Mattvidi Associates Ltd. Partnership v. NationsBank of Virginia, N.A.

• Decision Date: 01 September 1993
• Docket Number: No. 1327,1327
• Citation: 639 A.2d 228,100 Md.App. 71
• Parties: MATTVIDI ASSOCIATES LIMITED PARTNERSHIP, et al. v. NATIONSBANK OF VIRGINIA, N.A. ,
• Court: Court of Special Appeals of Maryland

Page 71

100 Md.App. 71

639 A.2d 228

MATTVIDI ASSOCIATES LIMITED PARTNERSHIP, et al. v. NATIONSBANK OF VIRGINIA, N.A.

No. 1327, Sept. Term, 1993.

Court of Special Appeals of Maryland.

April 7, 1994.

Roger C. Simmons (Edmund W. Law and Gordon & Simmons, on the brief), Frederick, for appellants.

William R. Naeher (Michele D. Lynch and Thompson, Hine and Flory, on the brief), Washington, DC, for appellee.

Argued before WILNER, C.J., and GARRITY and MOTZ, JJ.

MOTZ, Judge.

This is an appeal from the award of a large judgment by the Circuit Court for Montgomery County (McGuckian, J.) in favor of a bank and against a borrower and the guarantors of a loan made by the bank.

(i)

On November 8, 1988, Sovran Bank, N.A. (predecessor in interest to appellee, NationsBank of Virginia, N.A.) agreed to lend appellant, Mattvidi Associates Limited Partnership, $4,750,000 for the purpose of constructing two buildings in Waldorf, Maryland; all outstanding principal was to be repaid by November 8, 1990. The remaining appellants, Alan Landau, Peter Yeskel, Nathan and Pauline Wechsler, and various Wechsler trusts, guaranteed Mattvidi's repayment of the loan. The project fell several months behind schedule and it was impossible for appellants to secure permanent financing and pay off the bank's note when it matured on November 8, 1990. Appellants contacted the bank and indicated a desire to extend the loan. The bank and appellants negotiated as to terms of a loan extension during the fall and winter of 1990-1991. On February 7, 1991, pursuant to a request by the bank, appellants articulated the terms of their pending loan extension application in a formal, written proposal. The bank did not accept appellants' proposal; instead, the parties agreed on a different loan extension agreement, extending the loan until April 30, 1991.

Another proposal was submitted by appellants for a further loan extension based on different terms; it was not accepted by the bank but discussions continued between the bank and appellants. On August 19, 1991, the bank and all appellants executed a Pre-Workout Agreement formally allowing negotiations to go forward. In that document, appellants agreed, inter alia, "not to seek to admit as evidence, or as a basis for any claim against Lender, in any court of law ... any discussions undertaken ... pursuant to this letter agreement." Negotiations did continue for a short time, but ultimately the bank gave notice of default in a letter dated September 20, 1991.

Six weeks later, on November 4, 1991, the bank filed this action in the circuit court; the complaint was accompanied by a motion for summary judgment. On January 24, 1992, appellants filed an opposition to that motion, asserting: (1) that they needed discovery to verify the amount of their alleged debt; (2) that the late charge sought by the bank was an unenforceable penalty; and (3) that the bank's claim for attorneys' fees should be limited to those reasonably and actually incurred. Appellants simultaneously filed their answer, which asserted that the Complaint failed to state a claim upon which relief could be granted and included a Rule 2-323(d) general denial; it also restated their late charge and attorneys' fees defenses. Appellants moved for partial summary judgment on the late charges. On February 5, 1992, the circuit court issued its trial date notice providing for: (1) the calendar call on March 24, 1993, (2) discovery to be concluded no later than 45 days prior to the calendar call or by February 7, 1993 and (3) trial to begin on April 5, 1993.

In an attempt to further continuing workout discussions, the parties mutually agreed on numerous occasions between January 29, 1992 and November 18, 1992 to postpone the hearing on their motions for summary judgment and to delay responses to discovery. In early December, 1992, the bank stated its intention to decline appellants' loan request and to prosecute this litigation; deposition notices were served by the bank, and it answered outstanding discovery requests propounded by appellants. On December 23, 1992, new counsel (appellants' third law firm) entered an appearance on behalf of appellants and moved for a continuance of the summary judgment hearing, which was then scheduled for January 14, 1993. New defense counsel asserted he needed time to assess additional defenses, and/or counterclaims, including those based on possible violations of the Equal Credit Opportunity Act, 15 U.S.C. § 1691-1691f ("the ECOA"). The circuit court granted a continuance until February 23, 1993.

On January 8, 1993, four days after securing this continuance, appellants served the bank with document requests to elicit the facts assertedly necessary to appellants' defense and counterclaim theories. Although this document request required the bank to respond by a date after the discovery deadline, the bank did respond and produced 3500 pages of documents; the bank, however, withheld internal documents relating to the loan and appellants' loan extension application, which appellants asserted they needed to develop their new defenses. On February 16, 1993, appellants filed a supplemental memorandum in opposition to the bank's motion for summary judgment; this was the first filing that set forth the basis of their additional defenses, including a defense based on the ECOA.

On February 22, 1993, appellants moved for (1) another continuance of the summary judgment hearing, scheduled for the next day, February 23, (2) a continuance of the trial, scheduled for April 5, 1993, and (3) production of the bank's internal documents. Appellants also filed a pleading entitled "Amended Answer and Counterclaim." In fact, the answer itself was identical to that filed a year earlier on January 24, 1992; appended to the old answer was a new counterclaim, adding claims predicated on ECOA and fraud. All appellants' motions were opposed by the bank and the bank filed a motion to strike the counterclaim.

The motion to continue the summary judgment hearing was denied and the hearing was held, as scheduled on the next day, February 23, 1993. At that hearing, the circuit court denied the bank's motion to strike appellants' supplemental memorandum in opposition to summary judgment. Instead, the court considered the arguments made in that supplemental memorandum along with all other summary judgment arguments and, ultimately, denied all summary judgment motions.

On March 24, 1993, appellants' motion to continue the trial was denied. A week later, on March 30, 1993, the circuit court granted in part appellants' motion to compel, and directed the bank to produce some of its internal documents. The next day, March 31, 1993, the court granted the bank's motion to strike appellants' counterclaim. Appellants were granted leave to reassert those claims as affirmative defenses, if approved by the trial judge.

Immediately prior to trial on April 5, 1993, appellant asked the trial judge (a different member of the circuit court) to reconsider the March 31, 1993 order to strike the appellants' counterclaim, or, in the alternative, to grant appellants leave to file a true amended answer, which would have restated their ECOA and fraud counterclaims as affirmative defenses. The trial court denied appellants' motions.

Trial commenced that afternoon. After a two and one-half day bench trial, Judge McGuckian found in favor of the bank and entered judgment against each of the appellants for $3,135,412.33 in principal, $519,290.26 in accrued interest through and including April 5, 1993, and late charges in the amount of $156,770.61. On May 13, 1993, the bank filed its application for attorneys' fees, which appellants opposed. On July 9, 1993, after a hearing on the application, the circuit court awarded the bank $97,212.90 in attorneys' fees and $10,133.63 in related litigation expenses. Appellants noted an appeal on July 23, 1993. ¹

Appellants raise seven questions before us:

1. Whether the lower court erred in striking appellants' February 22, 1993 amended answer and counterclaim the substance of which was communicated to the Bank more than three months before trial?

2. Whether the lower court erred in denying appellants' April 5, 1993 request for leave to file an amended answer?

3. Whether the lower court erred in precluding all testimony concerning the parties post-September 4, 1991 loan extension discussion pursuant to a Pre-Workout Agreement that was not supported by consideration?

4. Whether the lower court erred in admitting NationsBank's computer-generated loan reconstruction, particularly without affording appellants an opportunity to review underlying source documents that were responsive to appellants' long-standing discovery requests and present in the courtroom during trial?

5. Whether the lower court erred in failing to find that NationsBank breached its duty to mitigate the damages resulting from the Guarantor Appellants' alleged breach of their Guaranty?

6. Whether the lower court erred in failing to find that the late charge provision contained in the Mattvidi Note was an unenforceable penalty?

7. Whether the lower court erred in awarding NationsBank the full amount of requested attorneys' fees and related litigation expenses because the Bank deliberately refused to supplement its responses to appellants' long-standing discovery requests, and did not produce a critical witness at a July 9, 1993 hearing in order to frustrate appellants' ability to test the merits of the Bank's claim for attorneys' fees?

(ii)

The first and second arguments urged by appellants--their principal arguments in this Court--are variations on a common theme, i.e., the circuit court "abused its discretion" in not permitting them to file a counterclaim or an amended answer. Appellants maintain that the lower court erred first on March 31 in striking their counterclaim and second on April 5 in refusing to permit them to file an amended answer. ...