Evergreen Bank, N.A. v. Sullivan

• Decision Date: 16 October 1997
• Docket Number: No. 2:96-CV-255.,2:96-CV-255.
• Citation: 980 F.Supp. 747
• Court: U.S. District Court — District of Vermont
• Parties: EVERGREEN BANK, N.A., Plaintiff, v. John A. SULLIVAN, Jr., Ralph R. DesLauriers, Defendants.

980 F.Supp. 747

EVERGREEN BANK, N.A., Plaintiff, v. John A. SULLIVAN, Jr., Ralph R. DesLauriers, Defendants.

No. 2:96-CV-255.

United States District Court, D. Vermont.

October 16, 1997.

Michael Paul Palmer, Palmer Legal Services, Middlebury, VT, for Evergreen Bank, N.A.

Douglas Clark Pierson, Pierson, Wadhams, Quinn & Yates, Burlington, VT, for John A. Sullivan, Jr.

Thomas Zeller Carlson, Langrock, Sperry & Wool, Burlington, VT, for Ralph DesLauriers.

OPINION AND ORDER

SESSIONS, District Judge.

Plaintiff Evergreen Bank ("Bank") seeks summary judgment in this collection action against John Sullivan ("Sullivan") for default on an original bank loan and Sullivan's assignment and guarantee to the Bank of a $300,000 promissory note from Bolton Valley Corporation ("BVC") and Ralph DesLauriers ("DesLauriers"). The Bank also seeks summary judgment against DesLauriers for default on his guarantee of Sullivan's obligations to the Bank. Since DesLauriers failed to oppose the Bank's motion, summary judgment against him is automatically granted pursuant to Local Rule 7.1(a)(6). For the reasons that follow, the Bank's Motion for Summary Judgment against Sullivan is granted.¹

I. Factual Background

For the purposes of summary judgment, the following facts are undisputed. On September 26, 1991, Sullivan signed a $300,000 Line of Credit Agreement ("LCA") from the Bank in Plattsburgh, New York. The loan credit agreement originated in New York, was guaranteed by BVC and DesLauriers and secured by a second mortgage lien on property owned by BVC. It states that in the case of default, no notice is necessary to collect on the debt.² The LCA makes no mention of choice of applicable state law.

On October 4, 1991, BVC and DesLauriers signed and executed a Mortgage Note in the amount of $300,000 payable to Sullivan. Secured by a Mortgage Deed for Bolton Valley, the Mortgage Note referenced and incorporated the terms of the LCA³ and stated it was to be "governed by and construed in accordance with the laws of the State of Vermont." Mortgage Note at 2 (Paper 1, Exhibit B).

That same day, Sullivan signed and delivered to the Bank an Assignment & Guarantee of Note (A & G), guaranteeing and assigning with recourse the BVC Mortgage Note. Sullivan's guarantee of BVC's payments to the Bank was signed and acknowledged in New York and subject to the terms of the LCA.⁴

Over the next several months Sullivan withdrew the $300,000 available through the line of credit and presumably dispensed it to BVC. Sullivan had little or no contact with the Bank until the Spring of 1994. At that time BVC contacted Sullivan because it had significantly fallen behind in payments and was having difficulty getting the Bank's agreement on a split-payment plan.⁵ In negotiating with the Bank on BVC's behalf, the Bank agreed to notify Sullivan of any future delays in payments by BVC. The split payment plan was agreed to by the Bank and BVC caught up on their payments. Sullivan heard from BVC again in December of 1994, when he learned that BVC had again defaulted on their payments and the Bank had not implemented the agreed payment plan. There is no evidence that Sullivan took any action at that time to remedy BVC's default.

Three months later, BVC filed for bankruptcy. Upon learning the Bank was unhappy with BVC's reorganization plan, Sullivan sent a fax to the Bank on June 29, 1995, encouraging support for a second draft of the plan. On July 3, 1995, the Bank notified Sullivan of their vote for confirmation of BVC's second bankruptcy plan but stated that in doing so they would be reserving their rights against Sullivan.

When BVC fell behind on their payments three weeks after their bankruptcy plan was approved, the Bank forwarded to Sullivan a copy of the default notice issued to BVC. On August 18, 1995, the Bank sent another letter to BVC demanding payment and again forwarded a copy to Sullivan. BVC notified the Bank on May 30, 1996, that it would not be making any more payments. On June 7, 1996, the Bank sent Sullivan a copy of the final notice of default that had been sent to BVC.

Since BVC is insolvent, the Bank is suing Sullivan as both the original debtor and as guarantor of BVC's payments. Sullivan does not contest liability but claims the Bank's notice of default was insufficient under Vermont State law therefore precluding summary judgment and entitling him to an offset in damages. While the Bank contends that New York law applies, they believe they have met the notice requirements under either New York or Vermont law.

II. Issues and Analysis

A. Standard for Summary Judgment

Summary judgment is appropriate if there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A party seeking summary judgment bears the burden of demonstrating the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2553. The party opposing summary judgment may not rest on its pleadings, but must set forth specific facts showing there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The evidence of the nonmoving party is to be believed, and all justifiable inferences are to be drawn in its favor. Id. at 255, 106 S.Ct. at 2513, (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970)). Unless there is sufficient evidence to enable a jury to return a verdict in favor of the nonmoving party, there is no issue for trial. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted).

B. Choice of Law Analysis

It is well established that federal courts determine governing law in diversity actions by looking to choice of law principles in the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941). When contractual parties have not specified clearly the state law to be applied to a given case, Vermont utilizes the test laid out in Restatement (Second) Conflict of Laws § 188 to determine which state has the most significant relationship to the transaction and the parties. Pioneer Credit Corp. v. Carden, 127 Vt. 229, 233, 245 A.2d 891, 893-94 (1968). According to the Restatement; the factors to be weighed are: (a) the place of contracting; (b) the place of negotiation; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties. Restatement (Second) Conflict of Laws § 188. Having considered each of these factors, the Court concludes that New York law applies in this action.

As an initial matter, the Court must determine which of the many documents involved in the parties' transactions are central to this cause of action. The Vermont Supreme Court in Pioneer is instructive on this issue. In Pioneer, a Vermont couple signed and executed a promissory note in Massachusetts using Vermont property as collateral for their purchase. Pioneer, 127 Vt. at 231, 245 A.2d 891. Before concluding Massachusetts law applied, the Vermont Supreme Court first determined that "[t]he mortgaged property is collateral to the promissory notes which are the real basis of this action. Neither the title to that property nor the mortgage lien is involved." Id., at 233, 245 A.2d 891.

By analogy, neither the BVC Mortgage Deed nor the Mortgage Note are central to this claim. Once BVC defaulted on the payment of these debts, the deed and note became secondary to Sullivan's original loan from the Bank and his subsequent Assignment & Guarantee to the Bank of BVC's debt to him. Absent the Note and Deed, Sullivan is still liable for the $300,000 he withdrew and guaranteed. Therefore the Assignment & Guarantee and LCA form the basis of this litigation.

The contact points of the Assignment & Guarantee and the LCA favor New York as the state with the strongest contacts. The subject matter of the action is the outstanding debt on the $300,000 loan from the New York Bank. Both the Assignment & Guarantee and the LCA originated from the Bank. Payments were delivered and made to the Bank. At the time of contracting, the Bank had all of its branches and principal place of business in New York. Vermont had only limited contact with the parties and transactions; Sullivan was a Vermont resident at the time of contracting and the payments were written in and mailed from Vermont.

In evaluating the contact points of the Assignment & Guarantee and the LCA, "the place of making and the place of performance are entitled to substantial weight in the choice of applicable law." Pioneer, 127 Vt. at 233, 245 A.2d 891; Crocker v. Brandt, 130 Vt. 349, 351-52, 293 A.2d 541 (1972); Village of Morrisville Water & Light Dept. v. United States Fidelity & Guar. Co., 775 F.Supp. 718, 723 (D.Vt.1991). Both the LCA and the Assignment & Guarantee originated from and were delivered to the Bank. The Assignment & Guarantee was signed and executed in New York. The majority of the performance also took place in New York where payments on the loan were made and processed. In short, Sullivan's obligations were "made, delivered and payable" to the New York Bank. Pioneer, 127 Vt. at 233, 245 A.2d 891 (Massachusetts law applied to the promissory notes of Vermont residents since that is where "the notes were made, delivered and payable"). Because New...