Vend-A-Matic, Inc. v. Foothill Capital Corp. (In re S & S Industries)

Citations: 37 B.R. 838; 1984 Bankr. LEXIS 6192Docket: Bankruptcy Nos. 81-02303-B, 81-02304-B, 81-02305-B, 81-02306-B and 81-02307-B; Adversary No. 83-0332-B

Court: District Court, E.D. Michigan; February 26, 1984; Federal District Court

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On April 20, 1981, Detroit Plastic Products filed for Chapter 11 bankruptcy, which was converted to Chapter 7 on April 29, 1981. At the time of conversion, the debtor owed Foothill Capital Corporation approximately $4.8 million, secured by all its assets. Due to the secured debt exceeding the fair market value of the assets, the trustee abandoned these assets to Foothill, but stipulated that any sale offer from Foothill be subject to court approval to maximize potential equity for unsecured creditors. 

In November 1982, Foothill sold the assets to Venture Industries Corporation with court approval. The bill of sale listed the conveyed property but omitted eleven vending machines owned by Vend-A-Matic, Inc., which had leased them to the debtor. Vend-A-Matic had been aware of the bankruptcy proceedings and sought to retrieve the machines, but did not receive notification of the abandonment. After the sale, Venture took possession of the machines, repaired five of them at a significant cost, and sought to clarify ownership. Vend-A-Matic filed a conversion complaint against the trustee, Foothill, and Venture, leading to the dismissal of the trustee from the action. Venture then cross-claimed against Foothill for breach of warranty of title, arguing that despite the vending machines not being listed in the bill of sale, parol evidence could establish their intended conveyance under Michigan’s Uniform Commercial Code (M.C.L. 440.2202). This code allows consideration of additional evidence unless the written agreement is deemed complete and exclusive. Venture had prepared a detailed inventory of the property, documented in an accompanying Exhibit “A.”

The Exhibit includes detailed inventories of the property involved in the sale: eight pages of machinery and equipment, six pages of office furniture, ten pages of miscellaneous machines, and a seven-page inventory list. Under the miscellaneous category, it specifically enumerates various additional items, including steel baskets, tote bins, shelves, and tools. The purchase encompasses all existing auxiliary equipment necessary for an Injection Mold Manufacturing Operation, such as chillers and water towers, along with a catch-all provision covering all machinery and equipment physically present on the premises as of October 29, 1982, regardless of whether they are explicitly listed in the Exhibit.

An Addendum details four pages of equipment excluded from the sale. Venture's intent to acquire all machinery used in the debtor's manufacturing process is clear, as non-manufacturing assets were explicitly listed when included. The court determined that the bill of sale constituted a complete and exclusive listing of property to be conveyed, prohibiting Venture from introducing parol evidence to modify the agreement, although it allowed record-keeping evidence. Testimony was found to be conflicting and insufficient to establish that the vending machines were included in the sale.

Ultimately, the court concluded that Foothill did not intend to convey the vending machines to Venture, resulting in no cause of action against Foothill. The remaining issue is whether Vend-A-Matic, the vending machines' owner, must reimburse Venture for repair costs or increased market value. Venture's claim relies on quasi-contract principles, arguing for restitution due to unjust enrichment. However, the court noted that unjust enrichment does not automatically arise, and Venture acknowledged a pre-existing ownership dispute over the machines, undermining its claim for compensation.

Venture's failure to include the vending machines in the sale indicates that it did not intend for them to be part of the transaction, despite having an exhaustive list of assets. As the machines belonged to a defunct debtor, Venture, having acquired the assets through a bankruptcy court hearing, should have known about the ownership issues. It could have easily clarified ownership by consulting the trustee or debtor or seeking a court ruling but chose not to. The services Venture performed were voluntary and unsolicited by Vend-A-Matic, negating the claim for unjust enrichment as one cannot be unjustly enriched by involuntary benefits. Legal precedents establish that quasi-contractual relief is unavailable when services are rendered for self-gain without an expectation of payment from the recipient. Allowing claims for remuneration in such circumstances would incentivize carelessness in dealing with others' property, as it would diminish the incentive to be vigilant about ownership rights. Venture's decision to keep and repair the vending machines was a calculated risk; having lost this gamble, it cannot now seek compensation. An appropriate order will be submitted.