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1st Source Bank v. Minnie Moore Resources, Inc.

United States District Court, N.D. Indiana, South Bend Division

May 17, 2019

1ST SOURCE BANK, Plaintiff,



         Minnie Moore Resources, Inc. took out a loan from 1st Source Bank to finance its purchase of mining equipment. The loan was secured by the equipment being purchased, and was guaranteed by Minnie Moore's president. After the loan went into default, 1st Source Bank sued Minnie Moore and its president, seeking a money judgment in the outstanding amount and seeking to foreclose on the collateral. It now seeks summary judgment on those claims. The defendants do not deny that they are liable for the outstanding loans, but contest 1st Source Bank's ability to foreclose on the collateral, arguing that the equipment they actually received from the seller was defective and different from what they ordered. Those arguments do not affect 1st Source Bank's rights in the collateral, though, so the Court grants the motion for summary judgment.


         Minnie Moore Resources, Inc. operates a mining venture in Idaho. Its president is Carl Johnston. In order to scale up Minnie Moore's operations, Mr. Johnston began looking in August 2017 to purchase three pieces of heavy equipment: (1) a “Grizzly” (a materials separator), (2) an Extec rock crushing plant; and (3) an Extec screening plant (a different type of materials separator). Mr. Johnston found an online advertisement by Interval Equipment Solutions, Inc. for those pieces of equipment. After discussions with Interval Equipment Solutions, Mr. Johnston agreed to purchase those three pieces of equipment for a combined price of $350, 000. Mr. Johnston then contacted 1st Source Bank to obtain financing for that purchase.

         On September 21, 2017, Minnie Moore (by Mr. Johnston) executed a Promissory Note and a Loan and Security Agreement with 1st Source Bank. In the Promissory Note, Minnie Moore agreed to repay the $350, 000 purchase price (plus $800 in fees) over a term of four years. The Note identified the three pieces of equipment and their purchase prices, and directed 1st Source Bank to disburse the loaned funds directly to Interval Equipment Solutions. [DE 33-2]. The Loan and Security Agreement also pledged collateral to secure that loan. It identified the collateral as follows:

Grizzly Screen s/n RT-17-0801
Extec C12 Track Mounted Jaw Crushing Plant s/n 11899
Extec S-5 Track Mounted Screening Plant s/n 9520

[DE 33-1 p. 7]. The agreement stated that the collateral also included any accessories and manuals and other materials related to those pieces of equipment. The agreement further stated that if Minnie Moore defaulted on its payment obligation, 1st Source Bank could require the remaining balance to be paid immediately, together with any unpaid interest. 1st Source Bank later filed UCC Financing Statements to perfect its security interest in the collateral. In addition to those documents that Mr. Johnston executed on behalf of Minnie Moore, Mr. Johnston executed a Guaranty of Payment on his own behalf. In that agreement, Mr. Johnston “unconditionally guarantee[d]” full payment of all of Minnie Moore's obligations to 1st Source Bank. [DE 33-3].

         After completing the purchase, Minnie Moore received the three pieces of equipment from Interval Equipment Solutions. The Grizzly worked properly, but Minnie Moore believed that the rock crusher and the screening plant were defective. Upon further investigation, Minnie Moore came to believe that the equipment that Interval Equipment Solutions delivered to it were not the same pieces of equipment it had ordered. Though the invoice represented that the rock crusher was a 2009 model, the equipment that was delivered was actually a 2008 model. And though the invoice represented the screening plant to be a 2008 model, it was actually a 2006 model. The rock crusher was also missing an identification plate. After Minnie Moore pointed that out, Interval Equipment Solutions sent a replacement plate, but it did not match the serial number on the invoice: the invoice identified the serial number as “11899, ” while the replacement plate said “11889.” The screening plant did not have an identification plate, either, but its serial number was stamped onto the frame of the equipment.

         Believing the equipment to be defective, Minnie Moore stopped making payments to 1st Source Bank. In December 2017, 1st Source Bank declared Minnie Moore to be in default and demanded immediate payment of the entire loan balance. Minnie Moore failed to make any payments, so 1st Source Bank filed this action against Minnie Moore and Mr. Johnston. 1st Source Bank first seeks money judgments against Minnie Moore and Mr. Johnston on the loan and the guaranty, respectively. 1st Source Bank also seeks to foreclose on the collateral. 1st Source Bank has moved for summary judgment, and that motion has been fully briefed. As of February 14, 2019, the outstanding balance on the loan was $406, 273.36, and interest continued to accrue at $45.82 per day.


         A court must grant summary judgment if the movant shows that there “is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A “material” fact is one identified by the substantive law as affecting the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A “genuine issue” exists with respect to any material fact when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. Where a factual record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial, and summary judgment should be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In determining whether a genuine issue of material fact exists, courts must construe all facts in the light most favorable to the non-moving party and draw all reasonable and justifiable inferences in that party's favor. Jackson v. Kotter, 541 F.3d 688, 697 (7th Cir. 2008); King v. Preferred Tech. Grp., 166 F.3d 887, 890 (7th Cir. 1999). However, the non-moving party cannot simply rest on the allegations contained in its pleadings but must present evidence sufficient to show the existence of each element of its case on which it will bear the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Robin v. Espo Eng'g Corp., 200 F.3d 1081, 1088 (7th Cir. 2000).

         III. ...

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