SUBURBAN TRUST AND SAV. v. University of Delaware

• Decision Date: 29 December 1995
• Docket Number: Civil Action No. 94-665 MMS.
• Parties: SUBURBAN TRUST AND SAVINGS BANK, an Illinois Savings Bank, Plaintiff, v. The UNIVERSITY OF DELAWARE, a corporation organized under the laws of the State of Delaware, Defendant.
• Court: U.S. District Court — District of Delaware

910 F. Supp. 1009

SUBURBAN TRUST AND SAVINGS BANK, an Illinois Savings Bank, Plaintiff, v. The UNIVERSITY OF DELAWARE, a corporation organized under the laws of the State of Delaware, Defendant.

Civil Action No. 94-665 MMS.

United States District Court, D. Delaware.

December 29, 1995.

COPYRIGHT MATERIAL OMITTED

Frederick L. Cottrell, III, Esq., of Richards, Layton & Finger, Wilmington, Delaware; Of Counsel: Richard W. Burke, Esq., and Andrew D. James, Esq., of Burke, Warren & MacKay, P.C., Chicago, Illinois; attorneys for plaintiff.

Daniel F. Wolcott, Jr., Esq., and Linda S. Kranitz, Esq., of Potter Anderson & Corroon, Wilmington, Delaware; attorneys for defendant.

OPINION

MURRAY M. SCHWARTZ, Senior District Judge.

I. INTRODUCTION

Plaintiff Suburban Trust and Savings Bank ("Suburban Trust" or "Bank"), an Illinois corporation, filed this diversity action on December 13, 1994, alleging breach of contract against defendant The University of Delaware ("University"), a Delaware corporation. Before the Court are the parties' cross-motions for summary judgment, Docket Items ("D.I.") 10, 33; the Court held oral argument in this matter on October 4, 1995. For the reasons set forth below, the Court will deny plaintiff's motion for summary judgment and grant defendant's motion for summary judgment. Jurisdiction is invoked pursuant to 28 U.S.C. § 1332; venue is proper under 28 U.S.C. § 1391(a).

II. FACTUAL BACKGROUND

In 1993, the University of Delaware entertained bids from two vendors for the provision of round-the-clock, 7 day per week computer services. Affidavit of Victoria Windley, D.I. 25, Exh. 3. After some negotiation, the University agreed for these services to be provided by Enterprise Computer Services, Inc. Enterprise initially tendered a 36 month contract characterizing the service agreement as a lease; the contract also included a clause that provided that Enterprise could, without the University's consent, assign the contract to a third party. Id. After some negotiation, the terms were changed to reflect the contract's nature as a maintenance and service agreement, rather than a lease. The contract was also changed to provide that the contract could be assigned only upon the mutual consent of both the University and Enterprise. Id. The parties consummated their agreement on June 16, 1993.

The maintenance contract obligated the University to pay Enterprise a monthly payment of $8,028 on the first day of each month, for 36 months, from July 1, 1993, to June 30, 1996. The contract also contained a waiver of defense clause, providing:

All amounts payable by the University under this Agreement shall be absolute and unconditional and shall not be subject to any defense, setoff, counterclaim, or recoupment for any reason whatsoever, and such amounts shall be and continue to be payable in all events.

D.I. 25, Exh. 1, ¶ 3. The contract further provided that "if an Enterprise Event of Default occurs, the University may, sic take action against Enterprise to the full extent provided by law." Id. at ¶ 10(b).

By the time the contract went into effect, July 1, 1993, the University paid the first payment of $94,409.28. This payment was an advance for maintenance services of an agreed list of computer equipment owned by the University. In addition, Enterprise was to "donate" and maintain one more processor to the University. Id.

During that summer, Victoria R. Windley, the University's Director of Purchasing, was approached by Jack McMahon of Harbor Capital about possible assignment of the University's payment obligations to a third party. Id. Accordingly to Windley, she inquired specifically about the ramifications of an assignment, i.e., whether assignment would have any effect other than to merely change to whom the University would send payment for services provided. Id. An agreement was tendered notifying the University that Enterprise was granting a security agreement and assignment of the University contract to Suburban Trust and Savings. The assignment agreement included the following language:

Customer University, by signature below, acknowledges and agrees that: Customer's obligations to make all Payments under the agreement and the rights of Suburban Trust in and to such amounts, shall be absolute and unconditional and shall not be subject to any abatement, reduction, setoff, defense, counterclaim or recoupment whatsoever. ...

Notice and Agreement for Assignment of Enterprise Contract, D.I. 25, Exh. 2. Although this contractual language was contrary to her understanding of what the assignment meant, for reasons unknown, Windley signed the second agreement allowing assignment of the stream of payments to Suburban Trust. She now claims that she did not understand the agreement to mean that the University would have to pay even if Enterprise failed to provide the services it had agreed to furnish. D.I. 25, Exh. 3.

In the spring of 1994, the University learned that Enterprise was no longer a going concern and thus would not be providing further services to the University under its contract. Id. The University subsequently contracted with another vendor for computer maintenance services. Id.

Suburban Bank and Trust, as assignee, posits that under the terms of the assignment agreement, the University has an absolute obligation to continue payment on the Enterprise service contract. The Bank has prayed for damages in the amount of $187,686.44 as the amount owed for the remaining months of service,¹ appropriate delinquency charges, and attorney's fees and costs.

III. DISCUSSION

A. Summary Judgment Standard— Cross Motions for Summary Judgment

Both sides have moved for summary judgment. Under the Federal Rules of Civil Procedure, the Court shall grant a motion for summary judgment if it determines "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the initial burden of demonstrating that it should prevail under Rule 56(c), see Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986), which can be accomplished by simply pointing out to the Court that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986); see also Peters Township School Dist. v. Hartford Acc. & Indem. Co., 833 F.2d 32, 34 (3d Cir.1987). In opposition, the nonmoving party must come forward with evidence supporting a claim that there is a genuine issue of material fact in dispute which requires resolution by the trier of fact. First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968).

An issue is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "Material facts" are those which, under applicable substantive law, might affect the outcome of the case. Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir.1994) (citing Anderson, 477 U.S. at 248, 106 S.Ct. at 2510). All reasonable doubts and inferences must be resolved in favor of the nonmoving party when reviewing each motion for summary judgment. "The nonmovant's allegations must be taken as true and, when these assertions conflict with those of the movant, the former must receive the benefit of the doubt." Valhal Corp. v. Sullivan Assoc., Inc., 44 F.3d 195, 200 (3d Cir.1995) (quoting Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977)). In drawing these inferences, the Court may not make credibility determinations or weigh evidence. Petruzzi's IGA Supermarkets v. Darling-Delaware, 998 F.2d 1224, 1230 (3d Cir.), cert. denied, ___ U.S. ___, 114 S.Ct. 554, 126 L.Ed.2d 455 (1993).

These standards do not change when the parties file cross motions for summary judgment. Southeastern Pa. Transportation Auth. v. Pennsylvania Pub. Util. Comm'n, 826 F.Supp. 1506, 1512 (E.D.Pa.1993), aff'd mem., 27 F.3d 558 (3d Cir.1994), cert. denied, ___ U.S. ___, 115 S.Ct. 318, 130 L.Ed.2d 279 (1994). When faced with cross motions for summary judgment, the Court must consider the motions independently. Williams v. Philadelphia Hous. Auth., 834 F.Supp. 794, 797 (E.D.Pa.1993), aff'd mem., 27 F.3d 560 (3d Cir.1994). In short, the Court's inquiry for each motion is directed at "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2507.

B. Choice of Law

As a threshold matter, a federal court sitting in diversity must address the issue of what law governs the rights and liabilities of the parties before it. In so doing, the Court looks to the substantive law of the forum state in which it sits, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); the forum state's choice of law doctrine is included within its substantive law, Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Kruzits v. Okuma Machine Tool, Inc., 40 F.3d 52, 55 (3d Cir.1994). Because the issues at summary judgment turn on contract construction, the Court must examine Delaware's choice of law provisions for matters sounding in contract. Delaware has adopted the "most significant relationship test" as the choice of law rule relevant to the instant issues. Travelers Indem. Co. v. Lake, 594 A.2d 38 (Del.1991); Oliver B. Cannon and Son, Inc. v. Dorr-Oliver, Inc., 394 A.2d 1160, 1166 (Del.1978).

In this case, however, the contract at issue contains language mandating that the agreement be "interpreted and the rights and liabilities of the parties hereto determined, in accordance...