The opinion of the court was delivered by: MATHEW KENNELLY, District Judge
MEMORANDUM OPINION AND ORDER
Engel Machinery Inc. has sued Wells Fargo Equipment Finance, Inc. for
breach of contract. Engel claims it is the third-party beneficiary of an
equipment financing agreement between Wells Fargo and Style Master, Inc.
under which Wells Fargo agreed to finance Style Master's purchase of five
injection molding machines from Engel. Engel delivered three of the
machines to Style Master, which filed for bankruptcy, and it claims Wells
Fargo owes it payment for those units.
Wells Fargo has moved for summary judgment, arguing that no enforceable
contract exists and that even if a contract exists, Engel is not entitled
to recover because it did meet the contract conditions for obtaining
financing. Engel responds that an enforceable contract exists between it
and Wells Fargo, and that even if the contract were not properly
executed, the doctrine of promissory estoppel requires Wells Fargo to pay
Engel for the delivered machines. For the reasons stated below, the Court
grants Wells Fargo's motion for summary judgment on Count 2
but denies it on Counts 1 and 3.
In the summer of 2001, Style Master negotiated with Engel to acquire
five injection molding machines with Wells Fargo to finance the
acquisition. On September 18, 2001, Wells Fargo provided Style Master
with a "lease purchase proposal" in which Wells Fargo set forth the terms
of its proposed financing arrangement. The proposal contemplated that
Wells Fargo would purchase three 1250 ton and two 800 ton machines and
would lease them to Style Master pursuant to specified terms. Later in
September, Wells Fargo submitted to Style Master a proposed "master
lease" and related documents. These included an "agreement of sale"
pursuant to which title to the machines would pass to Style Master after
it paid off the lease in full, and "pay proceeds" letters directing Wells
Fargo to disburse payment to Engel. Engel signed the master lease, but
there is no evidence that Wells Fargo ever signed it.
In addition, Engel and Wells Fargo negotiated a "remarketing agreement"
under which Engel agreed to attempt to resell or re-lease the machines if
Style Master defaulted on its payment obligations to Wells Fargo, and two
agreements (referred to by the parties as "holdback agreements") which
entitled Wells Fargo to hold back a portion of the purchase price as
security for Style Master's performance during the first twelve months of
the lease. The remarketing agreement recited that Wells Fargo "has
entered into or has agreed to enter into" a master lease with Style
Master "pursuant to which [Wells Fargo] will finance the acquisition" of
the machines. The holdback agreements stated that to induce Wells Fargo
to finance the equipment, Engel agreed that a payment consisting of 90%
of the total purchase price would be due from Wells Fargo on commencement
of the lease, in return for transfer of title to Wells Fargo, and that
a contingent payment of the remaining 10% would be due twelve
months later so long as Style Master had made the required payments under
the master lease. This amounted to a "holdback" of part of the purchase
price as a form of security for Style Master's satisfaction of its
obligations to Wells Fargo under the proposed lease. The remarketing and
holdback agreements were both signed by Engel and Wells Fargo, though
Wells Fargo disputes whether the person who purportedly signed on its
behalf had the authority to do so.
On December 7, 2001, Wells Fargo provided Engel with two signed letters
advising that Wells Fargo "has provided commitment[s]" to Style Master
for $1,794,890.40 (for three 1250 ton machines) and $890,168.00 (for two
800 ton machines), and stating that Wells Fargo's disbursement of funds
to Engel was subject to the terms and conditions of Wells Fargo's
commitment to Style Master, and was also subject to the delivery and
installation of the machines and their acceptance by Style Master. The
letters stated that the commitments would expire on December 26 and
December 28, 2001, respectively.
Two 750 ton machines (not 800 ton machines) were delivered by Engel to
Style Master on December 14 and 17, respectively. It is not clear exactly
when the installation took place; however, the machines were not accepted
by Style Master until January 14 and 31, 2002. A single 1250 ton machine
was delivered by Engel to Style Master on December 21, 2001; it was
installed and accepted by Style Master on February 4, 2002. The other two
1250 ton machines were never delivered. There is no evidence that Engel
or Style Master obtained a written extension of Wells Fargo's financing
commitments, which as set forth in its December 7, 2001 letters required
the installation and acceptance of three 1250 ton machines by December 26
and two 800 ton machines by December 28.
In mid-January 2002, Wells Fargo advised that it would not pay for any
of the machines. Wells Fargo's in-house counsel sent Engel's outside
counsel a letter on February 4, 2002 stating that the commitment had
expired before the machines had been installed and that Wells Fargo had
no obligation to pay for them. In March 2002, Style Master petitioned for
relief under Chapter 11 of the Bankruptcy Code.
Engel commenced this action against Wells Fargo in February 2003. Its
complaint contains three claims. Count 1 is a claim for breach of the
remarketing and holdback agreements, which Engel alleges amounted to a
promise by Wells Fargo to Engel to finance the purchase of the machines.
Count 2 is a claim for breach of the purported master lease between Wells
Fargo and Style Master, of which Engel claims to be a third part
beneficiary. Count 3 is a claim of promissory estoppel. Wells Fargo has
moved for summary judgment on all three claims.
Summary judgment is proper when "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if
any, show 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). The Court must look at the evidence "as a jury might,
construing the record in the light most favorable to the nonmovant and
avoiding the temptation to decide which party's version of the facts is
more likely true." Payne v. Pauley, 337 F.3d 767, 770
(7th Cir. 2003). The Court's "function is not to weigh the
evidence but merely to determine if `there is a genuine issue for
trial.'" Bennett v. Roberts, 295 F.3d 687, 694 (7th Cir. 2002)
When, as in this case, "jurisdiction is based on diversity of
citizenship, the substantive rights of the parties are governed by state
law." Help at Home, Inc. v. Medical Capital, LLC, 260 F.3d 748,
753 (7th Cir. 2001) (citing Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938)). Wells Fargo initially argued that it was entitled
to summary judgment on Count 2, Engel's claim for breach of the master
lease, on the grounds that the agreement had not been signed by Wells
Fargo and thus was unenforceable under the Illinois Credit Agreements
Act ("ICAA"). See Def.'s Mot. at 4 ("Thus, this statute
precludes Engel from asserting any claims based on agreements between
Wells Fargo and Style Master, to which Engel was not a party, i.e.,
Engel's third party beneficiary claim in Count II of the Complaint.").
Though Wells ...