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FIRSTAR BANK v. FAUL CHEVROLET

March 11, 2003

FIRSTAR BANK, N.A., PLAINTIFF,
v.
FAUL CHEVROLET, INC., THE FAUL GROUP, INC., AND LAWRENCE J. FAUL, DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve, United States District Judge

MEMORANDUM OPINION AND ORDER

Firstar Bank, N.A. ("Firstar") filed a six-count complaint against Faul Chevrolet, Inc. ("the Dealership"), The Faul Group, Inc., and Lawrence J. Faul (collectively, "Defendants"). On February 24, 2003, the Court entered partial summary judgment in favor of Firstar and against the Dealership with respect to three of the six counts. See Firstar Bank, N.A. v. Faul Chevrolet, Inc., 2003 WL 548365 (N.D. Ill. Feb. 24, 2003). Before the Court now is Defendants' motion for summary judgment on Count I (piercing the corporate veil), Count IV (fraud), Count V (fraudulent conveyance), and Count VI (conversion). For the reasons stated herein, Defendants' motion is granted in part, and denied in part.

LEGAL, STANDARD

Summary judgment is proper when the evidence presented to the Court "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of triable fact exists only if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Pugh v. City of Attica Indiana, 259 F.3d 619, 625 (7th Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)). The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The party that bears the burden of proof on a particular issue, however, may not rest on its pleadings but must affirmatively demonstrate that there is a genuine issue of material fact. Id. at 324, 106 S.Ct. at 2553. A mere scintilla of evidence in support of the non-movant's position is insufficient. See Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. A party will be successful in opposing summary judgment only if it presents "definite, competent evidence to rebut the motion." E.E.O.C v. Sears, Roebuck & Co., 233 F.3d 432, 437 (7th Cir. 2000).

In deciding whether summary judgment is appropriate, the Court "considers the evidentiary record in the light most favorable to the non-moving party, and draws all reasonable inferences in his favor." Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002). Further, the Court accepts the non-moving party's version of any disputed facts so long as it is supported by relevant, admissible evidence. Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996).

FACTUAL BACKGROUND

I. Firstar's Relationship With The Dealership

On March 3, 1999, the Dealership and Firstar executed a dealer agreement. (R. 60-1, Defs.' Statement of Material Facts ¶ 49.) Under the agreement, Firstar had the right to purchase motor vehicle retail installment sale contracts and lease contracts that the Dealership had entered into with its customers. (Id. ¶ 50.) In order to start the process, the Dealership would fax a customer's credit application to Firstar. (Id. ¶ 54.) if and when Firstar agreed to purchase the contract, the Dealership would prepare and deposit a Firstar draft note for the purchase price plus any commission it earned at the time.*fn1 (Id. Ex. W at 49.)

Once the Dealership delivered the vehicle to the customer, it provided Firstar with the final documents. (Id.) After receiving those documents, Firstar created a loan file. (Id.) All told, Firstar purchased approximately $7 million worth of sales contracts and leases from the Dealership. (Id. ¶ 52.)

II. Drafting Irregularities

The Dealership prepared drafts for Firstar's purchases of both sales and lease contracts. Very few drafting problems normally occur with respect to sales contracts. A redrafting of the note related to a sales contract is generally only necessary where the wrong type of draft note was used or where there was a problem with the titling of the car. (R. 60-1, Defs.' Statement of Material Facts ¶ 160.) Errors with drafts relating to lease agreements, however, are more common and occur approximately thirty to forty percent of the time. (Id. ¶ 161.) Lease agreement errors do not always require a redraft. (Id.) The primary reason for redrafting is that there was a mistake in the amount listed on the initial draft. (Id. ¶ 162.) it is unusual to need to write additional drafts or to redraft unless a purchaser like Firstar gives instructions to do so. (Id. ¶ 165.) Firstar's procedure was to always notify the Dealership in writing if they needed to redraft or to write additional drafts. (Id. ¶ 166.) During 1999 and 2000, several irregularities occurred with respect to the Dealership's writing and depositing of Firstar drafts, as detailed below.

A. Kieffer Transaction

On March 24, 1999, Richard Kieffer agreed to lease a motor vehicle from the Dealership. (R. 60-1, Defs.' Statement of Material Facts ¶ 72.) Initially, Firstar declined to purchase the lease. (Id.) Notwithstanding Firstar's decision, the Dealership prepared and deposited a Firstar draft for $29,596.84 two days later. (Id.) Firstar later agreed to purchase the lease. (Id.) The Dealership then prepared and deposited another Firstar draft for $28,421.84. (Id.) This second draft paid for the purchase of the lease. (Id.) The Dealership owes Firstar for the initial draft. (Id.)

B. Caballero Transaction

On July 31, 1999, Marcos Caballero entered into a contract to purchase a motor vehicle with the Dealership. (R. 60-1, Defs.' Statement of Material Facts ¶ 77.) Firstar approved the purchase of the contract on August 11, 1999. (Id.) Two days later, the Dealership prepared and deposited a Firstar draft for $23,782.38. (Id.) On September 9, 1999, the Dealership prepared and deposited another Firstar draft for $21,892.09. (Id.) The second draft paid for the contract entirely. (Id.) The Dealership owes Firstar for the first draft. (Id.)

C. Amato Transaction

On September 3, 1999, Anthony Amato agreed to lease a motor vehicle from the Dealership. (R. 60-1, Defs.' Statement of Material Facts ¶ 69.) Firstar initially declined to purchase the lease. (Id.) The Dealership, nonetheless, prepared and deposited a Firstar draft for $50,203.80 on that day. (Id.) Later, Firstar agreed to purchase the lease. (Id.) On October 14, 1999, the Dealership prepared another Firstar draft for the same amount. (Id.) This second draft paid for the purchase of the lease. Firstar returned the previous draft. (Id.)

D. Iacullo Transaction

On September 14, 1999, Maureen Iacullo signed an agreement to lease a motor vehicle from the Dealership. (R. 60-1, Defs.' Statement of Material Facts ¶ 75.) Although the Dealership had not executed that customer contract, it forwarded the documentation to Firstar. (Id.) Firstar approved the purchase of the lease the next day. (Id.) On September 16, the Dealership prepared and deposited a Firstar draft for $26,221.90 for the lease. (Id.)

On September 20, 1999, the Dealership prepared another lease with different terms for Iacullo. (Id.) It then prepared and deposited. another Firstar draft for $25,232.23. (Id.) This time, lacullo did not execute the lease. (Id.) Firstar eventually returned the initial draft, but the Dealership still owes for the second draft. (Id.)

E. Carison Transaction

On September 18, 1999, Donna Carlson agreed to lease a motor vehicle from the Dealership. Firstar approved of the purchase of the lease. (R. 60-1, Defs.' Statement of Material Facts ¶ 71.) Two days later, the Dealership prepared and deposited a Firstar draft for $30,305.71. (Id.) A week later, the Dealership prepared and deposited another draft for $30,618.05. (Id.) This second draft entirely paid for the lease. (Id.) The previous draft was returned to Firstar and charged to the Dealership's account on the same day that the Dealership deposited the second draft. (Id.)

F. Ciffone Transaction

On September 23, 1999, Gerald Ciffone and Therese Ciffone agreed to lease a motor vehicle from the Dealership. (R. 60-1, Defs.' Statement of Material Facts ¶ 80.) Two days before, Firstar had approved of the purchase of the lease and the Dealership prepared and deposited a Firstar draft for $25,316.71. (Id.) On September 23 and September 27, the Dealership prepared and deposited two Firstar drafts for $22,979.59 each. (Id.) Firstar returned the September 27 draft. (Id.) The September 23 draft paid for the purchase of the lease entirely. (Id.) The parties dispute whether the Dealership owes Firstar for the September 21 draft. (Id.)

G. Hatz Transaction

On November 8, 1999, Gregory Hatz agreed to lease a motor vehicle from the Dealership. (R. 60-1, Defs.' Statement of Material Facts ¶ 78.) Firstar had approved of the lease and the Dealership had prepared and deposited a Firstar, draft for $21,779.63 three days earlier. (Id.) On the day Hatz executed the lease, the Dealership prepared and deposited another draft for the same figure. (Id.) The first draft paid for the purchase of the lease entirely. (Id.) The Dealership owes Firstar for the second draft. (Id.)

H. Shabayev Transaction

On November 8, 1999, Alex Shabayev agreed to lease a motor vehicle from the Dealership. (R. 60-1, Defs.' Statement of Material Facts ¶ 76.) Even before the lease was signed, the Dealership prepared and deposited three drafts. (Id.) Firstar, which initially declined to purchase the lease before later agreeing to its purchase, returned two of the drafts on November 19, 1999. (Id.) The Dealership prepared and deposited a fourth draft on November 8, 1999 for $25,386.76, which entirely paid for the lease. (Id.) The Dealership still owes Firstar $25,848.22 for the third draft. (Id.)

I. Painter Transaction

On November 20, 1999, Scott Painter agreed to lease a motor vehicle from the Dealership. Firstar approved of the purchase of the lease. (R. 60-1, Defs.' Statement of Material Facts ¶ 74.) The Dealership prepared and deposited three drafts, each for $27,346.40. (Id.) One draft alone would have paid for the purchase of the lease. (Id.) The Dealership still owes Firstar for two of the drafts. (Id.)

J. Navarro Transaction

On November 26, 1999, Michelle Navarro agreed to purchase a motor vehicle from the Dealership. (R. 64-1, Pl.'s Statement of Add'l. Material Facts ¶ 178.) The amount to be financed was $18,369.87. (Id.) The Dealership submitted the Navarro deal to at least six financing institutions. (Id. ¶ 179.) Only Mercantile Bank agreed to finance the deal. (Id.)

Firstar declined the deal on November 15, 1999, yet the Dealership wrote a Firstar draft for $18,369.87 on November 26, 1999. (Id.) The dealership still owes Firstar for the improper draft. (Id.) Great Bank declined the deal on November 19, 1999, but the Dealership had written a draft on Great Bank's account on November 18, 1999 for $19,349.87. (Id.) The dealership wrote a draft on Key Bank USA's account for $19,439.00 on November 24, 1999. (Id.) The Mercantile Bank approved the deal on November 15, 1999, but the ...


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