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AMERICAN ACCEPTANCE CORP. v. SCOTT HOUS. SYS.

November 22, 1985

AMERICAN ACCEPTANCE CORPORATION, Plaintiff
v.
SCOTT HOUSING SYSTEMS, INC., Defendant



The opinion of the court was delivered by: SHAPIRO

 NORMA L. SHAPIRO, J.

 This action was commenced by plaintiff, American Acceptance Corporation, to recover from defendant, Scott Housing Systems, Inc., as guarantor of promissory notes issued in connection with the financing of its mobile home sales. Jurisdiction is based on diversity of citizenship between the parties; 28 U.S.C. ยง 1332 (1977). Before the court are plaintiff's motion for summary judgment pursuant to Fed.R.Civ.P. 56 and plaintiff's motion for leave to file an amended complaint pursuant to Fed.R.Civ.P. 15. For the reasons set forth, plaintiff's motion for summary judgment will be granted but its motion for leave to file an amended complaint will be denied.

 On or about March 7, 1983, plaintiff entered into a written agreement with defendant whereby plaintiff agreed to extend credit to defendant's dealers to enable them to purchase defendant's mobile homes for resale. The March 7, 1983 Agreement (the "Agreement") did not specify the terms, rates or conditions for plaintiff's extension of credit to defendant's dealers. Instead, the specific arrangements for credit extension were developed by dealer programs and set forth in rate letters. Paragraph 1 of the Agreement provided that these rate letters were incorporated and made a part of the Agreement.

 Paragraph 11 of the Agreement provided that the Agreement should be governed by Pennsylvania law. Defendant has offered no reason why the parties' choice of law should not control. Accordingly, Pennsylvania law is applied in determining the legal consequences of the Agreement.

 Plaintiff and defendant developed a financing program for independent dealers of defendant. The terms, rates and conditions were set forth in a rate letter dated August 1, 1983 (the "Rate Letter"). The first dealer to enroll in the Independent Dealer Program was Luneau Mobile Home Sales, Inc. ("Luneau"), a dealer of defendant in Louisiana.

 Pursuant to the Agreement and the Rate Letter, plaintiff provided Luneau with floor plan financing. Plaintiff received a note and collateral chattel mortgage from Luneau (the "Luneau Paper") to secure Luneau's indebtedness.

 Plaintiff filed the Luneau financing documents with the recorders of mortgages in the parishes where the mortgaged mobile homes were located to perfect its security interest in the collateral. Under Louisiana law, the financing documents should have been recorded with the Department of Public Safety instead of the Recorders of Mortgages in the various parishes. See La. Rev. Stat Ann. 32: 710 (West Supp. 1985). *fn1"

 On February 7, 1984, Luneau signed a promissory note payable to "Bearer" in favor of plaintiff and executed a "Louisiana Sale and Mortgage" that was also signed by plaintiff. The Louisiana Sale and Mortgage recites that plaintiff sold Luneau the mobile homes purchased from defendant but financed by plaintiff; Luneau mortgaged the mobile homes to plaintiff to secure payment of the promissory note.

 In or about March, 1984, Luneau defaulted on its obligations to plaintiff. Plaintiff demanded that defendant purchase the Luneau Paper pursuant to paragraph 6 of the defendant's Agreement with plaintiff (under which defendant guaranteed Luneau's indebtedness to plaintiff), but defendant refused.

 In deciding a motion for summary judgment, the court must determine whether the moving party has carried its burden of establishing that there are no genuine issues of material fact and it is entitled to judgment as a matter of law. See Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir. 1981). All reasonable inferences from the evidentiary materials of record must be drawn in favor of the non-moving party. Small v. Seldows Stationery, 617 F.2d 992, 994 (3d Cir. 1980). Examining the entire record of the instant case in the light most favorable to defendant, defendant has failed to show why plaintiff is not entitled to judgment as a matter of law.

 The defendant raises two defenses to its obligation to plaintiff as guarantor under the Agreement. First, defendant argues that the obligation to purchase the paper was discharged by plaintiff's failure to perfect a security interest in the collateral. The United States District Court for the Western District of Louisiana has not yet determined whether plaintiff's filing the financing documents in the wrong offices impaired the collateral. However, even if plaintiff's mistake did impair the security of the collateral, defendant's obligation has not been discharged.

 Under Pennsylvania common law, a creditor has a duty not to impair security in its control; see First National Consumer Discount Company v. McCrossan, 336 Pa. Super. 541, 486 A.2d 396, 399 (1984). But the rule against the impairment of collateral has limited applicability to a guaranty that is absolute and unconditional. Id. 486 A.2d at 401. "An unconditional guaranty is one whereby the guarantor agrees to pay or perform a contract on default of the principal without limitation." Continental Leasing Corp. v. Lebo, 217 Pa. Super. 356, 272 A.2d 193, 197 (1970). "A creditor who is a party to an unconditional guaranty contract and who additionally holds a security interest, is not under an affirmative duty to preserve the collateral unless the guarantor relies on the collateral." Fireman's Fund Insurance Co. ...


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