Wainwright Bank & Trust Co. v. Railroadmens Federal Sav. & Loan Ass'n of Indianapolis
| Decision Date | 25 November 1986 |
| Docket Number | No. 85-2680,85-2680 |
| Citation | 806 F.2d 146 |
| Parties | 4 UCC Rep.Serv.2d 1295 WAINWRIGHT BANK & TRUST COMPANY, Plaintiff, v. RAILROADMENS FEDERAL SAVINGS & LOAN ASSOCIATION OF INDIANAPOLIS, et al., Defendants. Robert H. WILSON, Samuel L. Dowden, and Nancy C. Dowden, Defendants and Third-Party Plaintiffs-Appellants, v. The UNITED STATES SMALL BUSINESS ADMINISTRATION, Third-Party Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Matthew H. Hobbs, Tabbert, Creamer & Capehart, Indianapolis, Ind., for defendants and third-party plaintiffs-appellants.
Gerald A. Coraz, Asst. U.S. Atty., John Daniel Tinder, U.S. Atty., Indianapolis, Ind., for third-party defendant-appellee.
Before WOOD and COFFEY, Circuit Judges, and ESCHBACH, Senior Circuit Judge.
Third-party plaintiffs-appellants, Robert H. Wilson and Samuel L. Dowden, seek reversal of the district court's grant of summary judgment in favor of third-party defendant-appellees, the United States Small Business Administration. We affirm.
There is no dispute as to the facts. Robert H. Wilson and Samuel L. Dowden, third-party plaintiffs-appellants ("plaintiffs" or "appellants") were the founders of the Golden Manor Corporation, an Indiana corporation financed with a $350,000 loan from Wainwright Bank & Trust Company ("Wainwright"), and the third-party defendant-appellee, the United States Small Business Administration ("SBA"). The Golden Manor Corporation loan, approved in the amount of $350,000, was secured with the appellants' personal guarantees and personal real estate mortgages on property located in Hamilton County, Indiana. Real property was purchased with the loan for the purpose of operating a restaurant named the Golden Manor.
In 1979, the restaurant owned by the appellants, after a short period in operation, encountered financial difficulties resulting in the Golden Manor Corporation becoming insolvent and defaulting on the loan. On July 7, 1979, the Automatic Sprinkler Corporation filed suit in the Hamilton (Indiana) Superior Court to collect a debt owed by the Golden Manor Corporation. The SBA, the State of Indiana, and Topics Newspaper, Inc. were named as co-defendants to answer for the claims asserted against the Golden Manor Corporation. On August 16, 1979, Wainwright assigned its interest in the mortgages and personal guarantees executed by the Golden Manor Corporation to the SBA. On November 28, 1979, the United States acting for and on behalf of the SBA, cross-claimed against the Golden Manor Corporation, the State of Indiana, and Topics Newspaper, Inc. to foreclose on the SBA's mortgage on the real estate of the Golden Manor Corporation. On April 20, 1981, the United States was awarded judgment on its cross-claim in the sum of $322,732.83 plus interest accruing to the date of judgment together with a decree of foreclosure on the mortgages.
During this same approximate time period, several events involving the property of the Golden Manor Corporation took place. On October 17, 1979, the Hamilton County Circuit Court appointed a Receiver for the Golden Manor Corporation, and approximately four months later, on February 8, 1980, gave the Receiver the authority to appraise and to proceed to attempt to sell the Golden Manor Corporation's property. The appraisal valued the real property at $420,000 and the personal property at $25,325.
The Receiver, though diligent in his efforts to locate a private buyer for the property 1 over a ten-month period, received but two offers. One was rejected as patently insufficient. The Receiver recommended approval of the other offer from Fred Spottsville, Jr., M.D. (the "Spottsville offer"). The SBA, on January 29, 1981, rejected the Spottsville offer, primarily on the basis of an inadequate debt-to-net-worth ratio of Dr. Spottsville and his personal corporation.
On April 20, 1981, the Hamilton Superior Court rendered judgment in favor of the SBA allowing them to foreclose on the property of the Golden Manor Corporation. The SBA then requested that the Sheriff of Hamilton County publish a notice of foreclosure sale in a public newspaper of general circulation (the Noblesville Daily Ledger) for three days, May 28, June 4 and June 11, 1981. Notices of the sale were also posted in three public places in Hamilton County, and at the door of the Hamilton County Courthouse in Noblesville, Indiana in compliance with the Indiana Code.
An appraisal conducted by the SBA on June 29, 1981 valued the real property of the Golden Manor Corporation at $315,000. On July 9, 1981, a public sale was held and the Sheriff of Hamilton County sold the real property at the door of the Hamilton County Courthouse, Noblesville, Indiana, to the highest bidder, the SBA, for the sum of $235,000. On October 1, 1981, the personal property of the Golden Manor Corporation likewise was sold to the highest bidder at a public auction for $8,575. 2
On March 15, 1983, the appellants filed a third-party complaint against the SBA. The appellants alleged that the SBA breached its contractual obligation of good faith dealing in refusing to permit the assumption of the loan by Dr. Spottsville. 3 The case was removed from the Boone County Superior Court to the United States District Court for the Southern District of Indiana. The district court granted summary judgment in favor of the SBA pursuant to Fed.R.Civ.P. 56(c). Wainwright Bank & Trust Co. v. Railroadmens Federal Savings & Loan Assoc. of Indianapolis, No. IP 83-417-C, Slip Op. ( .
The appellants appeal the grant of summary judgment to the SBA raising what amounts to one primary issue containing two subissues. The appellants argue that a genuine issue of material fact existed regarding whether the SBA's sale of the real and personal property was commercially reasonable. Whether summary judgment was properly granted depends on (1) whether there was a genuine issue of material fact concerning the commercial reasonableness of the SBA's choice of a public auction over a private sale, and (2) whether there was a genuine issue of material fact concerning the commercial reasonableness of the SBA's manner of the public sale.
A grant of summary judgment is proper if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The primary purpose of a grant of summary judgment is to avoid unnecessary trials when there is no genuine issue of material fact in dispute. Mintz v. Mathers Fund, Inc., 463 F.2d 495, 498 (7th Cir.1972).
The moving party, in making a motion for summary judgment, "has the burden of establishing the lack of a genuine issue of material fact." Big O Tire Dealers, Inc. v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir.1984). In Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.1983) (en banc), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983), this Court noted that to preclude summary judgment, the non-moving party must show the disputed fact to be material, that is, it must be outcome-determinative under the applicable law. Thus, facts not outcome-determinative under the applicable law, though in dispute, may still permit the entry of summary judgment.
In Munson v. Friske, 754 F.2d 683, 690 (7th Cir.1985) this Court stated:
By entering summary judgment for a party, the district court is concluding that based on the evidence upon which the plaintiff intends to rely at trial, no reasonable jury could return a verdict for the plaintiff.... In reviewing a summary judgment, an appellate court must view the entire record and the inferences drawn therefrom in the light most favorable to the party opposing the motion.... If a study of the record reveals that inferences contrary to those drawn by the trial court might be permissible, then the summary judgment should be reversed.
(citations omitted). An appellate court should reverse a grant of summary judgment when a material fact is shown to be in dispute, however the plaintiffs must "allude to specific facts which raise a genuine issue for trial." Linhart v. Glatfelter, 771 F.2d 1004, 1008 (7th Cir.1985). Finally, in Mintz v. Mathers Fund Inc., 463 F.2d 495, 498 (7th Cir.1972), we stated:
Appellate courts should not look the other way to ignore the existence of the genuine issues of material facts, but neither should they strain to find the existence of such genuine issues where none exist.
The appellants argue that the district court erred in granting summary judgment because there were important factual issues in dispute concerning whether the sale by the SBA was commercially reasonable, both in the SBA's choice of a public over a private sale and in the manner of conducting the public sale.
a. The applicable rule of decision is based on Indiana law.
Unless there is some overriding federal interest in uniformity, the applicable state law provides the rule of decision. See United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500, 15 L.Ed.2d 404 (1966). This court has applied the Uniform Commercial Code ("U.C.C.") in determining the rights and obligations of guarantors with respect to the SBA. See United States v. Cain, 736 F.2d 1195 (7th Cir.1984); United States v. Warwick, 695 F.2d 1063 (7th Cir.1982). Because the State of Indiana has adopted the U.C.C., it controls our disposition of this issue. 4 Since commercial reasonableness is a question of fact, 5 we may overturn the district court's findings of fact only if they are "clearly erroneous." See Fed.R.Civ.P. 52(a); Warwick, 695 F.2d at 1071. 6
The appellants argue that a genuine issue of material fact existed regarding the SBA's choice of holding a public auction rather than a private sale. In particular, they argue the SBA's rejection of the Spottsville offer was commercially unreasonable. Sec. 26-1-9-504(3) of the Indiana Code () prov...
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