ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., MID-AMERICA

• Decision Date: 20 April 1993
• Docket Number: No. 75002,MID-AMERICA
• Citation: 854 S.W.2d 371
• Parties: ITT COMMERCIAL FINANCE CORP., et al., Respondents, v.MARINE SUPPLY CORP., d/b/a George Walker's Earth City Marine, et al., Appellants.
• Court: Missouri Supreme Court

Page 371

854 S.W.2d 371

ITT COMMERCIAL FINANCE CORP., et al., Respondents, v. MID-AMERICA MARINE SUPPLY CORP., d/b/a George Walker's Earth City Marine, et al., Appellants.

No. 75002.

Supreme Court of Missouri En Banc.

April 20, 1993.

Justin C. Cordonnier, Thomas B. Weaver, St. Louis, for appellants.

William R. Bay, Mike W. Bartolacci, St. Louis, for respondents.

ROBERTSON, Chief Justice.

This case raises important issues relating to summary judgment practice. Here, we consider which party bears the burden of establishing the absence of genuine issues of material fact and a legal right to judgment when the party seeking summary judgment is a "claimant" and the non-moving party has raised an affirmative defense.

Plaintiffs, ITT Commercial Finance Corporation (ITT) and Mercantile Bank of St. Louis, N.A. (Mercantile), sued Mid-America Marine Supply Corporation (Mid-America), their debtor, and George Walker, William Rice and Scott Evert, guarantors of Mid-America's debts. The trial court sustained motions by ITT and Mercantile for summary judgment on their claims against Evert and against Evert on his counterclaims. Evert appealed. The Court of Appeals, Eastern District, affirmed. We granted transfer, Mo. Const. art. V, § 10, and now affirm.

I.

In 1986, George Walker founded Mid-America, a marine sales and supply business. As with most retail sales ventures, Mid-America's financial needs focused on initial inventory acquisition and ongoing "floor-plan" financing. Walker turned to ITT. ITT agreed to provide financing for Mid-America in exchange for Mid-America's promissory note, a security interest in all of its inventory, machinery, equipment and fixtures, and personal guaranties of the entire indebtedness from Walker, Rice and Evert. Walker also secured "startup" financing from Mercantile in the amount of $150,000. As part of its inducement to issue this loan, Mercantile obtained a security agreement and written guaranties of the debt from Walker, Rice and Evert. Evert limited his guaranty to Mercantile to a one-third share of the principal sum, i.e., $50,000.

Mid-America closed the finance agreement with ITT on January 28, 1986; the Mercantile loan closed a week later. By the end of the summer of 1987, Mid-America had defaulted on its obligations to ITT and Mercantile and George Walker had failed to make good on his guaranties.

On November 24, 1987, Mercantile and ITT brought suit to replevin its collateral and to recover on Mid-America's promissory notes and the guaranties of Walker, Rice and Evert. The court ordered replevin. The lenders sold the collateral and applied the proceeds to the debts. Mercantile and ITT took default judgments against Mid-America and Walker on July 20, 1989, and received summary judgments against Rice on December 18, 1990. Those judgments remain unsatisfied and are not involved in this appeal.

On September 15, 1988, Evert filed his answer to the first amended petitions of Mercantile and ITT. Evert asserted, as affirmative defenses, that the plaintiffs were "barred from any relief by estoppel, waiver, duress and a failure of consideration;" that the plaintiffs had disposed of the collateral in a commercially unreasonable way; and that the plaintiffs had fraudulently induced him to participate in the transactions.

Nearly two years later, Evert filed an amended answer. He dropped the defenses of estoppel, waiver, duress and failure of consideration against ITT and substituted the affirmative defense that ITT had "altered the instruments in question." Evert's amended answer retained the estoppel, waiver, duress and failure of consideration defenses as against Mercantile, however, and reiterated the affirmative defenses of fraudulent inducement and commercial unreasonableness against both plaintiffs. Finally, Evert's amended answer included counterclaims against ITT and Mercantile for fraudulent misrepresentation. He claimed that plaintiffs' agents' misrepresentations induced him to sign the guaranties. Evert sought $200,000 in actual damages and $2,000,000 in punitive damages.

On September 4, 1990, ITT and Mercantile moved for summary judgment on their claims against Evert and on his counterclaims against them. Though he had had nearly three years to conduct discovery and gather his facts, Evert's response to these motions consisted simply of his own affidavit reiterating the allegations of fraudulent inducement and the affidavit of his handwriting expert to the effect that one of the three ITT guaranties bearing Evert's signature had been forged.

Following a hearing, the trial court sustained Mercantile's motion for summary judgment, assessing damages at $50,000 of principal, plus post-judgment interest and attorney's fees in excess of $13,000. On ITT's claim, the court also granted summary judgment against Evert, assessing damages at slightly less than $250,000 of principal (after reduction for the sale of collateral), just over $100,000 of contract interest, plus post-judgment interest and attorney's fees in excess of $39,000, and costs of repossession and sale of more than $24,000. The trial court also sustained Mercantile's and ITT's motions for summary judgment on Evert's counterclaims.

II.

A. The Standard of Review

When considering appeals from summary judgments, the Court will review the record in the light most favorable to the party against whom judgment was entered. Zafft v. Eli Lilly, 676 S.W.2d 241, 244 (Mo. banc 1984); Cooper v. Finke, 376 S.W.2d 225, 228 (Mo.1964). Facts set forth by affidavit or otherwise in support of a party's motion are taken as true unless contradicted by the non-moving party's response to the summary judgment motion. Cherry v. City of Hayti Heights, 563 S.W.2d 72, 75 (Mo. banc 1978); Dietrich v. Pulitzer Publishing Company, 422 S.W.2d 330, 333 (Mo.1986). We accord the non-movant the benefit of all reasonable inferences from the record. Martin v. City of Washington, 848 S.W.2d 487, 489 (Mo. banc 1993); Madden v. C & K Barbecue Carryout, Inc., 758 S.W.2d 59, 61 (Mo. banc 1988).

Our review is essentially de novo. The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially. E.O. Dorsch Electric Co. v. Plaza Const. Co., 413 S.W.2d 167, 169 (Mo.1967). The propriety of summary judgment is purely an issue of law. As the trial court's judgment is founded on the record submitted and the law, an appellate court need not defer to the trial court's order granting summary judgment. Elliott v. Harris, 423 S.W.2d 831, 834 (Mo. banc 1968); Swink v. Swink, 367 S.W.2d 575, 578 (Mo.1963).

B. Foundational Concerns

The Rules of Civil Procedure recognize three procedures by which the trial court can pretermit the need for a full trial on the merits. The rules encourage use of these procedures to permit resolution of claims as early as they are properly raised in order to avoid the expense and delay of meritless claims or defenses and to permit the efficient use of scarce judicial resources.

Where the pleadings fail to state a cause of action under the law or fail to state facts entitling the party to relief, the trial court may dismiss the lawsuit. Where the evidence adduced by a plaintiff at trial fails to prove the elements of the plaintiff's cause of action, a motion for a directed verdict is properly sustained.

The third procedural tool, summary judgment, lies between the other two and is the subject of this case. Summary judgment is designed to permit the trial court to enter judgment, without delay, where the moving party has demonstrated, on the basis of facts as to which there is no genuine dispute, a right to judgment as a matter of law. Rule 74.04. Summary judgment proceeds from an analytical predicate that, where the facts are not in dispute, a prevailing party can be determined as a matter of law. Rule 74.04 establishes a step-by-step procedure by which such cases can be identified and resolved. Lack of adherence to the text of the rule, however, and a lingering disfavor of summary judgment, have robbed this rule of it usefulness. This opinion, it is intended, will clarify the analysis and dispel any remaining doubt that summary judgments play an essential role in our system.

In the present case we consider which party bears the burden of establishing a legal right to judgment and the absence of genuine dispute as to the material facts when the party seeking summary judgment is a "claimant" and the non-movant has raised an affirmative defense. ITT and Mercantile argue that they need only establish the elements of their causes of action to force the defendant to come forward with evidence showing the existence of a genuine issue of material fact as to his affirmative defenses. Not unexpectedly, Evert disagrees. He asserts that the movants must show the absence of any genuine issues of material fact, not only as to the elements of their claims, but also as to his affirmative defenses.

Prior to considering the merits of the parties' arguments, we believe a discussion of the historical role of summary judgment in Missouri, in the context of the underlying theory of pleading, is of some assistance.

1. History of Summary Judgment

In 1849, Missouri became the second state in the union to adopt a comprehensive civil code. The Missouri General Assembly adopted the Code of 1849, based on New York's Field Code, to modernize procedures and promote a more efficient system of justice. See Mo.Laws 1848-49, pp. 73-109 ("Practice in Courts of Justice"). The code eliminated archaic forms of "common law pleading," substituting instead a system of code pleading, or "fact pleading." The code required that the first pleading in a civil case contain a "statement of the facts constituting a cause of action ... in ordinary and concise language ... [and] in such a manner as to enable a person of common understanding...