The opinion of the court was delivered by: POLLAK
Plaintiff Petron Trading Co., Inc. (Petron) brought this diversity case alleging that defendant Hydrocarbon Trading and Transport Co., Inc. (HTT) received and retained money from various third parties that was actually owed to plaintiff. The amended complaint (hereafter referred to as the complaint) states three causes of action, for conversion, unjust enrichment, and fraudulent misrepresentation. Defendant moved for summary judgment; the parties filed numerous memoranda, argued the motion orally, and then filed two rounds of supplemental submissions. The motion is now ripe for disposition.
The case arises out of the contractual relationships that each of the parties had with a third party, Alpha Petroleum Co. (Alpha). On September 10, 1982, the Office of General Services for the State of New York awarded a contract to Alpha to supply fuel oil to various political subdivisions of New York State through July 31, 1983. Complaint, Ex. B. In the fall of 1982, Alpha entered into a contract with defendant, in which defendant was to meet Alpha's responsibilities under its New York contract by supplying the fuel oil to the designated state recipients. Defendant would send its invoices to Alpha, and Alpha would send invoices to the State. Payments by the State were addressed to Alpha, but were sent to a lockbox at the Bank of New York maintained jointly by Alpha and defendant. A minimum balance of $ 35,000 was kept in the account, and payments in excess of that were forwarded by wire transfer to one of defendant's accounts in Texas. According to an affidavit, attached to defendant's motion, by Roger K. Ego, Chief Accountant for the defendant, defendant "had no knowledge of which invoices sent to Alpha had been paid by Alpha," and "at any one time, HTT would only know the total amount which had been invoiced to Alpha and the total amount received from Alpha." Later in 1982, defendant terminated its contract with Alpha, and made its last delivery of fuel oil on December 3, 1982.
On November 30, 1982, Alpha entered into a contract with plaintiff that was similar to the one it had had with defendant. Complaint, Ex. A. Plaintiff was to supply fuel oil to the state recipients, and to send invoices to Alpha. Alpha would then prepare an invoice for the state, which plaintiff would mail. The state recipients were to send their payments to Alpha at an address which was in fact a lockbox jointly maintained by Alpha and plaintiff at the European/American Bank in New York.
In addition to the lockbox arrangement, a security feature common to both the Alpha/Petron contract and the Alpha/HTT contract, the Alpha/Petron contract included an additional security provision. In paragraph 3(b) of the contract Alpha granted Petron a security interest in Alpha's rights to payment from New York State:
As security for the prompt and unconditional payment for the Oil sold to it hereunder, and the performance of all of Alpha's other obligations hereunder, Alpha hereby grants to Petron a security interest and a general lien upon, and does hereby pledge, assign and transfer to Petron all of its right, title and interest in, to and under Alpha's rights to payment from the State under the Contract, now existing or hereafter arising.
Early in 1983, plaintiff became aware that it was not receiving timely payments in the lockbox. It is not clear when plaintiff began to suspect that payments that should have been sent to its lockbox were in fact being sent to the lockbox maintained by Alpha and defendant. On February 24, 1983, plaintiff sent a letter to Alpha in which plaintiff asked for "a list of payments received by Hydrocarbon Trading that should have been remitted to our lockbox." When it received no reply, plaintiff's President, Charles F. Hurchalla, sent a letter to defendant on March 14, 1983, asking for defendant's assistance in determining whether HTT had received any payments that should have been sent to Petron. Attached to this letter was a copy of the February 24 letter to Alpha. Complaint, Ex. E. There is no record of any written response from defendant to the March 14 letter, but plaintiff asserts that, in a follow-up phone call, defendant's President, Gerald LaBouff, stated that he was unaware of any mistaken payments. Complaint, para. 19. On August 3, plaintiff sent defendant a telex asking defendant to investigate the matter, and defendant replied that it lacked sufficient information to respond. Complaint, Exs. F, G. Plaintiff now alleges that from January, 1983, through August, 1983, "at least $ 542,718.15 [in payments owing to Petron] were mistakenly mailed by several of the state entities" to the lockbox maintained by Alpha and defendant. Complaint, para. 9.
At oral argument, counsel for defendant conceded "for the sake of this argument" that some payments for deliveries made by plaintiff were sent to defendant's lockbox. Tr. at 12. Counsel for defendant maintained, however, that defendant took from the lockbox only the money owed it by Alpha, and that it returned payments in excess of what it was owed to Alpha:
We get to a situation in May of 1983, when all of a sudden, $140,000 gushes through the lockbox into our accounting department. At that point they took a look at what was opened, and they realized that Alpha's account in New York State was pretty much paid up, but Alpha had other accounts with them, that Alpha owed $65,000. We kept that $ 65,000, offset it against the different account, took the remaining $75,000 -- it's actually $ 76,000 -- sent it back to Alpha, said it's overpayment, and instructed the Bank of New York to terminate the lockbox agreement. We don't have a single penny in our possession for which we did not provide fuel oil. I don't think there's any dispute on that today.
Tr. at 9. In his affidavit, Roger Ego, defendant's Chief Accountant, states:
5. HTT received payment from the Alpha lock box in May, 1983. On May 23, 1983, [defendant] received a wire transfer of $98,500.00 from Alpha which resulted in any [sic] overpayment of the monies owed HTT by Alpha. Pursuant to Alpha's instructions, HTT returned the excess of $ 76,261.93 to Alpha on May 24, 1983, and instructed the Bank of New York that the lock box arrangement was to be terminated.
6. Since this litigation was filed, I have reviewed the Alpha account and have been unable to reconcile the account to the penny. It appears that in June, 1983, the Alpha account showed a credit of $93.81. This credit was later removed and I have not yet been able to determine the reason for the appearance or the removal of this credit. Except for this possible credit of $ 93.81, however, HTT has no funds received from Alpha which were not owed it by Alpha.
Plaintiff has not submitted any evidence that contradicts these paragraphs of the affidavit, and defendant argues that Ego's conclusion that defendant had not kept more funds than Alpha owed it is not in dispute. At argument, however, counsel for plaintiff contended that the Ego affidavit was not entitled to any weight. Counsel noted that the documents on which the affiant relied are not attached to the affidavit, and that some of these documents have not been produced through discovery. Tr. at 42.
According to the affidavit of Chief Accountant Ego, defendant: (1) did not receive any post-5/24/83 payments; (2) kept only those pre-5/24/83 payments that covered outstanding debts owed by Alpha; and (3) returned to Alpha any extra payments. As plaintiff noted at oral argument, the Ego affidavit is not accompanied by any supporting documentation. From the statements made at oral argument, it appears that plaintiff has been allowed to review defendant's accounts related to its fuel oil contract, but not other records which may also be relevant. For example, defendant stated at argument that it used lockbox payments to offset a $65,000 debt on a "different account" with Alpha. Tr. at 9. Plaintiff ...