Inergy Propane, LLC v. Union Bank , 158 F. App'x 987 ( 2005 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
December 15, 2005
TENTH CIRCUIT
Clerk of Court
INERGY PROPANE, LLC,,
Plaintiff-Appellant-Cross-
Appellee,
v. Nos. 04-6211 and 04-6254
(D.C. No. CIV-03-894-HE)
UNION BANK OF CHANDLER, (Western District of Oklahoma)
Defendant-Appellee-Cross
Appellant.
ORDER AND JUDGMENT*
Before BRISCOE, Circuit Judge, McWILLIAMS, Senior Circuit Judge,
McCONNELL, Circuit Judge.
04-6211
On July 1, 2003, Inergy Propane, LLC (Inergy), a Delaware Limited Liability
Company authorized to do business in Oklahoma, brought suit in the United States
District Court for the Western District of Oklahoma against the Union Bank of Chandler
(the Bank). Jurisdiction was based on 28 USC § 1332, Inergy and the Bank being citizens
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
of different states and the amount in controversy being in excess of $75,000. Under the
heading “General Allegations,” Inergy stated that it routinely sold and purchased propane
to and from Powder Horn Petroleum Company (Powder Horn). Inergy went on to allege
that “as a regular part of their business and customary course of dealing, Inergy and
Powder Horn net and offset amounts owed from one to the other as a result of concurrent
or overlapping sales and purchases of propane.” In this connection, Inergy alleged that
“after netting their accounts receivable and accounts payable, if any balance remains
outstanding between Inergy and Powder Horn, the party with the balance due normally
instructs its bank to wire transfer an amount equal to such balance due to the other party’s
commercial bank.” According to the complaint, Wachovia Bank was the commercial
bank for Inergy and the Bank was the commercial bank for Powder Horn.
Inergy then went on to allege in its complaint that as of April 17, 2003, Inergy had
a gross account payable to Powder Horn of $109,200, and Powder Horn had a gross
account payable to Inergy of $103,950, and that, accordingly, Inergy under its
understanding with Powder Horn, had due and payable to Powder Horn the amount of
$5,250, i.e., the difference between $109,200 and $103,950. According to the complaint,
on April 25, 2003, Inergy, intending to instruct its bank, Wachovia Bank, to wire transfer
to Powder Horn’s account at the Bank the sum of $5,250, such being the “net amount due
and payable to Powder Horn,” mistakenly instructed Wachovia to wire transfer the sum of
$109,200 to Powder Horn’s account at the Bank, such being the gross amount due
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Powder Horn and not the “net amount” due Powder Horn.
Inergy then went on to allege as follows:
13. Due to this clerical error, Inergy wired $103,950 in
excess of the net amount due and payable to Powder Horn.
Powder Horn agrees that the $103,950 excess payment
belongs to Inergy and should be returned to Inergy.
14. Upon receipt of the wire transfer, Union Bank withdrew
the $103,950 excess payment from Powder Horn’s account.
15. On May 16, 2003, Inergy realized that it had erroneously
wired the wrong amount to Powder Horn’s account.
16. On May 20, 2003, Inergy contacted Union Bank to
request return of the $103,950 overpayment.
17. On May 21, 2003, Inergy made a written demand on
Union Bank to return the $103,950 belonging to Inergy.
*****
20. As of the date of this complaint, Union Bank has failed
and refused to return the $103,950 belonging to Inergy.
Based on the foregoing, Inergy sought recovery of the $103,950 which it states
was mistakenly given to the Bank, and sets forth three different claims for relief, i.e., (1)
unjust enrichment; (2) money had and received (“the $103,950 belonging to Inergy
should in ‘equity and good conscience’ be returned by Union Bank to Inergy”); and (3)
conversion.
On July 18, 2003, the Bank filed its answer to Inergy’s complaint, the gist of
which was a denial that Inergy was “entitled to recover in the action.” In paragraph 8 of
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its answer, the Bank alleged as follows:
In response to the allegations contained in paragraph
fourteen of plaintiff’s complaint, Union admits that in the
exercise of its legal, lawful, and contractual rights it applied
funds from the accounts maintained by Powder Horn
Petroleum Company, Inc., to the obligations owed to Union
by Powder Horn Petroleum Company, Inc. All other
allegations, express or implied, contained in paragraph
fourteen of plaintiff’s complaint are denied.
The Bank in its answer also denied that it was liable to Inergy under any of its
three claims for relief, i.e., unjust enrichment, money had and received, or conversion,
and, under the heading of “Affirmative Defenses,” alleged that Inergy had failed to state a
claim for relief against the Bank, that Inergy’s claims were barred by the doctrines of
estoppel, waiver and laches, and that Powder Horn was, in fact, indebted to the Bank
pursuant to certain loan agreements upon which it had defaulted and that the Bank had
acted “at all times pursuant to its legal, lawful and contractual rights.”
Although there had been no discovery by either party, Inergy, on October 9, 2003,
filed a motion for summary judgment with a supporting brief, contending that there was
no genuine issue of material fact and that it was entitled to judgment as a matter of law.
On October 27, 2003, the Bank filed its “objections” to Inergy’s motion for summary
judgment, with a supporting brief. In the first paragraph in its “objections” the Bank
spoke as follows:
The undisputed facts of this action establish that if summary
judgment is appropriate it is appropriate in favor of Union
Bank. Questions of fact exist which render summary
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judgment inappropriate in favor of plaintiff in this action.
(Emphasis added.)
In its “objections,” the Bank also argued that Powder Horn’s funds in its accounts
at the Bank had been applied to Powder Horn’s loan obligations to the Bank over two
weeks before Inergy asserted any claim based on an alleged “mistake” by Inergy.
As a preliminary matter, we note that the Bank never filed a motion for summary
judgment in its favor based on Fed.R.Civ.P. 56. As stated, Inergy did file a motion for
summary judgment and a hearing was held on that motion, in the course of which the
Bank argued that Inergy’s motion for summary judgment should be denied, and, in thus
arguing, suggested that actually it was the Bank which should be granted summary
judgment on the claims asserted in Inergy’s complaint. It was in this setting that the
district court on March 28, 2004, denied Inergy’s motion for summary judgment, and the
district court, sua sponte, in a sense, entered summary judgment in favor of the Bank. Be
that as it may, we believe that even though the Bank filed no formal cross-motion for
summary judgment, the district court, from a procedural standpoint, did not err in
considering, at the hearing on Inergy’s motion for summary judgment, whether summary
judgment should be entered, instead, for the Bank. See Pueblo of Santa Ana v. Mountain
States Tel. & Tele. Co., 734 F.2d 1402 (10th Cir. 1984), rev’d on other grounds, 472 U.S.
237 (1985). Inergy has made no suggestion in this Court, or in the district court, that it
was somehow “ambushed” or otherwise “surprised” when the district court denied
Inergy’s motion for summary judgment and entered summary judgment in favor of the
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Bank. Accordingly, we will resolve the present appeal on its merits.
As stated, this is a diversity case and hence involves the application of Oklahoma
law to the facts of the present case. Before the district court when it denied Inergy’s
motion for summary judgment, and more or less sua sponte, entered summary judgment
in favor of the Bank were the following: (1) Inergy’s complaint and the Bank’s answer
thereto; (2) Inergy’s motion for summary judgment and its brief in support thereof; (3) the
Bank’s “objection” to Inergy’s motion for summary judgment and a brief in support
thereof; and (4) various affidavits and depositions submitted by the parties. Based
thereon, the district court, on the eve of trial, denied Inergy’s motion for summary
judgment and entered summary judgment in favor of the Bank. Inergy appeals, arguing
that the district court erred in entering summary judgment for the Bank, and that summary
judgment should have been entered in its favor as a matter of law.
In its unpublished order, the district court first stated that although there was a
dispute as to the existence of a so-called “netting agreement” between Inergy and Powder
Horn, such was in the district court’s view, immaterial. What was material, according to
the district court, was that the Bank had a preexisting banking relationship with Powder
Horn which included a credit arrangement to finance Powder Horn’s working capital
needs, involving a principal amount of $4,000,000. The court noted that at the time the
Bank received Inergy’s check to the Bank for $109,200 which was deposited in Powder
Horn’s account with the Bank, it was undisputed that Powder Horn was in default of its
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obligations to the Bank and that the Bank simply “applied the funds from Inergy, upon
their receipt, to Powder Horn’s indebtedness to the bank.” The district court went on to
note it was some three weeks later that Inergy first contacted the Bank, claiming “clerical
error,” and asked the Bank to return to Inergy “the sum of $103,950,” which, it said,
rightfully belonged to Inergy, i.e., the difference between the amount Inergy remitted to
the Bank, $109,200, and the amount it says it intended to remit, namely, $5,250. The
district court went on to frame the question before it as follows: “whether Union Bank
had the right to apply the funds of Powder Horn in [its] deposit account to amounts owed
by [Powder Horn] to the bank and whether, based on the claims advanced by it, plaintiff
has some greater claim to the funds.” The district court then answered that question as
follows: “The undisputed facts establish the fact that Union Bank had both a security
interest in all deposits of Powder Horn and a right of set-off.”
By way of general background, it would appear that on about February 18, 2003,
Powder Horn entered into a loan agreement with the Bank for the principal sum of
$4,000,000 and in connection therewith executed and delivered to the Bank a promissory
note and security agreement, which was duly recorded. Powder Horn also maintained its
deposit accounts with the Bank. Further, on or about April 17, 2003, Powder Horn
submitted invoice number 10105 to Inergy showing $109,200 due and owing for the
delivery of 5,000 barrels of propane. The invoice directed Inergy to make payment to the
Bank for Powder Horn’s account. On that same day, Inergy submitted to Powder Horn
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invoice number 40906 showing $103,950 due and owing for the delivery of 5,000 barrels
of propane. That invoice directed Powder Horn to make payment to the First National
Bank, Charlotte, North Carolina, for Inergy’s accounts. Neither invoice contained any
reference to the other invoice and neither indicated any agreement for a
“set off” or “net out” in favor of either.1
It was in this general setting, that on April 25, 2003, Inergy directed its bank,
Wachovia, to wire transfer $109,200 to the Bank for Powder Horn’s account, which was
consistent with the directions contained in Powder Horn’s invoice, and was in the same
manner Inergy had previously paid invoices from Powder Horn. On or about May 6,
2003, the Bank declared Powder Horn in default on its loan obligations and applied the
monies in Powder Horn’s accounts to Powder Horn’s outstanding loan indebtedness with
the Bank. It was some two weeks later, after Inergy ascertained that Powder Horn could
not pay it the $103,950 it owed Inergy, that Inergy first contacted the Bank and stated that
due to a clerical error within its offices, Inergy had sent a wire for $109,200 instead of for
$5,250, and made a demand for Union Bank to return $103,950.
Based on the record before it, the district court summarized the facts out of which
the present controversy arose as follows:
Plaintiff Inergy Propane, LLC (“Inergy”) and Powder Horn
1
Inergy disputes this contention, but, as previously noted, the district court found
that dispute to be “immaterial.”
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Petroleum Company (“Powder Horn”) bought and sold
propane to each other. As of April 25, 2003, sales between
the companies resulted in Inergy owing Powder Horn
$109,200 and Powder Horn owing Inergy $103,950. On that
date, Inergy instructed its bank to wire $109,200 to Powder
Horn’s bank, defendant Union Bank
The bank had previously loaned money to Powder Horn and
the company was in default on its loan when the Inergy
payment was deposited in the bank account. Union Bank
applied the funds from Inergy, upon their receipt, to Powder
Horn’s indebtedness. Approximately three weeks later Inergy
contacted the bank, asserting it had paid the sum of $109,200
by mistake and had intended to pay only the net amount it
owed Powder Horn after setting off the $103,950 Powder
Horn owed it. When Union Bank refused to reverse the
transaction, Inergy filed this lawsuit seeking the return of the
$103,950 through claims for unjust enrichment, money had
and received, and conversion.
We are in general agreement with the district court’s appraisal of the evidentiary
matter before it when it denied Inergy’s motion for summary judgment and sua sponte
entered summary judgment for the Bank. We agree with the district court that the
existence of a “netting” agreement between Inergy and Powder Horn, assuming there was
one, was “immaterial for the purposes of resolving” Inergy’s claims against the Bank.
Inergy claims that Okla. Stat. tit. 12A § 1-9-404 subjected the Bank to any netting
agreement between Inergy and Powder Horn. Assuming that such a netting agreement
existed, Inergy’s argument misconstrues the relationship between the parties. Section 1-
9-404 deals only with rights acquired by an assignee. Accordingly, under § 1-9-404, the
Bank would be subject to Inergy’s claims against Powder Horn only if it were an assignee
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under the contract. Inergy presented no evidence demonstrating that Powder Horn
assigned its rights under the Inergy Propane-Powder Horn contract to Union Bank.
Absent such an assignment, there is no basis for subjecting the Bank to Inergy’s claims
against Powder Horn. The present controversy apparently only blossomed after Powder
Horn failed to pay the $103,950 which it admittedly owed Inergy. It was apparently at
that particular time that Inergy first discovered its in-house “clerical error” which
precipitated its demand on the Bank to pay Inergy the sum of $103,950. Because the
Bank was not an assignee to the contract between Inergy and Powder Horn, Inergy’s right
to recovery existed only against Powder Horn, not the Bank. As mentioned, this is a
diversity case governed by Oklahoma law.
Further, we agree with the district court that neither Okla. Stat. tit. 12A-§1-9-340
nor Commerce Bank N.A. v. Chrysler Realty Corp., 244 F.3d 777 (10th Cir. 2001),
dictates a reversal in the present case. As the district court found, § 1-9-340 confirms that
the Bank’s perfected security interest in funds deposited into Powder Horn’s accounts has
priority over Inergy’s claims. Although the plain language of § 1-9-340 applies only to a
Bank’s right of recoupment against secured parties, the concept is clear: a bank may
exercise a right of set-off against any party other than one perfected by control. Because
Inergy did not have a security interest in the $103,950, let alone one perfected by control,
§ 1-9-340 gives the Bank priority over the funds deposited in Powder Horn’s account.
As mentioned, this is a diversity case and hence is governed by Oklahoma law. In
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reviewing a federal district court’s understanding and application of state law, our review
is de novo. Horace Mann Ins. Co. v. Johnson, 953 F.2d 575, 576 (10th Cir. 1991). Using
that standard of review, we are in accord with the district court’s understanding and
application of Oklahoma law to the facts of the instant case.
Accordingly the judgment of the district court denying Inergy’s motion for
summary judgment and sua sponte granting summary judgment in favor of the Bank is
affirmed.
04-6254
Subsequent to the district court’s entry of summary judgment in favor of the Bank,
the Bank filed a motion for attorney fees in the amount of $24,795. Inergy thereafter filed
a response thereto, and the Bank later filed a reply. The district court denied the Bank’s
motion for attorney fees and the Bank cross-appeals the district court’s denial of its motion
for attorney fees.
All agree that this being a diversity case, the question of attorney fees is to be
determined under Oklahoma law. Oklahoma, like most other states, follows the American
rule that each party is responsible for its own litigation costs and expenses, including attorney
fees. Further, Oklahoma courts are without authority to award attorney fees absent a specific
statute or contractual term. In re Meridan Reserve, Inc., 87 F.3d 406, 410 (10th Cir. 1996).
The Bank, apparently recognizing that under Oklahoma law, Inergy’s claims of
unjustified enrichment, money had and received, and conversion would not, themselves
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justify an award of attorney fees, suggests that the district court should have looked at the
“underlying facts,” such as the various purchase and sale agreements between Inergy and
Powder Horn, and the Bank’s enforcement of its security interest in Powder Horn’s accounts
with the Bank. In this regard, we would note that neither of those “underlying facts” were
between Inergy and the Bank, the first being between Inergy and Powder Horn and the
second being between the Bank and Powder Horn. As stated, Inergy’s claims against the
Bank were for unjust enrichment, money had and received, and conversion.
In denying the Bank’s motion for attorney fees, the district court concluded its order
by stating that the Bank “has failed to establish a contractual right, specific statutory
authorization, or some other basis for a fee award.” We agree with the district court that
Okla. Stat. tit.12, §936 is not broad enough to permit the Bank to receive an attorney fee in
a case where Inergy sued the Bank for unjust enrichment, money had and received, or
conversion.
Judgment affirmed.
ENTERED FOR THE COURT
Robert H. McWilliams
Senior Circuit Judge
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