Newton v. First Union Nat. Bank

• Decision Date: 03 May 2004
• Docket Number: No. 01-CV-6283.,01-CV-6283.
• Citation: 316 F.Supp.2d 225
• Parties: James B. NEWTON and Philadelphia Maintenance Co., Inc. Plaintiffs, v. FIRST UNION NATIONAL BANK<SMALL><SUP>1</SUP></SMALL> Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

316 F.Supp.2d 225

James B. NEWTON and Philadelphia Maintenance Co., Inc. Plaintiffs, v. FIRST UNION NATIONAL BANK¹ Defendant.

No. 01-CV-6283.

United States District Court, E.D. Pennsylvania.

May 3, 2004.

COPYRIGHT MATERIAL OMITTED

Anthony J. Mazullo, Jr., Mazullo & Murphy, P.C., Doylestown, PA, Kevin J. Murphy, Stengel Moyer & Mazullo PC, Doylestown, PA, Robert M. Stengel, Robert M. Stengel, PC, Doylestown, PA, for Plaintiffs.

Douglas H. Riblet, Curtin & Heefner, LLP, Philadelphia, PA, John J. Hart, Curtin & Heefner, Morrisville, PA, Daniel P. Mazo, Curtin & Heefner, LLP, Morrisville, PA, for Defendants.

MEMORANDUM AND ORDER

ANITA B. BRODY, District Judge.

Plaintiffs James B. Newton ("Newton"), an African American, and Philadelphia Maintenance Inc. ("PMC"), a corporation of which Newton is the president and sole shareholder, bring this action against First Union National Bank² [hereinafter "the Bank"] alleging that the Bank improperly demanded repayment of a line of credit ("Line of Credit") issued to PMC on October 19, 1995, ultimately obtaining a confessed judgment against Newton for the outstanding amount under the Line of Credit. Plaintiffs further allege that the Bank breached an agreement to make a certain advance to PMC under the Line of Credit.

The following three causes of action remain³: (1) claim by Newton for racial discrimination in violation of 42 U.S.C. § 1981 in connection with the Bank's following actions: demanding repayment of the Line of Credit, refusing to extend additional credit, and entering judgment against Newton personally; (2) claim by Newton and PMC for lack of good faith and fair dealing in connection with the Bank's following actions: demanding repayment of the Line of Credit, refusing to give PMC a certain advance under the Line of Credit, and entering judgment against Newton personally; (3) claim by PMC for breach of contract in connection with the Bank's alleged refusal to make a certain advance under the Line of Credit.⁴ Presently before this court is the Bank's motion for summary judgment on all counts. For the reasons that follow, the Bank's motion is granted.

I. Factual Background⁵

As previously stated, PMC is a corporation of which Newton, an African-American, is the president and sole shareholder. (Newton 6/6/02 Dep. at 3.) At all relevant times, PMC was engaged in the business of providing janitorial services to institutional customers, primarily to the United States government. (Pl.'s Resp. to Def.'s Mot. for Summ. J. at 1.) In order to obtain government contracts, PMC had to engage in a competitive bidding process. The bidding process included the requirement that PMC identify a financial reference and funding source. (Newton 11/7/02 Dep. at 27.) In addition to requiring a financial reference for the purpose of procuring new contracts, PMC's relationship with financing institutions was also important for the purpose of financing startup contracts in which PMC was to perform work prior to payment. (Pl.'s Resp. at 1.) To this end, PMC began its relationship with the Bank in approximately 1988 or 1989 when PMC was initially issued a line of credit. (Newton 6/6/02 Dep. at 6, 8.) From 1989 until the time of this suit, PMC never missed a payment on any loan issued by the Bank. (Pl.'s Resp. at 1.)

A. PMC Line of Credit

As of 1995, Theresa DiCamillo ("DiCamillo"), then a vice president at the Bank, was the officer primarily responsible for the Bank's relationship with PMC. (Def.'s Mot. for Summ. J. ¶ 10.) On October 19, 1995, Newton, as President of PMC, executed a Master Demand Note which governed PMC's Line of Credit with the Bank. (Id., Ex. C (Master Demand Note).) Most pertinently, the Master Demand Note contained, inter alia, the following provisions:

NOTE NOT A COMMITMENT TO LEND — Borrower acknowledges and agrees that no provision hereof, and no course of dealing by Bank in connection herewith, shall be deemed to create or shall imply the existence of any commitment or obligation on the part of Bank to make Loans. Except as otherwise provided in a currently effective written agreement by Bank to make Loans, each Loan shall be made solely at Bank's discretion.

. . . . .

DEMAND NOTE — This note is and shall be construed as a "demand instrument" under the Uniform Commercial Code. Bank may demand payment of the indebtedness outstanding under this Note or any portion thereof at any time.

(Id.) According to the Master Demand Note, "loans" were defined as "loans and advances made by Bank evidenced by this [Master Demand] Note." (Id.) Furthermore, the maximum principal amount of the Line of Credit under the Master Demand Note was $350,000. (Id.) Under the Master Demand Note, PMC was the borrower. (Id.)

B. The Guaranty

In addition to the Master Demand Note, Newton also signed a Guaranty ("Guaranty") on October 19, 1995. (Id., Ex. D (Guaranty).) The Guaranty provided, in pertinent part, that Newton, as Guarantor, guaranteed the payment, performance and satisfaction when due of all "Obligations," defined as "all existing and hereafter incurred or arising indebtedness, obligations and liabilities of the Obligor to the Bank." (Id.) The Guaranty defined the "Obligor" as PMC. (Id.) Furthermore, the Guaranty provided that "[p]ayment by each Guarantor is due upon demand by Bank and is payable in immediately available funds in lawful money of the United States of America." (Id.) Under the terms of the Guaranty, Newton, as an individual, personally guaranteed the obligations of PMC. The Guaranty also contained a clause, otherwise known as a "warrant of attorney," authorizing any attorney or clerk of court to confess judgment against Newton "upon the occurrence of a default or an Event of Default under or in connection with any of the Obligations, or at any time thereafter." (Id.)

In conjunction with the Guaranty, Newton signed an "Explanation and Waiver of Rights Regarding Confession of Judgment," which included the following information:

The Obligor is agreeing that the Bank may enter this judgment and understands that the Obligor will be unable to contest the validity of the judgment, should the Bank enter it, unless the Obligor successfully challenges entry of the judgment through a petition to open or strike the judgment

(Id., Ex. D (Explanation and Waiver of Rights Regarding Confession of Judgment).) Under the terms of the "Explanation and Waiver of Rights Regarding Confession of Judgment," Newton was identified as the "Obligor." (Id.)

C. The Credit Freeze

According to plaintiffs, in 1998 through 1999, "PMC lost some contracts. PMC's tax returns showed accounting losses for PMC due to accounting changes and as Newton withdrew significant compensation." (Pl.'s Resp. at 2.) According to accountant reviewed financial statements, PMC showed net losses of $123,463 and $218,852, for fiscal years 1998 and 1999 respectively. (Def.'s Mot. for Summ. J. ¶ 20 (citing Wennemer Aff., Ex.s 1, 7).)

In December 1998, the Bank notified PMC that the Line of Credit was "frozen." (Newton 6/6/02 Dep. at 17.) In other words, the Line of Credit was thereafter limited to $250,000, roughly the amount which had already been lent to PMC by the Bank as of December 1998. In his deposition, Newton stated that the Bank froze the Line of Credit due to PMC's poor financial performance, a concern that had been expressed to Newton previously that year. (Id. at 61.)

Also at the end of 1998, PMC bid on a prospective contract with the Jacksonville Naval Air Station ("Jacksonville Contract") which was projected to generate $25,000 of net profit per month. (Pl.'s Resp. at 2.) According to plaintiffs, "with [the Bank's] consent, PMC identified [the Bank] in its bid as PMC's financial reference and funding source for this contract." (Id.) In this regard, in their response to the Bank's motion for summary judgment, plaintiffs contend that "PMC's representatives received repeated oral assurances and promises from Terri DiCamillo ... that if this contract were awarded, the $100,000 "frozen" unused amount on the [Line of Credit] would be released to fund the start-up costs on this Jacksonville Contract." (Id.)⁶ Although plaintiffs represent these facts as true, they offer no evidentiary support for this contention. In fact, Newton's deposition belies this fact:

Question: Had [DiCamillo] prior to the time that you faxed notice of the award [of the Jacksonville Contract] to her said something indicating to you that she would provide you with additional money for that contract?

Answer: Yeah, comments like, you know, get the job and then, you know, we'll review it.

(Newton 6/6/02 Dep. at 21) (emphasis added).

After PMC was awarded the Jacksonville Contract, Newton faxed a copy of the award to DiCamillo and spoke with her. (Id. at 23.) According to Newton, during that conversation, DiCamillo informed Newton not only that the Bank would not fund the Jacksonville Contract, but also that PMC's account had been transferred to the "work-out department," which plaintiffs now identify as the Special Asset Management group, or "SAM." (Id. at 24, 71; Pl.'s Resp. at 2-3). The SAM was a unit within the Bank "responsible for managing the Bank's credit relationships with borrowers whose credit facilities were classified as `distressed.'" (Def.'s Mot. for Summ. J. ¶ 32.)

On October 12, 1999, Newton and Keith Harris ("Harris"), PMC's Controller, met with DiCamillo and Tom Young ("Young"), another Bank employee who worked in the SAM group. (Newton 6/6/02 Dep. at 80.) While many of the specific exchanges between the parties at the meeting are contested, it is undisputed that Young informed Newton that the Bank intended to end its banking relationship with PMC and that the Bank expected immediate repayment of the funds already extended to PMC under the Line of Credit. (Id. at 91, 97; Harris Dep. at 172, 175, 177, 179.) According to Newton, Young refused to consider any of Newton's proposals regarding repayment of the...