Opinion
Case No. 3:04CV7467.
November 15, 2005
ORDER
This is a suit by Epicentre Strategic Corp., the assignee of a creditor of CR Masonry of Michigan (CR). CR performed masonry work on a new high school in Perrysburg, Ohio.
Epicentre's complaint named three defendants: the architect, Fanning/Howey Associates, Inc.; the project manager, Rudolph/Libbe, Inc.; and Perrysburg Exempted Village School District. Epicentre claims Rudolph/Libbe mismanaged the project, causing CR to incur additional expenses. As CR's assignee, Epicentre brings this commercial tort claim. Pending is Rudolph/Libbe's motion for summary judgment. For the following reasons, the motion shall be granted.
Epicentre's claim against Fanning was dismissed under Fed.R.Civ.P. 12(b)(6) per my March 18, 2005, order.
Background
In January 1996, Perrysburg School District contracted with Fanning/Howey for the design and construction of a new high school. The School District subsequently contracted with Rudolph/Libbe to provide construction management services for the project.In November, 1999, the School District solicited bids for various aspects of the construction. CR Masonry submitted the lowest bid for the masonry work. The School District and CR Masonry then entered into a contract for that work on February 4, 2000. Construction began shortly thereafter. The high school opened as scheduled in August, 2001.
Before beginning work on the high school, CR obtained financing from National Bank of Detroit (NBD), which later merged with BankOne Corporation. CR granted NBD a security interest in some of its property as a condition of the loan. BankOne subsequently assigned its security interest to Plaintiff Epicentre, who asserts the present commercial tort claim against Rudolph/Libbe.
Discussion
Epicentre alleges Rudolph/Libbe negligently failed to perform its contractual obligations, resulting in significant losses to CR and ultimately Epicentre.
Rudolph/Libbe has moved for summary judgment, alleging Epicentre lacks standing to pursue such a claim because CR could not assign any claim it may have, or, if CR could assign its claim, the purported assignment failed to reference the presently-asserted commercial tort claim with sufficient particularity.
Because I find Epicentre's claim fails for both reasons, Rudolph/Libbe's motion for summary judgment shall be granted.
I. Assignability
Epicentre alleges it received by assignment BankOne's CR commercial tort claim arising out of the Perrysburg high school project under CR's "Assignment of Debt and Security Interest" dated March 9, 2004. (Doc. 58-5, at 3.)Ohio law governs the instant case, and defines a commercial tort claim as follows:
"Commercial tort claim" means a claim arising in tort with respect to which:
(a) The claimant is an organization; or
(b) The claimant is an individual, and the claim:
(i) Arose in the course of the claimant's business or profession; and
(ii) Does not include damages arising out of personal injury to or the death of an individual.
Prior to the 1999 revision of U.C.C. Article 9, a borrower could not grant a security interest in a commercial tort claim. Revised Article 9, effective July 1, 2001, permits security interests in a commercial tort claims. The claim must, however, exist when the borrower grants the security interest. O.R.C. § 1309.204(B)(2). Accordingly, the parties may not create a security interest in a commercial tort claim through an after-acquired property clause. Id.
The Official Comment section for § 9-108 states:
Under Section 9-204, an after-acquired collateral clause in a security agreement will not reach future commercial tort claims. It follows that when an effective security agreement covering a commercial tort claim is entered into the claim already will exist. § 9-108, Official Comment 5.
Here, CR entered into the Continuing Security Agreement with NBD on December 17, 1998. The "Collateral" section of the agreement includes "Accounts Receivable, Inventory, Equipment, [and] Instruments," but fails to mention any commercial tort claim. (Doc. 58-4, at 1.) CR, moreover, did not submit a bid for the project's masonry work until nearly a year after signing the Continuing Security Agreement on December 15, 1999. Thus, at the time of the security agreement, CR, and ultimately BankOne, had no commercial tort claim against Rudolph/Libbe.
NBD Bank subsequently became part of BankOne Corp.
Because no commercial tort claim existed at the time of the security agreement, BankOne had no tort claim to assign Epicentre on March 9, 2004. Thus, Epicentre has no rights to CR's commercial tort claim.
Further, CR's security agreement with NBD did not describe the tort claim with sufficient particularity. O.R.C. § 1309.108 (UCC § 9-108) mandates that commercial tort claims be described with greater specificity than most other claims: "A description only by type of collateral . . . is an insufficient description of a commercial tort claim." O.R.C. § 1309.108(E)(1). "The reference to " only by type" (emphasis supplied) in subsection (e) means that a description is sufficient if it . . . contains a descriptive component beyond the "type" alone." § 9-108, Comment 5.
Notwithstanding the questionable significance of its timing and validity, the "Clarification of Continuing Security Agreement" dated July 18, 2005, purports to describe some sort of commercial tort claim. This "Clarification," however, only provides that "CR Masonry of Michigan hereby reaffirms and specifically grants Epicentre Strategic Corporation — Michigan, as successor in interest to the Bank, a security interest in any choses of action, whether in contract or in tort, including commercial tort actions, which Debtor could bring at law or in equity." (Doc. 58-6, at 1.) This description contains nothing beyond the mere type of claim, and is therefore insufficient under O.R.C. § 1309.108(E)(1).
Conclusion
Because Epicentre's claim fails for both of the reasons asserted in Rudolph/Libbe's motion for summary judgment, it is
ORDERED THAT defendant Rudolph/Libbe's motion for summary judgment be, and the same hereby is granted.
So ordered.