Boulevard Bank v. Adams Newspapers, 91-CV-73747.
| Decision Date | 18 March 1992 |
| Docket Number | No. 91-CV-73747.,91-CV-73747. |
| Citation | 787 F. Supp. 122 |
| Parties | BOULEVARD BANK NATIONAL ASSOCIATION, a national banking association, Plaintiff/Counter-Defendant, v. ADAMS NEWSPAPERS, INC., a Delaware corporation, and Stephen Adams and Adams Publishing of Royal Oak, Defendants/Counter-Plaintiffs, and Dan-Mar Enterprises, Inc. d/b/a Mark Ridley's Comedy Castle, a Michigan corporation, and Columbia Construction Management, Inc., a Michigan corporation, Defendants. |
| Court | U.S. District Court — Western District of Michigan |
Stephen E. Glazek, James S. Fontichiaro, Barris, Sott, Denn & Driker, Detroit, Mich., for plaintiff/counter-defendant Boulevard Bank Nat. Ass'n.
Timothy D. Kelly, Mary Lynn Jahnke, Carol Baker, Kelly & Berens, Minneapolis, Minn., Penny L. Deitch, Dawn L. Phillips, Karen Russell, Phillips & Russell, Birmingham, Mich., for defendants/counter-plaintiffs Adams Newspapers, Inc., Stephen Adams and Adams Pub. of Royal Oak.
Richard A. Polk, Birmingham, Mich., for defendant Mark Ridley's Comedy Castle.
Before me are plaintiff's motions for summary judgment on counts 1 through 3 of its first amended complaint and for dismissal or summary judgment on Adams Newspapers, Inc., Stephen Adams and Adams Publishing of Royal Oak, Inc.'s (Adams defendants) counterclaim. Because I find that no issues of material fact exist and plaintiff is entitled to relief as a matter of law, the motions are GRANTED.
This action is based upon the breach of a promissory note by Adams Newspapers, Inc. (ANI), and Stephen Adams' refusal to honor an unconditional guaranty securing that note. In January 1989, Boulevard Bank National Association (BBNA) loaned ANI one million seven hundred thousand dollars ($1,700,000) to enable ANI to purchase "The Source," a weekly paper circulating in southeastern Michigan. The loan and note were secured by a junior mortgage on a building located in Royal Oak, Michigan. BBNA also took a security interest in all of ANI's assets, particularly those of "The Source." As further security, Stephen Adams executed a "secured guaranty agreement" under which he agreed to unconditionally guarantee ANI's performance. To secure the guaranty, Adams pledged all of the issued and outstanding shares of ANI to BBNA. Final payment of the note was due no later than June 30, 1994.
In spring 1990, ANI approached BBNA proposing to restructure the loan agreement. Adams was consolidating his debt with another lender, and that lender required that "The Source" be part of its security free of BBNA's interest. BBNA agreed to release its security interest in "The Source" on the following conditions: (1) the elevation of BBNA's junior mortgage on the Royal Oak property to first position; (2) the continuation of Adams' guaranty; and most significantly, (3) the acceleration of the note maturity date to December 31, 1990. A modification and allonge were so executed. The original loan documents, as well as the modification agreement, contain an integration clause.
ANI failed to pay the note on the due date. In letters dated January 3, 1991 and February 14, 1991, ANI's vice president requested a two-year extension of the loan due date. BBNA was unwilling to further modify the loan and accordingly sent written notice declaring the loan in default and demanding payment.
ANI now alleges that in the course of modifying the original loan agreement, an oral agreement was reached to the effect that the source of repayment for the restructured loan was no longer the operational income from the "The Source," but rather the sale or refinance of the property located in Royal Oak, Michigan. Accordingly, ANI counterclaimed that the note should be reformed to reflect the oral understanding of the parties based on mutual mistake or unilateral mistake and misrepresentation. ANI claims that it is entitled to a reasonable period of time, but no longer than the original 1994 due date, to sell or refinance the Royal Oak property and use the proceeds to retire BBNA's note.
The Adams defendants also counterclaimed that BBNA violated the Anti-Tying statute, 12 U.S.C.A. § 1972(1)(C) (West 1989), claiming that one of the reasons BBNA decided not to further modify the loan agreement was that a related Adams-controlled publication, Chicago Magazine, had been sold and no longer maintained its deposits with the bank.
The parties agree that due to a choice of law clause in the loan agreement, the loan documents are to be construed under Illinois law while the mortgage is to be construed under Michigan law.
(1) Parol Evidence
Typically, parol evidence is inadmissible to vary or contradict the clear written provisions of integrated contracts, including mortgage loan agreements. NAG Enterprises, Inc. v. All State Industries, Inc., 407 Mich. 407, 285 N.W.2d 770 (1979); Ditzik v. Schaffer Lumber Co., 139 Mich. App. 81, 360 N.W.2d 876 (1984); Suriano v. EMI Services Corp., 181 Ill.App.3d 789, 130 Ill.Dec. 507, 537 N.E.2d 836 (1989); Land of Lincoln Sav. & Loan v. Michigan Ave. Nat. Bank, 103 Ill.App.3d 1095, 59 Ill.Dec. 794, 432 N.E.2d 378 (1982).
ANI does not deny that the parol evidence rule would normally make evidence of prior oral agreements inadmissible, only that such evidence is admissible when a party alleges a mutual mistake of fact or unilateral mistake combined with fraud or misrepresentation. However, in Land of Lincoln, under facts very similar to those here, the court held:
The defense is asserting that the agreement as embodied in the note and mortgage is not the agreement of the parties, but that the agreement was that an extension would be granted if the defendants were unable to sell the property. Thus, the defendants are seeking to vary the unambiguous terms of the agreement through evidence prior and contemporaneous oral agreements. This, the parol evidence rule does not permit.
Moreover, to prove mutual...
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