EXCEPT AS SPECIFIED ABOVE IN THIS SECTION 6 OR
BELOW IN SECTION 7, SELLER MAKES NO REPRESENTATION OR
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR
ORAL, AND SHALL NOT BE RESPONSIBLE FOR: ... (2) THE
FINANCIAL CONDITION, CREDITWORTHINESS OR OTHER
CONDITION OF THE LESSEE OR ANY OTHER PERSON OR ENTITY
OBLIGATED FOR PAYMENT OF AMOUNTS DUE UNDER OR IN
CONNECTION WITH A LEASE OR ANY DOCUMENT RELATING TO A
LEASE; .... (4) THE COLLECTABILITY OF ANY
(Filing No. 1-1, Compl., Ex. A, Master Discounting
Agreement ¶ 6) (emphasis added).
present lawsuit involves a vehicle lease between Balboa
and Americorp Xpress Carriers, LLC. The parties agree
that United purchased the lease from Balboa on a
non-recourse basis, and the transaction was guaranteed
by Frank Flores. (Compl. ¶ 6). Among the
documents United received prior to entering
into the transaction were the personal Guaranty of
Flores and the Statement of Financial Condition of
Flores. (Id. ¶ 8).
the sale of the lease by Balboa, Americorp and the
Guarantor, Flores, defaulted in payment and performance
under the lease. (Id. ¶ 12). Thereafter,
Americorp and Flores filed for bankruptcy in the United
States District Court for the Southern District of
Texas. (Id. ¶ 14). Flores allegedly
testified under oath to facts that indicate the
financial statements he provided to Balboa, and which
Balboa provided to United, were false in significant
and material respects. (Id.). United alleges
that Balboa breached its warranties to United under
¶¶ 6 and 7 because the statements made in the
financial documents were not true, and therefore, it is
entitled to attorneys' fees. (Id.
¶¶ 14, 15).
Standard of Review
Rule of Civil Procedure 12(b)(6) authorizes the
dismissal of claims for "failure to state a claim
upon which relief may be granted." Fed.R.Civ.P.
12(b)(6). The purpose of a motion to dismiss is to test
the legal sufficiency of the complaint, not the merits
of the lawsuit. Szabo v. Bridgeport Machines,
Inc.,249 F.3d 672, 675 (7th Cir. 2001). A court
may grant a Rule 12(b)(6) motion to dismiss only if a
complaint lacks "enough facts to state a claim to
relief that is plausible on its face." Bell
Atlantic Corp. v. Twombly,550 U.S. 544, 570
(2007). A complaint sufficient on its face need not
give "detailed factual allegations, " but it
must provide more than "labels and conclusions,
and a formulaic recitation of the elements of a cause
of action." Id. at 555. The court accepts
all well-pleaded factual allegations in the complaint
as true and draws all reasonable inferences in favor of
the plaintiff. See Yeksigian v. Nappi, 900
F.2d 101, 102 (7th Cir. 1990).
addition to the allegations of the complaint, the court
may consider "documents that are attached to the
complaint, documents that are central to the complaint
and are referred to in it, and information that is
properly subject to judicial notice."
Williamson v. Curran,714 F.3d 432, 436 (7th
Cir. 2013) (citing cases). In the present case, United
attached several documents, including the Master
Discounting Agreement, to the Complaint. The court
properly considers those documents in ruling on the
attached an article entitled "The Ins and Out of
Equipment Leasing" to its motion. (Filing No. 8-1,
The Ins and Out of Equipment Leasing). This article is
not referenced in the Complaint and is, therefore, a
document outside the pleadings. As this is a motion to
dismiss, the court will not consider this article.
McCready v. eBay, Inc.,453 F.3d 882, 891 (7th
Cir. 2006) ("At the 12(b)(6) stage, we typically
would be confined to [Plaintiffs] Complaint.").
United's Motion to Strike is therefore
contends that, pursuant to the Master Discounting
Agreement, it can only be liable to United if it knew
that Americorp's financial information was
materially false. United did not allege Balboa had
actual knowledge of that fact. Therefore, Balboa
argues, the Complaint must be dismissed for failure to
state a claim.
this is a diversity case filed in the State of Indiana,
Indiana rules of contract interpretation control.
Hinc v. Lime-O-Sol Co.,382 F.3d 716, 719 (7th
Cir. 2004). Under Indiana law, the interpretation of a
contract is a question of law for the court. AM
General LLC v. Armour,46 N.E.3d 436, 440 (Ind.
2015). A contract is ambiguous if its terms are
susceptible to more than one reasonable interpretation.
Trustees of Indiana Univ. v. Cohen, 910 N.E.2d
251, 257 (Ind.Ct.App. 2009). When the language of a
written contract is unambiguous, however, the court
must give effect to the intentions of the parties as
expressed in the four corners of the document.
Id. Moreover, in interpreting the contract,
the court is required to read the contract as a whole,
and accept an interpretation of the contract that
harmonizes its provisions and not one which places the
provisions in conflict. Whitaker v. Brunner,814 N.E.2d 288, 294 (Ind.Ct.App. 2004).
principle issue is whether the preamble's language
stating that the Seller (Balboa) represents and
warrants to the Purchaser (United) that, "to its
knowledge:" qualifies Balboa's representations
set forth in paragraph 6(k). Balboa argues it does, as
evidenced by the colon that follows those limiting
words. United argues that the preamble to paragraph 6
"in essence makes little sense if, in fact, all of
the warranties contained in 6(a) through 6(m) are
limited by Seller's actual knowledge." (Filing
No. 13, Response at 6). It notes the Agreement does not
define "actual knowledge, " and in paragraph
6(c), the knowledge requirement is included again.
(Id.). If the actual knowledge requirement
refers to all subparagraphs of paragraph 6, United
continues, it would not be restated in paragraph 6(c).
In making this argument, United fails to appreciate
that it apparently drafted the Agreement. Therefore,
any ambiguities in the Agreement are construed against
United. MP ACT Const. Grp., LLC v. Superior
Concrete Constructors, Ind.,802 N.E.2d 901, 910
(Ind. 2004) ("When there is an ambiguity in a
contract, it is construed against its drafter.").
the plain terms of paragraph 6(k) of the Agreement, the
modifying clause "without limiting or qualifying
any of the preceding representations and warranties of
Seller" is preceded by the preamble itself. It may
sound odd to be read in that manner, but that is how
the Agreement was drafted. What is important here is
that the modifying clause does not limit or otherwise
qualify the preamble. In other words, the coming
representation is limited by what Balboa knew.
court's understanding of the Agreement as requiring
knowledge on the part of Balboa is further supported by
the concluding language of Paragraph 6, wherein the
parties included a disclaimer in all capitalized
letters stating that Balboa was not vouching for the
creditworthiness or the collectability of the lessee.
Additionally, the Agreement contemplates that United
Leasing will conduct its own credit review and
underwriting of the lessee as outlined in Paragraphs 3,
4, 7(e), and Schedule A to the Specification of
Assigned Schedule. And lastly, but significantly, the
Agreement provides that Balboa will assign lease
transactions to United Leasing on a non-recourse basis,
meaning the assignee (United) bears the risk of loss.
Balboa's motion to dismiss United's breach of
warranty claim is therefore GRANTED.
also alleges Balboa breached the terms of paragraph
7(b) of the Master Discounting Agreement. Paragraph
Each financial statement of SELLER furnished to
PURCHASER in connection with this Agreement is true and
correct and has been prepared in accordance with
generally accepted accounting principles consistently
applied throughout the periods involved.
refers to Balboa's own financial statements, not
the lessee's (Americorp). Thus, it has no
application here. This may be why United failed to
argue that Balboa breached paragraph 7(b) in its
Response; instead, it argued Balboa breached the terms
of paragraphs 7(d) and (e). However, a party cannot
amend its complaint in its response brief to a motion
to dismiss. Pirelli Armstrong Tire Corp. Retiree
Medical Benefits Trust v. Walgreen Co., 641 F.3d
436, 448 (7th Cir. 2011); Thomason v.
Nachtrieb,888 F.2d 1202, 1205 (7th Cir. 1989)
("[I]t is a basic principle that the complaint may
not be amended by the briefs in opposition to a motion
to dismiss."). Therefore, United may not raise
these new claims now. Balboa's motion to dismiss
United's breach of contract claim is
United alleges it is entitled to attorneys' fees
pursuant to paragraph 27 of the Master Lease Agreement
between Balboa and Americorp. The operative agreement
here is the Master Discounting Agreement, which does
not provide for either party to recover attorneys'
fees. Accordingly, even if United's claims survived
this motion, Balboa would not be entitled to
attorneys' fees. Balboa's motion to dismiss
United's claim for attorneys' fees is therefore
court finds United's Complaint fails to state a
plausible claim for relief under either a breach of
warranty or breach of contract theory. Accordingly,
Balboa's Motion to Dismiss (Filing No. 7) is
GRANTED without prejudice. In
addition, United's Motion to Strike (Filing No. 11)
may amend its ...