This action comes before the court on a Motion for Summary Judgment filed by Venture Industries Corporation (Venture).
This case was removed from the Macomb County Circuit Court to the United States Bankruptcy Court for the Eastern District of Michigan under the provisions of 28 U.S.C. § 1452(a). On a Motion to Dismiss, Abstain or Remand, The Honorable Walter Shapiro ruled that the Bankruptcy Court had subject matter jurisdiction under 28 U.S.C. §§ 1334(b) and 157(b)(2). He further concluded that abstention was not appropriate. On July 27, 1998, The Honorable Paul V. Gadola of the United States District Court for the Eastern District of Michigan denied a Motion for Leave to Appeal. The case was then transferred on a Motion for Change of Venue to the United States Bankruptcy Court for the Western District of Michigan where the Debtor’s base bankruptcy case was pending. Accordingly, we are authorized to enter final judgment subject to the appeal rights afforded by 28 U.S.C. § 158 and Fed.R.Bank.P. 8001 et seq.
FACTS
On March 25, 1985, Car-Tec, Inc. (Car-Tee) and AutoStyle Plastics, Inc. formerly C & F Stamping Company (AutoStyle) entered into an agreement whereby Car-Tec would be the exclusive sales agent in the United States and Canada for vehicle component parts manufactured by AutoStyle. Among various other terms, the agreement provided that after termination of the contract, Auto-Style would continue to pay Car-Tec its full commissions for any product so long as it continued to be sold to any customer. 1
The vehicle component sales programs procured by Car-Tec for AutoStyle were documented by blanket purchase orders giving AutoStyle the right to manufacture and sell the components for the entire model runs of General Motors’ (GM) and other manufacturer’s vehicles for which they were supplied. These were called “life of the part” contracts.
By early 1996, AutoStyle was having serious financial difficulties. On May 23, 1996, AutoStyle announced to its employees that it would be ceasing operations. AutoStyle’s assets included accounts receivable owed by GM for parts that had already been produced. In fact, approximately 80-85% of AutoStyle’s work was done for GM. If Au-toStyle were to close, however, GM would be faced with a parts shortage that could have led to a plant shut down which in turn would have cost GM anywhere from a half a million to a million dollars per day. Because GM’s practice was to offset any damages suffered from a parts shortage against the amounts owed the supplier, AutoStyle faced the possibility that it would never collect its receivables.
In mid-May, Venture, a designer, supplier and manufacturer .of automotive components, contacted AutoStyle about leasing some of AutoStyle’s equipment. Beginning on May 28, 1996, negotiations took place not only with regard to Venture leasing AutoStyle’s equipment, but to it acquiring substantially all AutoStyle’s operating assets.
These negotiations culminated on June 2, 1996, with the execution of an “Agreement of Venture Industries Corporation and Affiliates to Lease and Sublease the Operating Assets of AutoStyle” (the Lease Agreement). The Lease Agreement specifically stated that it was subject to bankruptcy court approval. In addition, page 19 provides: “On or before the court filing on 6/3/96 General Motors shall have made purchase arrangements for all existing AutoStyle — General Motors production with Venture at pricing satisfactory to Venture and General Motors.”
According to Venture, after it and GM agreed on pricing satisfactory to both parties, GM canceled all existing purchase orders with AutoStyle, and placed new purchase orders with Venture on new terms for all the components previously produced by AutoStyle. Car-Tec argues that GM issued purchase orders to Venture for the production of the very same component parts previ
On June 3, 1996, AutoStyle filed for bankruptcy under Chapter 11 2 and immediately sought bankruptcy court approval of the Lease Agreement. On the same day, Car-Tec was given detailed notice of two hearings; one, “Authorizing Assumption of Exec-utory Contract, Leases and Sub-Leases (With Option to Buy)” and the other, “Authorizing and Confirming Sale of Inventory Outside the Ordinary Course of Business Free and Clear of Liens and Other Interests.” These hearings were to be held in the Bankruptcy Court for the Western District of Michigan on June 7,1996 at 10 a.m.
On that day, the Lease Agreement was approved and the June 7 order signed. In the order, the Court found that Venture was a good faith purchaser and that it had purchased the operating assets of AutoStyle “free and clear of all liens, encumbrances, claims, security interests and obligations, except such restrictions and obligations as Venture has expressly agreed to under the terms of the [lease] agreement.” The order further stated that “[s]uch liens, encumbrances, claims, security interests and obligations shall attach to the proceeds from the sale of the inventory in the same order of validity, rank and priority as said interest now exists
Car-Tec argues that it is entitled to commissions for the sales and production programs which Venture took over and fulfilled because it was the procuring agent in the development of the programs and there was an implied assumption of the contract between Car-Tec and AutoStyle.
Although Car-Tec may have valid arguments regarding the “procuring agent doctrine” and an implied contract theory, there are several obstacles that must be overcome before these issues can be considered. Chief among them is notice.
STANDARD FOR REVIEW
Summary Judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Bank.P. 7056. The summary judgment rule requires that the disputed facts be material. Material facts are facts which are defined by substantive law and are necessary to apply the law. The rule also requires the dispute be genuine. A dispute is genuine if a reasonable jury could return a judgment for the nonmoving party.
First National Bank of Arizona v. Cities Service Co.,
DISCUSSION
On or around June 3, 1996, Car-Tec received notice of the hearing for bankruptcy approval of the Lease Agreement. This notice included a detailed explanation of the contents of the Lease Agreement as well as everything to be discussed and decided at the hearing. It is not known whether Car-Tec attended the hearing, but this is irrelevant. Car-Tec is charged with notice and consequently the duty of discovering what occurred at that hearing.
The bankruptcy court order clearly provided that Venture was acquiring assets free and clear of any claims. Car-Tec’s future commissions for work it had completed satisfies the definition of “claim” as defined in 11
In
In re White Motor Credit Corp.,
Car-Tee’s claims against Venture arise from Car-Tec’s contract with AutoStyle. This contract was commenced prior to bankruptcy. All work performed by Car-Tec for AutoStyle had been completed by the time GM canceled its contract with AutoStyle and placed orders with Venture. Therefore, Car-Tec’s right to payment is an interest in the property sold by AutoStyle to Venture. But for the sale, Car-Tec would have no claim against Venture. Thus, because its claim is based on an agreement entered into with AutoStyle, it is a pre-petition obligation that should have been brought forward during the bankruptcy. See
In re White Motor Credit Corp.,
The Court finds unpersuasive Car-Tec’s arguments regarding the implied assumption of the contract and the procuring cause doctrine. The theory behind the procuring cause doctrine is that a sales agent is entitled to recover commissions on sales for which he has been the procuring cause. Car-Tec claims to be the procuring cause behind the programs instituted by AutoStyle and GM because each of the programs was originated due to Car-Tec’s efforts in the expectation of receiving commissions. The Court does not doubt that thousands of man-hours were expended in the initiation and implementation of these programs, but the fact remains that all work done by Car-Tec was completed prior to bankruptcy. When Car-Tec discovered that AutoStyle, Venture and GM were negotiating a deal to transfer these programs, whether through the notice of hearing, at the hearing, or during the negotiations, it should have taken steps to safeguard its position. At that time Car-Tec could have participated in the negotiations, objected to the sale, appealed the June 7, 1996 order or even filed suit against GM. Car-Tec failed to take any of these salutary steps. Instead it has filed suit against the purchaser, Venture after it is too late to do so and procedurally inappropriate.
This Court cannot permit Car-Tee to subvert the Bankruptcy Code’s order of priorities simply because it is dissatisfied with its potential distribution in the bankruptcy case. The proper bankruptcy procedure would have been to object to the court’s June 7, 1996 order or file an appeal therefrom. See Fed.R.Bankr.P. 8002. Car-Tec can not now collaterally attack that order when it failed to exercise any of its previous rights.
NOW, THEREFORE, IT IS HEREBY ORDERED that the Defendant’s Motion for Summary Judgment is hereby GRANTED.
IT IS FURTHER ORDERED that a copy of this Opinion and Order be served by first-class United States mail, postage prepaid, upon James J. Vlasie, Esq., and Daniel P. Perk, Esq., with an information only copy to be served upon Jeff A. Moyer, Esq.