Jack Mann Chevrolet Co. v. Associates Inv. Co.

• Decision Date: 11 February 1942
• Docket Number: No. 8835.,8835.
• Citation: 125 F.2d 778
• Parties: JACK MANN CHEVROLET CO. v. ASSOCIATES INV. CO.
• Court: U.S. Court of Appeals — Sixth Circuit

125 F.2d 778 (1942)

JACK MANN CHEVROLET CO. v. ASSOCIATES INV. CO.

No. 8835.

Circuit Court of Appeals, Sixth Circuit.

February 11, 1942.

COPYRIGHT MATERIAL OMITTED

Edward N. Barnard, of Detroit, Mich. (Max E. Klayman, of Detroit, Mich., on the brief), for appellant.

Elroy Jones, of Detroit, Mich. (Dykema, Jones & Wheat, of Detroit, Mich., on the brief), for appellee.

Before SIMONS, MARTIN, and McALLISTER, Circuit Judges.

McALLISTER, Circuit Judge.

This is an appeal from a judgment on the pleadings of no cause of action on the complaint of appellant, and a summary judgment in favor of appellee.

On December 3, 1937, Associates Investment Company, by virtue of claimed rights under chattel mortgages, repossessed automobiles and other personal property from Jack Mann Chevrolet Company. On December 4th, appellant filed its bill of complaint in the Circuit Court for Wayne County and, on allegations that the Investment Company had wrongfully seized the property, secured an order temporarily restraining appellee from selling the repossessed automobiles.

Thereafter, conferences were held between the parties, resulting in the execution of an agreement providing that certain automobiles which were repossessed, upon which there were no chattel mortgages, but which were covered by a so-called blanket mortgage, would be returned immediately to the Mann Company on payment of $568.75. This amount was paid by appellant and the cars in question returned. It was further agreed that certain used cars, which were repossessed, would be sold by the Investment Company on specified dates, at a stated address, in Detroit, with the right of the Mann Company to withhold from the sale any of such cars, until successive auctions, but in no event would the number of cars so withheld from any sale, exceed 50% of the total number of cars offered for sale at such an auction.

Under the terms of the agreement, the Mann Company waived any notice of sale provided for in the mortgages, or in federal or state statutes, and released the Investment Company from any claim that it had at that time, or might thereafter have, arising out of the repossession of the automobiles under the blanket mortgage. It further waived any of its rights under the terms of any chattel mortgages for new cars, or under any state or federal statutes, requiring notice of sale of any new automobiles included in any chattel mortgages; and the Investment Company was authorized to dispose of any new cars it had seized, at public or private sale, without further notice. Upon the execution of the settlement agreement, the attorney for the Mann Company moved to dismiss the bill of complaint which had been filed to restrain the sale, and on December 9, 1937, the bill and order to show cause why the sale should not be restrained, were dismissed by the Circuit Court of Wayne County. The new and used cars were then sold by the Investment Company, but instead of conducting auctions for the used cars in Detroit, as provided for in the agreement, the cars were sold in Ohio. The Investment Company claims that because of market conditions, it was found more advantageous to sell the cars in that state, and that appellant was advised of the situation and had a representative present at these sales in order to withhold used cars from sale until successive auctions, under the terms of the contract.

On September 12, 1939, approximately 21 months after the execution of the settlement agreement and the sale of the automobiles by the appellee company, the Mann Company commenced an action at law, in the Wayne County Circuit Court, against the Investment Company, claiming judgment in the amount of $100,000.00. The declaration was on the common counts, with a bill of particulars, setting forth a claim to an equity in automobiles alleged to have been converted by the Investment Company, in the amount of $15,525.50; an amount due on Dealer's reserve and Dealer's acceptance, of $4,475.00; and a claim for loss of profits and damage and injury to the business of the appellant, due to appellee's wrongful conversion, in the amount of $80,000.00. On application of the appellee, the cause was removed to the District Court, and a motion was filed on behalf of the Investment Company for a more definite complaint and bill of particulars. On order of the District Court, sustaining the motion of the Investment Company, an amended complaint was filed by the Mann Company, containing three counts. The first count was based upon wrongful conversion of the automobiles sold by appellee under the settlement agreement, and claimed $20,000.00 damages; the second count claimed damages of $80,000.00 for the total destruction of appellant's business, resulting from the alleged wrongful conversion; and in the third count, appellant claimed judgment in the amount of $5,000.00 on the common counts.

Thereafter, the Investment Company filed another motion for a more definite complaint and bill of particulars. In its motion, it asked that the Mann Company set forth, with particularity and definiteness, the facts with regard to the alleged conversion, and stated that it did not know what appellant claimed with reference to the settlement agreement in which the Mann Company released the Investment Company from any claims in connection with the repossession of the automobiles. It further asked that the allegations with regard to the claim set forth in the bill of particulars for "Dealer's reserve and Dealer's acceptance," be made more definite. On a second order of the District Court, requiring appellant to file a more detailed complaint and bill of particulars, amendments to the amended complaint were filed, in which the Mann Company alleged that the Investment Company, after seizing the automobiles, removed them from the state of Michigan to the state of Ohio, "and there sold and disposed of said automobiles, contrary to the will of plaintiff, and has failed, neglected and refused to give any accounting thereof to plaintiff." It was further set forth that the Mann Company predicated no rights on its original suit for conversion, and made no claim for damages on account of any violation of the settlement agreement.

It was alleged, however, upon information and belief, that the Investment Company, at the time of entering into the settlement agreement, did so in bad faith and without any intent upon its part to abide thereby, and appellant set forth "that almost immediately after such settlement agreement had been entered into, defendant proceeded to violate the same, did not dispose of the said automobiles on the scheduled time and basis set forth in such agreement, but, on the contrary, proceeded to dispose of the said automobiles without regard to the provisions of such agreement." It was further alleged that the conversion relied upon by appellant, consisted of the wrongful taking of possession and seizure of the automobiles by the Investment Company on December 3, 1937, and that because of the bad faith of the Investment Company in entering into the agreement, "such settlement agreement is, therefore, void and of no effect."

With regard to the item of $4,475.00 set forth in the bill of particulars as "Dealer's reserve and Dealer's acceptance," it was stated that the Mann Company arrived at such amount by relying upon the books and records of the Investment Company, which showed that appellant was entitled to a credit in that amount with respect to such account, and appellant stated that it was content to rely upon the credit so appearing on appellee's books.

To such amended complaint, the Investment Company filed its answer, stating that the automobiles in question had been subject to a chattel mortgage; that they were sold for a sum less than the amount due upon them; that the Mann Company had no equity in the cars but was chargeable with a loss on the sales; that a settlement agreement had been entered into, in which it was agreed that the Investment Company would sell the used cars in question at public auction, with the right and privilege of the appellant to withhold sale of any used cars up to 50% of the total number offered at auction, and that the remaining cars were to be offered at successive auctions; that the Mann Company had waived notice of sale and that, upon execution of the agreement, had released the Investment Company of any claims that it then had or might thereafter have, arising out of the repossession of the automobiles. It was further alleged that the settlement agreement was a full and complete release of any alleged rights that the appellant had, arising out of the repossession; that the automobiles in question had been disposed of in Ohio with the full knowledge and permission of the appellant; that the Investment Company had given appellant a complete accounting for the automobiles sold; and that an agent of the appellant attended all of such sales in the state of Ohio. In further answer, the Investment Company claimed that instead of a credit in favor of appellant on its books, there was a deficit in the amount of $5,982.13. Appellee then filed a counterclaim for $5,982.13 for losses incurred in the sale of the repossessed cars. The Investment Company moved for a judgment on the pleadings of no cause of action on the amended complaint of the Mann Company, and for a summary judgment, supported by affidavit of amount due, on its counterclaim.

In reply to such motion, the Mann Company repeated that the settlement agreement was procured by the fraud of the Investment Company; that with reference to the credits as shown on the books of the Investment Company, it admitted the record of only those credits legitimately incurred by appellant, and not sums determined by appellee after its wrongful and unlawful conversions. On the pleadings, the District Court entered judgment of no cause of action on the claim of the Mann Company and granted the motion for summary judgment on the...