Consolidated Services, Inc. v. Keybank Nat. Assoc.
| Decision Date | 23 November 1998 |
| Docket Number | No. 3:98 CV 0014 AS.,3:98 CV 0014 AS. |
| Parties | CONSOLIDATED SERVICES, INC., Plaintiff, v. KEYBANK NATIONAL ASSOC. and Keycorp, Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
This cause is before the Court on Defendants' Motion for Summary Judgment. Both parties have fully briefed the issues and the Court has considered same.1 Additionally, the Court heard oral argument on October 19, 1998. Plaintiff, Consolidated Services, Inc. (CSI), is an Indiana corporation with its principal place of business in South Bend, Indiana. Defendant, Keybank National Association (Keybank), is a corporation existing under a charter filed with the Comptroller of the Currency in Washington, D.C. with its principal place of business in Cleveland, Ohio. Jurisdiction is proper pursuant to 28 U.S.C. § 1332.
This case arises from a dispute over the terms of a credit agreement entered into between Plaintiff and Defendant. CSI is a federally licensed freight forwarder. From 1974 until 1994, CSI maintained a business relationship with St Joseph's Bank. In 1994, the bank was bought by Society National Bank and in 1995 the name was changed to KeyBank National Association.
In 1994, CSI decided to expand is business into the "intermodal" method of transportation. In order to do so, CSI requested an eight million dollar line of credit through Keybank. This request was denied. However, in part due the long working relationship between CSI and the bank, Society National agreed to extend 2.7 million dollars as an "interim loan" to Leonard and Sylvia Kanczuzewski, the principal shareholders of CSI. The loan was to provide a six-week interim in which CSI was to secure alternate financing. It was made on August 16, 1994 and was to mature on September 30, 1994. Because CSI was unable to secure its alternate financing within the expected time the loan was extended twice by mutual agreement of the parties. The last extension ended December 31, 1994. As of January 12, 1995, the loan was unpaid. Keybank sent a letter to CSI demanding payment of the balance and agreeing to forbear from collection efforts until February 15, 1995 if CSI met eight conditions as set forth in the letter. (Def's App. N)
Kanczuzewski contends that he crossed out one of the conditions and then signed and returned the letter to Keybank on January 30, 1995. He asserts that this letter was a contract and that by signing and returning it he accepted the terms. Keybank and Kanczuzewski met with counsel present on January 17 at which time the bank allegedly agreed to provide a forbearance until February 15, 1995 and to withhold action on several of the items requested in the January 12 letter until January 27, 1995. On January 20, 1995, Keybank sent a second letter to CSI in which it specifically stated that it agreed to withhold action on three items until January 27, 1995.2 (Def's App. O) The letter also made clear that if CSI was unable to close a loan pending with Comerica by such time those three items would be due immediately. The letter reiterated that Keybank would only forbear from enforcing its rights in connection with the original loan until February 15, 1995. The Comerica loan did not close and as of February 14, 1995, CSI had not contacted Keybank or made any payments on its outstanding loan. Additionally, CSI had not complied with the three requirements that were due immediately if the Comerica loan did not close. Accordingly, Keybank called CSI to schedule a meeting for the following day, February 15, 1995. From this point on the facts are in dispute.
A meeting took place at approximately 3:00 pm on February 15. According to Kanczuzewski, Keybank offered CSI a forty-five day extension of the forbearance in exchange for four conditions being met by Kanczuzewski.3 Kanczuzewski claims he immediately complied with the conditions offered by Keybank at the meeting. In spite of his compliance, Kanczuzewski alleges that on February 22, 1995, Keybank breached the February 15 agreement and withdrew approximately 1.175 million dollars from CSI's account to apply toward the principle of the outstanding loan. Kanczuzewski also alleges that Keybank breached its oral promise to continue to pay freight charges CSI owed to Santa Fe Railway. Said charges were paid at the end of each week as part of the ongoing regular course of business. According to Kanczuzewski, because the bank refused to honor the alleged agreement, did not cover the freight charges and demanded immediate payment of the loan CSI was forced into bankruptcy.
Not surprisingly, Keybank's version of these facts differs. Keybank adamantly denies that it offered an additional forty-five day extension to its forbearance. It agrees that it made a proposal to CSI that included four requirements, however, Keybank claims that Kanczuzewski refused the offer. (McGraw Dep. p. 63-69) At 5:00 p.m. on February 15, 1995, the forbearance period ended and the funds in the cash collateral account were applied to the outstanding loan. CSI and Keybank continued to negotiate after this occurred. CSI asked Keybank to return $800,000.00 of the funds taken so that CSI could operate through the following Tuesday, at which time it would provide a plan for liquidation to the bank. In exchange for two mortgages as collateral the bank agreed to return the requested monies to CSI until Tuesday. On Wednesday, February 22, 1995 another meeting was held. Keybank asserts that no agreement was reached by the parties on that day and no liquidation plan was submitted. Because the forbearance had expired on February 15 and no new agreement was in place Keybank pursued the cash collateral.
CSI filed Chapter 11 bankruptcy in April, 1995. Subsequently, on January 8, 1998, CSI filed suit against Keybank alleging breach of contract, promissory estoppel, constructive fraud, breach of covenant of good faith and fair dealing and, failure to execute a payment order pursuant to Indiana statute. On July 1, 1998, Keybank filed this Motion for Summary Judgment as to all claims.
Summary judgment is proper if the pleadings, depositions, answers to interrogatories and admissions on file, together with any affidavits, show that there exists no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.4 Fed.R.Civ.P. 56; Russo v. Health, Welfare & Pension Fund, Local 705, 984 F.2d 762 (7th Cir.1993).5 The initial burden is on the moving party to demonstrate, "with or without supporting affidavits," the absence of a genuine issue of material fact and that judgment as a matter of law should be granted in the moving party's favor. Celotex, 477 U.S. at 324, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 56); Essex v. United Parcel Serv., Inc., 111 F.3d 1304, 1308 (7th Cir.1997). A question of material fact is a question which will be outcome determinative of an issue in the case. The Supreme Court has instructed that the facts material in a specific case shall be determined by the substantive law controlling the given case or issue.6 Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Once the moving party has met the initial burden, the opposing party must "go beyond the pleadings" and "designate `specific facts shows that there is a genuine [material] issue for trial.'" Id. The nonmoving party cannot rest on its pleadings, Wintz v. Northrop Corp., 110 F.3d 508, 512 (7th Cir.1997) Waldridge v. American Hoechst Corp., 24 F.3d 918, 920-21 (7th Cir. 1994), nor may that party rely upon conclusory allegations in affidavits. Cusson-Cobb v. O'Lessker, 953 F.2d 1079, 1081 (7th Cir.1992).
During its summary judgment analysis, the court must construe the facts and draw all reasonable inferences in the light most favorable to the nonmoving party. Valance v. Wisel, 110 F.3d 1269, 1274 (7th Cir.1997); Patel v. Allstate Insurance Co., 105 F.3d 365, 367 (7th Cir.1997). However, despite a conflict in facts and inferences on some elements of a claim, summary judgment is appropriately entered when no dispute exists with regard to facts which are dispositive of the litigation. Ohio Valley Plastics, Inc. v. National City Bank, 687 N.E.2d 260, 262 (Ind. Ct.App.1997), trans. denied. Applying this standard the Court addresses Defendant's motion.
The sole issue in the present case is whether the terms of the original loan contract were modified at the February 15, 1995 meeting to guarantee CSI an additional forty-five day forbearance extension and if so, does the Statute of Frauds apply? Interpreting the facts in the light most favorable to CSI and assuming, arguendo, that an oral modification to the terms of the original agreement was made at the February 15 meeting, CSI's claims still fail.
Indiana law requires that credit agreements be in writing. The Indiana Code provides:
A debtor may bring an action upon a credit agreement only if the agreement:
(1) is in writing;
(2) sets forth all material terms and conditions of the credit agreement, including the loan amount, rate of interest, duration, and security; and
(3) is signed by the creditor and the debtor.
Ind.Code.Ann. § 32-2-1.5-4 (Burns Supp. 1991) (emphasis added). Moreover, the statute explicitly states that a debtor may bring an action upon a credit agreement with a creditor to enter into a new credit agreement, amend or modify a prior credit agreement, forbear from exercising rights under a prior credit agreement, or grant an extension under a prior credit agreement only if the above three conditions are satisfied. Id. at § 32-2-1.5-5....
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Consol. Serv. v. KeyBank Nat'l. Assoc.& KeyCorp, 98-4221
...granted summary judgment for the bank on the basis of the Indiana Credit Agreement Statute of Frauds, Ind. Code sec. 32-2-1.5. 29 F. Supp. 2d 942 (N.D. Ind. 1998). CSI argues that the requirements of the statute of frauds were satisfied, but alternatively seeks to avoid it by invoking doctr......