Panasonic Communications & Systems Co. v. State, Dept. of Admin., Bureau of Purchases
| Decision Date | 13 March 1997 |
| Docket Number | KEN-96-118 |
| Citation | 691 A.2d 190 |
| Parties | PANASONIC COMMUNICATIONS & SYSTEMS CO. v. STATE of Maine, DEPARTMENT OF ADMINISTRATION, BUREAU OF PURCHASES. Docket: |
| Court | Maine Supreme Court |
Andrew M. Horton (orally), Seth W. Brewster, Verrill & Dana, Portland, for plaintiff.
Andrew Ketterer, Attorney General, H. Cabanne Howard, Asst. Atty General (orally), Augusta, for defendant.
Before WATHEN, C.J., and GLASSMAN, RUDMAN, and LIPEZ, JJ.
¶1 Panasonic Communications & Systems Co. ("Panasonic") appeals from the judgment entered in the Superior Court (Kennebec County, Atwood, J.), pursuant to M.R.Civ.P. 56(c), denying its motion for a summary judgment and granting a summary judgment for the State of Maine's Department of Administration, Bureau of Purchases ("the State"). Panasonic contends that the trial court erred in ruling that a letter agreement between OASYS, Inc. ("OASYS"), Panasonic, and the State was not a valid contract, and in finding that Panasonic was not a third-party beneficiary of the contract between OASYS and the State for the supplying of photocopy services. Panasonic also contends that the court erred in granting a summary judgment to the State on Panasonic's promissory estoppel claim because it was not properly before the court on the motion for a summary judgment or, in the alternative, because there remains a factual dispute over whether Panasonic detrimentally relied on the State's promise to send payments to an escrow account for its benefit. We disagree with Panasonic's contentions and affirm the summary judgment.
¶2 In January 1990, the State executed a purchase order contract with OASYS to lease photocopy equipment, supplies, and services in return for monthly payments based on the amount of photocopies made. Although Panasonic was not a party to this agreement, OASYS purchased the necessary copiers from Panasonic in February 1990 on credit and agreed to make monthly payments to Panasonic from the funds OASYS received from the State. That agreement required OASYS to establish an escrow account in which Panasonic would have a security interest and to make "arrangements with the State of Maine to deposit all such copier payments only in such account." As the Escrow and Pledge Agreement dated March 23, 1990, between OASYS, Panasonic, and Key Bank recites: "By letter dated February 7, 1990 ..., Panasonic agreed to sell to OASYS, and OASYS agreed to buy, certain plain paper copiers in connection with the lease or rental of such copiers to the State of Maine...." 1
¶3 OASYS also borrowed $100,000 from Key Bank to finance its venture, and both Panasonic and Key Bank retained security interests in the funds OASYS received from the State. The Escrow and Pledge Agreement between OASYS, Panasonic, and Key Bank states in pertinent part:
As additional security for the payment of the Monthly Billing Amount and for any obligations owed to Panasonic as a result of the assumption by Panasonic of any service obligations of OASYS to the State of Maine, OASYS has agreed to grant to Panasonic a security interest in all accounts and contract rights arising from the Purchase Order [contract between OASYS and the State]. OASYS has further agreed to cooperate in establishing ... a separate escrow pledge account, ... for the purpose of accepting all payments for copiers from the State of Maine pursuant to the Purchase Order ..., and has agreed to grant Panasonic a security interest in the Escrow Funds.
The State was not a party to this Escrow and Pledge Agreement.
¶4 On May 3, 1990, three days after OASYS was to have delivered the photocopying machines to the State, OASYS President Kevin Cloutier called Bureau of Purchases Director Richard B. Thompson, Jr. to arrange the escrow payments with the State. According to Thompson, Cloutier told him that he needed written assurance that the State would make the monthly payments to the escrow account to protect the interests of Panasonic before OASYS could secure the necessary financing and access to the Panasonic machines. Panasonic asserts that its plea for this assurance was due to the fact that by early May
the agreement between the State and OASYS was on the brink of unraveling. OASYS's suppliers, including Panasonic, were concerned about OASYS's ability to pay and, consequently, whether they would be paid. Panasonic was willing to rescue the agreement between OASYS and the State--and supply copiers to OASYS for the benefit of the State--as long as the State promised that Panasonic would be paid.
These assertions about an unanticipated crisis contradict the terms of the March Escrow and Pledge Agreement indicating that payment by the State into an escrow account was a condition of Panasonic's performance almost from the beginning of its contractual relationship with OASYS.
¶5 On May 3, subsequent to Cloutier's call to Thompson, the State signed a letter agreement dated March 23, 1990, which provides that the monthly payments would be made payable to OASYS but sent to the escrow account rather than to OASYS directly. The letter agreement stated:
As inducement to both Panasonic and Key Bank for assistance in this project, OASYS has granted to [them] a security interest in the funds due under the above-referenced purchase order.... In connection with this, an escrow account has been established at Key Bank.
Although the letter agreement specified that the State could "request Panasonic to assume the servicing obligations" should OASYS fail to perform the contract for the photocopy services, Thompson expressly deleted that paragraph before signing the letter.
¶6 To facilitate the payments to the escrow account, OASYS was to affix a label to each invoice indicating that payment was to be made to the escrow account. OASYS failed to place such labels on the April and May 1991 invoices, and the State therefore issued those two checks directly to OASYS in the total amount of $170,595.89. According to Thompson, the State official responsible for issuing the checks was contacted by an OASYS staffer, "who asked to pick up each of the two checks in question personally." Succeeding payments were made to the escrow account until OASYS declared bankruptcy under Chapter 7 of the U.S. Bankruptcy Code and became unable to perform the balance of the contract.
¶7 In 1992 Panasonic sued OASYS to collect funds in excess of $1.5 million. In the bankruptcy proceeding Panasonic obtained funds that had been held in the escrow account as well as an assignment from Key Bank of its interest in the escrow account. The two payments sent directly to OASYS, however, were never deposited into the escrow account. Panasonic's unsatisfied claim against OASYS still exceeds $1 million. In November 1994, Panasonic filed this breach of contract action, alleging that the State's failure to make the April and May 1991 payments to the escrow account was a breach of the letter agreement which damaged it in the amount of $170,595.89.
¶8 Panasonic moved for a summary judgment. The State also moved for a summary judgment and raised the defense of lack of consideration. In its reply brief Panasonic notified the court of its intent to move for leave to amend its complaint with a claim for promissory estoppel, which motion it filed along with an amended complaint in September 1995. Panasonic supported its request that the trial court consider the promissory estoppel claim with its assurance that there would be no undue delay. Instead of opposing Panasonic's motion to amend, the State argued against the application of estoppel on the merits at the summary judgment motion hearing.
¶9 In its order the court simultaneously granted Panasonic leave to amend its complaint, denied Panasonic's motion for a summary judgment and granted a summary judgment for the State, ruling on both the breach of contract and promissory estoppel claims. See M.R.Civ.P. 56(c). The court held that the letter signed by OASYS, Panasonic, and the State was not a valid contract because the State's promise to make payments to an escrow account lacked consideration from either OASYS or Panasonic; that the allegedly modified contract between OASYS and the State similarly was invalid and therefore created no obligation to a third-party beneficiary; that the court could consider a claim for promissory estoppel first raised in a memorandum in opposition to a motion for a summary judgment; and that because Panasonic failed to establish that the State's promise to pay the escrow account induced its detrimental reliance, the State could not be estopped from denying any obligation to Panasonic. We agree with these holdings.
¶10 In reviewing an appeal from a grant of a summary judgment, we view the evidence in the light most favorable to the party against whom judgment was entered and review the trial court's decision for errors of law. Gonzales v. Commissioner, Dep't of Public Safety, 665 A.2d 681, 682 (Me.1995). When there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law, we affirm. Id. at 682-83. The trial court does not decide any disputed factual questions. It determines only whether the record before it generates a genuine issue of material fact. Casco N. Bank, N.A. v. Edwards, 640 A.2d 213, 215 (Me.1994).
¶11 The letter agreement signed by Panasonic, OASYS, and the State did not create a contractual relationship between Panasonic and the State because neither OASYS nor Panasonic provided the necessary consideration. Whitten v. Greeley-Shaw, 520 A.2d 1307, 1309 (Me.1987). OASYS had a legal obligation to supply the State with photocopy services as of January 1990, and it provided no new consideration in exchange for securing the State's agreement to make payments to the escrow account. See, e.g., Wescott v. Mitchell, 95 Me. 377, 383, 50 A. 21 (1901) (...
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