Antoniou et al v. US Bancorp

Filing 65

ORDER signed by Judge J P Stadtmueller on 1/26/10: denying 48 defendant's Renewed Motion for Summary Judgment on Plaintiffs' Claims and Motion for Partial Summary Judgment on Defendant's Claims; granting 42 plaintiffs' Motion for Summary Judgment; plaintiffs have and recover from defendant $342,847.56 together with accrued interest calculated at 5.40% per annum (subject to any contractual rate adjustment occurring during the case) together with costs as taxed by the clerk of the court. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
____________________________________________ A N T H O N Y A. ANTONIOU and IRENE D. ANTONIOU, P la in t iffs , v. U S BANCORP f/k/a First Bank Southeast NA d /b /a US Bank NA, D e fe n d a n t. ____________________________________________ Case No. 07-CV-675

ORDER
O n June 28, 2007, plaintiffs, Anthony and Irene Antoniou, filed suit against d e fe n d a n t alleging that defendant impermissibly refused to cash plaintiffs' certificate o f deposit ("CD") purchased from defendant's predecessor. Given the diversity of c itiz e n s h ip between the parties, and the fact that the amount in controversy exceeds $ 7 5 ,0 0 0 , defendant removed this action to this court on July 23, 2007. After some d is c o ve ry had taken place, the court, upon request, permitted defendant to amend its answer to add affirmative defenses as well as a counterclaim. The court granted p la in tiffs an opportunity to conduct further discovery as to these claims and d e fe n s e s . Now that discovery is closed, the parties have filed cross-motions for s u m m a ry judgment. Upon consideration of these motions, the court finds that p la in tiffs are entitled to summary judgment for the reasons stated herein.

BACKGROUND
O n October 2, 1991, plaintiffs purchased a CD in the amount of $144,997.79 fro m First Bank Southeast of Lake Geneva. (Def. Resp. Pl. PFOF [Dkt. #60] ¶ 1). S h o r tly thereafter, plaintiffs placed the CD in a safety deposit box, where it remained fo r approximately 15 years because plaintiffs forgot about the CD's existence. (Id. ¶ 3). F r o m 1990 through 1995, Anvan/GN Limited Partnership ("Anvan") and A n v a n /G N Limited Partnership No. 7 ("Anvan No. 7") ­ both Anthony Antoniou (" A n t o n io u ") controlled entities engaged in the construction and sale of c o n d o m in iu m s ­ took out a series of loans ("the Anvan loan" and "the Anvan No.7 lo a n ") from First Bank Southeast of Lake Geneva (which merged with Firstar Bank M ilw a u k e e in 1995). (Id. ¶ 4; Def. PFOF [Dkt #49] ¶ 4). These loans were called d u e by Firstar in September of 1995. (Bennet Aff. Supp. Pl. Mot. S.J. [Dkt. #43] Ex. 5 ). At the times the loans were called, there were approximate balances of

$ 1 6 6 ,4 5 2 .9 1 due on the Anvan No. 7 loan and $1,008,835.72 (collectively: "the A n v a n debt") due on the Anvan loan. (Def. Resp. Pl. PFOF ¶ 9). On March 22, 1 9 9 6 , Anvan, Anvan No. 7, Antoniou, and other personal guarantors of the Anvan d e b t, entered into a "Moratorium Agreement" with Firstar. (Id. ¶ 12). The Moratorium Agreement specified that if collateral, consisting of certain re a l estate projects specifically identified therein, were completed and sold by d e s ig n a te d dates and for certain minimum prices, then Firstar would provide

-2-

a d d itio n a l credit of up to 135% against the loan balance. (Id. ¶ 14-15). Anvan and A n v a n No. 7 timely completed, and obtained the required release price for, the real e s ta te projects identified in the Moratorium Agreement. (Id. ¶ 21). After applying the s a le proceeds to the Anvan debt, the Anvan No. 7 loan was paid in full, and the A n v a n loan had a balance due of $217,900.27. (Id. ¶ 22). No assets owned by any o f the personal guarantors, including Antoniou, were applied to the remaining Anvan d e b t, nor did Firstar attempt to collect the remaining balance from the assets of any o f the guarantors. (Id. ¶¶ 23-24). On December 14, 1997, Firstar wrote-off the $ 2 1 7 ,9 0 0 .2 7 balance and issued a 1099 to Anvan reflecting the forgiveness of debt. (Id . ¶ 25). In the spring of 2007, Irene Antoniou went to her safety deposit box to locate a birth certificate and found the CD placed there in 1991. (Id. ¶ 27). On May 2, 2 0 0 7 , plaintiffs presented the CD to defendant U.S. Bank (Firstar merged with U.S. B a n k in 1999) for payment. Defendant refused to pay the CD and sent a Notice of D is h o n o r to plaintiffs. (Id. ¶ 29).

ANALYSIS
I. S u m m a r y Judgment Standard S u m m a ry judgment is appropriate where the movant establishes that there is n o genuine issue of material fact and that it is entitled to judgment as a matter of law. F e d . R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "Material fa c ts " are those facts which "might affect the outcome of the suit," and a material fact

-3-

is "genuine" if a reasonable finder of fact could find in favor of the nonmoving party. S e e Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is appropriate where a party has failed to make "a showing sufficient to establish the e x is te n c e of an element essential to that party's case and on which the party will b e a r the burden of proof at trial." Celotex, 477 U.S. at 317. A party opposing s u m m a r y judgment may not rest upon the mere allegations or denials of the adverse p a rty's pleading, but must set forth specific facts showing that there is a genuine is s u e for trial. Fed. R. Civ. P. 56(e). Any doubt as to the existence of a material fact is to be resolved against the moving party. Anderson, 477 U.S. at 255. II. D e fe n d a n t's Motion for Summary Judgment D e fe n d a n t has moved for summary judgment on plaintiffs' claim, arguing that its refusal to cash the CD is justified because Antoniou released the bank from its o b lig a tio n s concerning the CD when he signed the Moratorium Agreement, which c o n ta in e d a broad release provision. Additionally, defendant has asserted a

c o u n te rc la im against Antoniou, arguing that by filing this lawsuit he committed an "E v e n t of Default" under the Moratorium Agreement, and that according to the A g r e e m e n t an Event of Default entitles defendant to recover the balance of the o b lig a tio n s covered by the Agreement. Defendant has moved for partial summary ju d g m e n t on its counterclaim, asking the court to grant it summary judgment as to th e issue of liability, and then to resolve the issue of damages in further proceedings.

-4-

D e fe n d a n t claims it is entitled to summary judgment on plaintiffs' claim b e c a u s e the Moratorium Agreement released it of its obligation to cash plaintiffs' CD. T h e Moratorium Agreement contained a release provision stating: R e le a s e . In order to induce the Bank to refrain from exercising its rights a n d remedies against the Debtors and Guarantors, the Debtors and G u a r a n to r s agree as follows: (a ) The Debtors and Guarantors, each acting on behalf of its, his or t h e ir respective successors, assigns, heirs, bankruptcy trustees, and p e r s o n a l representatives, hereby give a full release from all claims, s u m s of money, accounts, actions, suits, proceedings, and demands w h a ts o e ve r, which either of them at any time had or has up to the date o f the execution of this Agreement, against the Bank, its officers, d i re c to r s , related corporations, branches, attorneys, employees, a g e n ts , and successors for or by reason of or in respect to any act, c a u s e , matter or thing; and (b ) It is the express intention of the Debtors and Guarantors to provide th e fullest possible release of all claims. By their signatures below, the D e b to rs and Guarantors represent that they have read this release, had a d e q u a te opportunity to discuss it with an attorney of their choice and fu lly understand its terms. (B e n n e t Aff. Supp. Pl. Mot. S.J. [Dkt. #43] Ex.13, ¶ 7)(emphasis added). Defendant a s s e rts that a CD is a "sum of money," and thus Antoniou's signing of the M o ra to riu m Agreement released his claim against defendant for payment on the CD. T h u s , the issue before the court is one of contract interpretation, specifically, w h e th e r the release provision in the Moratorium Agreement does in fact release d e fe n d a n t from its obligation to honor plaintiffs' CD. W h e n engaging in contract in te rp re ta tio n , the goal of the court "is to ascertain the true intentions of the parties a s expressed by the contractual language." State ex rel. Journal/Sentinel v. Pleva,

-5-

4 5 6 N.W . 2 d 359, 362 (W is . 1990).1 "If the contract is unambiguous, [the court's] a tte m p t to determine the parties' intent ends with the four corners of the contract w ith o u t consideration of extrinsic evidence. Huml v. Vlazny, 2006 W I 87, ¶ 52, 716 N .W .2 d 807. T h e court finds that the parties' intent can be found unambiguously within the fou r corners of the contract, and thus no resort to extrinsic evidence is necessary. In looking at the four corners of the contract, the court, contrary to defendant's s u g g e s tio n s , must look not only at the release provision, but at the entire contract. F u rth e r, in construing releases, "[t]he intent is to be sought from the whole and every p a rt of the instrument . . . . and although the terms of a release are general, their o p e ra tio n will be limited to those things within the contemplation of the parties at the tim e of its execution." Resink v. Wallenfang, 99 N.W .2 d 196, 199-200 (W is . 1959) (c ita tio n s omitted). "[T]he ultimate test of the intended scope of [a release] is w h e th e r the obligee has received `full satisfaction, or that which the law must c o n s id e r as such.'" Brown v. Hammermill Paper Co., 276 N.W .2 d 709, 713 (W is . 1 9 7 9 ) (quoting Lovejoy v. Murray, 70 U.S. 1, 3 (1865)).

According to Section 9(d) of the Moratorium Agreem e n t, the Agreem e n t is to be "governed and c o n s tr u e d in accordance with the internal laws of the State of W is c o n s in ." (Bennet Aff. Supp. Pl. Mot. S.J. E x . 1 3 , ¶ 9). Because the choice of law provision does not exclude W is c o n s in 's choice of law rules, the p r o v is io n operates not to dictate the applicable substantive law of the case, but rather the law applicable to d e te r m in e the governing substantive law. In a contract case, "contract rights m u s t be determ in e d by the law o f the jurisdiction with which the contract has its m o s t significant relationship." State Farm Mutual Automobile I n s . Co. v. Gillette, 2002 W I 31, ¶ 26, 641 N.W .2 d 662. Factors to consider include: (1) place of contracting; ( 2 ) place of perform a n c e ; (3) place of negotiation; (4) location of the subject m a tte r of the contract; and (5) r e s id e n c e s or places of business of the parties. McCraw v. Mensch, 461 F. Supp.2d 872, 877 (W .D . W is . 2 0 0 6 ). In the instant case, factors 1-4 are all in W is c o n s in , as is the place of business of som e of the parties to the contract. Thus, W is c o n s in 's substantive law of contracts governs this case.

1

-6 -

W h e n looking at the Moratorium Agreement as a whole, it is clear that the CD w a s not within the contemplation of the parties. The Agreement set out specific a c tio n s required by the debtors and guarantors. (Bennet Aff. Supp. Pl. Mot. S.J. E x . 1 3 , ¶ 2). It also specified certain pieces of collateral (all of it being real estate o w n e d by Anvan and Anvan No. 7) as well as the minimum release price for each p ie c e of collateral. (Id. ¶ 8). The Agreement further explained, in detail, the manner in which the proceeds from the sold collateral would be applied to the debt. (Id.). It is evident from these provisions that there was no contemplation whatsoever of the re le a s e of the CD, worth approximately $186,000 at the time. For a contract, defined b y detailed specifications regarding insular pieces of collateral (and calculations as to how to apply the proceeds of that collateral to the debt), to release a party from a $186,000 CD ­ without any reference to that CD or any mention as to how those fu n d s would apply to the debt ­ would be completely irrational. See Fishman v. L a S a lle National Bank, 247 F.3d 300, 302 (1st Cir. 2001) ("The presumption in c o m m e rc ia l contracts is that the parties were trying to accomplish something ra tio n a l. Common sense is as much a part of contract interpretation as is the d ic tio n a ry or the arsenal of canons."). Interpreting the contract in the manner

s u g g e s te d by defendant would make no sense, and the court declines to do so. See D is p a tc h Automation, Inc. v. Richards, 280 F.3d 1116, 1119 (7th Cir. 2002) ("W h e n a contractual interpretation makes no economic sense, that's an admissible and, in the limit, a compelling reason for rejecting it.").

-7-

If the court has erred by not considering extrinsic evidence, such error is c le a rly harmless, for the extrinsic evidence demonstrates, even more clearly than the c o n tra c t itself, that the parties did not intend to release defendant from its obligations u n d e r the CD. The extrinsic evidence shows that, after the proceeds from the sale o f the collateral identified in the agreement were applied to the Anvan debt, there w a s a balance due of $217,900.27. (Def. Resp. Pl. PFOF ¶¶ 21-22). It also shows th a t despite the substantial net worth (in excess of $15 million as of July 1995) of the g u a ra n to rs of the Anvan debt, defendant did not attempt to collect the remaining b a la n c e of the debt from any of the personal assets (such as CDs or bank accounts) o f any of the guarantors. (Id. ¶¶ 11, 23-24). Rather, defendant wrote off the re m a in in g balance, and issued Anvan a 1099 reflecting forgiveness of $217,900.27. (Id . ¶ 25). The memorandum reflecting the forgiveness of the debt explicitly stated th a t "no additional payments are expected before the loan is removed from the s ys te m ." (Id.). This shows that plaintiffs' CD, was neither released nor intended to b e released. Its existence was not within the contemplation of the parties; there was a b s o lu te ly no agreement of any kind pertaining to the CD. D e fe n d a n t moved for summary judgment on plaintiffs' claim, arguing that the c la im must fail because the CD was released. Since the court finds the CD was not re le a s e d , defendant's motion for summary judgment on plaintiffs' claim must be d e n ie d . Defendant also moved for partial summary judgment as to the issue of lia b ility on its counterclaim. However, defendant did not present any facts,

-8-

a rg u m e n t, or law in support of its counterclaim. Accordingly, defendant's motion for p a rtia l summary judgment as to its counterclaim must also be denied.2 III. P la in tiffs ' Motion for Summary Judgment P la in tiffs have moved for summary judgment on their claim against defendant for defendant's failure to honor the CD. Defendant asserted the following affirmative d e fe n s e s in its amended answer: recoupment, accord and satisfaction, estoppel, w a ive r, and release. Other than raising these affirmative defenses in its amended a n s w e r, defendant has not argued them (and thus certainly has not met its burden o f proof regarding them) in response to plaintiffs' motion for summary judgment. The c o u r t has already demonstrated that defendant's claim of release fails. Likewise e a c h of the other affirmative defenses must fail as well. "A recoupment . . . is a reduction or rebate by the defendant of part of the p la in tiff's claim because of a right in the defendant arising out of the same t r a n s a c t io n . " Zweck v. D.P. Way Corp., 234 N.W .2 d 921, 926 (W is . 1975).

O b vio u s ly, plaintiffs' right to payment under the CD did not arise from the same, or e ve n a related, transaction from which the Anvan debt arose. re c o u p m e n t defense accordingly fails. A c c o rd and satisfaction is a manner in which a disputed claim may be d isc h a r g e d . To have accord and satisfaction, the parties must have intended to Defendant's

The sam e result would attain even if defendant had supported its m o tio n for partial sum m a r y j u d g m e n t on its counterclaim , because the court's ruling as to the issue of release essentially precludes d e f e n d a n t from succeeding on its counterclaim .

2

-9 -

e n te r into an agreement to discharge an existing disputed claim. Hoffman v. Ralston P u r in a Co., 273 N.W .2 d 214 (1979). "There must be expressions sufficient to make th e creditor understand or to make it unreasonable for him not to understand that the p e rfo rm a n c e is offered in full satisfaction of the claim." Id. at 217. There were no in d ic a tio n s in the instant case that forgiveness of the balance of the Anvan debt was o ffe re d in full satisfaction of the claim arising from the CD. Defendant's accord and s a tis fa c tio n defense accordingly fails. "T h e elements of estoppel are as follows: action or non-action on the part of o n e against whom estoppel is asserted, which induces reasonable reliance thereon b y the other, and which is to his or her detriment." Alexander Co., Inc. v. Bensaid, 2 0 0 2 W I App 165, ¶ 10, 647 N.W .2 d 467. There is no evidence in the instant case th a t Antoniou took any action, or forbore any action, that would indicate to defendant th a t Antoniou would relinquish his claim arising from his CD if defendant would fo r g ive the Anvan debt. Defendant's estoppel defense accordingly fails. A waiver is a knowing and voluntary relinquishment of a claim. W IS JI-CIVIL 3 0 5 7 (1993). Thus, a person waiving a right must have the intent to do so. Murray v . Roundhouse Marketing & Promotion, Inc., 2003 WI App. 111, ¶ 24, 664 N.W .2 d 126. There is no evidence that Antoniou had any intent when he signed the

M o r a to r iu m Agreement to waive his right to collect on his and his wife's CD. Thus, d e fe n d a n t's waiver defense fails.

-10-

P la in tiffs ' complaint, with a copy of the CD attached to it, established a prima fa c ie case for plaintiffs. As all of the defenses defendant raised in response to p la in tiffs ' case have been refuted, and as defendant has offered no legal reason why it should be excused from paying the sum owed on the CD, the court finds that p la in tiffs are entitled to summary judgment as to their claim. P la in tiffs also moved for summary judgment on defendant's counterclaim, the th ru s t of which was that Antoniou's filing of this suit equated to an "Event of Default" s in c e filing this suit was in contravention of the release provision of the Moratorium A g r e e m e n t. However, as the release provision of the Agreement had no bearing on th e CD at issue in this suit, the court finds that the filing of this suit was not in c o n tra ve n tio n of the release provision, and thus did not constitute an Event of D e fa u lt. Therefore, plaintiffs are entitled to summary judgment as to defendant's c o u n te r c la im .

CONCLUSION
D e fe n d a n t 's motion for summary judgment as to plaintiffs' claim fails because p la in tiffs ' claim was not released by the Moratorium Agreement as defendant argues it was. Defendant's motion for partial summary judgment as to its counterclaim fails b e c a u s e defendant did not present any evidence, argument, or law in support th e r e o f. Plaintiffs' motion for summary judgment on their claim succeeds because p la in tiffs have shown that they are entitled to payment pursuant to the terms of their C D . Plaintiffs' motion for summary judgment on defendant's counterclaim succeeds

-11-

b e c a u s e plaintiffs have shown that the filing of the instant suit did not constitute an E ve n t of Default. T h e court's grant of summary judgment on plaintiffs' claim entitles plaintiffs to p a ym e n t in full on their CD, pursuant to the terms specified in said CD. Plaintiffs p u rch a s e d the CD on October 2, 1991, for $144,997.79. (Compl. [Dkt. #1] Ex. A). T h e terms of the CD entitle plaintiffs to a 5.40% annual rate of return. (Id.). The CD s p e c ifie s that it matured thirty days from the date of purchase, and it automatically re n e w s for successive periods equal to the original term (thirty days) until presented fo r payment. (Id.). Per these terms, the principal and accrued interest on the CD as o f June 30, 2007 (the time of the filing of this suit), was $342,847.56. (Id. Ex. C).3 T h u s , plaintiffs are entitled to have and recover from defendant $342,847.56 to g e th e r with accrued interest and costs as taxed by the clerk of the court. Accrued in te re s t is to be calculated at 5.40%, subject to any contractual rate adjustment o c c u rrin g during the pendency of this case. A c c o r d in g ly , IT IS ORDERED that defendant's Renewed Motion for Summary Judgment o n Plaintiffs' Claims and Motion for Partial Summary Judgment on Defendant's C la im s (Docket #48) be and the same is hereby DENIED; and

The $342,847.56 am o u n t com e s from an am o r tiz a tio n schedule, subm itte d by plaintiffs, detailing e a c h successive m a tu r a tio n date ­ from the date of purchase until June 30, 2007 ­ as well as the interest a c c r u e d for each thirty-day period, and the updated balance of the total worth of the CD at each m a tu r a tio n d a te . Defendant has not challenged plaintiffs calculations.

3

-1 2 -

IT IS FURTHER ORDERED that plaintiffs' Motion for Summary Judgment (D o c k e t #42) be and the same is hereby GRANTED; IT IS FURTHER ORDERED that plaintiffs have and recover from defendant $ 3 4 2 ,8 4 7 .5 6 together with accrued interest ­ calculated at 5.40% per annum (s u b je c t to any contractual rate adjustment occurring during the case) ­ together with c o s ts as taxed by the clerk of the court. T h e clerk is directed to enter judgment accordingly. D a te d at Milwaukee, W is c o n s in , this 26th day of January, 2010. BY THE COURT:

J .P . Stadtmueller U .S . District Judge

-13-