Texful Textile Ltd. v. Cotton Exp. Textile, Inc.

• Decision Date: 25 May 1995
• Docket Number: No. CV 94-2192 RAP (Mcx).,CV 94-2192 RAP (Mcx).
• Citation: 891 F. Supp. 1381
• Court: U.S. District Court — Central District of California
• Parties: TEXFUL TEXTILE LIMITED, Plaintiff, v. COTTON EXPRESS TEXTILE, INC., et al., Defendants.

891 F. Supp. 1381

TEXFUL TEXTILE LIMITED, Plaintiff, v. COTTON EXPRESS TEXTILE, INC., et al., Defendants.

No. CV 94-2192 RAP (Mcx).

United States District Court, C.D. California.

May 25, 1995.

Steven I. Smith and Alan I. Kaplan, Herzfeld & Rubin, Los Angeles, CA, for Texful Textile Ltd. John R. DaCorsi, DaCorsi & Cort, Woodland Hills, CA, for Cotton Exp. Textile, Inc., Nader Nourafchan, and Said Salek.

Janis Abrams, Irene Duryee Gilbert, and Martin E. Roberts, F.D.I.C.-Federal Deposit Insurance Corp., Legal Div., Los Angeles, CA, for the U.S. and Through the F.D.I.C. and the U.S.

ORDER GRANTING SUMMARY JUDGMENT AND SUMMARY ADJUDICATION

PAEZ, District Judge.

On May 1, 1995, the Court heard three motions: plaintiff Texful Textile Limited's ("Texful") motion for summary judgment against defendant Federal Deposit Insurance Company ("FDIC") and the FDIC's motion for summary judgment against Texful, along with Texful's motion for summary adjudication against defendants Cotton Express Textile, Inc. ("Cotton"), Nader Nourafchan, and Said Salek. Upon full consideration of the moving, opposition, and reply memoranda, declarations, exhibits, authorities, and oral arguments of counsel, the Court hereby grants the FDIC's motion and denies Texful's cross-motion, and grants Texful's motion for summary adjudication against Cotton, Nourafchan, and Salek on the claim for conversion.

I INTRODUCTION

Plaintiff Texful Textile Limited ("Texful") filed this action for breach of contract, money had and received, goods sold and ordered, and fraud against defendant Cotton Express Textile, Inc. ("Cotton") on April 5, 1994. Texful is a Hong Kong corporation; Cotton is a California corporation. The amount in controversy was alleged to be $124,618.85. The claims arose out of Cotton's alleged failure to pay for textiles ordered from Texful, which Texful delivered. One of the banks involved, Capital Bank of California, was placed in receivership with the FDIC appointed as receiver shortly thereafter. Texful submitted an administrative claim and received a Receivership Certificate of Proof of Claim, No. 544, in the amount of $124,618.45.

On June 1, 1994, Texful filed its First Amended Complaint, adding three defendants: Cotton's secretary and director, Nader Nourafchan; Said Salek (whose role was not specified in the pleading); and the United States by and through the Federal Deposit Insurance Corporation as Receiver for Capital Bank of California. Texful added two claims: conversion and conspiracy and for a judicial determination pursuant to 12 U.S.C. § 1821(d)(6)(A).¹ The FDIC's cross-claim against Cotton, Nourafchan, and Salek was filed on December 2, 1994.

The FDIC filed a motion for summary judgment on the grounds that Texful had received all it was entitled to receive and that the requirements of 12 U.S.C. §§ 1821 and 1823(e)² have not been met. Texful crossmoved against the FDIC on the ground that it was entitled to be treated as an insured depositor of Capital Bank.

Plaintiff Texful also moved for summary judgment against the remaining defendants on the ground that defendants obtained possession of the goods wrongfully. Defendants correctly observed that the motion is in reality one for summary adjudication because it does not address the remaining claims in the First Amended Complaint.

II RELEVANT FACTUAL BACKGROUND

The following facts are undisputed and are drawn from the parties' statements of uncontroverted facts unless otherwise indicated.

On or about January 9, 1993, Texful and Cotton entered into a contract which provided that Texful would ship textile goods to Cotton for which Cotton would pay the amount of $136,078.20.

On or about January 20, 1993, Texful's bank, Hong Kong-Shanghai Bank transmitted to Capital Bank a cover letter enclosing a sight draft (# 1749/42) in the amount of $136,078.20, an invoice for textiles (# 1749/42), and a bill of lading (# APLU003551640). Texful's bank subsequently issued a credit, thus reducing the amount of the sight draft to $124,078.40. The bill of lading transmitted to Capital Bank was negotiable and could be used by anyone possessing it to obtain the goods it referred to, that is, 544 rolls of textiles.

Upon receipt of the cover letter and documents, Capital Bank transmitted an acknowledgement to Texful's bank. Capital's acknowledgement completed the creation of a transaction called a "Documentary Collection" or "D/P collection," governed by Publication No. 322 of the International Chamber of Commerce.³ As a result, Capital could only release the bill of lading to defendants "against payment" in local currency which was immediately available. In addition, the buyer, Cotton Express, had to pay for the goods (that is, Capital Bank had to hold the sum of $124,078.40 for plaintiff's account) before it was entitled to possession of the bill of lading and the goods it described.

On June 15, 1993, defendant Said Salek appeared at Capital Bank and gave Bank Vice-President Jacques Naffaa Cotton Express check no. 3629 in the amount of $124,078.40, and received the bill of lading. Declaration of Jacques Naffaa ("Naffaa Dec."), ¶¶ 7, 8. The account on which the Cotton Express check was written was overdrawn in the amount of $27,000. Defendants Nourafchan and Salek knew the account was overdrawn. Defendants Nourafchan and Salek are the sole shareholders and officers of Cotton Express.

The Cotton defendants do not dispute the fact that by obtaining the shipping documents with a bad check, payment was not effected, and defendants obtained the goods in violation of the stated terms of ICC Publication No. 322. Texful did not consent to defendants' action.

Defendants contend that they had arranged with Capital Bank to "pay" for the goods with the check drawn against insufficient funds which they would subsequently cover with a wire transfer of funds. Defendants never covered the bad check. (They contend that the FDIC take-over prohibited them from making deposits after June 18, 1993, but have not explained why they have not, to this day, paid Texful.)

Defendants took possession of the goods, sold them for a profit, and did not turn over the proceeds of the sale(s) to Texful. Salek's net worth is $2.5 million; Nourafchan's is $3.5 million. Defendants represented to Texful that they had "paid" for the goods, which Texful claims was false.

Defendants claim they believed they had paid for the goods. They also state that Capital Bank was not bound by Publication No. 322 and that the way they conducted the transaction with Texful was a method they had used "on numerous occasions."

On June 18, 1993, the Superintendent of Banks for the State of California, in the Matter of Capital Bank of California, issued an Order for Liquidation and Order Taking Possession of Property and Business. The Superintendent also issued a Tender of Appointment as Receiver to the FDIC. The FDIC accepted appointment as Receiver pursuant to 12 U.S.C. § 1821(c) and California Financial Code § 3221.

Texful filed its administrative claim in the Receivership of Capital Bank. Evidently the full amount of the claim was allowed, but only as an unsecured claim, not as a claim against the deposits. The FDIC contends that the Bank had no deposit account records or depositor relationship with Texful when the Bank failed. Texful argues that the Bank had sufficient insured funds of Cotton Express on hand when Capital released the bill of lading. The FDIC claims that the two certificates of deposit that were in Salek's and Nourafchan's name were pledged to Capital Bank as collateral for a promissory note.

III DISCUSSION

A Standard

Rule 56(c) of the Federal Rules of Civil Procedure provides for summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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." Summary judgment "terminates the action without trial" and is a "judgment `on the merits.'" Schwarzer, Tashima, and Wagstaffe, California Practice Guide: Federal Civil Procedure Before Trial ("Fed.Civ.Proc."), § 14:28 (1994). Not only is summary judgment not "disfavored," but it is "an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corporation v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986).

In a trilogy of 1986 cases, the Supreme Court clarified the standard for summary judgment. See Celotex Corporation v. Catrett, supra; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); and Matsushita Electrical Industry Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514. The Court determines a fact's materiality according to the governing substantive law; if the fact may affect the outcome, it is material. Id. at 248, 106 S.Ct. at 2510. If the moving party seeks summary adjudication with respect to a claim or defense upon which it bears the burden of proof at trial, its burden must be satisfied by affirmative admissible evidence. By contrast, when the non-moving party bears the burden of proving the claim or defense, the moving party can meet its burden by pointing out the absence of evidence from the non-moving party. The moving party need not disprove the other party's case. See Celotex, 477 U.S. at 325, 106 S.Ct. at 2554; see also Fed.Civ.Proc., §§ 14:123-141.

When the moving party meets its burden, the "adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts...