National Metal Finishing Co., Inc. v. BarclaysAmerican/Commercial, Inc., 89-1736

• Citation: 899 F.2d 119
• Decision Date: 08 January 1990
• Docket Number: No. 89-1736,89-1736
• Parties: NATIONAL METAL FINISHING COMPANY, INC., Plaintiff, Appellant, v. BARCLAYSAMERICAN/COMMERCIAL, INC., Defendant, Appellee. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 119

899 F.2d 119

16 Fed.R.Serv.3d 554

NATIONAL METAL FINISHING COMPANY, INC., Plaintiff, Appellant, v. BARCLAYSAMERICAN/COMMERCIAL, INC., Defendant, Appellee.

No. 89-1736.

United States Court of Appeals,

First Circuit.

Heard Jan. 8, 1990.

Decided March 29, 1990.

Robert Aronson, for plaintiff, appellant.

Robert D. Cultice, with whom Brooks S. Thayer and Goldstein & Manello, Boston, Mass., were on brief, for defendant, appellee.

Before BREYER, Circuit Judge, BOWNES, Senior Circuit Judge, and CYR, Circuit Judge.

BOWNES, Senior Circuit Judge.

This is an appeal from a memorandum and order of the district court reversing a judgment initially entered by it in favor of appellant National Metal Finishing Company, Inc. ("National") and entering judgment for appellee BarclaysAmerican/Commercial, Inc. ("Barclays") instead. In its first opinion and order, issued after a four day bench trial, the court found that there was an implied contract between Barclays and National and that Barclays had breached the contract. The court then reconsidered this ruling pursuant to motions filed by Barclays under Fed.R.Civ.P. 52(b) and 59(e). On reconsideration, the court concluded that it had clearly erred in finding an implied contract, and entered a new judgment in favor of Barclays. National appeals from this second judgment, challenging both the district court's power to reverse itself and the propriety of the court's doing so on the facts of the case.

I. BACKGROUND

During all times relevant to this lawsuit, National was a Springfield, Massachusetts corporation engaged in the business of metal plating and finishing. Barclays was a North Carolina corporation engaged in the business of commercial factoring, advancing money to companies in exchange for the assignment to Barclays of the companies' accounts receivable. The dispute between National and Barclays arose out of their common relationship with the Las Brisas Fan Company ("Brisas"), a ceiling fan manufacturer with an assembly plant in Chattanooga, Tennessee and a sales office in Yoakum, Texas.

In March, 1981, National began plating and finishing ceiling fan parts for Brisas. At roughly the same time, in an unrelated arrangement, Barclays and Brisas entered into a written factoring agreement whereby Brisas would assign the accounts receivable from its fan sales to Barclays and Barclays would advance cash to Brisas against the accounts receivable as they were assigned.

Approximately one year after the parties entered into these independent agreements, Brisas' business began to decline. By the fall of 1982 Brisas owed $150,000 to National for fan plating services, an amount that National ultimately wrote off as an uncollectible bad debt for 1982. Brisas also owed at least $620,000 to Barclays for an over-advance that Barclays had given Brisas in late 1981 to fund a build-up of fan inventory in preparation for the 1982 selling season.

In October, 1982, Barclays held a meeting with Brisas to discuss Brisas' financial situation and the repayment of its debt to Barclays. The president of National, Donald Schulz, attended this meeting, as did the president of Brisas, Robert Drake. Drake and Schulz presented a plan to move Brisas' assembly operation from Tennessee to the National plant in Massachusetts, as part of an effort to reduce Brisas' overhead expenses and restore profitability. Schulz also indicated that he planned to invest money in Brisas to help finance the move and that he would oversee Brisas' fan production operation after the move.

The relocation was completed by January, 1983. Barclays agreed to continue factoring Brisas' accounts receivable, and National continued to plate fan parts. National, however, was unwilling to extend Brisas additional credit and thus entered into a new payment arrangement whereby Brisas agreed to pay for National's plating services on a partial c.o.d. basis.

Despite the new arrangement, Brisas quickly fell behind in its payments to National. Schulz advised Brisas that National could not increase its exposure and would cease fan production unless a new payment plan were established. Drake invited Schulz to attend a Brisas board of directors meeting on March 7, 1983, to discuss the matter.

At the March 7 meeting, Schulz informed representatives of Brisas and Barclays that he could not extend additional credit to Brisas. To address Schulz's concerns, Brisas and Barclays agreed that Barclays would wire money directly to National on a weekly basis to pay Brisas' fan plating bills. As part of this new payment arrangement, Brisas gave Barclays written authorization to advance money to National against any accounts receivable assigned to Barclays by Brisas.

Within weeks, however, the payments to National again began to fall behind. Schulz notified Barclays that its weekly payments were falling behind and that National could not continue to increase its exposure. Barclays invited Schulz to its North Carolina offices for an April 7 meeting to try to resolve the problem.

At this meeting, Barclays gave Schulz a check in the amount of $24,982 to bring the payments to National up to date. Barclays also instructed National's bookkeeper to call Barclays every Monday with the prior week's Brisas expenses so that Barclays could send a check in that amount.

For a number of weeks following the April 7 meeting, National received timely payments from Barclays for Brisas' fan plating expenses. Brisas' financial troubles continued, however, and the payments began to fall behind again in May. Schulz was unsuccessful in his attempts to obtain full payment from Barclays and also was unsuccessful in his efforts to obtain any written guarantee of full payment from Barclays.

Brisas went into involuntary bankruptcy on June 24, 1983. At a July meeting, Schulz requested that Barclays pay National for all of Brisas' outstanding expenses with National. Barclays refused, contending that it had made no independent agreement with National to do so.

As a result of this refusal, National brought suit against Barclays in federal district court, alleging that Barclays had breached an unconditional agreement with National to pay Brisas' fan plating expenses. Barclays answered that no such agreement ever was formed with National. Barclays contended that any payment arrangement with National had consisted solely of an agreement between Barclays and Brisas for Barclays to wire money directly to National on Brisas' behalf to the extent that Brisas had assigned sufficient accounts receivable to Barclays to cover the payment.

After a four day bench trial, the district court issued findings of fact and conclusions of law holding that an implied contract had indeed been formed between Barclays and National in the March and April meetings whereby Barclays had agreed to pay National for Brisas' fan plating expenses. The court placed particular weight on its conclusion that Barclays had never made clear to Schulz that Barclays' weekly payments to National were contingent on the sufficiency of the accounts receivable assigned to Barclays by Brisas.

Barclays filed timely motions requesting the district court to reconsider its findings and conclusions pursuant to Fed.R.Civ.P. 52(b) and 59(e). Referring in detail to specific testimony and documentary evidence Barclays argued that the trial record showed that it had made amply clear to National that any payments to National from Barclays were contingent on the sufficiency of Brisas' accounts receivable.

After careful review of the trial transcript, which had not been available to the court in preparing the first opinion, the court granted Barclays' motion, stating in a new memorandum and order that it had failed to consider certain testimony and evidence in reaching its first decision. Concluding that it had clearly erred in finding that Barclays had not made apparent to National the connection between its payments and the sufficiency of Brisas' accounts receivable, the court held that no implied contract had been formed and entered a new judgment in favor of Barclays. National appeals from this second judgment.

Three issues are raised in this appeal: (1) the trial court's power to reverse itself; (2) the proper standard that should govern the court's decision to reverse, and the standard that governs our review of this decision; and (3) our application of these standards to the facts of this case.

II. POWER OF REVERSAL

The district court specifically grounded its power to reverse itself on Fed.R.Civ.P. 52(b), which provides that a court may amend its findings of fact and amend its judgment accordingly. Because of the court's explicit reliance on Rule 52(b), National focuses the main thrust of its challenge on a court's powers under 52(b). We point out, however, that Barclays relied on Fed.R.Civ.P. 59(e) as well as on Rule 52(b) in its request to the court that it reconsider its opinion. ¹

Because of the close relationship between Rule 59(e) and Rule 52(b), we do not think that it is of dispositive significance that the district court relied on 52(b) rather than 59(e). Circuit precedent suggests that challenges to the correctness of a judgment are properly construed as motions under Rule 59(e). See, e.g., Rodriguez-Antuna v. Chase Manhattan Bank Corp., 871 F.2d 1, 2 (1st Cir.1989); Appeal of Sun Pipe Line Company, 831 F.2d 22, 24 (1st Cir.1987), cert. denied, 486 U.S. 1055, 108 S.Ct. 2821, 100 L.Ed.2d 922 (1988); see also Huff v. Metropolitan Life Ins. Co., 675 F.2d 119, 122 (6th Cir.1982). The relief sought under 52(b) and 59(e) is so similar, however, that if the district court had the power to reverse itself under either 52(b) or 59(e), then National's challenge to this power must fail, regardless of whether the court in fact relied on the less appropriate provision. See St. Mary's Hospital Medical Center v. Heckler, 753 F.2d 1362, 1365 (7th Cir.), cert. denied, 472 U.S. 1028, 105 S.Ct. 3502, 87 L.Ed.2d 633 (1985...