Universal Truck & Equip. Co. v. Caterpillar, Inc.

UNIVERSAL TRUCK & EQUIPMENT COMPANY, INC., NEW LONDON MINING,MANUFACTURING & PROCESSING, LLC, NICHOLAS E. CAMBIO, VINCENT A.CAMBIO, and NICHOLAS E. CAMBIO, as Trustee of THE NICHOLAS E.CAMBIO, RODNEY A. MALAFRONTE AND VINCENT A. CAMBIO TRUST, Plaintiffs,

v. CATERPILLAR, INC., et al., Defendants,and CATERPILLAR FINANCIAL SERVICES CORPORATION andSOUTHWORTH-MILTON, INC., Defendants and Plaintiffs-in-Counterclaim.

C.A. No. 10-466 S

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

Date: November 5, 2012

ORDER

WILLIAM E. SMITH, U.S. District Judge.

Caterpillar, Inc. ("Caterpillar") and Caterpillar Financial Services Corporation ("Cat Financial" and, collectively, "Defendants") have filed a motion for summary judgment on all of the claims asserted by Universal Truck & Equipment Company, Inc. ("Universal"), New London Mining, Manufacturing & Processing, LLC ("New London"), Nicholas E. Cambio ("Nick Cambio"), individually and as Trustee of the Nicholas E. Cambio, Rodney A.Malafronte, and Vincent A. Cambio Trust ("Trust"), and Vincent A. Cambio ("Vincent Cambio" and, collectively, "Plaintiffs") and Defendants' counterclaims. For the reasons that follow, Defendants' motion for summary judgment is granted.

I. Background

A. The First Agreement

On or about March 17, 2008, New London entered into a Security Agreement and Promissory Note ("First Agreement") to purchase and/or refinance twenty-two pieces of equipment ("First Equipment") from Cat Financial for a total purchase price of $3,393,889.87. (Caterpillar Inc.'s and Caterpillar Fin. Servs. Corp.'s Mot. for Leave to File Corrected Statement of Facts and Aff. of A. Neil Hartzell ¶ 1, ECF No. 77-1 ("Defs.' SOF").) New London agreed to pay Cat Financial approximately $64,405.17 per month for sixty months. (Id. ¶ 4.) Also, Cat Financial was granted a first priority, continuing security interest in the First Equipment as collateral ("Pledged Collateral"). (Id. ¶ 3.) Personal guarantees ("First Guarantees") were executed by Universal, Nick Cambio, Vincent Cambio, and Nick Cambio as Trustee of the Trust (collectively, the "Guarantors"). (Id. ¶ 5.)

B. The Second Agreement

In mid-2009, New London and Cat Financial entered into discussions to explore ways to refinance the First Agreement.(Id. ¶ 10.) Cat Financial proposed selling the First Equipment at quick-rate sales of sixty percent distressed value. (Id. ¶ 12.) As part of these sales, New London would be charged approximately $40,000 for shipping and would remain liable for any resulting deficiency. (Id.)

On or about July 29, 2009, the parties agreed that, prior to the execution of a refinancing, New London would immediately surrender four pieces of equipment to be sold or redeemed as a way to reduce the remaining deficiency.¹ (Defs.' SOF ¶ 14.) The four units were to be stored on dealer Southworth-Milton, Inc.'s ("Southworth") lot for seventy-five days, during which New London could try and sell the equipment itself. (Id.) After seventy-five days, the four pieces would be sold through Cat Financial's normal remarketing process. (Id.) New London would remain liable for any deficiency resulting from the sales. (Id.)

Cat Financial confirmed these terms in an e-mail to Melissa Faria, a representative of New London. (Id.) Defendants aver that, at no time during the negotiations was New London told by anyone on behalf of Cat Financial that Cat Financial guaranteed a price for any of the four pieces sold or that there would be no deficiency owed following the sales. (Id. ¶ 15.)

Plaintiffs dispute the events surrounding the sale of the four units. They contend that, in addition to the Second Agreement, there was an oral agreement between Caterpillar, Cat Financial, Southworth, and New London stipulating that New London would turn over four pieces of equipment to reduce the deficiency on the First Agreement. (Pls.' Statement of Disputed Facts ¶ 14, ECF No. 88-1 ("Pls.' SODF").) They further contend that the four pieces were valued at approximately $1,000,000, and the outstanding balance of the First Agreement would be reduced by that amount regardless of how much Cat Financial actually received when it sold them.

On or about July 31, 2009, Cat Financial and New London refinanced the terms of New London's prior purchase of eighteen pieces of equipment, plus six additional pieces ("Second Equipment" and, collectively with the First Equipment, the "Equipment") for a total price of $2,490,272.25. (Defs.' SOF ¶ 22.) As part of the refinancing, the parties executed another Security Agreement and Promissory Note dated July 31, 2009 ("Second Agreement"), stipulating that New London was to pay Cat Financial $17,500 per month for nine months and $55,472.69 per month for the following fifty-one months. (Id. ¶¶ 23-24.)

C. Subsequent Events

On or about August 9, 2009, the four pieces of equipment were moved to Southworth's lot in Milford, Massachusetts.Thereafter, on October 14, 2009, Joseph Kohler of Cat Financial sent an e-mail to Ms. Faria informing her that, at the end of the seventy-five-day period, the equipment was likely going to be made ready for sale at Cat Financial's Regional Sales Center in North Carolina. (Id. ¶ 29.) Three of the units were also listed on Cat Financial's sales site, CatUsed.com, to generate a world-wide audience of potential buyers. (Id. ¶ 34.) Two of the four pieces were sold at an auction in North Carolina, the 988G Front Loader was sold to a private buyer, and the final piece was sold to Southworth while it was held in Southworth's lot. (Id.) The four pieces sold at prices comparable to that of other used equipment at the time, as well as the values assigned by the Green Book.² (Id. ¶ 36.)

New London last made a payment under the Second Agreement in April 2010. (Id. ¶ 38.) Cat Financial sent letters to New London and the Guarantors notifying them that New London was in default and, pursuant to the Second Agreement, the entire unpaid principal amount was then due and payable along with all accrued and accruing unpaid interest thereon. (Id. ¶ 40.) However, New London has not responded to Cat Financial's demands for payment other than by selling, after this suit commenced and with CatFinancial's consent, five other pieces of equipment. (Id. ¶ 41.)

As of September 30, 2010, New London was indebted to Cat Financial for approximately $2,500,000 in unpaid payments, as well as interest, which accrues daily, cost of collection, and attorney's fees. (Id. ¶ 42.)

On June 18, 2010, Plaintiffs filed suit in Rhode Island Superior Court for Kent County alleging breach of contract and fraud, and requesting a declaratory judgment and injunctive relief related to Defendants' purported breach of contract and fraudulent misrepresentations. Defendants counterclaimed, alleging breach of contract and unjust enrichment, and also requested a permanent injunction for a writ of replevin. On November 16, 2010, Defendants removed the case to this Court. Defendants now move for summary judgment on all of Plaintiffs' claims and Defendants' counterclaims.

II. Legal Standard

Summary judgment is appropriate when, viewing the record in the light most favorable to the non-moving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56; see also Drumm v. CVS Pharmacy, Inc., 701 F. Supp. 2d 200, 206 (D.R.I. 2010). "A genuine issue of fact exists where the evidence is such that a reasonable jury could return a verdictfor the nonmoving party." Drumm, 701 F. Supp. 2d at 206 (quoting Taylor v. Am. Chemistry Council, 576 F.3d 16, 24 (1st Cir. 2009)).

III. Discussion

A. Plaintiffs' Claims against Caterpillar

Viewing the facts in the light most favorable to Plaintiffs, no reasonable jury could find that Caterpillar was a party to any of the negotiations with New London and Cat Financial. Simply put, there is no mention of Caterpillar whatsoever in any of the documents relating to the loan agreements. Plaintiffs' alternative argument, that Caterpillar and Cat Financial should be viewed as a single corporate entity, and, thus, Caterpillar should be held liable, fails as well. (See Pls.' Obj. to Defs.' Caterpillar, Inc.'s and Caterpillar Fin. Servs. Corp.'s Mot. for Summ. J. 4, ECF No. 88-1 ("Pls.' Obj.").) The only evidence to support this argument is the deposition testimony of a New London employee stating that she always assumed she was communicating with Caterpillar during her talks with Cat Financial. (See Dep. of Melissa A. Faria, Ex. I 101:6-102:18, ECF No. 77-2.) However, an unfounded assumption does not justify disregarding Caterpillar and Cat Financial's respective corporate forms. See Scully Signal Co. v. Joyal, 881 F. Supp. 727, 737 (D.R.I. 1995) ("[T]he corporate entity should be disregarded . . . only when the facts of a particular caserender it unjust and inequitable to consider the subject corporation a separate entity." (quoting R&B Elec. Co. v. Amco Constr. Co., 471 A.2d 1351, 1354 (R.I. 1984))). Based on the lack of evidence demonstrating Caterpillar's involvement, Plaintiffs' claims against Caterpillar must fail.

B. Plaintiffs' Claims against Cat Financial

1. Breach of Contract

Under Rhode Island law, to establish a claim for breach of contract, a plaintiff must demonstrate that: (1) an agreement existed between the parties; (2) the defendant breached the agreement; (3) the breach caused damages to the non-breaching party. Barkan v. Dunkin' Donuts, Inc., 627 F.3d 34, 39 (1st Cir. 2010) (citing Petrarca v. Fid. & Cas. Ins. Co, 884 A.2d 406, 410 (R.I. 2005)).

The allegations underlying the breach of contract claims against Cat Financial stem from the four pieces of equipment sold to reduce the deficiency on the First Agreement. Plaintiffs contend that an oral agreement was reached where New London would turn over four pieces of the Pledged Collateral, valued at roughly $1,000,000, to Cat Financial. (See Pls.' Obj. 8.) According to Plaintiffs, this...