Court for an order of dismissal under Fed.R.Civ.P. 12(b)(6), incorporated by Fed.R.Bankr.P. 7012. The Court granted Defendant's motion as to that portion of the Complaint which pleaded a theory of "negligent misrepresentation" since that cause of action was unavailable to Plaintiff as a matter of applicable Idaho law. The motion was in all other respects taken under advisement. This decision resolves that motion.

II. BACKGROUND

A. The Complaint

Plaintiff alleges that, in 1998, it was seeking long-term financing in excess of $4,000,000. It approached an entity known as "LeasX" which, Plaintiff asserts, "committed to providing loans" in such magnitude. Plaintiff contends that LeasX was Defendant's agent.¹

Plaintiff asserts that Defendant received from Plaintiff over $350,000 in advance payments, taxes and security deposits under this financing commitment. The prayer of the Complaint asks for damages in this amount on the basis of "fraud, conversion and/or negligent misrepresentation." Complaint, at p. 7. It also asks for "direct, incidental, and consequential damages resulting from breach of contract in an amount to be proven at trial." Id. (emphasis supplied.)

The "contract" which Plaintiff alleges existed and was breached was one by which Defendant agreed to provide financing or credit to Plaintiff. See, e.g., Complaint at paragraphs VIII and X.² Plaintiff alleges:

Defendant, acting on its own and through LeasX, committed to providing loans exceeding $4 million to Plaintiff. Copies of said lease agreements are attached hereto and incorporated herein as Exhibits "1", "2," and "3."

Complaint, at paragraph VIII. (emphasis supplied)

The first of these "Incorporated agreements" is Exhibit 1, an "equipment lease agreement" between Plaintiff and Defendant concerning a 1992 Caterpillar 950F. This document is signed by both parties, with Ken Wexler signing on December 18, 1998 for Plaintiff. Defendant's execution appears on the document's second page (i.e., the reverse of page one) under the heading "Accepted by Advanta Business Services" and bears the date of January 4, 1999. The agreement provides for a 60 month lease of the described equipment, and appears complete in its terms and conditions regarding the parties' rights and obligations.³

The second document, Exhibit 2, also purports to be a 60 month equipment lease agreement. It is on a preprinted form document of Defendant, apparently identical to the form used in Exhibit 1. This document refers to an "attached Exhibit A" for a description of the equipment leased. There is no Exhibit A attached. No vendor's name appears on the document. This document was signed by Ken Wexler for Plaintiff, allegedly on December 16, 1998, the same date that appears next to his signature on Exhibit 1. However, this document as attached to the Complaint contains no second page, and there is no indication that this agreement was accepted by or executed by Defendant.

The third document, Exhibit 3, is essentially identical to Exhibit 2. It is a form lease agreement, which also refers to a missing "Exhibit A" for description of the subject equipment. It is lacking the second page as well, and there is no indication that this lease was accepted or executed by Defendant.

B. The Amended Complaint

Subsequent to the filing of the motion to dismiss, Plaintiff was allowed to amend the Complaint, which now alleges:

The contract for financing includes, without limitation, a letter dated December 2, 1998, signed by Lou Bories. At said time and place, Mr. Bories was acting as an agent of Defendant Advanta. A copy of said agreement is annexed to the Complaint as Exhibit "4".

Complaint, at paragraph X (emphasis supplied.)

Exhibit 4 states on its face that it is a "Commitment Letter" of LeasX to Plaintiff for $4,000,000 of equipment lease financing. But it also specifically states:

This letter of intent is subject to formal credit approval and commitment and the development of documentation and all other specifics acceptable to LeasX, Inc.

The letter also indicates that the equipment to be financed under the "master lease" was "to be determined." It reflects that monthly payment amounts would be $76,651.79 and payments would be required on a quarterly basis.

In addition to thus amending the Complaint, Plaintiff also filed on May 15 an affidavit of William Radobenko, the current president of Plaintiff, to which three documents are attached. One is this same December 2, 1998 letter of Bories, Exhibit 4. The second is an Advanta letter to a third party, apparently offered by Plaintiff to establish that LeasX was an agent of or broker for Defendant.⁴

The third document is an undated letter from Barry Burdick, a vice president of Defendant to Plaintiff (the "Burdick Letter"). It indicated that LeasX, as an equipment leasing broker, had forwarded to Defendant a "lease application" for Plaintiff, and that Defendant had "conditionally approved" that application. The Burdick Letter further states, however, that such conditional approval was being withdrawn, though Plaintiff was offered the opportunity to resubmit the application for reconsideration.

C. The motion

Upon these pleadings of record, Defendant moves to dismiss Count I of the Complaint, which alleges a cause of action for breach of a "valid contract for financing . . . for leases in excess of $4 million," on the basis that Plaintiff has failed to sufficiently allege a valid or enforceable contract. Defendant's contention is premised upon Idaho Code § 9-505, which provides:

9-505. Certain agreements to be in writing. — In the following cases the agreement is invalid, unless the same or some note or memorandum thereof, be in writing and subscribed by the party charged or by his agent. Evidence, therefore, of the agreement cannot be received without the writing or secondary evidence of its contents:

. . . . .

5. A promise or commitment to lend money or grant or extend credit in an original principal amount of fifty thousand dollars ($50,000) or more, made by a person or entity engaged in the business of lending money or extending credit.

Defendant submits that the documents relied upon by Plaintiff and attached to the Complaint constitute neither complete and enforceable equipment leases (except for Exhibit 1) nor an enforceable contract for financing. It points to the absence of complete and integrated terms, and to the absence of execution by Defendant or its purported agent.

The motion came on for hearing on June 13. After dismissing the "negligent misrepresentation" count, the Court granted the Plaintiff's motion for leave to amend the Complaint (which added the sentence set forth above to the allegations of paragraph X, and added Exhibit "4"). The Court further stated that the motion to dismiss would be dealt with as if it were a summary judgment motion since materials outside of the pleadings were being offered.⁵

Plaintiff was provided 15 days to submit additional materials on the matter, after which Defendant was provided a like 15 day period.

On June 28 Plaintiff filed an affidavit of its counsel, Mr. Paul, to which is attached a large amount of discovery material generated in this litigation, including numerous documents. Defendant filed a legal memorandum in rebuttal, but did not file any other materials.

III. DISPOSITION

A. Standards on motions to dismiss

The purpose of a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable here under F.R.B.P. 7012, is to test the legal sufficiency of a plaintiff\'s claims for relief. In determining whether a plaintiff has advanced potentially viable claims, the complaint is to be construed in a light most favorable to the plaintiff and its allegations taken as true. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Church of Scientology of Cal. v. Flynn, 744 F.2d 694, 696 (9th Cir.1984). When reviewing the allegations of a complaint, legal conclusions, deductions or opinions couched as factual allegations are not given a presumption of truthfulness. See Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981). The complaint should not be dismissed for a failure to state a claim unless it appears that the plaintiff can prove no set of facts in support of the claim which would entitle plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Jacobson v. Hughes Aircraft Co., 105 F.3d 1288, 1292 (9th Cir.1997). Thus, a court may properly grant a Rule 12(b)(6) motion if it is clear from the face of the complaint and judicially-noticed documents that the plaintiff cannot prevail as a matter of law.

Stocks v. Calo (In re Calo), 97.3 I.B.C.R. 87 (Bankr.D.Idaho 1997). See also, Edwards v. Ellsworth, May, Sudweeks, Stubbs, Ibsen & Perry, 10 F.Supp.2d 1131, 1132 (D.Idaho 1997). As discussed in Schneider v. California Dept. of Corrections, 151 F.3d 1194 (9th Cir.1998), the issue is not whether a plaintiff will ultimately...