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HAMMOND CORP. v. GENERAL ELECTRIC CREDIT CORP.

April 30, 1974

HAMMOND CORPORATION, A DELAWARE CORPORATION, PLAINTIFF,
v.
GENERAL ELECTRIC CREDIT CORPORATION, A NEW YORK CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Will, District Judge.

MEMORANDUM OPINION

The plaintiff, Hammond Corporation (Hammond), a Delaware corporation having its principal place of business in Illinois, brings this diversity action under 28 U.S.C. § 1332, against the General Electric Credit Corporation (GECC), a New York corporation having its principal place of business in Connecticut. The plaintiff has filed a two count complaint seeking compensatory damages of $94,215.75 in the first count, for the alleged breach of several financing contracts, and a declaratory judgment in the second, finding that the plaintiff is not liable to the defendant for a like amount under a separate guaranty agreement. The defendant moves to transfer the instant suit pursuant to 28 U.S.C. § 1404(a) to the federal district court for the District of Massachusetts. For the reasons set forth hereinafter, we find that the defendant's motion must be denied.

I

The defendant entered into one such floor plan financing agreement in March 1970 with Melody Ranch, Inc. (Melody), a Massachusetts corporation which owns several Massachusetts retail outlets which sell new Hammond organs. Under the original floor plan financing agreement between Melody and GECC, the defendant refused to extend credit to more than $150,000 worth of inventory. Accordingly, in order to permit Melody to obtain an additional $100,000 of financing from the defendant, the plaintiff, on September 14, 1972, issued a written guaranty to the defendant, which provided that:

    Hammond Organ Company hereby guarantees payment in
  event of default of payment by the above referenced
  company [Melody] on a floor plan line of credit for
  an amount not to exceed one hundred thousand dollars
  [$100,000] for products manufactured by the Hammond
  Organ Company.

The plaintiff in its guaranty agreement expressly distinguished this additional $100,000 of financing from prior commitments, stating that the guarantee would not extend to the original $150,000 of credit. It also provided that the defendant must conduct inventory inspections every 30 days and notify the plaintiff of any sales made out of trust for which payment was refused within 15 days as conditions precedent for recovery. The term "out of trust" refers to financed sales made without an accounting to GECC.

Based upon the plaintiff's written guaranty, the defendant agreed to expand Melody's line of credit. It was soon discovered, however, that Melody was making substantial sales out of trust in violation of the floor plan agreement. In response to these improprieties the defendant sent Melody a notice of default and indicated that it was terminating the financing agreements on January 11, 1973. Thereafter, on January 15, 1973, the defendant notified the plaintiff that Melody had made $50,224.11 worth of sales out of trust covered by the guaranty agreement and requested reimbursement in that amount.

Subsequent to this January 15, 1973 request for funds, a dispute arose between the parties as to first, the exact amount of sales which Melody made out of trust, and, second, whether the defendant had complied with the conditions necessary to establish liability under the guaranty agreement. On February 6, 1973, the defendant revealed that it had previously erred and that the amount of Melody's out of trust sales was in reality $94,215.75, and it increased its demand upon the plaintiff to that amount. The plaintiff contends that the defendant has been unwilling or unable to document that figure or, for that matter, any other figure. The plaintiff further maintains that the defendant failed to make the necessary inventory checks or to give the plaintiff timely notice of the default as required by the guaranty agreement and therefore is not entitled to the $94,215.75, even if that was the proper amount.

II

Based upon the aforementioned facts, the defendant has offered seven considerations in support of its motion to transfer. These considerations are:

  1. The primary focus of the plaintiff's complaint is
    upon activities which ...

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