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Corrugated Paper Products Inc. v. Longview Fibre Co.

decided: January 31, 1989.


Appeal from the United States District Court for the Northern District of Indiana, South Bend Division. No. S85-200--Robert L. Miller, Jr., Judge.

Cummings and Cudahy, Circuit Judges, and Pell, Senior Circuit Judge.

Author: Cudahy

CUDAHY, Circuit Judge.

Plaintiff-appellant, Corrugated Paper Products, Inc. ("Corrugated"), appeals the grant of summary judgment in favor of the defendant-appellee, Longview Fibre Company ("Longview"). Corrugated's complaint in this diversity case alleges that it is a third-party beneficiary of a contract for the sale of certain used industrial equipment entered into by Longview and Atlas Corrugated Machinery, Inc. ("Atlas"). Since we agree with the district court that Corrugated has not put forward any facts which would entitle it to third-party beneficiary status, we affirm.


Corrugated and Longview are manufacturers of cardboard and other paper products. Atlas buys and sells used machinery employed in the paper products industry. During the latter part of 1983, Corrugated informed Atlas that it was interested in purchasing a used "cut-off" knife for its Mishawaka, Indiana facility. On February 17, 1984, Atlas received a letter from Longview indicating that Longview had a used cut-off knife for sale. Shortly thereafter, Atlas employee Berneice Gurley contacted Longview's Russell Reeve and indicated that Atlas was interested in purchasing the knife. During this phone conversation, Gurley told Reeve that Atlas had a prospective buyer for the equipment. According to their depositions, Reeve asked Gurley for assurances that Atlas would purchase the equipment "for its own account," whatever the outcome of Atlas' further business dealings with the (unidentified) subsequent purchaser. Gurley assured Reeve that Atlas would acquire the knife irrespective of the status of the further sale.

Between February 22 and March 30, 1984, Corrugated employees spoke directly with employees at Longview regarding the knife's technical specifications, performance and condition. On April 3, 1984, a Corrugated representative visited Longview's plant in Cedar Rapids, Iowa, to inspect the knife in operation. As a result of this visit, on April 10, 1984, Corrugated and Atlas entered into a written agreement for the purchase of the knife. Corrugated sent Atlas a deposit of $5,000 on May 1, 1984. Alter cashing the deposit check, Atlas sent a written purchase order for the knife to Longview on May 17, 1984, together with its own check in the amount of $5,000. The purchase order stated that the knife would be shipped F.O.B. to Corrugated's Mishawaka plant. The purchase order also provided that the knife would be shipped "approximately June 15, 1984 upon installation of new replacement machinery." Between the Corrugated visit to Cedar Rapids and the execution of the purchase order, Gurley again assured Reeve that Atlas was purchasing the knife for itself and that the deal was not contingent on Atlas' success in reselling the equipment.

During the summer of 1984, Corrugated contacted Longview on several occasions to determine the shipping date of the equipment. Longview informed Corrugated that shipping had been delayed due to Longview's difficulties in securing satisfactory replacement machinery. On September 10, 1984, Atlas sent an amended purchase order to Longview, directing that the equipment be sent to a different buyer. Longview complied with Atlas' request.*fn1 On September 28, Corrugated learned from Longview employees that the knife would not be shipped to Corrugated.

On March 26, 1985, Corrugated filed suit against both Atlas and Longview, alleging breach of contract. Summary judgment was granted to Corrugated against Atlas, but this judgment is apparently uncollectible. The district court also entered summary judgment in favor of Longview, finding that Corrugated was not a third-party beneficiary of the Atlas-Longview agreement. Corrugated appeals from the summary judgment in favor of Longview.


In reviewing the district court's grant of summary judgment, we must examine the entire record to determine whether a genuine issue of material fact exists requiring a trial on the merits, construing all facts in the light most favorable to the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-52, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Scherr v. Woodland Community Consol. Dist. No. 50, 867 F.2d 974 (7th Cir. 1988). However, if the nonmovant bears the burden of proof on an issue, it "may not simply rest on its pleadings, but must affirmatively demonstrate, by specific factual showings, that there is a genuine issue of material fact requiring trial." First Nat'l Bank of Cicero v. Lewco Securities Corp., 860 F.2d 1407, 1411 (7th Cir. 1988); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-26, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Since Corrugated bears the burden of demonstrating it is a third-party beneficiary, we must determine whether Corrugated has identified specific facts to support the contention that it is entitled to enforce the Atlas-Longview contract.

Under New Jersey law,*fn2 the intent of the contracting parties when executing the contract is the controlling factor in determining whether enforceable rights have been created in a third party. The New Jersey Supreme Court has only recently stated that

[the] principle that determines the existence of a third party beneficiary status focuses on whether the parties to the contract intended others to benefit from the existence of the contract, or whether the benefit so derived arises merely as an unintended incident of the agreement.

In Brooklawn v. Brooklawn Housing Corp., 124 N.J.L. 73, 11 A.2d 83 (E. & A. 1940), the Court of Errors and ...

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