Mikail v. PAM Management, Inc. et al
MEMORANDUM (Order to follow as separate docket entry).Signed by Honorable Malachy E Mannion on 4/12/17. (bs)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO. 3:15-2437
PAM MANAGEMENT, INC. and
DRUMS FUEL STOP, INC.,
Pending before the court is the motion for summary judgment of plaintiff
Samuel Mikail, (Doc. 38), pursuant to Fed.R.Civ.P. 56, with respect to his
breach of contract claims raised in his complaint, (Doc. 1), against defendants
PAM Management, Inc. (“PAM”), (Count I), and Drums Fuel Stop, Inc.
(“Drums”), (Count II). Plaintiff seeks judgment in his favor and against PAM
on his breach of contract claim in Count I in the principal amount of
$1,300,000. Regarding the breach of contract claim in Count II, plaintiff seeks
judgment in his favor and against Drums in the principal amount of $325,000.
Plaintiff contends that he is entitled to summary judgment since the
undisputed evidence shows that defendants failed to make the required
payments owed under the contracts to his assignor for the sale of her stock
shares in defendant truck stops and, since there is no clear and convincing
evidence that the parties agreed to oral modifications of the written contracts
postponing the payments which were due. Based upon the court’s review of
the motion and related materials, plaintiff’s motion for summary judgment will
be GRANTED since there are no disputed material facts that the written
contracts were breached and since the evidence is not sufficient to prove that
the contracts were orally modified to allow for annual postponements of the
monies due under them.
Plaintiff is an adult individual residing in London, United Kingdom.
Defendant PAM is a Pennsylvania corporation with an address of Hickory Run
Travel Plaza, Interstate 80, Exit 274, White Haven, PA 18661. Defendant
Drums is a Pennsylvania corporation with an address of Hickory Run Travel
Plaza, Interstate 80, Exit 274, White Haven, PA 18661. PAM and Drums
basically operate as a truck stop. Plaintiff filed this action on December 18,
2015, (Doc. 1), regarding the assignment to him of two promissory notes and
two stock purchase agreements involving PAM and Drums to satisfy debts
owed to him. On February 2, 2016, defendants jointly filed a motion to dismiss
the complaint under Rules 12(b)(7) and 19 for failure to join necessary and
indispensable parties. (Doc. 16). After defendants’ motion was briefed and
exhibits were submitted, the court issued a memorandum and order on
August 23, 2016 denying the motion to dismiss. (Doc. 33, Doc. 34). On
August 30, 2016, defendants filed their answer to the complaint with
affirmative defenses. (Doc. 37).
Following discovery, plaintiff filed a motion for summary judgment on
November 15, 2016. (Doc. 38). Plaintiff also simultaneously filed his
statement of material facts with exhibits and his brief in support of his motion.
(Doc. 39, Doc. 40). On December 6, 2015, defendants filed their response to
plaintiff’s statement of material facts and additional material facts along with
exhibits and their brief in opposition of his motion. (Doc. 41, Doc. 42). On
December 20, 2016, plaintiff filed his reply brief in support of his motion for
summary judgment with additional exhibits. (Doc. 43).
This court has diversity jurisdiction over this case under 28 U.S.C.
On January 1, 2009, PAM, through its president, Darshan K. Grewal
(“Darshan”), executed a stock purchase agreement (the “PAM Agreement”)
and promissory note (the “PAM Note”) with Kathleen S. Shukla (“Shukla”).
Manjit Shukla was the original owner of the PAM stocks and his wife Kathleen
Shukla acquired his shares of stock when he died. The PAM Note and PAM
Agreement are collectively referred to as the “PAM Contract.” PAM’s
attorneys drafted the PAM Contract and PAM was represented by its
The material facts are derived from plaintiff’s statement of material
facts, from defendants’ responses thereto with additional material facts as
well as the exhibits submitted by the parties. The court has omitted any legal
conclusions from the material facts.
For purposes of plaintiff’s summary judgment motion, the court views
the facts in the light most favorable to defendants. See Hampden Real Estate,
Inc. v. Metropolitan Management Group, Inc., 142 Fed.Appx. 600, 602 (3d Cir.
attorneys regarding the execution of this contract. The parties agree that the
PAM Contract is governed by Pennsylvania law.
The PAM Contract provided that in exchange for Shukla’s shares of
stock in PAM, Shukla was to receive five annual interest-only payments at a
6% per year rate, and one principal payment in the amount of $1,000,000 due
on February 20, 2014.2 (Doc. 22-1, Doc. 22-2). The PAM Note also provided
that as security for PAM’s obligations to Shukla, PAM’s counsel would hold
her PAM stock shares in escrow until she was paid in full by PAM. Further,
the PAM Note stated that if PAM did not pay Shukla in full, PAM’s counsel
“shall” deliver her stock shares back to her. Shukla then delivered her shares
of stock to PAM’s counsel to be held in escrow.
The first annual interest-only payment of $60,000 was to be made on
February 20, 2010, and that all subsequent interest-only payments for
$60,000 were to be made on the first day of February thereafter, for a total of
$300,000 in interest over the life of the PAM Contract. The total amount due
to Shukla for her shares of PAM stock under the contract was $1,300,000 due
In plaintiff’s complaint, it is alleged that the parties had orally agreed to
amend the PAM and Drums Contracts so that an interest rate of 6% per
annum would accrue on the outstanding principal balance even though no
such provision was contained in the Contracts. Regardless, since the
Contracts did not specify the interest rate, Pennsylvania law provides that the
statutory rate of 6% applied. See Pittsburgh Constr. Co. v. Griffith, 834 A.2d
572, 591 (Pa.Super.Ct. 2003)(“[T]he statutory rate of interest in the
Commonwealth is fixed at 6% ... .); see also 41 Pa.C.S.A. §202 (“Reference
in any law or document enacted or executed heretofore or hereafter to ‘legal
rate of interest’ and reference in any document to an obligation to pay a sum
of money ‘with interest’ without specification of the applicable rate shall be
construed to refer to the rate of interest of six per cent per annum.”).
by February 20, 2014. While denying that any payments are due, defendants
indicate that since plaintiff’s complaint was filed on December 18, 2015, the
payments which plaintiff alleges were due in February of 2010 and February
of 2011 under the PAM Contract are barred by the 4-year statute of limitations
applicable to contract actions under Pennsylvania law.
It is undisputed that defendants have not made any payments to either
Shukla or plaintiff under the PAM Contract. Defendants have offered to return
the PAM stock shares to Shukla but she has refused to accept them.
Defendants also state that after the PAM Contract was executed, the parties
verbally modified the contract “so that any and all interest payments under the
[PAM Contract] would be postponed until such time as PAM had sufficient
cash flow from the business operations to make interest payments.”
Additionally, defendants contend that their evidence shows Shukla orally
agreed, through Rattan, if she had not been paid from the cash flow of the
PAM business pursuant to the contract, she would be paid from the sale
proceeds if the business was sold. (Doc. 41, ¶’s 7, 9, Doc. 39-2).
The parties agree that there have been no written modifications or
amendments to the PAM Contract. The parties dispute whether the PAM
Contract was verbally modified subsequent to its execution.
On January 1, 2009, Drums, through its president, Darshan, executed
a stock purchase agreement (the “Drums Agreement”) and promissory note
(the “Drums Note”) with Shukla. Manjit Shukla was the original owner of the
Drums stocks and his wife Kathleen Shukla acquired his shares of stock when
he died. The Drums Note and Drums Agreement are collectively referred to
as the “Drums Contract.” Drums’ attorneys drafted the Drums Contract and
Drums was represented by its attorneys regarding the execution of this
contract. The parties agree that the Drums Contract is governed by
The Drums Contract provided that in exchange for Shukla’s shares of
stock in Drums, Shukla was to receive five annual interest-only payments at
a rate of 6% per year, and one payment of principal on February 20, 2014, in
the amount of $250,000. (Doc. 22-3, Doc. 22-4). The Drums Note also
provided that as security for Drums’ obligations to Shukla, Drums’ counsel
would hold her Drums stock shares in escrow until she was paid in full by
Drums. Further, the Drums Note stated that if Drums did not pay Shukla in
full, Drums’ counsel “shall” deliver her stock shares back to her.
Shukla then delivered her shares of Drums stock to defendants
pursuant to the Drums Contract to be held in escrow until she was paid in full
under the contract.
The first interest-only payment of $15,000 to Shukla was due by Drums
on February 20, 2010, and all subsequent interest-only payments of $15,000
were to be made on the first day of February thereafter, for a total of $75,000
in interest over the life of the Drums Contract. Thus, Shukla should have been
paid a total of $325,000 by February 20, 2014 for her shares of stock in
Drums. While denying that any payments are due, defendants indicate that
since plaintiff’s complaint was filed on December 18, 2015, the payments
which plaintiff alleges were due in February of 2010 and February of 2011
under the Drums Contract are barred by the 4-year statute of limitations
applicable to contract actions under Pennsylvania law.3
It is undisputed that defendants have not made any payments to either
Shukla or plaintiff under the Drums Contract. Defendants have offered to
return the Drums stock shares to Shukla but she did not accept them.
Defendants also state that after the Drums Contract was executed, the parties
verbally modified the contract “so that any and all interest payments under the
[Drums Contract] would be postponed until such time as Drums had sufficient
cash flow from the business operations to make interest payments.”
Additionally, defendants maintain that their evidence shows Shukla orally
agreed, through Rattan, if she had not been paid from the cash flow of the
Drums business pursuant to the contract, she would be paid from the sale
proceeds if the business was sold. Defendants also point out that the Drums
business was closed from 2001 to 2014 and since it was not operational, it
was not making any money. (Doc. 41, ¶’s 17, 19).
The parties agree that there have been no written modifications or
amendments to the Drums Contract. The parties dispute whether the Drums
Contract was verbally modified after it was executed.
The court will address defendants’ statute of limitations affirmative
defense with respect to both contracts below.
The Assignments of PAM Contract and Drums Contract
On August 24, 2015, Shukla sent an handwritten letter to plaintiff
concerning the outstanding balance on the PAM and Drums Contracts, and
wrote, in part, that: “Whatever you can pay me from this debt that
[defendants] owe me, on whatever terms suit you, I will be in agreement and
will be most grateful [ ]. I understand I might have to notarize a few
documents so they can be assigned to you in due course.” (Doc. 39-8). In
response to the letter, plaintiff wired £900,000.00 to Shukla’s bank account
on September 7, 2015 and the Barclays Bank’s payment confirmation
referenced that his payment was made for “Truck Stops.” (Doc. 39-9).
On September 17, 2015, Shukla sent a handwritten letter to plaintiff
stating, in part: “Thank you very much for remitting the amount due to me
under the promissory note[s] for the three truck stops in the U.S. [ ]. I am
happy to proceed with assigning the debts to you.” (Doc. 39-10).
On September 28, 2015, Shukla as “Assignor” executed two documents
prepared by her attorney each titled “Deed”, (Doc. 22-7, Doc. 22-8), in which
plaintiff was the “Assignee.” The first Deed pertained to the PAM debt and
provided in part:
The Assignor is owed a debt of US $320,000 from [PAM], for the
balance of capital payable under the stock purchase agreement
dated January 1, 2009 for her sale to [PAM] of her sixty (60)
shares of the capital stock in [PAM] (Debt). The Assignor has
agreed to assign the Debt to the Assignee on the terms of this
deed with effect from the date of this deed (Effective Date). The
Assignor assigns all its rights, title, interest, and benefit in and to
the Debt to the Assignee with effect from the Effective Date.
The second Deed pertained to the Drums debt and provided in part:
The Assignor is owed a debt of US $80,000 from [Drums], for the
balance of capital payable under the stock purchase agreement
dated January 1, 2009 for her sale to [Drums] of her thirty three
and one third (33 1/3) shares of the capital stock in [Drums]
(Debt). The Assignor has agreed to assign the Debt to the
Assignee on the terms of this deed with effect from the date of
this deed (Effective Date). The Assignor assigns all its rights, title
interest, and benefit in and to the Debt to the Assignee with effect
from the Effective Date.
On December 11, 2015, Shukla executed Amended and Supplemental
Assignments in favor of plaintiff “in order to alleviate any confusion that may
have arisen due to the proportional application of the March 2015 Payment,
and the inadvertent failure to account for unpaid Interest Amounts due under
the PAM [Contract] and Drums [Contract].” (Doc. 22, ¶’s 54-55, Doc. 22-10,
Doc. 22-11). The Amended Assignments stated:
[O]n or about September 28, 2015, Assignor assigned all of her
rights under the [PAM Contract and Drums Contract] to Assignee.
[T]he Assignor desires to confirm that she did grant, bargain, sell,
assign, transfer, and set over to Assignee, his successors and
assigns, any and all right, title, and interest the Assignor may
have in and to [the PAM Contract and Drums Contract].
In her Declaration, (Doc. 22, ¶’s 46-47, 50, 59), Shukla averred as
follows: “In executing the Assignments, it was always my intent to transfer any
and all rights, title, interest and benefit that I had under the 2009 [Contracts]
to Mr. Mikail”; “It was not my intent to retain any interest in, or rights to, the
2009 [Contracts], nor any portion thereof”; “Any and all rights to payment
under the 2009 [Contracts] belong to Mr. Mikail alone”; and “In the Amended
Assignments, I confirmed that on September 28, 2015, I did grant, bargain,
sell, assign, transfer, and set over to Mr. Mikail, any all of my rights, title,
interest and benefit in and to the [Contracts].” (See also Doc. 23).4
The Alleged Oral Modifications of the Contracts
Defendants allege that there were subsequent oral modifications to both
Contracts. Defendants also allege that all of the oral agreements to modify the
Contracts were made between Darshan’s husband, Amarjit S. Grewal
(“Grewal”), and Balvinder S. Rattan (“Rattan”), Shukla’s nephew, (see Doc.
23). However, defendants do not have any documents relating to the alleged
oral agreements between Grewal and Rattan.5 Defendants state that Grewal
was acting on behalf of defendants and Rattan was acting on Shukla’s behalf
as her representative. In fact, when Manjit Shukla (“Manjit”) originally owned
the stocks, he gave Rattan power of attorney over his affairs. Later, Rattan
held himself out to Grewal as being attorney in fact under a durable power of
attorney to handle the affairs of Shukla, who was an elderly woman and did
To the extent defendants seek to again challenge the assignments of
the Contracts from Shukla to plaintiff, the court will not revisit this issue which
it decided in its August 23, 2016 memorandum and order. (Doc. 33, Doc. 34).
The Court notes that Shukla and Rattan are residents and citizens of
the United Kingdom and they were not deposed in this case. (Doc. 41 ¶ 64).
Plaintiff was deposed, (Doc. 41-10), and Grewal submitted an Affidavit, (Doc.
not speak the native Punjabi language spoken by Grewal. Also, Rattan spoke
Punjabi and would translate discussions between Grewal and Shukla.
Grewal first became involved with PAM sometime before 2002 when
Manjit told him that his health was failing and he could not operate the
business. Manjit also told Grewal that he was having financial difficulties at
the PAM business and that it was operating in the red. Manjit then asked
Grewal to help him operate the PAM truck stop. Eventually, when Manjit’s
health further declined, Grewal took over the operations of the PAM business
and remodeled it to meet the new industry standards. (Doc. 41-2 at 34-35,
86). Additionally, since Grewal’s wife Darshan was also president of Drums,
Grewal was involved with the operations of this company as well.
After the PAM and Drums Contracts with Shukla were executed in
2009, Grewal avers in his Affidavit that no payments were made to Shukla
under the Contracts since Shukla, through Rattan, “annually [ ] agreed to
postpone the payments due by the terms of the [Contracts] because the
[defendant] Companies did not have the cash flow to make the payments.” He
further avers that “[t]hese [annual] postponements were made by Mrs. Shukla
(and Mr. Rattan) with the understanding that Mrs. Shukla would be paid when
the Companies were sold if she had not been paid at that time of such sales
from cash flow of the Companies.” (Doc. 41-1, ¶15).
Defendants designated Faruk Ozbek (“Ozbek”), their Manager, as their
Rule 30(b)(6) representative who could testify about the facts regarding the
alleged annual oral agreements to postpone payments due by the terms of
the Contracts. (Doc. 39-17, Doc. 39-18). Ozbek was questioned about his
knowledge of the alleged annual oral agreement by Shukla and Rattan to
postpone the payments due under the terms of the Contracts since the
defendant companies did not have the cash flow to make the payments and,
the alleged agreement that the postponements were made with the
understanding that Shukla would be paid when the companies were sold if
she had not been paid. Ozbek responded that he was aware of the annual
postponements and stated:
I have [heard of the postponements] through Mr. Grewal’s
conversation that I had with Mr. Grewal about this. He said he had
concerns about this stock purchase agreement and companies
are not doing good and he tried to market these privately, the
PAM Management especially, and every now and then he says
like two or three times he approached -- he made a trip to
England to approach [Shukla and Rattan] and saying that,
“They’re not doing so good. We need to discuss what we’re going
to do,” and he’s been told by Mr. Rattan, “That’s okay. Don’t worry
about it.” That’s the only thing I know about the postponements or
(Doc. 39-2, pp. 31-32, Doc. 41-2).
In terms of the relationship between Grewal and Rattan, Ozbek stated
that “they were like family” and “when Rattan comes to USA, he was staying
with [Grewal] and they treated each other like family.” Shukla also stayed at
Grewal’s house once when she visited the United States. (Id. at 85).
Ozbek was further questioned about the annual postponements of the
payments due under the Contracts and he stated:
My understanding [defendants] were -- ultimately they were going
to try to market the truck stop, make it profitable and market it;
and after the sale, [defendants] were satisfying the [Notes]. That
was my understanding after having conversations with Mr.
Grewal. [ ] Mr. Grewal told me every time he approached [Rattan]
about Drums and PAM [Rattan] was saying, “Don’t worry. It’s
okay. Don’t worry.”
(Id. at 42).
Again, Ozbek was asked what he knew about the alleged
postponements and he responded: “Mr. Grewal told me on so many
occasions that he had a conversation with these people, mostly -- not mostly,
only Rattan about this; and every time [Grewal] approaches to [Rattan]
saying, ‘We're not doing so good. What do we have to do about this,’ [Rattan]
was saying, ‘Don't worry about it.’” Ozbek understood Grewal’s comments to
mean that Shukla and plaintiff were not demanding the payments due under
the Contracts and that Rattan knew Grewal was trying to market the truck
stops. (Id. at 38-39). Ozbek also stated that “I believe [Rattan] and [Grewal]
agreed on these terms” regarding the postponements of the payments due.
(Id. at 49). Ozbek repeated throughout his deposition that Grewal told him that
any time he (Grewal) raised a concern about the PAM and Drums stock
purchase agreements and shares, “Mr. Rattan was saying, ‘Don’t worry. It’s
okay.’” (Id. at 42, 55).
Ozbek did not know if Grewal, Shukla and Rattan ever said that they
were going to put the oral agreements for postponement in writing. Nor did
Ozbek know when the stated individuals reached the oral agreements. Based
on Ozbek’s understanding of the oral agreements, Grewal advised Shukla
and Rattan that the companies were not doing well and Grewal told them that
he could not pay them for Shukla’s stocks. Grewal also told them that he
would try and sell the companies. If Shukla were not paid for Shukla’s stocks
from the cash flow of the truck stop businesses and the Notes were not
satisfied while Grewal was operating them, then Shukla would get paid at the
time the companies were sold. In essence, Ozbek indicated that “once PAM
[and Drums], the compan[ies], [were] sold, that’s when Ms. Shukla would be
paid under these [oral] postponements.” According to Ozbek, Rattan
acquiesced to the oral postponements since “any time [Grewal] raised a
concern about these stock purchase agreements and shares, Mr. Rattan
[said], ‘Don’t worry. It’s okay.’” Ozbek testified that he “believe[d] Mr. Rattan
and Mr. Grewal agreed on these terms”and that Grewal “exclusively dealt with
Mr. Rattan and not [ ] Shukla.” (Id. at 43-45, 49-50, 55). However, there is no
further evidence to show that any agreement was actually made between the
parties regarding the alleged postponements of the payments due under the
As further proof that Rattan knew PAM and Drums did not have cash
flow to pay Shukla, Ozbek indicated that when the PAM and Drums Contracts
were executed in 2009, Drums was not operating and PAM was operating but
not making a profit. Specifically, Ozbek indicated that Drums was closed
sometime prior to 2009 through sometime in 2014, when it reopened. He also
stated that between 2009 and 2014, Drums had to spend a lot of money to
address environmental problems, and that it had expenses to obtain a
required state highway occupancy permit. Ozbek stated that since Drums
reopened in 2014, it has not been profitable. Additionally, Ozbek testified that
from 2009 through 2014, PAM was not profitable. (Id. at 25-26, 30, 80-81).
However, under the terms of the PAM and Drums Contracts, there was no
condition to Shukla’s payment in these documents upon PAM or Drums being
Ozbek also stated that prior to 2015 when this case was initiated, he
never received anything in writing from either Shukla or Rattan requesting
payment under the PAM and Drums Contracts. However, Ozbek admitted that
there was no requirement under either Contract to make a demand before the
obligations to make payments became due. (Id. at 84-85, 88). Rather, the
Contracts simply provided that the annual payments were due Shukla as
During discovery, plaintiff sent defendants requests for admissions that
asked defendants to admit that the alleged oral modifications regarding the
annual postponements regarding any of the payments, i.e., interest-only
payments and principal payments, due under the Contracts to Shukla were
not supported by consideration. Defendants denied that the postponements
were not supported by consideration and, stated “a party’s knowing waiver of
a provision in a contract does not require consideration.” (Doc. 39-15, Doc.
39-16, at ¶’s 7-10).
Plaintiff also asked defendants in an interrogatory to “identify and
describe all consideration” that supported the alleged oral modifications to the
Contracts, and the only consideration which defendants identified was the
“mutual assent by the parties . . . to amend the payment terms of the
[Contracts].” (Doc. 39-11).
Defendants’ Additional Material Facts6
In November 15 and 18, 2015 e-mails to counsel for plaintiff, Rattan
detailed his conversations with Grewal about trying to recover on the debt
owed to plaintiff under the Contracts. Rattan stated that Grewal’s reasons for
not repaying the debt in cash was a “lack of funds” and due to “cash flow”
problems as well as an inability to sell another station. Grewal also indicated
that he was willing to repay plaintiff by offering stock shares in the
Pennsylvania trucks stops in lieu of the debt. Grewal did not deny that the
The Court notes that it has mostly incorporated defendants’ additional
material facts in the main discussion of the facts.
debt to plaintiff was due. Rattan also advised Grewal that he was no longer
involved in trying to recover the debt on behalf of Shukla. Rattan
acknowledged that he met with Grewal in the summer (i.e., July) of 2015 and
that Grewal suggested that Rattan return in September 2015 “to see how the
debt situation could be resolved.” (Doc. 41-7, Doc. 41-8, (Doc. 43-1, Doc. 432).
In an email Rattan sent counsel for plaintiff on February 4, 2016, he
again admitted that met Grewal in July of 2015 and that Grewal told him that
“they were unable to repay all the debt to Mrs. Shukla.” Rattan also
acknowledged that Shukla had “dismissed me from my legal obligation as
having a power of attorney to act on her behalf. . . .” (Doc. 41-12).
MOTION FOR SUMMARY JUDGMENT STANDARD
The plaintiff’s motion for summary judgment is brought pursuant to the
provisions Fed. R. Civ. P. 56. Summary judgment is appropriate if the
“pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show 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©; see also Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986); Turner v. Schering-Plough Corp., 901 F.2d 335, 340 (3d Cir.
1990). A factual dispute is genuine if a reasonable jury could find for the
non-moving party, and is material if it will affect the outcome of the trial under
governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986); Aetna Casualty & Sur. Co. v. Ericksen, 903 F. Supp. 836, 838 (M.D.
Pa. 1995). At the summary judgment stage, “the judge’s function is not
himself to weigh the evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at
249 ; see also Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004)
(a court may not weigh the evidence or make credibility determinations).
Rather, the court must consider all evidence and inferences drawn therefrom
in the light most favorable to the non-moving party. Andreoli v. Gates, 482
F.3d 641, 647 (3d Cir. 2007).
Moreover, the Third Circuit indicated that “although the party opposing
summary judgment is entitled to ‘the benefit of all factual inferences in the
court’s consideration of a motion for summary judgment, the nonmoving party
must point to some evidence in the record that creates a genuine issue of
material fact,’ and ‘cannot rest solely on assertions made in the pleadings,
legal memorandum or oral argument.’” Goode v. Nash, 241 Fed. Appx. 868
(3d Cir. 2007) (citation omitted). A material factual dispute is one that may
affect the outcome of the case under applicable law. Anderson v. Liberty
Lobby, Inc., 477 U.S. at 248.
To prevail on summary judgment, the moving party must affirmatively
identify those portions of the record which demonstrate the absence of a
genuine issue of material fact. Celotex, 477 U.S. at 323-24. The moving party
can discharge the burden by showing that “on all the essential elements of its
case on which it bears the burden of proof at trial, no reasonable jury could
find for the non-moving party.” In re Bressman, 327 F.3d 229, 238 (3d Cir.
2003); see also Celotex, 477 U.S. at 325. If the moving party meets this initial
burden, the non-moving party “must do more than simply show that there is
some metaphysical doubt as to material facts,” but must show sufficient
evidence to support a jury verdict in its favor. Boyle v. County of Allegheny,
139 F.3d 386, 393 (3d Cir. 1998) (quoting Matsushita Elec. Indus. Co. v.
Zenith Radio, 475 U.S. 574, 586 (1986)). However, if the non-moving party
“fails to make a showing sufficient to establish the existence of an element
essential to [the non-movant’s] case, and on which [the non-movant] will bear
the burden of proof at trial,” Rule 56 mandates the entry of summary judgment
because such a failure “necessarily renders all other facts immaterial.”
Celotex Corp., 477 U.S. at 322-23; Jakimas v. Hoffman La Roche, Inc., 485
F.3d 770, 777 (3d Cir. 2007); Watson v. Eastman Kodak Co., 235 F.3d 851,
858 (3d Cir. 2000) (the non-movant must establish the existence of each
element on which it bears the burden of proof).
Plaintiff contends that there are no genuine issues of material fact with
respect to his breach of contract claims against defendants PAM and Drums
since it is undisputed that defendants failed to make the annual payments due
under the Contracts, and that he is entitled to judgment as a matter of law
against both defendants in the principal amount of $1,625,000, together with
pre and post-judgment interest. Both parties agree that Pennsylvania law
applies to this case.
Because this is a case based upon diversity jurisdiction, 28 U.S.C.
§1332, and since the Contracts specified that they were governed by
Pennsylvania law, (Doc. 22-1, ¶5, Doc. 22-3, ¶5), the court applies
Pennsylvania law. See Moore v. Kulicke & Soffa Industries, Inc., 318 F.3d
561, 563 (3d Cir. 2003). In order to establish a breach of contract claim under
Pennsylvania law, plaintiff must demonstrate: “(1) the existence of a contract,
including its essential terms, (2) a breach of a duty imposed by the contract,
and (3) resultant damages.” CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053,
1058 (Pa.Super. 1999) (citation omitted); Gorski v. Smith, 812 A.2d 683, 692
(Pa.Super. 2002); Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir.
There is no dispute that plaintiff has established each of the elements
regarding his breach of contract claims against defendants. In particular, there
is no dispute that Shukla and defendants executed the Contracts and, that
she was to receive annual interest payments and one principal payment due
in February 2014. By February 20, 2014, Shukla should have been paid a
total of $1,300,000 for her PAM shares and a total of $325,000 for her Drums
shares. The undisputed evidence also shows that PAM and Drums beached
the Contracts by failing to make the required payments due to Shukla, and
now due to plaintiff based on the assignment. Further, plaintiff, as Shukla’s
assignee, has been damaged as a result of the breaches by defendants.
Notwithstanding the undisputed evidence, including the fact that there
were no written modifications or written amendments to the Contracts,
defendants maintain that genuine issues of material fact exist as to whether
Rattan, on behalf of Shukla, and Grewal, on behalf of defendants, orally
modified the Contracts. Specifically, defendants contend that Rattan and
Grewal orally agreed that all of the annual interest payments due under the
Contracts would be postponed until such time as PAM and Drums had
sufficient cash flow from the business operations to make interest payments.
Additionally, defendants contend their evidence shows Shukla orally agreed,
through Rattan, that if she had not been paid from the cash flow of the PAM
and Drums businesses under the Contracts, she would be paid from the sale
proceeds if the businesses were sold. Also, defendants point out that they
offered to return the PAM and Drums stock shares to Shukla pursuant to the
Contracts but she did not accept them.
No doubt that defendants did introduce evidence which they contend
shows that the Contracts were orally modified. In Hampden Real Estate, 142
Fed.Appx. at 602, the Third Circuit stated that a “written agreement may be
modified by a subsequent written or oral agreement and this modification may
be shown by writings or by words or by conduct or by all three.” (quoting
Kersey Mfg. Co. v. Rozic, 207 Pa.Super. 182, 215 A.2d 323 (1965), rev’d on
other grounds 422 Pa. 564, 222 A.2d 713 (1966)). Further, the parole
evidence rule does not apply and does not prevent evidence regarding the
intention of the parties to modify the payments terms under the Contracts
after the Contracts were executed. Id.
In Hampden Real Estate, 142 Fed.Appx. at 603, the Third Circuit
explained as follows:
It is well-settled law in Pennsylvania that a “written contract which
is not for the sale of goods may be modified orally, even when the
contract provides that modifications may only be made in writing.”
Somerset Cmty. Hosp. v. Allan B. Mitchell & Assocs., Inc., 454
Pa.Super. 188, 685 A.2d 141, 146 (1996). “The modification may
be accomplished either by words or conduct,” First Nat’l Bank of
Pa. v. Lincoln Nat’l Life Ins. Co., 824 F.2d 277, 280 (3d Cir.
1987), demonstrating that the parties intended to waive the
requirement that amendments be made in writing, Somerset
Cmty. Hosp., 685 A.2d at 146. An oral modification of a written
contract must be proven by “clear, precise and convincing
evidence.” Fina v. Fina, 737 A.2d 760, 765 (Pa.Super. 1999).
Since defendants are trying to prove a subsequent oral modification of
the Contracts, they have the burden of proving by “clear, precise and
convincing evidence” an oral contract modified the prior written Contracts.
Somerset Cmty. Hosp., 685 A.2d at 146.
Viewing the evidence in the light most favorable to defendants, the court
finds that there is no clear, precise and convincing evidence in the record to
raise a genuine issue of material fact as to whether the parties intended to
orally modify the Contracts. The court finds that defendants’ reliance on the
discussions between Rattan and Grewal to show that the parties intended to
modify the prior written Contracts and allow for the postponement of the
annual payments due under the Contracts is simply not sufficient to meet their
burden. Plaintiff correctly points out that defendants could not produce any
documents that evidenced the alleged annual oral agreements between the
parties to modify the Contracts, and defendants’ evidence regarding the
discussions between Rattan and Grewal does not satisfy the governing “clear,
precise and convincing” evidentiary standard at issue. Additionally, Ozbek did
not have any personal knowledge of the alleged oral modifications. Rather,
he testified, based on his discussions with Grewal, that he believed Rattan
and Grewal agreed on the modified terms. Ozbek testified that every time
Grewal raised a concern about the inability of PAM and Drums to make the
payments due Shukla under the Contracts since the companies did not have
the cash flow to make the payments, Rattan repeatedly told Grewal “Don’t
worry. It’s okay.” Ozbek also stated that it was his understanding Rattan and
Grewal agreed once PAM and Drums businesses were sold, Shukla would be
paid. This is not clear, precise and convincing evidence that the parties orally
modified the payment terms of the Contracts.
The court finds that defendants’ evidence is not enough under the
applicable evidentiary standard to justify a jury trial regarding the existence of
the alleged oral modifications of the Contracts. See Vino 100, LLC v. Smoke
on the Water, LLC, 864 F. Supp. 2d 269, 284 (E.D.Pa. 2012)(court granted
plaintiff summary judgment on its breach of contract claims since the record
was “devoid of any ‘clear, precise and convincing’ evidence that [the parties]
[orally] modified the royalty term of the [contract]”). At best, defendants’
evidence merely shows that the parties discussed whether Shukla would
postpone the payments due to her under the Contracts but there is no
convincing evidence that she ever actually agreed to the postponements or
that she was offered and received anything in return for agreeing to them.
As plaintiff explains, “Ozbek’s self-serving, double-hearsay testimony
that [Grewal] told him that Rattan had purportedly said ‘don’t worry about it’
suggests, at most, that there was a request by Defendants to postpone the
payments due under the Contracts, and that Rattan had responded merely by
expressing his belief that Shukla would not immediately move to enforce her
rights against Defendants.” Plaintiff states that Ozbek’s testimony does not
show by clear and convincing evidence that “a binding, enforceable oral
agreement – whereby Shukla purportedly ‘would not be paid’ until Defendants
were sold –was ever reached between the parties.” (Doc. 40 at 12). The court
Ozbek’s testimony does in fact contain double-hearsay as he was
repeating what Grewal allegedly told him about the substance of Grewal’s
conversations with Rattan and what both he (Grewal) and Rattan said in those
conversations. As noted above, Shukla and Rattan were not deposed in this
case. Grewal was not deposed but his Affidavit was submitted. It is clear that
“[t]he court may consider material evidence that would be admissible or
usable at trial in deciding the merits of a motion for summary judgment.”
Haywood v. Univ. of Pittsburgh, 976 Fed.Supp.2d 606, 625 (W.D.Pa.
2013)(citations omitted). Simply put, Ozbek’s testimony is not sufficient “clear,
precise and convincing” evidence to show that Rattan and Grewal reached an
agreement regarding the modifications and that Shukla agreed to them.
As stated, oral modifications can be accompanied by words or conduct,
Hampden Real Estate, 142 Fed.Appx. at 603, and in this case, it was not
accompanied by either. In terms of the relevant conduct, Ozbek’s
understanding was that Shukla did not make demands for the payments due
under the Contracts over six years since Rattan knew Grewal was trying to
market the truck stop. Ozbek also stated that before the instant law suit was
filed, he did not receive any written requests from Shukla or Rattan for the
payments due under the Contracts. As such, Ozbek believed that Rattan and
Grewal had orally agreed to modify the payment terms of the Contracts.
However, Shukla was not required to make any requests or demands for the
payments due to her under the Contracts and the evidence does not show
clearly and convincingly that she ever orally agreed to postpone the
Additionally, in his email of February 4, 2016, Rattan admitted that he
met Grewal in July of 2015 and that Grewal told him that “they were unable
to repay all the debt to Mrs. Shukla.” Plaintiff points out that when Rattan met
in London with Grewal in July 2015, defendants admitted in their responses
to his interrogatories, (Doc. 39-4, Doc. 39-7, ¶’s 12), that Rattan only had
preliminary discussions about modifying defendants’ payment obligations
under the Contracts stating that he would travel to the United States in
September 2015 to further discuss the matter. Thus, plaintiff states that no
binding oral agreement was reached by the parties either at this time or prior
to the assignments of the Contracts to him in September 28, 2015.
The court finds that defendants have failed to present sufficient
evidence under the applicable standard and have failed to meet their burden
to show that the parties agreed to orally modify the payment terms of the
Contracts at any time after the first payments became due. Thus, the court
finds that defendants are not entitled to have a jury decide if an oral
agreement was actually reached. Indeed, Rattan’s plan to meet again with
Grewal in September 2015 shows that the parties did not have any agreement
to postpone the payments owed Shukla under the Contracts.
“[T]o prove the existence of an oral contract, [defendants] must
establish that: (1) both parties manifested an intention to be bound by the
terms of the agreement; (2) the terms of the agreement were sufficiently
definite to be specifically enforced; and (3) there was mutuality of
consideration.’” CPG International LLC v. Shelter Products, Inc., 2017 WL
468224, *5 (M.D.Pa. Feb. 3, 2017) (citations omitted). “Pennsylvania requires
courts determining the existence of an oral contract to assess the parties’
conduct in light of the surrounding circumstances to determine the existence
of an oral contract, including its terms.” Id. (citations omitted). “The party
asserting the existence of an oral contract must establish its terms are ‘clear
and precise’” by a preponderance of the evidence. Id. (citations omitted).
Plaintiff contends that all three elements of an oral contract are lacking
in this case since the parties did not ever agree to the alleged oral
modifications of the Contracts, since the terms of the alleged oral contract
were not reasonably certain, i.e., the terms must “provide a basis for
determining the existence of a breach and for giving an appropriate remedy,”
and since the alleged oral modifications were not supported by valid
consideration. (Doc. 40)(citation omitted). Plaintiff also states that the alleged
oral modifications are not sufficiently definite to be enforced and that
defendants have not submitted any evidence concerning the time for
performance under the alleged oral modifications.
No doubt that “Pennsylvania law [ ], provides a [party] asserting the
existence of a valid oral contract must, in the absence of any writing, establish
the oral contract’s terms are clear and precise.” CPG International LLC, 2017
WL 468224, *5 n. 6 (citation omitted). Also, as stated, the evidentiary burden
applicable in this case is that the existence of an oral contract must be
established by defendants by “clear and precise” evidence since “the oral
contract modifies or changes or cancels a prior written contract.” Id. (citing
Pellegrene v. Luther, 169 A.2d 298, 300 (Pa. 1961); Hampden Real Estate,
142 Fed.Appx. at 603 (The applicable standard under Pennsylvania law is
that an oral modification of a written contract must be proven by “clear,
precise and convincing evidence.”). Defendants in this case are alleging that
there were oral agreements which modified or changed the prior written
Contracts regarding when the payments were due to Shukla.
The court finds that defendants have not met their burden by providing
enough evidence to establish that the terms of the alleged oral modifications
to the Contracts detailed above were sufficiently definite to be specifically
enforced. Nor have defendants shown that the alleged oral modifications were
supported by valid consideration to Shukla.
In short, the court finds that there is insufficient evidence to show
defendants were excused from making the annual payments to Shukla as
required by the written terms of the Contracts and there is insufficient
evidence to show the existence of the alleged oral modifications. On the
contrary, plaintiff has presented evidence showing that a binding, enforceable
oral agreement to modify the payment terms of the Contracts was never
reached between the parties and that the negotiations between Grewal and
Rattan never progressed to the formation of an oral agreement. (Doc. 43 at
Plaintiff also states that the alleged oral modifications to the Contracts
were not supported by consideration. Plaintiff states that defendants’
contention that the parties’ mutual assent to orally modify the Contracts
constitutes valid consideration for the alleged modifications is without merit
since “[t]he prevailing rule in Pennsylvania, ..., is that ‘[a] contract can be
modified with the assent of both contracting parties if the modification is
supported by consideration.’” (Doc. 40 at 16)(citing Trombetta, 907 A.2d at
558; Pellegrene, 403 Pa. at 215). As such, plaintiff points out that “under
Pennsylvania law, mutual assent and valid consideration are both essential
elements of Defendants’ oral modification defense, and the failure of proof as
to either element is fatal.” (Id. at 17)(citations omitted). Thus, plaintiff
maintains that the alleged oral modifications were of no effect in this case
because the undisputed evidence shows they were not supported by valid
The court finds no evidence that Shukla received consideration for the
alleged oral modifications to the Contracts. Defendants state that under
Pennsylvania law, mutual assent constitutes sufficient consideration in this
case. They cite to Empire Properties, Inc. v. Equireal, Inc., 674 A.2d 297, 302
(Pa.Super. 1996), in which the Superior Court stated “[c]onsideration is
implied from the mutual assent of the parties to the modification.” The court
did not find any cases that followed the Empire Properties case with respect
to its holding that the mutual assent of the parties constituted consideration
for the oral modification to a written contract. In fact, as plaintiff recognizes,
the courts after Empire Properties have consistently held that consideration
is required for oral modifications. Plaintiff argues that the Empire Properties
case is an anomaly and point out that the Pennsylvania Supreme Court
recently reaffirmed that well-established principal that “[a] contract, either oral
or written, may be modified by a subsequent agreement which is supported
by legally sufficient consideration, or a substitute therefor, and meets the
requirements for contract formation.” Shedden v. Anadarko E. & P. Co., L.P.,
136 A.3d 485, 490 (Pa. 2016). The court finds the cases cited by plaintiff,
(Doc. 43 at 12-13), to be more persuasive which have found that “[a]n
agreement may be modified with the assent of both contracting parties if the
modification is supported by consideration.” Wilcox v. Regester, 417 Pa. 475,
482 (1965); Allstate Ins. Co. v. Tokio Marine & Nichido Fire Ins. Co., 464
F.Supp. 2d 452, 457 (E.D.Pa. 2006)(“If either consent or consideration, or
both, are absent from an attempt to modify a contract, then the proposed
modification is void and the contract continues to operate as originally
constructed”); Great Northern Ins. Co. v. ADT Sec. Services, Inc., 517
F.Supp.2d 723, 736 (W.D.Pa. 2007) (“[O]nce a contract has been formed, its
terms may be modified as long as the parties mutually agree to the
modification and new consideration is provided for the modification.”)(citations
Thus, the court finds no merit to defendants’ argument that the mutual
assent of the parties was sufficient consideration for the oral modifications.
In the alternative, defendants assert that, even if there was no
consideration for the alleged oral modifications, it was not required since
Shukla knowingly waived her rights to the annual payments due to her under
the Contracts. Defendants state that a party can waive any right she has
under a contract and that Shukla waived her right to receive consideration for
agreeing to the oral modifications of the Contracts. Plaintiff states that
because defendants do not have evidence of an agreement with Shukla in
which she waived her rights to the annual payments under the Contracts, they
must prove that her alleged waiver of rights under the Contracts was
supported by consideration, or a substitute for consideration.
“A waiver is the act of intentionally abandoning a known right, claim or
privilege.” Creghan v. Procura Management, Inc., 91 F.Supp.3d 631, 643
(E.D.Pa. 2015) (citing Brown v. City of Pittsburgh, 409 Pa. 357, 186 A.2d 399,
401 (1962)). “To constitute a waiver of legal right, there must be a clear,
unequivocal and decisive act of the party with knowledge of such right and an
evident purpose to surrender it.” Id. (quoting Brown, 186 A.2d at 401). “Once
a party has waived a legal right, it cannot undo that waiver and recapture that
right.” Id. (citation omitted). As such, it was possible for Shukla to have
contractually waived her right to annual payments from defendants under the
Contracts, but her intent to do so would have to be evident from the record
and there must be evidence of a “clear, equivocal and decisive” act by Shukla
to show that she waived her right to the payments. There is simply no such
evidence in this case.
Plaintiff correctly indicates that defendants’ defense is essentially a
promissory estoppel defense. “To make a claim for promissory estoppel,
[defendants] must allege: 1) [Rattan and Grewal] made a promise they should
have reasonably expected to induce action or forbearance on the part of
[Shukla]; 2) [Shukla] actually took action or refrained from taking action in
reliance on the promise; and 3) injustice can be avoided only by enforcing the
promise.” MDNet, Inc. v. Pharmacia Corp., 147 Fed.Appx. 239, 244 (3d Cir.
2005)(citation omitted). “Promissory estoppel is applied to enforce a promise
not supported by consideration, where there is no binding contract.” Id.; see
also In re Ginko Assoc., L.P., 372 B.R. 229, 239 (E.D.Pa. 2007)(“either
additional consideration or reliance is required to support a contractual
The evidence detailed above shows that Shukla’s actions were not clear
and unequivocal demonstrating her intentional surrender of her right to annual
payments under the Contracts. Plaintiff cites, in part, to his deposition
testimony for support, (Doc. 41-10), regarding what Shukla told him about
Rattan’s meeting with Grewal in July 2015 and how she thought Grewal was
going to pay her but instead he only gave the same excuses about the truck
stop not making money and why she would have to wait longer to get paid.
Plaintiff has also provided evidence, including evidence that Grewal continued
to propose to Rattan in July 2015, two months before the assignments of the
Contracts to plaintiff, the return of Shukla’s stock shares in PAM and Drums
in lieu of making cash payments under the Contracts which would not have
been necessary if Shukla had already agreed to the oral modifications.
Additionally, as plaintiff states, (Doc. 43 at 8-9), defendants’ evidence only
shows that “[Grewal] continually made excuses to Rattan regarding
Defendants’ nonpayment under the Contracts, and sought patience and
leniency with regard to the enforcement of Shukla’s rights.” Further, just
because defendants failed to abide by the written payments terms of the
Contracts and Shukla did not take any action to enforce the Contracts for six
years is not evidence that Shukla waived her right to annual payments under
the Contracts. See Sellersville Sav. and Loan Ass’n v. Kelly, 29 B.R. 1016,
1019 (E.D.Pa. 1983)(citations omitted); Consolidated Rail Corp. v. Delaware
and Hudson Ry. Co., 569 F.Supp. 26, 29 (E.D.Pa. 1983) (“It has long been
held in Pennsylvania that proof of (a party’s) failure to rigorously enforce its
(contractual) rights does not sustain the burden of establishing an implied
waiver.”) (citations omitted). Rather, the evidence shows that Shukla patiently
waited for defendants to make the payments due to her under the Contracts
and indulged defendants for a 6-year period since the truck stops were not
making money but that her patience ran out after the July 2015 meeting with
Grewal in London when Grewal advised her that she would have to wait
longer to receive her payments. (Doc. 39-9, Doc. 41-10). As such, the court
finds that defendants have not established that Shukla waived her rights to
payment under the Contracts. Nor have defendants established mutual assent
to modify the Contracts. Also, as discussed, there was no valid consideration
given to Shukla for the alleged oral modifications of the terms of the
Based on the evidence discussed above and viewing the evidence in
the light most favorable to defendants, the court finds that defendants have
not established by “clear, precise and convincing” evidence the existence of
a binding, enforceable oral agreement between the parties to modify the
payment terms of the written Contracts. Nor does Shukla’s indulgence by
affording defendants six years to make the payments due to her under the
Contracts establish promissory estoppel since there is no evidence that
Shukla ever promised defendants that they could continue to postpone the
payments due to her. See Sellersville, 29 B.R. at 1019. In fact, the evidence
shows that defendants failed to make the payments due to Shukla since the
truck stops were not making money and not because Shukla failed to enforce
her rights under the Contracts or promised to postpone the payments which
were due. Thus, the court finds that defendants’ affirmative defense based
upon a waiver/promissory estoppel fails as a matter of law.
Although defendants did not file a summary judgment motion, they
essentially raise arguments in their brief in opposition to plaintiff’s motion
which could have been raised in their own dispositive motion. Nonetheless,
the court will consider defendants’ affirmative defenses since they were
asserted in their answer to plaintiff’s complaint. (Doc. 37).
First, defendants assert a statute of limitations defense to some of the
payments due under the Contracts arguing that the earlier annual payments
due are time barred by Pennsylvania’s 4-year statute of limitations period for
contract claims. See 42 Pa.C.S.A. §5525.
“‘An action upon a contract, obligation or liability founded in writing’ are
governed by a four year statute of limitations under Pennsylvania law.”
Donovan v. Idant Laboratories, 625 F.Supp.2d 256, 265 (E.D.Pa. 2009). In
Morgan v. Petroleum Products Equipment Co., 92 A3d 823, 828 (Pa.Super.
2014), the Pennsylvania Superior Court stated:
[I]t is well-settled that the statute of limitations begins to run as
soon as the right to institute and maintain a suit arises. Pocono
Int’l Raceway, Inc. v. Pocono Produce, Inc., 503 Pa. 80, 468 A.2d
468, 471 (1983). Thus, once a cause of action has accrued and
the prescribed statutory period has run, an injured party is
prohibited from bringing his or her cause of action. Id. There are,
however, exceptions to this general rule which act to toll the
running of the statute. One of these exceptions is the discovery
rule, which we have described as a “‘judicially created device
which tolls the running of the applicable statute of limitations until
the point where the complaining party knows or reasonably should
know that he has been injured and that his injury has been
caused by another party’s conduct.’” Coleman v. Wyeth Pharm.,
Inc., 6 A.3d 502, 510 (Pa.Super.2010) (citation omitted), appeal
denied, 611 Pa. 638, 24 A.3d 361 (2011). The discovery rule in
Pennsylvania applies to all causes of action, including breach of
contract. See Sadtler v. Jackson–Cross Co., 402 Pa.Super. 492,
587 A.2d 727, 731 (1991). [footnotes omitted].
In particular, defendants state that plaintiff’s claims for interest
payments due to her in February of 2010 and 2011 under both Contracts are
barred by the statute of limitations under Pennsylvania law. Under the PAM
Contract, the first annual interest-only payment of $60,000 was to be made
on February 20, 2010, and that all subsequent interest-only payments for
$60,000 were to be made on the first day of February thereafter. Under the
Drums Contract, the first interest-only payment of $15,000 to Shukla was due
by Drums on February 20, 2010, and all subsequent interest-only payments
of $15,000 were to be made on the first day of February thereafter.
Defendants state that the Contracts were executed on January 1, 2009, and
provided that the five interest payments to Shukla were to commence on
February 20, 2010 and occur every February for the next four years. Since
plaintiff’s complaint was filed on December 18, 2015, defendants contend that
plaintiff’s claims for interest regarding the payments which were due in
February of 2010 and 2011 are time barred as they accrued more than four
years before plaintiff commenced this action. Thus, defendants assert that the
first two interest payments which were due to Shukla under the terms of both
Contracts are now time-barred.
Initially, the continuing contract doctrine under Pennsylvania law which
provides that statute of limitations for a contract that is continuous does not
begin to run until the termination of the contractual relationship between the
parties, does not appear to apply since the Contracts provided for fixed
annual payment dates to Shukla and a final payment date which would
terminate the contractual obligations of the parties. See Jodek Charitable
Trust, R.A. v. Vertical Net Inc., 412 F.Supp.2d 469, 475 (E.D.Pa. 2006).
Rather, the Periodic-Payment Rule applies which provides,
The four-year statute of limitations applicable to claims for failure
to make payments due under a contract does not start to run until
the payment is due. Where a contract calls for periodic or
installment payments, each failure to make payments when due
constitutes a separate and distinct cause of action. Total Control,
Inc. v. Danaher Corp., 359 F.Supp.2d 387, 391 (E.D.Pa. 2005).
Consequently, a separate cause of action accrues each time the
defendant fails to make timely payment.
Raucci v. Candy & Toy Factory, 145 F.Supp.3d 440, 449 (E.D.Pa. 2015).
Further, neither the discovery rule nor equitable tolling apply in this case
since they both “require the plaintiff to demonstrate ‘that he or she could not,
by the exercise of reasonable diligence, have discovered essential information
bearing on his or her claim.’” In re Mushroom Transp. Co., Inc., 382 F.3d 325,
339 (3d Cir. 2004). Plaintiff has made no such showing in this case regarding
the annual payments due to her.
Thus, the interest payments which were due Shukla in February of 2010
and 2011 under both Contracts are time barred. Under either the discovery
rule or equitable tolling, Shukla clearly knew that she was injured regarding
the failure of defendants to make the February 2010 and 2011 interest
payments particularly since the court has found that there was no oral
modification to the Contracts allowing the postponement of any payments.
That is to say, since the Contracts were not orally modified as defendants
maintain, then Shukla should have been reasonably aware she was injured
within the applicable 4-year time period due to the failure of defendants to
make the February 2010 and 2011 interest payments.
As such, plaintiff’s claims for interest regarding the payments which
were due to Shukla under both Contracts in February of 2010 and February
2011 are time barred and shall be dismissed.
Secondly, defendants argue that Shukla did not pursue her sole remedy
specified in the Contracts which provided that if she was not paid in full
pursuant to the terms of the Contracts, the shares of stock in PAM and Drums
held in escrow by counsel for defendants would be returned to her.
Specifically, both Notes provided that: “As security for [defendants’]
obligations to [Shukla], James F. Mangan, Esquire, counsel for the
[defendants] shall hold the Shares in escrow until [defendants] ha[ve] paid
[Shukla] in full. If [defendants] do not pay [Shukla] in full, Mr. Mangan shall
deliver the Shares to [Shukla].” (Doc. 22-2, Doc. 22-4). In fact, when the stock
shares were offered back to Shukla she would not accept them. Plaintiff also
refused to accept the shares of stock which defendants offered to him.
Defendants state that under Pennsylvania’s “plain language” rule in contract
interpretation since the words of the Contracts were clear and unambiguous
the intent of the parties was that the stock shares were to be returned to
Shukla if she was not paid in full. Defendants contend that the plain language
rule bars plaintiff’s claim for money damages. Defendants state that “if it is
determined that the stock shares are not to be returned under the plain
language of the Agreements, then summary judgment cannot be granted as
the contract must be ambiguous and there are material, disputed issues of
fact related to the parties’ intent.” They state that a reasonable jury could find
that plaintiff is only entitled to return of the shares if no payments were made
under the Contracts since that is what the Contracts provided. (Doc. 42 at 12).
Under Pennsylvania law, “[i]n construing the terms of a contract, a
reviewing court must strive to ascertain and give effect to the intent of the
parties as found in the written contract.” John Spearly Const., Inc. v. Penns
Valley Area School Dist.,121 A.3d 593, 601 (Pa.Comwlth. 2015) (citation
omitted). The court “presumes the parties carefully select contract language
and are aware of the meaning of the terms selected.” Id.(citation omitted).
“When a written contract is clear and unequivocal, its meaning must be
determined by its contents alone.”Id.(citations omitted). Additionally, “[t]he
proper interpretation of a contract is a question of law to be determined by the
court in the first instance.” J.W.S. Delavau, Inc. v. Eastern Am. Transp. &
Warehousing, Inc., 810 A.2d 672, 681 (Pa.Super.Ct.2002) (citation omitted).
The court finds that the language of the Contracts was not ambiguous
and that the plain language did not provide that Shukla’s sole remedy for a
breach was the return of her shares of stock. Nor did the Contracts’ plain
language provide that Shukla was not entitled to pursue a claim for money
damages if she was not paid. The Pennsylvania Supreme Court has held that
“[w]here the parties do not expressly limit their remedies by contract, no such
limitation exists.” Liss & Marion, P.C. v. Recordex Acquisition Corp., 603 Pa.
198, 983 A.2d 652, 661 (2009)(citations omitted). The court simply cannot
modify the terms of the Contracts to read that Shukla’s only remedy was the
return of her stock shares particularly since the Contracts did not exclude
other remedies. See McMullen v. Kutz, 603 Pa. 602, 609, 612, 985 A.2d 769
(2009)(“the interpretation of the terms of a contract is a question of law” and
“courts are bound by the plain language of a contract as the best evidence of
the intent of the parties.”); Hanaway v. Parkesburg Group, LP, 132 A.2d 461,
479 (Pa.Super. 2015)(“Pennsylvania courts will not imply terms inconsistent
with the express terms adopted by the parties to the contract.)(citation
omitted). As plaintiff states, (Doc. 43 at 6), “the Contracts permit Plaintiff to
pursue any and all remedies available at common law for a breach of
contract, including, but not limited to, compensatory damages and interest.”
Thus, plaintiff is entitled to pursue his instant action for breach of the
Contracts in which he seeks money damages.
Plaintiff’s motion for summary judgment, (Doc. 38), is GRANTED with
respect to his breach of contract claims raised in his complaint, (Doc. 1),
against defendants PAM, (Count I), and Drums, (Count II), except with
respect to his claims for interest regarding the payments which were due
under the Contracts in February of 2010 and February 2011 since these
claims are dismissed as time barred. An appropriate order shall be issued.
s/ Malachy E. Mannion
MALACHY E. MANNION
United States District Judge
Date: April 12, 2017
O:\Mannion\shared\MEMORANDA - DJ\CIVIL MEMORANDA\2015 MEMORANDA\15-2437-02.wpd
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