WILLIAM G. HUSSMANN, JR., Magistrate Judge.
This matter is before the Honorable William G. Hussmann, Jr., United States Magistrate Judge
For the purposes of this motion for summary judgment, the facts in the light most favorable to the non-moving party are as follows:
1. Plaintiff Caudill Seed & Warehouse Co., Inc., ("Caudill Seed") is a Kentucky corporation with its principal place of business at 1402 West Main Street, Louisville, KY 40203. (Amended Complaint ¶ 1). Defendant Rose Seeding & Sodding, Inc., ("Rose Seeding") is an Indiana corporation with its principal place of business at 3718 Crescent Road, Charlestown, IN 47111. (Id. ¶ 2). Defendant Mark Rose is an Indiana resident. (Id. ¶ 3).
2. Caudill Seed is engaged in the sale of seed, mulch, fertilizer, and related product. (Amended Complaint ¶ 8). Rose Seeding is engaged in the landscaping business; Mr. Rose is the president and/or CEO of Rose Seeding. (Id. ¶¶ 9-10).
3. Between 2006 and 2009, Rose Seeding purchased seed and other related goods from Caudill Seed. (See Affidavit of Keith Vissing ("Vissing Aff.") ¶ 3).
4. In late 2007, Mr. Rose signed a credit application (hereinafter "Credit Application") agreeing to individual liability for sales made on credit from Caudill Seed to Rose Seeding. (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 1).
5. On September 22, 2008, Rose Seeding purchased $10,811.00 of product from Caudill Seed. On September 23, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (See Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 2).
6. On September 24, 2008, Rose Seeding purchased $23,309.00 of product from Caudill Seed. On September 25, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Exs. 3, 4).
7. On September 30, 2008, Rose Seeding purchased $6,107.00 of product from Caudill Seed. On September 30, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Ex. 2).
8. On October 2, 2008, Rose Seeding purchased $7,543.98 of product from Caudill Seed. On October 2 and 3, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Exs. 4, 5).
9. On October 3, 2008, Rose Seeding purchased $2,417.00 of product from Caudill Seed. On October 7, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Ex. 3).
10. On October 10, 2008, Rose Seeding purchased $13,379.40 of product from Caudill Seed. On October 13, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 3).
12. On October 20, 2008, Rose Seeding purchased $3,811.72 in product from Caudill Seed. On October 21, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Ex. 4).
13. On October 27, 2008, Rose Seeding purchased $5,655.20 of product from Caudill Seed. On October 28, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Exs. 3, 6).
14. On October 30, 2008, Rose Seeding purchased $6,838.60 of product from Caudill Seed. On November 3, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Ex. 2).
15. On November 4, 2008, Rose Seeding purchased $16,346.41 of product from Caudill Seed.
16. On November 6, 2008, Rose Seeding purchased $2,792.00 of product from Caudill Seed. On November 6, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id.).
17. On November 14, 2008, Rose Seeding purchased $2,885.20 of product from Caudill Seed. (Id.). On November 17, Rose Seeding purchased $271.25 of product from Caudill Seed. (Id. at Ex. 6). On November 17, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Exs. 3, 6).
18. On December 17, 2008, Rose Seeding purchased $1,320.00 of product from Caudill Seed. On December 17, 2008, Caudill Seed shipped and Rose Seeding accepted said product. (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 6).
19. On February 18, 2009, Rose Seeding purchased $4,766.67 of product from Caudill Seed. On February 19, 2009, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Ex. 4).
20. On February 20, 2009, Rose Seeding purchased $585.00 of product from Caudill Seed. On February 20, 2009, Caudill Seed shipped and Rose Seeding accepted said product. (Id. at Ex. 6).
21. These purchases amount to $43,131.33 worth of non-seed product and $69,545.94 worth of seed totaling $112,677.27. (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at 7, 9). No payments have been made for these orders. (Id.).
22. Defendants have not disputed that they received the product set forth in the invoices at issue herein, and applied the seed on various projects. (Rose Dep. at 37).
23. Caudill Seed alleges that the only notice Defendants gave to it that any of the product at issue herein constituted non-conforming goods pertained to seed contained in Order # 366440, for which Rose Seeding was duly credited.
24. Defendants allege that the seed purchased on these dates failed to germinate. (Vissing Aff. ¶ 4).
25. Defendants further allege that, as a result of the failure to germinate, Rose Seeding was required to redo or overseed fourteen job sites. (Id. ¶ 4; Response at 3).
27. Mark Wiley, a salesman for Caudill Seed, was notified of the germination problems. (Id. ¶ 7).
28. The invoices for the disputed product included a section entitled "Terms of Sale" which included various warranties and other terms. (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 10). Several of the sections within the Terms of Sale are relevant to this dispute. Specifically, the Terms of Sale explain that there is a specific manner in which Rose Seeding was to accept or reject "goods" as follows:
(Id. at Ex. 10). Furthermore, the Terms of Sale provide specific warranties for "goods" as follows:
(Id.). However, Caudill Seed provided a different set of warranties for its sale of seed; the Terms of Sale explained:
(Id.).
29. Despite the specific Terms of Sale, Defendants allege that Caudill Seed and Rose Seeding had a fifteen year history of doing business in which "[o]n numerous previous occasions when seed failed to germinate Caudill would recognize the failure and either discount or replace the non-conforming seed as necessary to remediate the job site in question."
31. Defendants filed an Answer and Counterclaim arguing that Caudill Seed breached the contract by selling Defendants seed that it claimed was certified, but was not, in fact, certified. Defendants also allege that Caudill Seed breached the warranty of merchantability by selling seed that failed to germinate in a quantity expected in accordance with industry standards. Furthermore, Defendants argue that they are not obligated to pay for the non-seed product because it was directly related to the application of the seed, and that when the seed failed to germinate, the non-seed product was rendered useless.
32. Caudill Seed filed this Motion for Summary Judgment arguing that they are entitled to judgment as a matter of law on all of their claims against Rose Seeding and Mr. Rose. Specifically, Caudill Seed argues that it is entitled to summary judgment on its breach of contract claim because Rose Seeding accepted delivery of both the seed and non-seed product and that Rose Seeding never rejected any of the relevant purchases. Having examined the arguments of the parties and the relevant legal authorities the court concludes that Caudill Seed's motion must be GRANTED.
Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The motion should be granted so long as no rational fact finder could return a verdict in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, a court's ruling on a motion for summary judgment is akin to that of a directed verdict, as the question essentially for the court in both is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52, 106 S.Ct. 2505. When ruling on the motion, the Court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences therefrom in that party's favor. Id. at 255, 106 S.Ct. 2505. If the nonmoving party bears the burden of proof on an issue at trial, that party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see also Silk v. City of Chicago, 194 F.3d 788, 798 (7th Cir.1999). Lastly, the moving party
This is a suit brought pursuant to the court's diversity jurisdiction. While a federal court sitting in diversity jurisdiction shall apply its own procedural laws, it must apply the substantive laws of the state in which it sits. First Nat. Bank and Trust Corp. v. American Eurocopter Corp., 378 F.3d 682, 689 (7th Cir.2004). This Court must, therefore, apply Indiana substantive law including Indiana's choice of law rules concerning contracts. In this case, the parties agree that Indiana contract law controls this dispute.
As an initial matter, the court must determine to what extent any liability on behalf of Rose Seeding extends to Mark Rose individually. Mr. Rose does not dispute that he signed a credit application in which he stated that he "certifies . . . that I(we) fully understand the credit terms as stated on the face and back of this form. In consideration of the extension of credit by Caudill to [Rose Seeding], I(we) agree to be personally and individually bound on all amounts due Caudill." (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 2). Defendants do not argue that this was an invalid guaranty.
In Indiana, the interpretation of a guaranty is governed by the same rules applicable to other contracts. Beradi v. Hardware Wholesalers, Inc., 625 N.E.2d 1259, 1261 (Ind.Ct.App.1993). As the Indiana Court of Appeals has explained:
Bruno v. Wells Fargo Bank, N.A., 850 N.E.2d 940, 945-46 (Ind.Ct.App.2006) (internal citations omitted).
In this case, given that Defendants do not dispute the validity of this guaranty, and given that a reading of the guaranty indicates that it was the intentions of the parties that Mark Roes was agreeing to be "personally and individually bound on all amounts due Caudill" the court concludes that this was a valid and enforceable guaranty. To hold otherwise would be to loosely interpret the guaranty in a manner so as to relieve the guarantor (Mark Rose) of liability fairly within the terms of the guaranty. Indiana law does not permit such a loose interpretation of a guaranty, and the court, therefore, concludes that Caudill Seed's Motion for Summary Judgment on the issue of personal liability must be GRANTED.
Caudill Seed asserts that it is entitled to judgment as a matter of law on its breach of contract claim because Rose Seeding was provided with a reasonable amount of time to inspect the seed and, within that reasonable time frame, never rejected the seed. Additionally, Caudill Seed argues
Indiana has adopted the Uniform Commercial Code in the area of sales. Indiana law provides that "a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." Ind.Code § 26-1-2-204. In addition, the parties duties after entering into a contract are described in Section 26-1-2-301 as follows: "The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract."
In this case, there is no dispute that Caudill Seed transferred and delivered the seed to Rose Seeding. The only question, then, is whether or not Rose Seeding properly rejected the seed. Under Indiana law,
(1) Acceptance of goods occurs when the buyer:
Ind.Code § 26-1-2-606. Additionally, "[r]ejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller." Ind.Code § 26-1-2-602.
The court must, therefore, determine what amounts to a "reasonable opportunity to inspect the goods" and a "reasonable time" to reject them. Caudill Seed argues that the Terms of Sale provide such a reasonable time: ten days. It is true that the Terms of Sale call for a ten-day period in which Rose Seeding shall reject the "goods" or otherwise it will have "irrevocably accepted the goods." (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 10). However, the court notes that the Terms of Sale clearly differentiate between "goods" and "seeds," providing for different warranties pertaining to goods than the warranties pertaining to seeds. (Id.). As a result, the court concludes that the ten-day period for acceptance/rejection of the seeds is not the appropriate amount of time. Instead, the court concludes that the concluding sentence of the section of the Terms of Sale entitled "Seed Purchases" which explains that "Caudill recommends that a five (5) pound sample of the seed be tested by Buyer in similar conditions to those for which the seed will be used" provides the appropriate "reasonable" length of time in which Rose Seeding could have properly rejected the seed. Had Rose Seeding tested the seed at issue in this case, determined that it did not germinate properly, and then notified Caudill Seed that it was rejecting the seed, then the court would have likely found such a rejection to have been proper. That, however, is clearly not what occurred here. Instead, Rose Seeding used the seed at issue in this case and only later alleged that the seed did not germinate properly. Rose Seeding's actions were inconsistent with a rejection of the seed. There is no evidence of "an effective rejection" as described in Section 26-1-2-602(1) of the Indiana Code. Therefore, Rose Seeding breached the various
While Rose Seeding failed to properly reject the seed and, therefore, was obligated to pay the contract price, Rose Seeding could still prevail on its Counterclaim against Caudill Seed if it were able to show that Caudill Seed's actions amounted to a breach of contract. Rose Seeding claims that, by shipping seed that did not germinate in a quantity expected in accordance with industry standards, Caudill Seed breached the warranty of merchantability. Indiana's version of the Uniform Commercial Code defines the implied warranty of merchantability as follows:
Ind.Code § 26-1-2-314. Section 26-1-2-316 provides for how to reconcile possible inconsistencies in the warranty language within a contract. Specifically it explains that "[w]ords or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other." Ind. Code § 26-1-2-316. And, it further provides the manner in which the implied warranty of merchantability may be disclaimed; "to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous. . . ." Id.
Here, the court notes that, at first glance, the language in the "Warranties" section of the Terms of Sale in which Caudill Seed warrants that the goods are of merchantable quality appears to conflict with language in the "Seed Purchases" section in which Caudill Seed "gives no other warranty, express or implied, of the merchantability . . . of the seeds." However, Section 26-1-2-316 instructs the court to construe such perceived conflicts as consistent wherever "reasonable." In this case, the decision to treat "goods" and seeds differently is a reasonable distinction. Whether or not seeds germinate is dependent upon many factors including the weather, watering, the quality of the fertilizer used, the quality of the soil, the knowledge of the landscaper, and presumably
Defendants' final argument for why Caudill Seed breached the parties' contract is that Caudill Seed sold seed that it claims was certified but was not actually certified. They state in their Response:
(Response at 7-8). Indeed the Terms of Sale do indicate that "Caudill warrants to the extent of the purchase price only that the seeds are as described on the invoice, the bag and/or the tag attached thereto, within recognized tolerances." (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 10). Nevertheless, Defendants waived any argument that the seed was not certified when it accepted the seed. Section 26-1-2-607 of the Indiana Code provides that "[a]cceptance of goods by the buyer precludes rejection of the goods accepted, and if made with knowledge of a nonconformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. . . ." Here, by planting seeds that were arguably not certified, Rose Seeding clearly signified its intention to accept non-conforming goods.
Defendants argue that they are not liable for the amounts they owe concerning the non-seed product that was purchased from Caudill Seed. The gist of their argument is that the fertilizer, tackifier, and netting were directly related to the application of the seed, and that when the seed failed to germinate, this non-seed product was rendered useless. They argue that once the seed failed to germinate, they
Caudill Seed also alleges that it is entitled to attorney's fees under the contract. The Credit Application signed by Mark Rose indicates that "IN THE EVENT THE ACCOUNT IS PLACED IN THE HANDS OF AN ATTORNEY FOR COLLECTION, AFTER DEFAULT, BUYER AGREES TO PAY THE COST OF COLLECTION, INCLUDING ATTORNEY'S FEES OF NOT LESS THAN 20%." (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 2). In Indiana, parties to a lawsuit generally must pay their own attorney's fees unless such a fee is authorized by statute, agreement, or stipulation. Holliday v. Crooked Creek Villages Homeowners Assoc., Inc., 759 N.E.2d 1088, 1095 (Ind.Ct.App.2001). "Accordingly, a contract allowing for recovery of attorney fees is enforceable, if the contract is not contrary to law or public policy." Dempsey v. Carter, 797 N.E.2d 268, 275 (Ind.Ct.App.2003). Here, the court finds no legal or public policy reason why the contract permitting an award of attorney's fees should be unenforceable. Rose Seeding accepted both the seed and non-seed product from Caudill Seed. Yet, Rose Seeding never paid for the product despite using it in numerous projects. Defendants argue that after Rose Seeding notified Caudill Seed of the defective seed, Caudill Seed was obligated to negotiate in good faith to resolve the conflict. The court disagrees. Caudill Seed fulfilled its contractual obligations by delivering the seed and non-seed product to Rose Seeding which Rose Seeding then accepted. Caudill Seed had no further contractual obligations. Instead it was Rose Seeding that had the contractual obligation to pay for the product after it accepted it. By failing to fulfill its contractual obligations, Rose Seeding (and Mark Rose individually) exposed itself to the attorney's fee component under the contract.
Having determined that Caudill Seed is entitled to attorney's fees, the court instructs Caudill Seed to submit a detailed Bill of Costs itemizing the attorney's fees sought for its attempts at collection of the debt owed by Defendants.
Caudill Seed also seeks interest on the unpaid debts pursuant to the Credit Application and the Invoices. The Credit Application signed by Mark Rose provides that payment is due 30 days from the date of an invoice. (Memorandum in Support of Caudill Seed's Motion for Summary Judgment at Ex. 2). The Invoices sent to Rose Seeding also included notice that "A service charge of 2% per month (24% annual rate) will be added to all balances which are 30 or more days past
Finally, pursuant to Section 24-4.6-1-101 of the Indiana Code, Caudill Seed is entitled to post-judgment interest in the amount of eight percent (8%) per annum.
For the reasons outlined above, Caudill Seed's Third Motion for Summary Judgment is
A separate Final Judgment shall enter after the court has reviewed the interest, attorney's fees, and costs submissions.
