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U.S. Bank Equipment Finance v. J.W. Jones Company, LLC

United States District Court, S.D. Indiana, Indianapolis Division

October 26, 2018




         This matter is before the Court on a Motion for Summary Judgment filed pursuant to Federal Rule of Civil Procedure 56 by Plaintiff U.S. Bank Equipment Finance, a division of U.S. Bank National Association (“U.S. Bank”) (Filing No. 56). Plaintiff U.S. Bank initiated this lawsuit asserting breach of contract, breach of guaranty, specific performance, replevin, and breach of fiduciary duty claims against J.W. Jones Company, LLC (“Jones Company”); Rock Equipment, Inc. (“Rock Equipment”); J.W. Jones Development Company, LLC (“Jones Development”); J.W. Jones Export Co, Inc. (“Jones Export”); Jones Trucking, Inc. (“Jones Trucking”); M.I.L. Latin America, LLC (“M.I.L.”); and John W. Jones (“Jones”) (collectively “Defendants” and, with the exception of Jones Company, “Guarantors”). U.S. Bank filed its Motion for Summary Judgment, arguing that it is entitled to judgment as a matter of law on various grounds. For the reasons stated below, the Motion for Summary Judgment is granted.

         I. BACKGROUND

         The following facts are not necessarily objectively true, but as required by Federal Rule of Civil Procedure 56, the facts are presented in the light most favorable to Defendants as the non-moving party. See Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

         Jones Company is an equipment dealer. On or about January 13, 2012, U.S. Bank, as lender, and Jones Company, as borrower, entered into a Dealer Security Agreement (the “Agreement”) (Filing No. 1-1). U.S. Bank agreed to extend credit to Jones Company and, in consideration, Jones Company agreed to grant to U.S. Bank a security interest in its inventory as collateral. Defendants Rock Equipment, Jones Development, Jones Export, Jones Trucking, and Jones were guarantors to the Agreement (Filing No. 1-4; Filing No. 1-5; Filing No. 1-6; Filing No. 1-7; Filing No. 1-8). U.S. Bank perfected its first priority security interest in the collateral on January 25, 2012 (Filing No. 1-2). On November 7, 2014, U.S. Bank and Jones Company amended the Agreement to change the specifics of the financial disclosures Jones Company was required to make to U.S. Bank (Filing No. 1-9). That same day, to induce U.S. Bank to join the amendment and to grant Extensions of Credit to Jones Company, M.I.L. became a guarantor (Filing No. 1-10).

         The Agreement required Jones Company to do three things relevant here. First, it had to furnish U.S. Bank with disclosures of Rock Equipment's finances within 120 days after the close of each fiscal year and within 45 days after the close of each other quarter and with Jones Company financial disclosures quarterly. (Filing No. 1-1 at 3-4) Second, Jones Company had to pay to U.S. Bank the amount of each extension of credit along with any accrued and unpaid interest charges according to the Agreement's terms, so-called “curtailment and interest payments.” (Filing No. 1-1 at 1.) Third, when Jones Company sold any inventory covered by the Agreement, it had to hold in trust and remit certain minimum proceeds to U.S. Bank to cover the reduction in value of U.S. Bank's collateral position. (Filing No. 1-1 at 2, ) Each Guarantor agreed to pay U.S. Bank any debt that arose out of the Agreement. (Filing No. 1-4 at 1; Filing No. 1-5 at 1; Filing No. 1-6 at 1; Filing No. 1-7 at 1; Filing No. 1-8 at 1; Filing No. 1-10 at 1.)

         Because of a downturn in the market for the type of equipment it sells, Jones Company was not able to fulfill these commitments. Jones Company did not provide U.S. Bank with the required financial statements for Rock Equipment for fiscal years 2015 and 2016 (Filing No. 57-6 at 7), nor with Jones Company financial statements for the third quarter ending September 30, 2016. Id. at 8. Jones Company failed to keep up with the curtailment and interest payments required by the Agreement due to insufficient funds. (Filing No. 57- 5 at 14-15.) In addition, Jones Company failed to hold in trust and pay U.S. Bank amounts due from the sale of inventory held as collateral under the Agreement. Id. at. As a result, the Guarantors failed to pay the debt Jones Company accrued under the Agreement. (Filing No. 57-6 at 8.)

         U.S. Bank brought this Complaint alleging breach of contract against Jones Company (Count I), breach of guaranty against the Guarantors (Counts II-VII), replevin against Jones Company (Count VIII), specific performance against Jones Company (Count IX), breach of fiduciary duty against Jones Company and Jones (Count X), and appointment of a receiver against Jones Company (Count XI). (Filing No. 1.) U.S. Bank affirmatively waived its appointment of a receiver claim in its Motion for Summary Judgment (Filing No. 57 at 2).

         In its Complaint, U.S. Bank alleges damages of $1, 362, 490.75 and requests that Jones Company forfeit the remaining inventory held as collateral under the agreement, which U.S. Bank values at approximately $1, 329, 660.26. (Filing No. 1-1.) In its claim for breach of fiduciary duty, U.S. Bank requests “punitive damages in the amount of three times U.S. BANK'S actual damages, plus prejudgment interest and attorneys' fees and costs.” Id. at 15. In its Motion for Summary Judgment, U.S. Bank recalculated its damages for breach of the Agreement to be $445, 642.13 plus attorneys' fees and costs of $72, 218.03 and requests judgment in that amount. (Filing No. 57 at 19-21). U.S. Bank also requests that the Court order Jones Company to transfer possession of its remaining inventory covered in the agreement. Id. at 20. Lastly, U.S. Bank seeks $90, 229.74 in damages against Jones Company and Jones on the breach of fiduciary duty claim, the amount Jones Company failed to hold in trust and remit to U.S. Bank when it sold off inventory covered by the agreement. Id. at 29.


         The purpose of summary judgment is to “pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.” Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587106 S.Ct. 1348 (1986). Federal Rule of Civil Procedure 56 provides that summary judgment is appropriate if “the pleadings, depositions, answers to interrogatories, and admissions 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 a judgment as a matter of law.” Hemsworth v., Inc., 476 F.3d 487, 489-90 (7th Cir. 2007). In ruling on a motion for summary judgment, the court reviews “the record in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party's favor.” Zerante, 555 F.3d at 584 (citation omitted). “However, inferences that are supported by only speculation or conjecture will not defeat a summary judgment motion.” Dorsey v. Morgan Stanley, 507 F.3d 624, 627 (7th Cir. 2007) (citation and quotation marks omitted). Additionally, “[a] party who bears the burden of proof on a particular issue may not rest on its pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact that requires trial.” Hemsworth, 476 F.3d at 490 (citation omitted). “The opposing party cannot meet this burden with conclusory statements or speculation but only with appropriate citations to relevant admissible evidence.” Sink v. Knox County Hosp., 900 F.Supp. 1065, 1072 (S.D. Ind. 1995) (citations omitted).

         “In much the same way that a court is not required to scour the record in search of evidence to defeat a motion for summary judgment, nor is it permitted to conduct a paper trial on the merits of [the] claim.” Ritchie v. Glidden Co., 242 F.3d 713, 723 (7th Cir. 2001) (citations and quotation marks omitted). “[N]either the mere existence of some alleged factual dispute between the parties nor the existence of some metaphysical doubt as to the material facts is sufficient to defeat a motion for summary judgment.” Chiaramonte v. Fashion Bed Grp., Inc., 129 F.3d 391, 395 (7th Cir. 1997) (citations and quotation marks omitted).


         Jones Company does not dispute that it breached the Agreement, and Defendants are willing to stipulate to judgment in the amount of $445, 642.13 on the breach of contract and breach of guaranty claims-the full amount sought by U.S. Bank. (Filing ...

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