ITT Commercial Finance Corp. v. Union Bank & Trust Co. of North Vernon

• Decision Date: 04 October 1988
• Docket Number: No. 16A04-8711-CV-357,16A04-8711-CV-357
• Citation: 528 N.E.2d 1149
• Parties: 7 UCC Rep.Serv.2d 901 ITT COMMERCIAL FINANCE CORP., Appellant (Plaintiff Below), v. UNION BANK & TRUST COMPANY OF NORTH VERNON, Indiana, Appellee (Defendant Below).
• Court: Indiana Appellate Court

Page 1149

528 N.E.2d 1149

7 UCC Rep.Serv.2d 901

ITT COMMERCIAL FINANCE CORP., Appellant (Plaintiff Below), v. UNION BANK & TRUST COMPANY OF NORTH VERNON, Indiana Appellee (Defendant Below).

No. 16A04-8711-CV-357.

Court of Appeals of Indiana Fourth District.

Oct. 4, 1988.

Christopher E. Baker, Rubin & Levin, Indianapolis, for appellant.

Corinne R. Finnerty, McConnell, Finnerty & Roche, North Vernon, for appellee.

CONOVER, Presiding Judge.

Plaintiff-Appellant ITT Commercial Financial Corp. (ITT) appeals an order denying its motion for summary judgment and granting summary judgment in favor of Defendant-Appellee Union Bank & Trust Company (Bank) in this priority of liens case.

We reverse.

At issue here is whether the Bank had a perfected priority purchase money security interest in a debtor's inventory.

ITT brought an action in replevin and for damages. In short, ITT alleged the Bank wrongly held "approximately 23" motorcycles belonging to Steven H. Gresham d/b/a Midway Cycle Sales, a Chapter 13 bankrupt, and ITT had a perfected security interest in these motorcycles superior to any lien asserted by the Bank. ¹ (R. 12-14). In relevant part, the Bank's answer admitted it had possession of the motorcycles and had refused ITT's demand for them. The Bank denied ITT had a security interest in the motorcycles or was entitled to possession of them. (R. 41-42). The Bank "counterclaimed," alleging it had a priority purchase money security interest in the motorcycles and was entitled to them. (R. 42-43). ITT denied the Bank's counterclaim and asserted, in sum, the Bank's claim of a security interest was inferior to inventory and purchase money security interests held by ITT. (R. 45-47).

ITT moved for summary judgment on its complaint and on the Bank's counterclaim. (R. 64). In addition to its memorandum in support of the motion, (R. 69-76), ITT attached the affidavit of Jeff Greene, (R. 66-68), several exhibits, (R. 68A-M), and incorporated the published deposition of Donald Pritchett, (R. 63). The Bank responded with a memorandum. The memorandum referred to testimony and evidence taken at an earlier hearing about prejudgment possession and to Pritchett's deposition. The Bank did not otherwise submit affidavits or additional evidence. The Bank concluded, in relevant part, there were genuine issues of material fact or inferences to be drawn from the facts which precluded summary judgment in favor of ITT. (R. 82-90). The court overruled ITT's motion for summary judgment and, under Ind. Rules of Procedure, Trial Rule 56(B), granted summary judgment to the Bank on its counterclaim, although the Bank had not asked it to do so. The court denied ITT's motion to correct error, (R. 113), and ITT appeals.

Summary judgment is appropriate only in limited situations. Ind. Rules of Procedure, Trial Rule 56 provides in part

(C) Motion and Proceedings Thereon.

... The [summary] judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, admissions and affidavits filed pursuant to Trial Rule 5(D), together with any testimony show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. ...

(E) Form of Affidavits--Further Testimony

--Defense Required. ...

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him. ... (Emphasis supplied).

Thus, the moving party carries the burden of establishing:

(a) there is no issue as to any material fact, and

(b) he is entitled to judgment as a matter of law.

Creighton v. Caylor-Nickel Hospital, Inc. (1985), Ind.App., 484 N.E.2d 1303, 1305-1306. The moving party must fulfill these two requirements before any burden shifts to the nonmovant. Id.

In a recent case we discussed this proposition stating

The method of ascertaining whether a material factual issue exists is as follows: Facts alleged in the complaint are taken as true except to the extent that they are negated by other pleadings, depositions, answers to interrogatories, affidavits, or other evidence presented by the moving party. (citing cases) All of which amounts to requiring the party moving for summary judgment to shoulder the burden of establishing the lack of material factual issue. ... Once the movant makes such a showing, the opposing party may not rest on his pleadings, but must then demonstrate the existence of a genuine issue for trial. (citing cases).

Kahf v. Charleston South Apartments (1984), Ind.App., 461 N.E.2d 723, 729, trans. denied. Therefore, the nonmovant may rest upon his pleadings until the moving party establishes no genuine factual issue exists. If, however, the moving party successfully demonstrates no genuine issue exists, the nonmoving party must show the presence of such a fact to stave off summary judgment. Fort Wayne Community Schools v. Fort Wayne Education Association, Inc. (1986), Ind.App., 490 N.E.2d 337, 339; Conard v. Waugh (1985), Ind.App., 474 N.E.2d 130, 134. In doing so, the nonmoving party may not merely rest upon his pleadings, but his response must set forth specific facts indicating an issue of material fact exists. Raymundo v. Hammond Clinic Assoc. (1983), Ind., 449 N.E.2d 276, 281; Popp v. Hardy (1987), Ind.App., 508 N.E.2d 1282, 1284; Fort Wayne Community Schools, supra, at 340; Ind.Rules of Procedure, T.R. 56(E). If the nonmovant fails to meet this burden, summary judgment may be granted. Raymundo, supra, at 280; Williams v. Lafayette Production Credit Association (1987), Ind.App., 508 N.E.2d 579, 582, reh. denied; Conard, supra, at 134; Ind.Rules of Procedure, T.R. 56(E).

When reviewing the grant of a summary judgment motion, we stand in the shoes of the trial court. Lafary v. Lafary (1985), Ind.App., 476 N.E.2d 155, 158. All evidence must be construed in favor of the nonmovant and all doubts as to the existence of a material issue must be resolved against the movant. Raymundo, supra, at 280; Penwell v. Southern Life Ins. Co. (1985), Ind.App., 474 N.E.2d 1042, 1044; Kahf, supra, at 729. Even if facts are not in dispute, summary judgment is inappropriate if conflicting inferences arise. Board of Aviation Commissioners of St. Joseph County v. Hestor (1985), Ind.App., 473 N.E.2d 151, 153.

Summary judgment is not a substitute for a trial to resolve factual disputes. Though the trial court may believe the nonmovant will be unsuccessful at trial, summary judgment should not be granted where material facts are disputed or conflicting inferences arise. Grimm v. Borkholder (1983), Ind.App., 454 N.E.2d 84, 86.

ITT contends it should have prevailed under general priority rules as a secured party who perfected its interest in inventory by filing a financing statement with the Secretary of State. IND.CODE 26-1-9-401, 29-1-9-312(5)(a). In the alternative, ITT argues it has a perfected purchase money security interest under IND.CODE 26-1-9-107(b) and this interest prevails over the Bank's claim it has a perfected purchase money security interest. ITT argues the Bank did not properly perfect its claim of purchase money security interest.

The Bank contends it had a perfected purchase money security interest which takes priority over ITT's security interest in inventory. The Bank argues ITT cannot be treated as a purchase money secured party.

The undisputed facts show one Steve Gresham, doing business as Midway Cycle Sales, entered into a Wholesale Financing Agreement with ITT on October 28, 1983. The agreement was to finance the purchase of new motorcycles from U.S. Suzuki Motor Corporation. ITT filed a financing statement with the Indiana Secretary of State on December 16, 1983. It named "Gresham, Steven d/b/a Midway Cycle Sales, R. 4, Box 383" North Vernon, as the debtor. The financing statement described the collateral upon which ITT asserted a lien as:

All inventory, raw materials, goods in process, finished goods, machines, machinery, furniture, furnishings, fixtures, vehicles, equipment, accounts receivable, book debts, notes, chattel paper, acceptances, rebates, incentive payments, drafts, contracts, contract rights, choses in action, and general intangibles, whether now owned or hereafter acquired, and all attachments, accessions, and additions thereto, substitutions, accessories, and equipment therefor, and replacements and proceeds.

(R. 68).

On January 9, 1984, Union Bank filed a financing statement with the Indiana Secretary of State claiming it was engaged in "Floor Planning of New Motorcycles." "Midway Cycle Sales and Service R.R. # 4 Box 383" North Vernon, was named as the debtor. (R. 168).

Later in January, 1984, ITT conducted a UCC search. It discovered Union Bank's financing statement. ITT did not then contact Union Bank or take further measures to determine upon which specific motorcycles Union Bank was asserting its lien, although it had no doubt the "Midway Cycle Sales and Service" therein mentioned referred to "Mr. Gresham." (R. 141-142). ITT made this discovery before it paid Suzuki for Gresham's purchase of the motorcycles. (R. 66-67).

In August, 1984, ITT began paying Suzuki invoices for Gresham. On June 19, 1985, ITT sent to Union Bank a "Notification Letter." It stated ITT "expects to acquire purchase money security interests in inventory of the above dealer [Gresham, Steven d/b/a Midway Cycle Sales, R 4, Box 383, North Vernon, IN]," then used the exact language of its earlier financing statement as to "all inventory, raw materials, ... etc."

In May, 1986, Union Bank began lending Gresham money under its "floorplanning" agreement with Gresham. The money it loaned was secured by trust receipts, bills...