Weiss-Lawrence, Inc. v. James Talcott, Inc.

• Decision Date: 01 August 1975
• Docket Number: Civ. A. No. 74-212.
• Citation: 399 F. Supp. 84
• Parties: WEISS-LAWRENCE, INC. v. JAMES TALCOTT, INC. v. Charles E. LAWRENCE and Seth J. Weiss a/k/a Ted Weiss.
• Court: U.S. District Court — District of New Hampshire

399 F. Supp. 84

WEISS-LAWRENCE, INC. v. JAMES TALCOTT, INC. v. Charles E. LAWRENCE and Seth J. Weiss a/k/a Ted Weiss.

Civ. A. No. 74-212.

United States District Court, D. New Hampshire.

August 1, 1975.

COPYRIGHT MATERIAL OMITTED

Harold D. Moran, Fisher, Parsons, Moran & Temple, Dover, N. H., for plaintiff.

Eaton W. Tarbell, Jr., Sulloway, Hollis, Godfrey & Soden, Concord, N. H., for defendant.

OPINION AND RULING

BOWNES, District Judge.

This is a ruling upon a motion by defendant James Talcott, Inc. ("Talcott") for summary judgment on both counts of a complaint brought by the plaintiff, Weiss-Lawrence, Inc. ("Weiss-Lawrence"). The complaint alleges negligent and false representation and abuse of process or some variation thereof. The motion for summary judgment is granted.

FACTS

Count I

Count I is an action for negligent and false representation. Plaintiff claims that defendant negligently and falsely represented the credit worthiness of a third-party. The factual background based on the record and viewing all questionable assertions in the light most favorable to the plaintiff follows.

The parties to this action entered into a financing agreement dated October 23, 1970 ("Agreement"), which essentially provided Talcott with the option of "factoring" certain accounts receivable of Weiss-Lawrence at a 15% discount and a security interest in the accounts receivable. Under the Agreement, Talcott was to decide whether or not each account receivable was "eligible" for factoring. (Agreement at ¶ 2) The Agreement also provided Talcott with a security interest in all factored accounts receivables "whether now existing or hereafter arising or in which we Weiss-Lawrence now have or may hereafter acquire any rights." (Agreement at ¶ 1)

In late March or early April, 1972, Roger S. Brooks, comptroller of plaintiff, had a telephone conversation with Richard P. Gagnon, a commercial loan officer of Talcott, regarding a loan against accounts receivable of Spaulding Shoe Company ("Spaulding"). This was, according to Brooks, the first communication between the parties concerning Spaulding. (Brooks Dep. at 11)

As a result of his conversation with Gagnon, Brooks understood that Talcott would treat the Spaulding account as eligible within the sense of the Agreement up to $5,000 initially, then to $20,000 after Weiss-Lawrence had enough experience with Spaulding to evaluate its credit worth. (Ibid.)

Subsequently, the plaintiff credited Spaulding with an amount in excess of $100,000, all of which was financed in turn by Talcott. (Lawrence Dep. at 79)

In addition to the April, 1972, Brooks-Gagnon telephone conversation, Lawrence telephoned Gagnon on the later occasions when plaintiff wanted to expand the loan base. (Lawrence Answers to Interrogatories) In expanding the loan base to $20,000, Lawrence stated that Gagnon advised him to watch the Spaulding account carefully. (Ibid.) Gagnon further warned Lawrence that accounts receivable outstanding more than ninety days "regardless if it's a AAA or Z account" would not be deemed eligible. (Lawrence Dep. at 89) In April or May, 1973, Gagnon sent plaintiff a copy of a Dunn & Bradstreet report of Spaulding based on November 30, 1970 financial figures. (Lawrence Dep. at 85)

That report indicated at a glance that between November 30, 1968 and November 30, 1970 Spaulding's net worth declined 50% from approximately $600,000 to approximately $400,000, and its profits from $40,000 to nil. The Dunn & Bradstreet summary stated that Spaulding's condition was "good" and its trend "steady."

Talcott made no other statements, either by word or by deed, concerning Spaulding to Weiss-Lawrence. (Brooks Dep. at 24; Lawrence Dep. at 93)

The plaintiff admits that it never asked Talcott why it was willing to lend 85% of $20,000 (Lawrence Dep. at 89); nor did it ask Talcott to guarantee Spaulding's accounts receivable. (Lawrence Dep. at 98) There seems no question that the plaintiff initiated requests to include Spaulding in the loan base.

Weiss-Lawrence sales to Spaulding for the period in question total $205,994.05. Of that amount, Spaulding paid Weiss-Lawrence $162,075.63, which included $7,731.26 for returned shoes. Weiss-Lawrence's first sale to Spaulding occurred on April 3, 1972, following approximately four months of negotiations. (Lawrence Dep. at 79)

It is the plaintiff's position that the defendant's behavior when considered in the light of all the circumstances was tantamount to a representation that Spaulding was credit worthy; that this representation was false and had been negligently made; that the plaintiff relied on the representation and suffered as a consequence thereof. The defendant denies having made a representation with respect to Spaulding's credit worthiness and further states that, if a representation is found, that the plaintiff was contributorily negligent for relying thereon without further investigation of its own.

Count II

Count II is:

In a plea of the case for that on or about October 23, 1970 the Plaintiff entered into a financing agreement with the Defendant whereby the Defendant agreed to advance maney sic to the Plaintiff on the security of certain accounts receivable of the Plaintiff, and other assets of the Plaintiff, to be assigned to the Defendant; the Plaintiff complied with the terms of said agreement but the Defendant wrongfully, negligently and contrary to the terms of said agreement withheld certain funds belonging to the Plaintiff; failed to account to the Plaintiff for certain sums of money and other assets belonging to the Plaintiff; charged excessive fees, contrary to the terms of said agreement, to the Plaintiff; converted to its own use certain monies and assets of the Plaintiff; and provided false and inaccurate credit information to the Plaintiff; causing loss of money, loss of business, and damage to its credit reputation to the Plaintiff; all to the damage of the Plaintiff, as it says, in the sum of Two Hundred Thousand ($200,000) Dollars.

At first glance, this Count appears to be a repetition of Count I couched in different language. However, in light of the plaintiff's pretrial memorandum and a general policy of liberally construing pleadings, I interpret this Count, with one exception,¹ as a claim that Talcott "recklessly and wrongfully persisted during the course of the bankruptcy proceedings in its claim for the J. C. Penney money and thereby unwarrantedly jeopardized the very existence of Weiss-Lawrence." (Plaintiff's Final Pretrial Report at Memorandum of Law (e))

On December 5, 1973, the plaintiff filed a petition with the bankruptcy court requesting an arrangement under Chapter XI of the Bankruptcy Act. On December 10, 1973, the defendant filed an application to reclaim a check in the approximate amount of $135,000 issued by J. C. Penney ("the J. C. Penney check") on or about December 6, 1973, in payment of an account receivable due the plaintiff. The defendant also moved for a preliminary injunction restraining the plaintiff from dealing in any way with the J. C. Penney check pending resolution of defendant's claim to it.

On December 21, 1973, the bankruptcy court heard arguments directed to whether or not the J. C. Penney check was upon a receivable and, as such, fell within the Agreement.

While finding that the Agreement included the J. C. Penney check, the bankruptcy court refrained from issuing an injunction, because it was of the opinion that Talcott would be repaid otherwise within a matter of days, which it was. In any event, plaintiff had expended approximately $90,000 of the $135,000 J. C. Penney check to meet its payroll.

Also heard on December 21, 1973, were Weiss-Lawrence's requests that Talcott release all liens against the plaintiff, as well as abate its charge for legal fees in the amount of $4,566.72. These fees were incurred in connection with services rendered in connection with the bankruptcy proceedings.

The court found that the request for release of Talcott liens had become moot, but that attorneys' fees were excessive to the extent of $1,250 and ordered that this amount be refunded.

The ultimate orders from the bankruptcy judge in connection with all the matters argued at the December 21, 1973 hearings were rendered on March 7, 1975, and appeals by Weiss-Lawrence therefrom were filed on March 27.

ISSUES

1. Did Talcott have a duty to exercise due care in the investigation of facts underlying any representations it made to Weiss-Lawrence respecting Spaulding?

2. If such a duty could be found, then did Talcott make representations to Weiss-Lawrence respecting Spaulding?

3. In petitioning the bankruptcy court for the proceeds of the J. C. Penney check and an injunction prohibiting anyone else from receiving these monies, did Talcott either abuse the bankruptcy process, or prosecute maliciously, or interfere with some prospective commercial advantage of Weiss-Lawrence?

ANALYSIS AND RULING

I. Negligent Misrepresentation

The law in New Hampshire regarding negligent misrepresentation is not completely lucid. This is not surprising in view of its lineage, which is mixed and includes among its ancestors the doctrines of fraud, gross negligence and equitable estoppel. See, Marshall v. Pierce, 12 N.H. 127 (1841); Lord v. Colley, 6 N.H. 99 (1833); Runlet v. Otis, 2 N.H. 167 (1820).

Currently, New Hampshire recognizes negligent misrepresentation, but a careful reading of the cases indicates that it is applied only after a common sense analysis of the relationship between the parties.

The courts of this State have not been extravagant in imposing obligations not to misrepresent negligently. In each case, the duty running between declarant and buyer, if any is found, is apparent from all the circumstances. These circumstances fall into two lines of cases. The first line is characterized by a representation, intent to have reliance, and damages. The second line has the elements of the first plus a...