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GATES RUBBER CO. v. VEHICLE PARTS WAREHOUSE CORP.

June 24, 1996

THE GATES RUBBER COMPANY, Plaintiff, against VEHICLE PARTS WAREHOUSE CORPORATION., Defendant.


The opinion of the court was delivered by: BARTELS

 Pursuant to Fed.R.Civ.P. 56(a), Plaintiff The Gates Rubber Company ("Gates") moves for summary judgment in this diversity contract action brought against Defendant Vehicle Parts Warehouse Corporation ("Vehicle Parts"). For the reasons set forth below, the motion is granted.

 BACKGROUND

 The following undisputed facts appear in the parties' papers. Gates, a Colorado corporation, manufactures various automotive parts. Between approximately December 1994 and July 1995, pursuant to a distribution agreement dated November 6, 1985, Vehicle Parts, a New York corporation, accepted certain goods from Gates valued at $ 176,275.86 for distribution. In spite of the fact that Gates began billing for the goods in December 1994 or January 1995 and continued each month thereafter, Vehicle Parts never tendered payment. Payment was due within 30 days of receipt of each invoice.

 The distribution agreement contains a clause that reads, "[Vehicle Parts] agrees to pay for all Gates merchandise purchased by [it] at the prices and in accordance with the terms of payment established by Gates from time to time." (Thomas Aff. in Supp. of Pl's. Mot. for Summ. J. Ex. A) Each month, the invoices stated that charges were subject to a 1 1/2% "financial carrying charge for each 30 days past due." There is no indication in the parties' papers whether, in the approximately ten years for which the distribution agreement governed the relationship between the parties, Gates ever charged, or Vehicle Parts ever paid, a finance charge.

 Vehicle Parts contended that any amount due should be reduced by at least $ 22,000 in accordance with an incentive program promulgated by Gates. Although Gates originally contested this defense, in supplemental papers requested by the Court, it later waived its objections to a rebate of $ 20,826.99. Vehicle Parts did not object to this accounting.

 As the parties now agree that Vehicle Parts owes Gates $ 155,448.87 (representing the value of the goods sold, delivered and accepted at $ 176,275.86, less a credit of $ 20,826.99), and there is no issue of fact regarding the sale of goods in dispute, the sole remaining issue is whether the finance charge is collectable.

 DISCUSSION

 Applying the standard applicable for summary judgment motions, it is uncontroverted that Vehicle Parts never paid Gates for $ 155,448.87 worth of goods which it ordered and accepted. Therefore, as a matter of law, payment is due and summary judgment for this amount is appropriate. Daviro Corp. v. Aras Corp., 167 A.D.2d 985, 562 N.Y.S.2d 7 (N.Y. App. Div. 4th Dep't 1990); Avis Rent A Car System v. McNamara Buick Pontiac, 90 A.D.2d 783, 455 N.Y.S.2d 643 (N.Y. App. Div. 2d Dep't 1982); Sunkyong America, Inc. v. Beta Sound of Music Corp., 199 A.D.2d 100, 605 N.Y.S.2d 62, 63 (N.Y. App. Div. 1st Dep't 1993); N.Y.U.C.C. ยงยง 2-606(1) (b), (c) and 2-607(1).

 The Court must now inquire whether or not the finance charge was part of the contract. If it was, the Court must decide whether the finance charge is enforceable upon summary judgment or whether it is void either as a penalty or usury.

 Because this case is before the Court based upon diversity jurisdiction, New York substantive law applies. Erie R. Co. v. Tompkins, 304 U.S. 64, 78-80, 82 L. Ed. 1188, 58 S. Ct. 817 (1938); Hanna v. Plumer, 380 U.S. 460, 465, 14 L. Ed. 2d 8, 85 S. Ct. 1136 (1965).

 Recent New York law is unambiguous that notice of a finance charge on monthly invoices alone does not evidence agreement to the finance charge and entitle plaintiff to interest at the contract rate. In order to prevail at a rate higher than the statutory 9% per annum, the contract itself must clearly specify the rate to be charged. Haun Welding Supply v. National Union Fire Ins., 222 A.D.2d 1099, 636 N.Y.S.2d 512, 513 (N.Y. App. Div. 4th Dep't 1995); Harry Rubin & Sons v. Clay Equipment, 184 A.D.2d 168, 591 N.Y.S.2d 596, 598 (N.Y. App. Div. 3rd Dep't 1992); Levy, King & White Advertising v. Gallery of Homes, 177 A.D.2d 967, 577 N.Y.S.2d 1012, 1013 (N.Y. App. Div. 4th Dep't 1991); Marine Management v. Seco Management, 176 A.D.2d 252, 574 N.Y.S.2d 207, 208-9 (N.Y. App. Div. 2nd Dep't 1991) aff'd 80 N.Y.2d 886, 600 N.E.2d 627, 587 N.Y.S.2d 900 (1992).

 The notion put forth by Gates that the interest rate specified on the invoices became a part of the contract through the New York UCC was rejected by the court in Harry Rubin & Sons. 591 N.Y.S.2d at 598. As Gates has put forth no evidence that the finance charge was ever subject to a course of dealing with Vehicle Parts, the necessary inference upon summary judgment is that during the course of the parties' relationship, a finance charge was neither levied nor paid, thus it is not a term of the agreement. Music Sales Corp. v. Mark Music Service, Ltd., 194 A.D.2d 470, 599 N.Y.S.2d 280, 281 (N.Y. App. Div. 1st Dep't 1993).

 Although in Lockwood Corp. v. Black, 501 F. Supp. 261, 265 (N.D. Tex. 1980), aff'd 669 F.2d 324 (5th Cir. 1982), the court found that a course of dealing existed which included imposition of a finance charge, that case is not applicable here. In Lockwood, the parties' conduct mirrored their conduct under a previous contract which clearly specified the finance charge, and the ...


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