Opinion
Case No.: 01-72387
March 11, 2002
OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Before the Court is Plaintiff's motion for summary judgment (Docket Entry # 6). The Court heard oral argument on this motion on February 21, 2002. Upon consideration of the motion, the submissions of the parties, and the applicable law, the Court will GRANT the motion.
II. BACKGROUND
This is a breach of contract case, here on diversity of citizenship jurisdiction. The contracts at issue are based on equipment leasing agreements for a baler and a conveyor. A company named Equipment Leasing Specialists originally leased a used 1992 baler, and a "Z-pan" conveyor, to Stanley Metal Associates, in the fall of 1999. David Friedman and Stewart Weiner personally guaranteed the payments under the leases. Equipment Leasing Specialists assigned the leases to Plaintiff GreatAmerica Leasing Corp. Stanley Metal Associates assigned its leases to Titan Recycling. Tim Engels personally guaranteed the payments under the leases, as owner of Titan.
These facts are taken, in large part, from this Court's December 11, 2001 Order.
Equipment Leasing is not a party to this suit.
Plaintiff does not indicate when this assignment occurred.
For ease of reference, Titan Recycling and Mr. Engels will be referred to collectively as Defendant.
The lease contains a provision regarding the Lessor's remedies in the event of default. (Original "Equipment Leasing Agreement(s), Pl.'s MSJ, Exh. 1, at 2, ¶ 12.). There are two such remedies: (1) repossession of equipment, and (2) acceleration of balance due. ( Id.) The provision states that these two remedies may be exercised separately or together, and that this should be construed as liquidated damages, and not a penalty provision. ( Id.) The paragraph also states that if a legal proceeding is initiated, the Lessee will also be responsible for `court costs and a reasonable attorney's fee not to be less than an amount equal to 33.33 percent of said balance." ( Id.) The paragraph further provides for interest to accrue on unpaid balances at the rate of 1 3/4 % per month. ( Id.) Defendant Tim Engels signed personal guaranties for the leases. (Guaranty, Pl.s MSJ, Exhs. 4 5.)
It is Plaintiff's contention that Titan Recycling and Tim Engels defaulted on the leases, to the tune of approximately $130,000. Defendant denies this, and attaches copies of Western Union receipts for payments (the last one is dated March 30, 2001) to his Answer.
On June 26, 2001, Plaintiff filed its complaint in this Court, alleging two counts: Count I — Breach of Contract, against Stanley Metal Associates and Titan Recycling, and Count II — Action Under Guarantees, against David Friedman, Stewart Weiner, and Tim Engels. On September 28, 2001, this Court signed a Stipulated Order of Dismissal, dismissing Stanley Metal Associates, David Friedman and Stewart Weiner only. The action is alive as against Titan Recycling for breach of contract, and Tim Engels (owner of Titan Recycling) for his personal guaranty.
On August 24, 2001, Mr. Engels sent this Court a letter, which this Court construed as his Answer. In that Answer, Mr. Engels denied the charges against the company and himself and attached documents which he alleges proved that "payments were made up until April." (Def's Ans. at ¶ 2.) The Court construed ¶ 4 of that letter as a motion to transfer venue. The Court denied the motion to transfer by Order dated December 11, 2001.
Plaintiff filed its motion for summary judgment on September 19, 2001. This motion is currently before the Court.
II. ANALYSIS
A. Summary Judgment Standard
This Court grants summary judgment when "the pleadings, depositions, answers to interrogatories, and admission 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." Fed.R.Civ.P. 56(c). Summary judgment is proper when "a party . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the moving party satisfies its burden, the party opposing the motion "must come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, "the mere existence of a scintilla of evidence" in support of the non-moving party is not sufficient to show a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
B. Discussion
As stated in Webster v. Edward D. Jones Co., 197 F.3d 815, 818 (6th Cir. 1999), in a diversity case, Michigan law is to be applied. Furthermore, the leases at issue here specifically provide for the application of Michigan law. (Exhs. 1 3, Pl.'s MSJ, at 2, ¶ 19.)
Under Michigan law, the elements of a breach of contract claim are: (1) a contract exists between the parties; (2) the terms of the contract require performance of certain actions; (3) at least one of the parties breached the contract; and (4) that the breach of the contract caused the other party injury. Webster, 197 F.3d at 819. Assignees stand in the shoes of assignors in terms of the rights/responsibilities enumerated in the contract. First of America Bank v. Thompson, 217 Mich. App. 581, 587 (1996). A personal guaranty obligates the guarantor to perform the requirements of the contract in the event the original party to the contract defaults. Mortgage Contract Co. v. Linenberg, 260 Mich. 142, 147 (1932).
C. Breach of Contract against Titan Recycling
1. Existence of a Contract
The original leases (between Stanley Metals and Equipment Leasing) are attached to Plaintiff's motion at Exhibits 1 and 3.
It is undisputed that Titan Recycling is the assignee of the original leases for the baler and conveyor, between Equipment Leasing and Stanley Metals. (Exh. 4 to Pl.'s MSJ.) Mr. Engels' Answer to the Complaint does not dispute this; he merely disputes when this occurred. (Def's Ans. at ¶ 1; see also Attachment F to Def's Ans.)
As to the assignment between Equipment Leasing and GreatAmerica Leasing, Plaintiff has attached an affidavit from an employee at GreatAmerica, Mr. Bill Kilburg, to show that the leases were assigned to GreatAmerica. Defendant's Answer does dispute this assignment. The last payment Defendant made (March 30, 2001) was made to Equipment Leasing. (Attachment A to Def's Ans.) There is no genuine dispute as to the existence of the contracts (the leases).
2. Terms of the Contract
The basic terms of the leases are that a certain number of rental payments are to be made monthly in the amounts of $2,013.90 and $1,012.93. (Exhs. 1 3 to Pl.'s MSJ, respectively.)
Most of the remaining terms of the leases are set forth on the reverse side of the leases. The relevant provision regarding default is found at ¶ 12. That provision provides the Lessor with remedies in the event of the Lessee's default. (Original "Equipment Leasing Agreement(s), Pl.'s MSJ, Exh. 1, at 2, ¶ 12.). There are two such remedies: (1) repossession of equipment, and (2) acceleration of balance due. ( Id.) The provision states that these two remedies may be exercised separately or together, and that this should be construed as liquidated damages, and not a penalty provision. ( Id.) The paragraph also states that if a legal proceeding is initiated, the Lessee will also be responsible for `court costs and a reasonable attorney's fee not to be less than an amount equal to 33.33 percent of said balance." ( Id.) The paragraph further provides for interest to accrue on unpaid balances at the rate of 1 3/4 % per month. ( Id.)
There is no dispute as to the terms of the contracts (leases).
3. Breach of the Contract
In support of its claim that Defendant Titan Recycling breached the contract, Plaintiff attaches the affidavit of Mr. Kilburg, who avers that Titan Recycling made its February 2001 payment on March 30, 2001, but has not made any payments since.
In the Answer, at ¶ 2, Defendants deny breaching the contracts, and state that payments were made up until April, referring to Attachments A, C, D. Those attachments are Western Union printouts for the dates of December 2000, February 2001, and March 2001. Defendants have not attached any other payment proofs.
Despite Defendants' blanket denial, it appears that the leases have in fact been breached, by Defendant Titan Recycling's failure to make any payments past March of 2001. There is no evidence before the Court to suggest that there is a genuine issue of material fact as to whether the rental payments past March 2001 were made.
4. Harm to Plaintiff
In support of this element, Plaintiff argues that it has lost the benefit of its bargain by not receiving the rental payments required by the leases, and that it paid the full price to the third party vendor in contemplation of receiving the rental payments.
In the Answer, Defendants generally assert what might be construed as a defense of failure to mitigate damages. Defendants assert that while "the leasing company had other offers on the same piece" it instead sold it for $35,000. (Ans. at ¶ 3.) In support of this statement, Defendants attach a facsimile page (Attachment G to Answer) evidencing a possible bid for $30,000.
The Court finds that there is no genuine dispute as to whether Plaintiff was harmed. Defendants' support for its mitigation defense is meritless: the attachment shows the bid to be less than the bid eventually accepted, and thus, there is no evidence before the Court that Plaintiff failed to mitigate its damages.
Thus, the Court finds that Plaintiff is entitled to summary judgment against Titan Recycling based upon the leases and the assignments.
D. Personal Guaranty against Tim Engels
1. Existence of a Contract
In support of its argument that Defendant Engels is liable for the unpaid lease payments, Plaintiff attaches each personal guaranty signed by Mr. Engels for each lease. (Exh. 5 to Pl.'s MSJ). Defendant Engels does not dispute the validity of the guaranties.
2. Terms of the Contract
The terms of the guaranties are clear: Mr. Engels agreed to guaranty "the prompt payment of all rent to be paid by the Lessee and the performance by the Lessee of all terms" of the contract. (Exh. 5 to Pl.'s MSJ). The guaranties also provide that the guarantor "waives notice of demand . . . or of any defaults and consents the Lessor may, without affecting the obligation hereunder, . . . proceed directly against the undersigned without first proceeding against Lessee or liquidating or otherwise disposing of any security . . . ." ( Id.)
Defendant Engels does not dispute the terms of the guaranties.
3. Breach of the Contract
In support of its claim that Defendant Engels breached the guaranties, Plaintiff attaches the affidavit of Mr. Kilburg, who avers that Mr. Engels has not made any payments on the leases.
In the Answer, at ¶ 2, Defendant Engels denies breaching the contracts, and states that payments were made up until April, referring to Attachments A, C, D. Those attachments are Western Union printouts for the dates of December 2000, February 2001, and March 2001. Defendant Engels has not attached any other payment proofs.
Despite Defendant Engels' blanket denial, it appears that the guaranties have in fact been breached, by Defendant Engel's failure to make any payments. He also waived his right to a demand letter explicitly in the guaranties. There is no evidence before the Court to suggest that there is a genuine issue of material fact as to whether Defendant Engels has failed to perform in conformance with the two guaranties he signed in February of 2001.
4. Harm to Plaintiff
For the reasons stated above in the analysis under the leases/assignments against Titan Recycling, the Court finds that Plaintiff has suffered harm from the breach, and that there is no genuine issue of material fact as to whether Defendant Engels is personally liable for the unpaid balance due under the leases.
III. ORDER
For the reasons stated above, the Court GRANTS Plaintiff's motion for summary judgment against Titan Recycling, Inc., and Tim Engels.
SO ORDERED.