In re Beeche Systems

D.A. Elia Construction Corporation (Elia) (defendant) entered into a contract with Beeche Systems Corporation (Beeche) (plaintiff) for Beeche to supply scaffolding equipment to Elia. The agreement included a buy-back provision that gave Elia the right to require Beeche to buy back the scaffolding at 50 percent of the contract price after Beeche received final payment from Elia. Shortly thereafter, Beeche filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. After numerous delays, Beeche completed delivery of the scaffolding equipment to Elia. Soon after delivery, Elia learned for the first time of Beeche’s bankruptcy filing. Elia claimed that because of the delays and Beeche’s failure to disclose the filing, Elia was concerned that Beeche might be unable or unwilling to comply with its remaining obligations. Instead of furnishing the final payment, Elia sent a letter to Beeche ordering Beeche to fulfill the buy-back provision by repurchasing the equipment. Beeche brought suit against Elia for the final payment and the return of the equipment. Elia counterclaimed for the price due under the buy-back provision. The bankruptcy court ordered Elia to return the equipment to Beeche, but denied Beeche’s request for final payment and Elia’s counterclaim for the buy-back price. Elia appealed, arguing that (1) under Uniform Commercial Code (UCC) § 2-610, Beeche had anticipatorily repudiated the contract by filing for bankruptcy, and (2) under UCC § 2-609(1), Beeche had anticipatorily breached the contract by failing to disclose the bankruptcy filing or provide Elia with adequate assurances of performance.