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Day v. Case Credit Corp.

February 22, 2007


The opinion of the court was delivered by: Wm. R. Wilson, Jr. United States District Judge


Pending is Defendant /Counter-Plaintiff Case Credit Corporation's ("Case") Motion for Summary Judgment on the Issue of Unjust Enrichment.*fn1 The Plaintiff /Counter-Defendants Raymond Day, Boren Holtoff, Mike Moreland, and Steve Ross ("the farmers") responded,*fn2 and Defendant/Counter Plaintiff replied.*fn3

I. Background

This case originated in the Desha County Circuit Court, when the farmers filed suit against Ron Kaufman ("Kaufman") and Case for fraud. Case answered and counter-claimed for breach of contract. Later, Kaufman was dismissed from the suit, and the case was removed to federal court based on diversity of citizenship.

The farmers were Kaufman's customers between 1996 and 1998. During this time, they agreed to purchase or lease various items of farm equipment from Kaufman. In each case, the farmers and Kaufman orally negotiated the terms of the lease and purchase agreements.

Kaufman entered into agreements with Case, agreeing to pay off the farm equipment Kaufman sold or leased to the farmers, in exchange for an assignment of rights to Case.

The agreements between Case and Kaufman were unknown to the farmers and did not reflect the terms of their oral contracts with Kaufman. For instance, the purchase agreements misrepresented lease agreements as outright sales, and inflated the sales price of equipment actually purchased by the farmers. In addition, Kaufman assigned Case forged "purchase agreements" that covered equipment that the farmers never possessed or agreed to purchase. Kaufman hid his schemes from Case and the farmers by giving Case phony addresses. Case's monthly statements were mailed to these addresses and never reached the farmers.

Eventually Case discovered Kaufman's activities, and its representatives met with the farmers. According to the farmers' joint affidavit, Case representatives engaged in the following conduct: a Case representative presented the farmers with forms entitled "account verifications" and asked each farmer to sign these forms; after the farmers pointed out that the forms contained erroneous terms, they were assured that the forms would only be used to verify their possession of the equipment; when the farmers met with Case representatives David Harris, Carey Yokum, and Mr. Rosenbaum, they refused to cure the "account verifications," and told the farmers that they would enforce the invalid terms in those documents; these representatives indicated that they were aware of the fraud committed by Kaufman, but refused to settle with the farmers or change the "account verification" terms.*fn4 Case did not provide affidavits or testimony from David Harris, Carey Yokum, or Mr. Rosenbaum contradicting the farmers' version of events. Moreover, in its response to the farmers' Statement of Undisputed Facts, Case admitted its awareness of Kaufman's wrongful conduct, and also admitted that the farmers attempted to settle based on the terms in the oral agreements.*fn5

Because settlement failed, the farmers filed a Complaint alleging that Kaufman was Case's agent and should be accountable for fraud. An Order granting Partial Summary Judgment found no agency relationship between Case and Kaufman.*fn6

Case's second Motion for Partial Summary Judgment on the issue of the farmers liability for breach of contract was granted.*fn7 Specific damages were determined in a later Order,*fn8 and a Judgment*fn9 was entered.

The farmers appealed. The Eighth Circuit affirmed the finding that Case was not an agent of Kaufman, but reversed the finding in favor of Case's breach of contract claim.*fn10 The Court held that the forged "purchase agreements" between Kaufman and the farmers were void and unenforceable, and that Case was not an assignee under any contract, including the oral contracts negotiated by the farmers and Kaufman.*fn11

According to the Eighth Circuit, two issues remain -- will the farmers be unjustly enriched if they are excused from an obligation to Case; and is Case barred from obtaining equitable relief under the "clean-hands doctrine," (the principle that denies remedy to a guilty party).*fn12

Case contends that the farmers' possession of farm equipment for the last six years, without making rental or installment payments, unjustly enriched them. Case further argues that unjust enrichment is an equitable remedy and should be decided by a court, not a jury. The farmers contend that Case has "unclean hands" and is not entitled to equitable relief. The farmers further contend that they did not act unjustly and had ...

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