The opinion of the court was delivered by: JAMES B. MORAN
This is one of several cases that have come before the court involving Georgia-Pacific Corporation (Georgia-Pacific), First Wisconsin Financial Corporation (First Wisconsin), DuPage Lumber and Home Improvement Center Company, Inc. (DuPage), West DuPage Building Corporation (West DuPage), James Green (Green), and Merle Smith (Smith).
In its complaint, plaintiff Georgia-Pacific alleges that First Wisconsin, the senior secured lender to DuPage, improperly disposed of collateral and breached the subordination agreement entered into by Georgia-Pacific and First Wisconsin.
First Wisconsin now moves for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated below, defendant's motion is granted.
Federal subject matter jurisdiction is based on 28 U.S.C. § 1332, the parties being of diverse citizenship and the amount in controversy exceeding $ 50,000.
Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Renovitch v. Kaufman, 905 F.2d 1040, 1044 (7th Cir. 1990). The movant has the burden of demonstrating lack of a genuine issue of material fact. Celotex Corporation v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). In assessing a motion for summary judgment we examine the "pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits," resolving all doubts in favor of the non-movant. Fed.R.Civ.P. 56(c). For that purpose we are "not required to draw every conceivable inference from the record -- only those inferences that are reasonable," in favor of the nonmovant. Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991). The facts recited reflect the above standard. Because the facts have been stated in detail in earlier opinions, we offer only a brief recitation of the facts here.
Beginning in the 1970s and continuing into the early 1980s, DuPage purchased substantial amounts of lumber and other building products from Georgia-Pacific. On August 1, 1977, DuPage and Georgia-Pacific entered into a security agreement wherein DuPage granted Georgia-Pacific a security interest in DuPage's inventory and accounts receivable.
On or about October 27, 1978, DuPage granted First Wisconsin a security interest in all of its existing and future accounts receivable and inventory. This agreement provided that
without [First Wisconsin's] written consent, [DuPage Lumber] shall not permit the aggregate amount of Obligations at any time outstanding to exceed the lesser of the total sum of $ 7,000,000.00 or:
(a) 70% of the amount owing on Qualified Accounts (including payments on Qualified Accounts which are in the process of collection by the Corporation and for which the [DuPage Lumber] has not received credit); plus
(b) the lesser of the sum $ 2,400,000.00 or 60% of Qualified Inventory at cost or wholesale market value, whichever is lower, the percent advanced on Qualified Inventory to be reduced xxxxxxx% per month during the term of this agreement.
In addition to other required payments, [DuPage Lumber] shall pay [First Wisconsin] in reduction of the Obligations such sums as may be necessary from time to time to maintain the foregoing ratios.
In order to induce First Wisconsin to make and renew loans, and in order to extend further credit to DuPage, Georgia-Pacific entered into a subordination agreement with First Wisconsin in February 1979. Under the agreement Georgia-Pacific agreed to subordinate any security interest it then held or thereafter acquired in DuPage's inventory, accounts receivable and proceeds of the inventory and accounts receivable. In addition, Georgia-Pacific authorized First Wisconsin to "collect, receive, enforce and accept any and all sums" becoming due on the property. Nevertheless, Georgia-Pacific remained free to demand payment of DuPage's debts in the ordinary course of business.
According to Georgia-Pacific, First Wisconsin loaned funds to DuPage in excess of the terms of the loan agreement between DuPage and First Wisconsin. In February 1982, First Wisconsin loaned West DuPage $ 500,000 and amended the mortgage on the West DuPage property in order to secure West DuPage's obligation to First Wisconsin. West DuPage then loaned the proceeds of this loan to DuPage. First Wisconsin did not inform Georgia-Pacific of the additional advances to DuPage or of the $ 500,000 loan to West DuPage.
After making several attempts to collect amounts owed from DuPage, Georgia-Pacific sent notices of claims to DuPage's account debtors in July 1982. On or about July 20, 1982, First Wisconsin sent DuPage notice of default under the loan agreement demanding payment of the $ 1,200,000 loan and surrender of DuPage's accounts receivable and inventory.
On July 27, 1982, Georgia-Pacific notified First Wisconsin, pursuant to terms of the subordination agreement, that it was ...