In re Gorman
| Decision Date | 07 February 2002 |
| Docket Number | No. 2:98-cv-301.,Adversary No. 98-1046.,Adversary No. 98-1072.,Bankruptcy No. 98-10293fgc.,2:98-cv-301. |
| Citation | 274 B.R. 351 |
| Court | U.S. District Court — District of Vermont |
| Parties | In re Robert GORMAN, Debtor. Robert Gorman, Plaintiff, v. Marcon Capital Corp. and Todd Enright, Defendants. Marcon Capital Corp., Plaintiff, v. Robert Gorman, Defendant. |
Robert Francis O'Neill, Gravel and Shea, Burlington, VT, for Marcon Capital Corporation, Todd Enright.
Marcon Capital Corp. ("Marcon") sued Robert Gorman ("Gorman") in Vermont state court alleging breach of a financing agreement and received an attachment on Gorman's real property. Subsequently Gorman filed for bankruptcy and brought suit against Marcon and Todd Enright ("Enright"), one of its principals, claiming breach of contract, fraud, negligence in lending, intentional infliction of emotional distress, tortious breach of the duty of good faith and fair dealing, and tortious interference with contractual relationships. This Court withdrew the reference of both proceedings to Bankruptcy Court for the District of Vermont and consolidated the cases in this Court for trial. Gorman has filed for partial summary judgment on his breach of contract claim1 against Marcon, based on Marcon's alleged violation of the Vermont Licensed Lender Act (Paper 50). Marcon has also filed for summary judgment in its breach of contract action against Gorman (Paper 55). For the reasons discussed below, the Court GRANTS in part and DENIES in part Gorman's motion for partial summary judgment and GRANTS in part and DENIES in part Marcon's motion for summary judgment.
The following facts are undisputed. In 1997 Gorman was the proprietor of Green River Rodmakers ("GRR"), a Vermont business engaged in crafting and selling fly-fishing rods. At that time Gorman was in need of capital for use by GRR. In order to procure such capital he posted notices on the Internet and an advertisement in the New York Times. Gorman received a telephone response from Marcon through Enright in April 1997. Marcon is a Connecticut corporation that provides emerging small businesses with financing and capital. Marcon is a federal licensee under the Small Business Investment Act of 1958. Enright is a vice-president of Marcon and a resident of Hinsdale, New Hampshire.
Shortly after speaking with Enright, Gorman met with Enright and Robert Mahoney, also a vice-president of Marcon. During that meeting Marcon requested additional financial data on GRR which Gorman delivered the following week.
On June 18, 1997 Gorman executed and returned to Marcon a form entitled "Request and Application for Capital for Green River Rodmakers." . In early July 1997, Marcon provided Gorman with a preliminary agreement proposing terms for financing (a "term sheet agreement"). (Paper 53, Ex. B).
Several days later Gorman met with Enright. During this meeting Gorman indicated that GRR was behind on the payment of two loans. Shortly thereafter, in the middle of July 1997, Marcon provided Gorman with a revised term sheet agreement, which Enright and Gorman then discussed. On September 8, 1997 Gorman signed a second revised term sheet agreement. Included with the signed term sheet agreement was a rider in which Gorman added additional terms.
In the term sheet agreement signed by Gorman, Marcon proposed providing total financing of $300,000 for use by GRR. It identified GRR as "a corporation to be organized under the laws of the State of Vermont with its principal place of business in Brattleboro, Vermont 05301." Term Sheet Agreement ¶ 1. The financing was to "be used to repay existing obligations owed by Robert Gorman, d/b/a Green River Rodmakers, to The First Vermont Bank and Trust Company." Term Sheet Agreement ¶ 12.
The first $50,000 of the financing was to be provided through a debenture purchase agreement.2 Term Sheet Agreement ¶ 3(a). An additional $250,000 was to be advanced according to a loan agreement. Term Sheet Agreement ¶ 3(b). The term sheet agreement detailed the interest payments and collateral required for the debenture purchase and loan agreements, the date of closing for both, Gorman's prepayment rights, and various conditions precedent to the closings. Term Sheet Agreement ¶¶ 6, 7, 11, 13, 15. It required Gorman to pay a break-up fee of $15,000 if he failed to close with Marcon because he had arranged any portion of the $300,000 through another source. Term Sheet Agreement ¶ 18. Gorman was also required to reimburse Marcon for legal fees and other expenses incurred by Marcon in connection with the transaction. Term Sheet Agreement ¶ 19. Finally, the term sheet agreement contained the following disclosure in bold upper case lettering above the signature line:
This term sheet is intended for use only as the basis for continued discussions between GRR and [Marcon], and does not constitute an agreement, commitment, contract or an offer to enter into an agreement or contract and shall not be deemed to obligate [Marcon] in any manner whatsoever....3
Enright contacted Gorman a few days later and the two discussed the closing of the financing agreements between Marcon and GRR. On or about September 13, 1997 Enright called Gorman and stated that the closing would occur in Connecticut. At some point in September Marcon provided Gorman's attorney with a letter "intended to confirm certain circumstances in connection with the proposed loan by [Marcon] to [Gorman]." Draft Letter from Gorman to Enright of 9/97 ("Enright Letter") at 1 (Paper 53, Ex. C). The letter was to be signed by Gorman and addressed to Enright. The letter addressed Gorman's solicitation of financing and Marcon's initial phone contact with Gorman. It also included a statement to be made by Gorman that "[a]lthough Marcon has conducted various due diligence investigations and meetings with [GRR] in Vermont, [GRR] understands and agrees that Marcon's making of loans to it does not constitute the conduct of business in Vermont by Marcon." Id. at 2.
Subsequently, at Gorman's request, Marcon provided Gorman $3000 for expenses associated with a trade show he planned to attend. Upon his return from the trade show, Gorman again met with Enright and the two discussed a "lockbox" provision4 Marcon had included in the financing agreements that would be signed at closing. Enright informed Gorman that the lockbox provision was a standard provision included in financing contracts. Gorman then stated that he would not sign the loan agreement. On October 17, 1997, Marcon obtained a writ of attachment for $22,562.18 on Gorman's real property in Brattleboro, Vermont. Marcon Capital Corp. v. Gorman, No. 2:428-10-97 Wmc (Vt.Sup.Ct. Oct. 17, 1997) (Order of Approval for Non-Possessory Writ of Attachment). The total attachment amount is based on Marcon's claim for $3,500 in expenses and $4,062.18 in legal fees associated with the transaction, as well as the $15,000 break-up fee. Enright Aff. ¶¶ 7, 9, 10 (Paper 51).
At the time Marcon became acquainted with Gorman, and throughout all of these events, Marcon did not hold a license to lend in Vermont. During all of these events Marcon was also aware of the licensing requirement for lenders. Enright Aff. ¶ 3 (Paper 53). At some point during these events, Marcon had applied to the Vermont Banking, Insurance, Securities, and Health Care Administration (hereinafter "BISHCA") for a license to lend. However, Marcon's application was rejected on the basis that Marcon did not meet the requirement that "the financial responsibility, experience, character, and general fitness of [Marcon] are such to command the confidence of the community and warrant the belief that the business will operate honestly, fairly, and efficiently within the purposes" of Title 8, Chapter 73 of the Vermont Statutes. Defs.' Resp. to Reqs. to Admit and Related Interrog. (hereinafter ) at 2 (Paper 51).
Summary judgment should be granted when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). When considering two opposing motions for summary judgment, the Court follows the same standard and need not grant either side's motion. Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 313-314 (2d Cir.1981).
A fact is material when it affects the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue as to a material fact exists when the evidence requires a factfinder to resolve the parties' differing versions of the truth at trial. Id. at 249, 106 S.Ct. 2505 (citing First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)). The moving party has the initial burden of coming forward with those parts of the record it feels demonstrate an absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The non-moving party must then "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). When evaluating a motion for summary judgment, the court is required to view the evidence in the light most favorable to the nonmoving party. Dister v. Cont'l Group, Inc., 859 F.2d 1108, 1114 (2d Cir.1988).
The Vermont Licensed Lender Act (the "LLA") provides that "[n]o person shall without first obtaining a license under this chapter ... (1) engage in the business of making loans of money, [or] ... contract for or receive on any such loan interest, a finance charge, discount or consideration therefor[.]" Vt. Stat. Ann. tit. 8, § 2201(a)(1) ...
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