UNITED FACTORS DIV. OF U. MERCHANTS & MFRS., INC. v. Murphy

• Decision Date: 29 October 1971
• Docket Number: No. 71 C 421.,71 C 421.
• Citation: 345 F. Supp. 768
• Parties: UNITED FACTORS DIVISION OF UNITED MERCHANTS & MANUFACTURERS, INC., Plaintiff, v. Redmond MURPHY and Richard J. Rieger, Defendants.
• Court: U.S. District Court — Northern District of Illinois

345 F. Supp. 768

UNITED FACTORS DIVISION OF UNITED MERCHANTS & MANUFACTURERS, INC., Plaintiff, v. Redmond MURPHY and Richard J. Rieger, Defendants.

No. 71 C 421.

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

October 29, 1971.

Michael L. Weissman, Aaron, Aaron, Schimberg & Hess, Chicago, Ill., for plaintiff.

Manuel Solotke, Greenstein & Solotke, Chicago, Ill., for defendants.

MEMORANDUM OPINION

MAROVITZ, District Judge.

MOTION FOR SUMMARY JUDGMENT

This is an action to recover funds owed by defendants to plaintiff. Murphy Carpet & Furniture, Inc., of which defendants Murphy and Rieger were sole shareholders, was indebted to plaintiff on May 22, 1970 in the amount of $23,825.65 and in consideration for the extension of further credit and the forbearance from collection of the amount owed, defendants entered into subordination agreements whereby they assigned to United Factors all indebtedness owed to them as shareholders by Murphy Carpet. The amount then owing defendants from the Murphy Carpet Company was represented in the agreements as being $150,000 (Exhibit "B" and "C"). Plaintiffs claim that the terms of these subordination agreements were violated in that a portion of this indebtedness was cancelled without plaintiff's knowledge or approval; that defendants falsely stated that the amount owed them by Murphy Carpet was $150,000 when it was considerably less; and that defendants represented that no previous subordination of this debt had been extended when indeed defendants had a prior agreement to subordinate the amount owed them by the corporation to the claims of all other creditors.

Plaintiff contends that there are no relevant factual issues in dispute and it has presented a sufficient amount of uncontroverted evidence by way of affidavit, admissions and exhibits to eliminate any factual doubt as to defendants' liability. We agree and, therefore, grant summary judgment.

The executed documents clearly indicate that defendants represented that $150,000 was owed them by Murphy Carpet.

The Murphy Carpet Financial Statement (Exhibit "H") dated July 2, 1969 lists the debt as $150,000 as does the balance sheet dated February 2, 1970 (Plaintiff's request for admissions Exhibit "A"). A subsequent balance sheet dated November 30, 1970 shows the balance owed defendants as being $100,000. Thus, sometime between February 2, 1970 and November 30, 1970 the debt was reduced by $50,000. If it was reduced prior to May 22, 1970, the date of the subordination agreements then defendants misrepresented the amount owed to them by Murphy Carpet; if it occurred after May 22, 1970 then it was in effect a cancellation of a portion of the debt in violation of the terms of the agreement. Plaintiff in Count II claims that the reduction of the amount owed was a result of the cancellation of a $50,000 note owed by defendant Rieger to the corporation which was subsequently written off against the amount owed by the corporation to defendants. (See Exhibits "E" and "F".) This plaintiff correctly argues would constitute a cancellation of a portion of the debt since the defendants are sole shareholders of the corporation and the write-off cancellation could not have been done without their approval. Thus, if we were to view the reduction of amount owed by Murphy Carpets as occurring subsequent to May 22, then it must be a cancellation of debt in violation of the agreement's terms. If, on the other hand, we view the reduction as occurring prior to the signing of the subordination agreement as Count III claims, then defendants falsely represented the amount owed them by Murphy Carpet. In fact, defendants themselves assert (Para. 4 Memorandum in Opposition to Plaintiff's Motion.) that had plaintiff examined the records of...