National Acceptance Co. of America v. Wechsler

• Decision Date: 05 May 1980
• Docket Number: No. 78 C 2115.,78 C 2115.
• Citation: 489 F. Supp. 642
• Parties: NATIONAL ACCEPTANCE COMPANY OF AMERICA, a Delaware Corporation, Plaintiff, v. James M. WECHSLER, Defendant and Third-Party Plaintiff, v. WINDSOR-DETROIT BARGE LINE, LTD., a Canadian Corporation, Third-Party Defendant.
• Court: U.S. District Court — Northern District of Illinois

489 F. Supp. 642

NATIONAL ACCEPTANCE COMPANY OF AMERICA, a Delaware Corporation, Plaintiff, v. James M. WECHSLER, Defendant and Third-Party Plaintiff, v. WINDSOR-DETROIT BARGE LINE, LTD., a Canadian Corporation, Third-Party Defendant.

No. 78 C 2115.

United States District Court, N. D. Illinois, E. D.

April 9, 1980.

On Motion to Transfer May 5, 1980.

James Murray, Jr., Richard L. Epling, Katten, Muchin, Gitles, Zavis, Pearl & Galler, Chicago, Ill., for plaintiff.

Roger L. Premo, Southfield, Mich., for third-party plaintiff.

William J. Campbell, Jr., Andrew J. Maxwell, O'Brien, Carey, McNamara, Scheuneman & Campbell, Ltd., H. Russell Barefield, Warren J. Marwedel, Haskell & Perrin, Chicago, Ill., for third-party defendant.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

This action arises out of a demand by plaintiff National Acceptance Company of America ("NAC") for payment of the amount due on certain loans for which defendant James M. Wechsler was the guarantor. The loans were made to Detroit Harbor Terminals, Inc. ("Detroit Harbor"), pursuant to separate agreements between NAC and Detroit Harbor in September, 1974, and July, 1976. At the time each of these agreements was executed, Wechsler also signed individual guaranties whereby he promised to assume responsibility for Detroit Harbor's indebtedness. On May 9, 1978, NAC notified Wechsler of Detroit Harbor's default on the amount due under the two loan agreements—nearly $500,000 —and demanded from him payment of that sum pursuant to the guaranties he signed. When Wechsler failed to pay the amount due, NAC filed this diversity action. 28 U.S.C. § 1332.

The case now is before the Court on NAC's motion for summary judgment. NAC submits that there is no dispute as to the following facts: (1) that defendant Wechsler signed the individual guaranties in question; (2) that NAC made loans to Detroit Harbor in the amount of $800,000; and (3) that Detroit Harbor has defaulted on the loan payments. Based on these facts, NAC argues that Wechsler as a matter of law is liable under the guaranties for the amount due. The defendant has failed to introduce any persuasive evidence in rebuttal of these factual assertions. Rather, defendant resists the motion for summary judgment on the grounds that the numerous affirmative defenses and counterclaims he raises—thirteen in all—involve unresolved issues of fact that render summary adjudication of this action inappropriate.

The Seventh Circuit has observed that "with the ever increasing burden upon the judiciary, persuasive reasons exist for the utilization of summary judgment procedure whenever appropriate." Kirk v. Home Indemnity Co., 431 F.2d 554, 560 (7th Cir. 1970). The benefit of this procedure is that it permits the court to avoid a useless trial when there are no factual disputes remaining in a case. Nonetheless, it is not within the province of the Court to resolve issues of disputed material fact in a trial by affidavit. Moutoux v. Gulling Auto Electric, Inc., 295 F.2d 573, 576 (7th Cir. 1961). "The party moving for summary judgment has the burden of clearly establishing the non-existence of any genuine issue of fact that is material to a judgment in its favor." Cedillo v. International Association of Bridge & Structural Iron Workers, Local Union No. 1, 603 F.2d 7, 10 (7th Cir. 1979). Any doubts must be resolved against the moving party. Moutoux, 295 F.2d at 576. It is in light of these principles that the Court will address the issues raised by defendant's affirmative defenses and counterclaims.

I. PROCEDURAL AFFIRMATIVE DEFENSES

In affirmative defenses I through VI, defendant claims that the complaint fails to state a claim upon which relief may be granted; that the Court lacks personal jurisdiction of Wechsler and subject matter jurisdiction of this action; that service of process was insufficient; that venue is improper in the Northern District of Illinois; and that the action must be dismissed for failure to join a number of necessary parties pursuant to Fed.R.Civ.P. 19(a). For the reasons that follow, the Court finds all these claims to be without merit.

Defendant's argument that the complaint fails to state a claim is based on a misreading of the complaint. Defendant suggests that the complaint fails to allege that Detroit Harbor has defaulted on payment of the amount due to NAC under the loan agreements or the amount of the indebtedness; yet that information is set forth clearly in the complaint. See Count I, ¶¶ 5, 9, 11; Count II, ¶¶ 8, 10, 12. Accordingly, the Court finds that the complaint adequately sets forth "a short and plain statement of the claim" as required by Fed. R.Civ.P. 8(a). Conley v. Gibson, 355 U.S. 41, 47-48, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957); Austin v. House of Vision, 385 F.2d 171 (7th Cir. 1967).¹

Defendant's positions with respect to personal jurisdiction and service of process are interrelated; he asserts that the Court lacks personal jurisdiction over him because the service of process was insufficient. Under the guaranty contracts, Wechsler designated as his agent for service of process, H. G. Kanes, the past president of NAC. Pursuant to these contracts, it was agreed that Kanes would forward process to Wechsler within five days of service. By these contracts, Wechsler also agreed to submit to personal jurisdiction in the Northern District of Illinois.

Wechsler, however, now argues that Kanes' affiliation with NAC creates a conflict of interest which invalidates Kanes' appointment as his agent for process. This contention, however, was considered and rejected in National Equipment Rental Ltd. v. Szukhent, 375 U.S. 311, 317-318, 84 S.Ct. 411, 415, 11 L.Ed.2d 354 (1964):

. . . Such a contention ignores the narrowly limited nature of the agency here involved. Florence Weinberg was appointed the respondents' agent for the single purpose of receiving service of process. An agent with authority so limited can in no meaningful sense be deemed to have an interest antagonistic to the respondents, since both the petitioner and the respondents had an equal interest in assuring that, in the event of litigation, the latter be given that adequate and timely notice which is a prerequisite to a valid judgment.

See also National Acceptance Company of America v. Darby K. Coal Company, Inc., Civil Case No. 76 C 1857, Unpublished Op. at 2 (N.D.Ill., December 23, 1976). Defendant further alleges that Kanes failed to forward the process to Wechsler within the agreed five-day period. If this were the case, then the service of process would be invalid. Szukhent, 375 U.S. at 318, 84 S.Ct. at 415. NAC, however, has supplied an affidavit by Kanes attesting to the fact that he received service on June 14, 1978, and forwarded the process to the defendant on June 19, 1978. In addition, NAC has submitted a true and correct copy of a certified mail receipt indicating that service was forwarded on June 19, 1978. In the face of this evidence, defendant's unsupported allegations are insufficient to raise a factual issue concerning the validity of process or of personal jurisdiction.

With respect to joinder under Rule 19(a), defendant asserts that because Detroit Harbor is "jointly and severally liable" for the amount due NAC, it is an indispensable party to this action. Defendant also lists as necessary parties several other entities who are parties in related actions pending in the Eastern District of Michigan. The Court, however, has grave doubts that these parties are indispensable for the purposes of Rule 19(a). See Dunlop v. Beloit College, 411 F.Supp. 398, 403 (W.D. Wis.1976). Moreover, the Court finds that the defendant has waived any right to raise this issue. Despite the importance of Rule 19 joinder, there is no bar to waiver of that right by a party. See State Farm Mutual Auto Insurance Co. v. Mid-Continent Casualty Co., 518 F.2d 292 (10th Cir. 1975); Process Control v. Tullahoma Hot Mix Paving Co., 79 F.R.D. 223 (E.D.Tenn.1977).² These guaranty contracts expressly provide that NAC is not required to "prosecute collection or seek to enforce or resort to any remedies against Debtor or any other party liable to Lender on account of Debtor's Liabilities or any guaranty thereof." This contractual provision would be rendered a nullity were the Court to require NAC to join a myriad of other parties in this proceeding. Indeed, the very purpose of a guaranty agreement—to provide NAC with a simple means of compelling payment of a debt due—would be eviscerated by requiring such joinder. On the basis of a similar provision, the court in National Acceptance Company of America v. Demes, 446 F.Supp. 388, 389 (N.D.Ill.1977), reached the same conclusion.

Defendant's attacks on subject matter jurisdiction and venue are derivative of his theory with respect to joinder. He argues that since joinder of an essential party—the State of Michigan—is impossible, the Court is without subject matter jurisdiction. In addition, he suggests that joinder of all the essential parties in this action would create jurisdiction under federal substantive law, thereby rendering venue improper in this district. Compare 28 U.S.C. § 1391(a) (venue in diversity cases) with 28 U.S.C. § 1391(b) (venue in cases arising under federal law). Inasmuch as the Court rejects defendant's argument with respect to joinder, it rejects the subject matter jurisdiction and venue arguments as well.³

Accordingly, the plaintiff's motion for summary judgment is granted as to defendant's affirmative defenses I through VI.

II. SUBSTANTIVE AFFIRMATIVE DEFENSES

Defendant's affirmative defenses VII through X all relate to the manner in which NAC disposed of certain collateral provided by Detroit Harbor. Specifically, defendant asserts that NAC's sale of the collateral would have set off his indebtedness had it been sold in a commercially reasonable manner (VII); that NAC accepted a leased crane in discharge of Detroit Harbor's—and thus the...