Atalanta Corporation v. Brazil Pacific, Ltd

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 98-50281
Summary Calendar
_______________
SCOTT KOLB,
d/b/a KOLB FOREST PRODUCTS,
and
LORILEE KOLB,
d/b/a KOLB FOREST PRODUCTS,
Plaintiffs-Appellees,
VERSUS
ATALANTA CORPORATION
and
BRAZIL PACIFIC, LTD.,
Defendants,
ATALANTA CORPORATION,
Defendant-Appellant.
_________________________
Appeal from the United States District Court
for the Western District of Texas
(W-97-CV-151)
_________________________
December 23, 1998
Before JOLLY, SMITH, and WIENER, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Atalanta Corporation (“Atalanta”) appeals a summary judgment
in favor of plaintiffs Scott and Lorilee Kolb, doing business as
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
Kolb Forest Products (“Kolb”). Because Atalanta has not raised a
genuine issue of material fact concerning Kolb’s status as a buyer
in the ordinary course of business, and because the district court
did not abuse it discretion in denying Atalanta’s motion to allow
additional discovery, we affirm.
I.
Since approximately 1993, Kolb has purchased and brokered the
purchase of large quantities of partially processed lumber and wood
products from Brazil Pacific Ltd. (“BP”). In these transactions BP
was serving as an agent for Atalanta, and BP’s president, Craig
Rosenlund, even negotiated payment arrangements with Kolb on
Atalanta’s behalf. In all these transactions, however, Kolb
received its actual invoice or commission (depending on whether it
had purchased or brokered the wood in question), and made its
payments (in response to an invoice), directly to or from Atalanta.
Things changed in early 1995, when Rosenlund offered to sell
Kolb some wood from sources other than Atalanta. Kolb agreed, and
over the next two years, Kolb purchased $200,994.30 of such wood.
BP instructed Kolb to pay by sending its checks directly to BP,
instead of Atalanta, and Kolb did so. In November 1996, Atalanta
invoiced Kolb for some of this same wood. Kolb refused to pay and
sought declaratory relief, naming Atalanta and BP as defendants.
Because BP failed to answer, default judgment was entered
against it. Atalanta, however, not only answered but filed a
counterclaim requesting payment of $127,364.84 from Kolb. Kolb
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moved for summary judgment on its request for declaratory relief
and Atalanta’s counterclaim. Atalanta responded by requesting that
the court extend the summary judgment submission date.
Atalanta’s request for extension was based on its need for
additional time to take Rosenlund’s deposition; the court granted
this extension, giving Atalanta an additional thirty days (to
November 13, 1997) to complete discovery. On October 29, 1997,
with leave of court, Kolb filed an amended motion for summary
judgment but did not introduce new evidence. Atalanta responded to
the amended motion on November 3 but also requested a second
extension of the summary judgment submission deadline for the
purpose of deposing Rosenlund. On December 22, Atalanta filed both
a supplemental response to Kolb’s amended motion and its third
request for an extension to depose Rosenlund.
On January 15, 1998, the court denied Atalanta’s motion for
extension and granted Kolb’s amended motion for summary judgment.
Atalanta ultimately did depose Rosenlund, on the untimely date of
March 27, 1998. The court entered final judgment on June 15, 1998.
Atalanta challenges both the summary judgment and the denial of the
motion to extend the summary judgment submission deadline.
II.
A.
We review a summary judgment de novo. International
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263 (5th Cir.
1991). We may affirm only if there is no genuine issue of material
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fact and if, on such undisputed facts, the moving party was
entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c);
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). All
reasonable inferences from the record must be drawn in favor of the
nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986).
B.
The parties correctly identify the dispositive issue in the
summary judgment motion: whether Kolb qualifies as a “buyer in the
ordinary course of business.” Under Texas’s adoption of the
Uniform Commercial Code, “a buyer in ordinary course of business
(Subdivision (9) of Section 1.201) . . . takes free of a security
interest created by his seller even though the security interest is
perfected and even though the buyer knows of its existence.” TEX.
BUS. & COM. ANN. § 9.307(a) (West 1991). Therefore, if Kolb
qualifies as a “buyer in ordinary course of business,” Atalanta
cannot recover against him. Under the referenced subdivision of
§ 1.201, we find the following definition of a “buyer in ordinary
course of business”:
a person who in good faith and without knowledge that the
sale to him is in violation of the ownership rights or
security interest of a third party in the goods buys in
ordinary course from a person in the business of selling
goods of that kind . . . .
TEX. BUS. & COM. ANN. § 1.201(9) (West 1994). We note that the
requirement under § 1.201(9) is “without knowledge,” not “without
notice.” This is an important distinction, because notice depends
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on objective reasonableness under the circumstances, whereas
knowledge for purposes of demonstrating bad faith connotes the
actual subjective knowing of a fact. Cf. Citizens Bridge Co. v.
Guerra, 258 S.W.2d 64, 69-70 (Tex. 1953). As the Code explains,
“[a] person 'knows' or has 'knowledge' of a fact when he has actual
knowledge of it.” TEX. BUS. & COM. ANN. § 1.201(25) (West 1994).
Atalanta argues that summary judgment was inappropriate
because it had raised genuine issues of material fact regarding
Kolb’s knowledge of whether the wood he purchased from BP was
coming from Atalanta or some other source. In support of this
argument, Atalanta points to (1) the lack of an affidavit on the
part of Lorilee Kolb; (2) the purported conclusional nature of
Scott Kolb’s affidavit; and (3) the purported “course of dealing”
among Kolb, BP, and Atalanta, which should have given rise to
Kolb’s knowledge that the wood he was purchasing was Atalanta’s.
Individually and taken together, these assertions do not create a
genuine issue of material fact.
C.
Despite Atalanta's assertions to the contrary, Kolb carries
his initial burden of putting forth the facts upon which judgment
in his favor as a matter of law may be rendered. While Atalanta is
correct in stating that merely conclusional affidavits are not
enough to meet this burden, see Associates Discount Corp. v. Rattan
Chevrolet, Inc., 462 S.W.2d 546, 550 (Tex. 1970), Kolb’s affidavit
is not merely conclusional. He identifies the grounds for his
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belief that the wood he was purchasing was BP’s and for his
attestation that he lacked knowledge to the contrary.
Atalanta argues that the lack of an affidavit from Lorilee
Kolb prevents Kolb from meeting its burden of proof. This issue is
illusory, because the record contained the deposition of Lorilee
Kolb that states, “I didn’t know who Brazil Pacific got the lumber
from, or who was involved.” This unimpeached statement serves to
satisfy Kolb’s burden of proof with regard to Lorilee.
D.
Atalanta points to evidence of a purported “course of dealing”
among Kolb, BP, and Atalanta. Atalanta argues that Kolb’s
deviation from this ordinary course of dealing belies his claim of
good faith lack of knowledge that the wood in question was
Atalanta’s. Our review of the record reveals that Atalanta’s
obsession with the Kolb’s “deviation” is unfounded.
The record demonstrates that Kolb had been in a business
relationship with BP for nearly two years at the time BP informed
him of its new-found source of wood for Kolb. Such an ongoing
relationship inevitably gives rise to a certain degree of trust,
and therefore it is not surprising that Kolb believed Rosenlund’s
representations regarding the source of the wood. Nothing in the
record suggests that the Kolbs were in any way suspicious, or even
had reason to be suspicious, of Rosenlund’s proposal. There was
nothing at all mysterious about BP’s informing Kolb of wood from
another source, or about Kolb’s agreeing to pay for this wood by
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issuing checks directly to BP, rather than to Atalanta.
In light of its long-term relationship with BP, Kolb acted
reasonably and businesslike. The record is devoid of any attendant
circumstances that would lead us to believe that Kolb had a reason
for mistrusting Rosenlund, let alone possessed actual knowledge of
wrongdoing.
Atalanta in turn argues that, at the very least, the
inferences that could be drawn from these circumstances, and that
must be drawn in Atalanta’s favor, preclude summary judgment. This
argument reveals a misunderstanding of summary judgment. As
explained in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986), “[t]he evidence of the nonmovant is to be believed, and all
justifiable inferences are to be drawn in his favor.” (Emphasis
added.). Although we could stretch our imagination to envision a
circumstance in which Atalanta’s facts supported its argument, that
would go beyond our obligation to make all “justifiable”
inferences. Such inferences must be reasonable, and the inferences
Atalanta asks us to make are simply unreasonable. For that reason,
no genuine dispute of material fact has been demonstrated.
III.
Atalanta questions the district court’s refusal to extend the
summary judgment submissions deadline. Atalanta speaks in
provocative terms of an affidavit by Rosenlund that was “incorrect”
because of reliance on “incomplete information provided by
Appellees’ counsel.” A review of the record shows that Atalanta’s
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assertions are far less weighty than one is initially led to
believe. While Rosenlund’s affidavit contained errors, these
errors were trivial and did not bear on a material fact pertinent
to the summary judgment motion. Under such circumstances, the
court did not abuse its discretion in refusing to grant a second
extension. See Leatherman v. Tarrant County Narcotics Intelligence
& Coordination Unit, 28 F.3d 1388, 1395-97 (5th Cir. 1994) (en
banc).
AFFIRMED.
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