Marion T LLC v. Formall Inc
Filing
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OPINION AND ORDER DENYING 22 MOTION for Summary Judgment by Plaintiff Marion T LLC. Telephonic Scheduling Conference set for 12/27/2013 at 09:00 AM in US District Court - Fort Wayne before Magistrate Judge Roger B Cosbey. Court will initiate call. Signed by Magistrate Judge Roger B Cosbey on 12/5/13. (cer)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
MARION T, LLC,
Plaintiff,
v.
THERMOFORMING MACHINERY
& EQUIPMENT, INC.,
Defendant.
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Cause No. 1:12-CV-456
OPINION AND ORDER
Before the Court in this declaratory judgment action is Plaintiff Marion T, LLC’s
(“Marion”) Motion for Summary Judgment against Defendant Thermoforming Machinery &
Equipment, Inc. (“Thermoforming”), regarding the ownership of certain industrial equipment.
(Docket # 22.) Marion argues that the executed contract between the parties clearly and
unambiguously sets forth the ownership rights of each party, and therefore, the inquiry is limited
to the terms of the contract. (Docket # 23.) In response, Thermoforming argues that both parties
mistakenly executed an incorrect draft of the contract, and therefore, the inquiry must include
extrinsic evidence, which it contends demonstrates a mutual mistake. (Docket # 26.) Because
there is a material dispute of fact on whether the executed contract reflects the actual intent of
the parties, Marion’s motion will be DENIED.
I. FACTUAL AND PROCEDURAL BACKGROUND
Although ownership of the industrial equipment in dispute has resulted in multiple
lawsuits, the underlying facts are straightforward. Marion owns an industrial manufacturing
storage facility at which the equipment in dispute was housed. (Lee Aff. ¶ 2.) At one point the
equipment was owned by non-party Trienda, but when Trienda failed to pay its rent, Marion
entered into a series of contracts with Thermoforming to purchase the equipment. (Kruschke
Dec. ¶¶ 5-9.)
In May 2012, the parties entered into a final agreement for the disposition of certain
equipment; Thermoforming would purchase the equipment listed in the contract and Marion
would own whatever was not listed. (Kruschke Dec. ¶ 9.) According to Marion, the parties
executed a clear and unambiguous contract listing the equipment Thermoforming would
purchase. Thermoforming then proceeded to violate the contract by removing and selling
equipment not listed in the contract. (Lee Aff. ¶¶ 6-7.)
According to Thermoforming, however, three drafts of the May 2012 contract were
created–each listing different equipment–and while the parties executed the first draft, this was
inadvertent as both parties believed they were signing the third draft. (Kruschke Dec. ¶ 16.)
Thermoforming explains that the parties exchanged the three drafts of the May 2012 contract and
that its President, Donald Kruschke, repeatedly communicated with Marion’s manager, Lester
Lee, on the contract’s terms. (Kruschke Dec. ¶¶ 11-15.) After reading the third draft and
discussing the phrasing of several terms with Lee, Kruschke asked an assistant to print it out.
(Kruschke Dec. ¶¶ 15-16.) The assistant mistakenly printed out the first draft and Kruschke
proceeded to make some final modifications and sign this draft without realizing it was the
wrong version. (Kruschke Dec. ¶ 16.)
In support of its position, Thermoforming proffers emails between the parties showing
that they exchanged the three drafts, that the third draft was the result of edits made to the earlier
drafts, and that the third draft includes the equipment that Marion alleges Thermoforming
improperly removed. (Dft.’s Resp. in Opp’n to Pl.’s Mot. for Summ. J. Exs. C-E.)
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Thermoforming also puts forth a declaration from Kruschke in which he states that prior to
executing the May 2012 contract, the parties visited Marion’s facility, determined which
equipment Thermoforming would purchase, and that this equipment is listed in the third draft.
(Kruschke Dec. ¶ 10.) Finally, Kruschke states that after the contract was executed, Marion
supervised the removal and resale of equipment listed in the third but not the first contract.
(Kruschke Dec. ¶ 17.)
II. LEGAL STANDARD
Summary judgment is proper when the pleadings, affidavits, and discovery and
disclosure materials on file show there is no genuine issue as to any material fact. Fed. R. Civ.
P. 56(c). A genuine issue of material facts exists if the “evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Ballance v. City of Springfield, 424 F.3d 614,
617 (7th Cir. 2005) (citation omitted). When ruling on a summary judgment motion, a court
“may not make credibility determinations, weigh the evidence, or decide which inferences to
draw from the facts.” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003). Instead, the court
determines whether the evidentiary record shows a material dispute of fact requiring a trial. Id.
If the evidence is such that a reasonable factfinder could return a verdict in favor of the
nonmoving party, summary judgment may not be granted. Id. A court must construe the record
in the light most favorable to the nonmovant; however, the nonmovant may not rest on the
pleadings, but must instead affirmatively demonstrate there is a genuine issue of material fact for
trial. Bratton v. Roadway Package System, Inc., 77 F.3d 168, 173 (7th Cir. 1996).
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III. ANALYSIS
As a preliminary matter, the parties dispute whether Indiana or Ohio law applies to this
case. Marion contends that Indiana law applies as the case was brought pursuant to an Indiana
statute. Thermoforming contends that Ohio law applies because it is an Ohio corporation and
because it obtained service first over Marion in Ohio in a case covering the same contract.
A federal court sitting in diversity applies the choice of law rules of the forum in which it
sits. West Bend Mut. Ins. Co. v. Arbor Homes LLC, 703 F.3d 1092, 1095 (7th Cir. 2013). Under
Indiana law, “before entangling itself in messy issues of conflict of laws a court ought to satisfy
itself that there actually is a difference between the relevant laws of the different states.” Barron
v. Ford Motor Co. of Can. Ltd., 965 F.2d 195, 197 (7th Cir. 1992). “If the purposes and policies
of two potential rules are the same, the forum should apply the forum law.” Hartford Acc. &
Indem. Co. v. Dana Corp., 690 N.E.2d 285, 291 (Ind. Ct. App. 1997); see Int’l Adm’rs v. Life
Ins. Co., 753 F.2d 1373, 1376 n.4 (7th Cir. 1985).
The Court’s analysis reveals there are no differences between the relevant Indiana and
Ohio laws that would affect the outcome of this litigation. In each forum, a party may seek to
reform a contract entered into under a mutual mistake of fact, and the party seeking reformation
may introduce parol evidence to reflect what the true intentions of the party were. Estate of
Reasor v. Putnam Cnty., 635 N.E.2d 153, 160 (Ind. 1994); Rylee Ltd. v. Izzard Family P’ship,
897 N.E.2d 208, 211 (Ohio Ct. App. 2008). Moreover, in both forums a mutual mistake can be
found where the parties to the contract reach an agreement but fail to correctly reduce that
agreement to writing, the party seeking reformation must prove by clear and convincing
evidence that the mistake was mutual, and the mistake must be material or go to the essence of
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the contract. See ArcelorMittal Cleveland, Inc. v. Jewell Coke Co., L.P., 750 F. Supp. 2d 839,
845-47 (N.D. Ohio 2010); Ball v. Versar, 454 F. Supp. 2d 783, 803-05 (S.D. Ind. 2006). Thus,
since there is no difference between Indiana and Ohio jurisprudence, the Court will apply this
forum’s law. Schaefer v. Newton, 868 F. Supp. 246, 252 (S.D. Ind. 1994).
Turning to the merits, the parties dispute the legal premise from which the contract can
be interpreted. Marion argues that under Indiana law, “[w]hen the terms of a contract are clear
and unambiguous, those terms are conclusive, and the court will not construe the contract or look
at extrinsic evidence but rather will simply apply the contract provisions.” John M. Floyd &
Assoc. Inc. v. Star Fin. Bank, 489 F.3d 852, 854 (7th Cir. 2007) (quoting Forty-One Assoc., LLC
v. Bluefield Assoc., L.P., 809 N.E.2d 422, 427 (Ind. Ct. App. 2004)). Marion asserts that because
the executed contract (the first draft) is clear and unambiguous, its provisions are determinative.
Thermoforming, however, correctly argues that “parol evidence is always admissible” to
demonstrate mutual mistake. Franklin v. White, 493 N.E.2d 161, 165 (Ind. 1986). Under
Indiana law, “[w]here both parties share a common assumption about a vital fact upon which
they based their bargain, and that assumption is false, the transaction may be avoided if because
of the mistake a quite different exchange of values occurs from the exchange of values
contemplated by the parties.” Perfect v. McAndrew, 798 N.E.2d 470, 478 (Ind. Ct. App. 2003)
(citation omitted). Further, the party seeking to avoid the transaction must establish the true
intentions of the parties by clear and convincing evidence. Meyer v. Marine Builders, Inc., 797
N.E.2d 760, 771 (Ind. Ct. App. 2003) (citing Estate of Reasor, 635 N.E.2d at 160).
Thermoforming’s evidence suggests that prior to executing the May 2012 contract, the
parties met at Marion’s storage facility and purportedly came to an agreement about which
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equipment Thermoforming would purchase. According to Thermoforming, this agreement is
reflected in the third but not the first agreement. Thermoforming’s theory of mutual mistake also
has some support in the e-mail correspondences between the parties, which demonstrates there
were multiple drafts of the contract, and that the third draft was composed from edits of the first
and second drafts. Additionally, there is evidence suggesting that Marion’s conduct after the
contract was executed–supervising the removal of equipment listed only in the third draft–is
consistent with Thermoforming’s view of the case.
Marion moved for summary judgment solely on the premise that the contract is clear and
unambiguous, and therefore, the Court cannot look beyond the four corners of that instrument to
interpret the true intent of the parties. Marion loses on that argument because Thermoforming
has introduced evidence of a mutual mistake, making parol evidence admissible. And although
Thermoforming has introduced evidence of mutual mistake and argued that the executed contract
should be reformed, the factual record is not adequately developed such that the Court can
determine which draft reflects the true intent of the parties. See Irvin v. Kaczmaryn, 913 F.
Supp. 1190, 1200 (N.D. Ill. 1996) (denying summary judgment because of an “inadequately
developed factual record” and because nonmovant’s evidence was not rebutted by the movant);
Cobraco Mfg. Co., Inc. v. Valley View Specialties Co., No. 90 C 0284, 1992 WL 77672, at *6
(N.D. Ill. Apr. 6, 1992) (denying motion for summary judgment because “summary judgment is
inappropriate when questions of law turn in significant part on the underlying factual record,
which the parties have not adequately developed”). Accordingly, further factual development of
the record is necessary before the Court can determine which draft of the contract controls.
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IV. CONCLUSION
For the foregoing reasons, the Court DENIES Marion’s motion for summary judgment.
(Docket # 22.) The Court sets the matter for a telephonic status scheduling conference for
December 27, 2013, at 9:00 A.M. The Court will initiate the call.
SO ORDERED.
Enter for this 5th day of December, 2013.
/s/ Roger B. Cosbey
ROGER B. COSBEY
United States Magistrate Judge
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