Facts
- Siemens Energy and Automation, Inc. (Siemens) manufactured electrical products and sold electrical goods on credit to Coleman Electrical Supply Company, Inc. (Coleman), a distributor owned and operated by brothers William Coleman and Stanley Coleman.
- To induce Siemens to extend open-account credit, William Coleman and Stanley Coleman each signed a separate written personal guaranty dated October 15, 1996, guaranteeing “all sums advanced” up to $75,000, plus interest, attorneys’ fees, and collection costs.
- Siemens shipped goods to Coleman on the open account, and Coleman accepted the goods.
- In 1998, Coleman suffered financial problems after losing a major customer and began falling behind on payments for the goods it had purchased.
- Coleman offered to return some of the unpaid goods to Siemens so Siemens could resell them; Siemens refused the proposed returns and demanded payment of the outstanding balance and payment under the guaranties.
- Siemens sued in federal court (E.D.N.Y.) to recover (1) the unpaid amount for goods sold, delivered, and accepted, and (2) $75,000 from each brother under the guaranties.
- Coleman and William Coleman argued Siemens had a duty to reduce its loss by accepting the return of goods and reselling them, and also asserted Siemens violated the covenant of good faith through “selective and disparate” pricing among distributors.
- Stanley Coleman opposed summary judgment by claiming factual disputes and alleging a conspiracy between Siemens and William Coleman to defraud him.
- Siemens moved for summary judgment against Coleman and both guarantors.
Issues
- Whether, under New York U.C.C. § 2-709(1)(a), a seller suing for the price of goods accepted must accept the buyer’s offered return of goods and attempt resale to reduce damages before recovering the price.
- Whether allegations of “selective and disparate” pricing (framed as a breach of the covenant of good faith) created a triable defense to Siemens’s claim for the price of accepted goods.
- Whether Siemens was entitled to summary judgment enforcing the two unconditional, capped personal guaranties where the guarantors admitted signing the guaranties and Coleman’s default, and where alleged conspiracy/fraud assertions were unsupported.
Decision
- The court granted Siemens’s motion for summary judgment against all defendants.
- Siemens was entitled to recover the contract price for goods Coleman accepted under N.Y. U.C.C. § 2-709(1)(a), plus allowable incidental amounts.
- The court rejected the defense that Siemens had to mitigate by accepting returned goods for resale; § 2-709(1)(a) permits recovery of the price for accepted goods, and § 2-709(1)(b) did not control because it concerns goods identified to the contract in circumstances involving nonacceptance/resale difficulty.
- The court entered judgment against Coleman for the unpaid balance sought on the open account (approximately $311,984.37), with applicable additions as allowed.
- The court enforced the guaranties and entered judgment against William Coleman for $75,000 and against Stanley Coleman for $75,000, plus contractually provided interest, attorneys’ fees, and collection costs.
- The “selective and disparate” pricing/good-faith theory did not raise a genuine dispute of material fact sufficient to defeat summary judgment.
- Stanley Coleman’s conspiracy allegations were not supported by the record and did not create a legally valid defense to Siemens’s enforcement of his guaranty.
Legal Principles
- Under N.Y. U.C.C. § 2-709(1)(a), when a buyer fails to pay as due, the seller may recover the price of goods the buyer has accepted, together with incidental damages.
- Section 2-709(1)(b) addresses recovery of the price for certain goods identified to the contract where resale is not reasonably achievable; it does not impose a requirement that a seller take back goods already accepted as a condition to suing for the price.
- A buyer’s offer to return accepted goods does not, by itself, impose a duty on the seller to accept the goods and resell them before pursuing the U.C.C. price remedy for accepted goods.
- The implied covenant of good faith cannot be used to impose obligations not found in the parties’ agreement (such as a general requirement of uniform pricing) or to excuse nonpayment absent competent proof tying the alleged conduct to a contractual breach that defeats the price claim.
- Under New York law, a clear, unconditional written guaranty is enforced according to its terms; upon the principal debtor’s default, the guarantor is liable up to the stated cap and for agreed interest and collection expenses unless a valid defense is proven.
- On summary judgment, conclusory or unsupported allegations (including claims of conspiracy) do not create a genuine issue of material fact.
Conclusion
Siemens Energy and Automation v. Coleman Electrical Supply Co. held that a seller may recover the price of goods the buyer accepted under N.Y. U.C.C. § 2-709(1)(a) without first accepting returns for resale, rejected a good-faith/disparate-pricing defense on the record presented, and enforced two separate $75,000 personal guaranties against the individual guarantors upon Coleman’s default.