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NATIONAL MICROSALES v. CHASE MANHATTAN BANK

April 10, 1991

NATIONAL MICROSALES CORPORATION, PLAINTIFF,
v.
THE CHASE MANHATTAN BANK, N.A., DEFENDANT.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Plaintiff National Microsales Corporation ("NMC") has moved for summary judgment on its complaint against defendant Chase Manhattan Bank, N.A. ("Chase"). NMC has also moved for sanctions against Chase for its conduct in discovery. For the following reasons, the motion for summary judgment is granted in part and denied in part. The motion for sanctions is denied at this time, with leave to renew at the close of litigation.

Prior Proceedings

The parties and the underlying dispute are described in more detail in the earlier opinion in this case dated October 13, 1989, 1989 WL 125884 as amended on October 20, 1989 ("the Opinion"). NMC v. Chase Manhattan Bank, 88 Civ. 8437 (RWS) (S.D.N.Y. Oct. 20, 1989). NMC is a Connecticut corporation engaged in the business of buying and selling computer output microfilming ("COM") equipment. Chase is a national bank which in 1988 entered into negotiations with NMC to sell some of its used COM equipment to NMC for resale. When Chase subsequently sold the equipment to a third party, NMC filed this diversity suit alleging breach of contract.

In June 1989, Chase moved for summary judgment dismissing NMC's complaint on the basis of the Statute of Frauds. N.Y.U.C.C. § 2-201(1). NMC cross-moved for summary judgment striking Chase's affirmative defense of the Statute of Frauds on the grounds that the contract was covered by the "merchant's exception" to the Statute. N.Y.U.C.C. § 2-201(2). Both motions were denied in the Opinion, because there was a factual dispute as to whether Chase was a "merchant" for UCC purposes. Opinion at 6-7.

The parties thereafter engaged in discovery related to the issue of Chase's status as a merchant of COM equipment. On November 30, 1990, NMC renewed its motion for summary judgment striking Chase's Statute of Frauds defense and also sought entry of judgment in its favor. The motion was argued on December 21, 1990.

Facts

The principal facts relied upon by NMC on the present motion relate to Chase's activities in the disposal of used COM equipment. Based upon its own review of Chase's records, NMC asserts without contradiction that the value of used COM equipment disposed of by Chase during the years 1987 through 1989 totalled nearly $6.5 million dollars. NMC also points to Chase's adoption of uniform procedures for purchasing new equipment and disposing of used equipment and other "surplus fixed assets," including procedures for soliciting bids from prospective purchasers of surplus property.

Chase's response is based primarily on the affidavit of George J. Stehle ("Stehle"), Chase's vice president in charge of office purchasing and contracts administration. Stehle testified that Chase never purchases goods for resale and that Chase has no specialized knowledge concerning the goods which it buys for its own use. He also stated that Chase had no familiarity with the market for the equipment which it purchased, and that when it disposes of surplus goods, it generally sells them to resellers, rather than end users, and usually sells the equipment for less than fair market value.

Discussion

The standards for summary judgment are set forth in the Opinion. The court is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Summary judgment is warranted only if "the evidence is such that a reasonable jury could not return a verdict for the nonmoving party." Id. at 248, 106 S.Ct. at 2510.

1. Chase is a Merchant for Purposes of the UCC.

Section 2-104 of the UCC defines a merchant as "a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction. . . ." N.Y.U.C.C. § 2-104(1). The Official Comment to this section states that

  The special provisions as to merchants appear only in
  this Article and they are of three kinds. Sections
  2-201(2), 2-205, 2-207 and 2-209 dealing with the
  statute of frauds, firm offers, confirmatory
  memoranda, and modification rest on normal business
  practices which are or ought to be typical of and
  familiar to any person in business. For purposes of
  these sections almost every person in business would,
  therefore, be deemed to be a "merchant" under the
  language "who . . . by his occupation holds himself
  out as having knowledge or skill peculiar to the
  practices . . . ...

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