Court Opinion

ID: 16690
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:56:45+00
Date Added: 2024-06-11T11:49:34.177913
License: Public Domain

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should not be published and is not precedent except under the limited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

                                     3
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

                                  4
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

                                    5
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

                                          6
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

                                          7
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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