Opinion ID: 3045525
Heading Depth: 2
Heading Rank: 1

Heading: Liability for Breach of Contract

Text: Appellants contend that the District Court’s factual findings were contrary to the evidence. We disagree.9 The evidence clearly reveals that any limit on F&R’s line of 8 The District Court had diversity jurisdiction pursuant to 28 U.S.C. § 1332. We have jurisdiction pursuant to 28 U.S.C. § 1291. 9 We review a district court’s factual findings for clear error, which exists when, giving all due deference to the opportunity of the judge in a bench trial to evaluate the credibility of witnesses and to weigh the evidence, we are left with a definite and firm conviction 8 credit beyond that which was provided in the Loan Agreement was placed there through Appellants’ own doing. At trial, Farash admitted that it was F&R’s bookkeepers, not Fleet, that included the erroneous Inventory Sublimit of $625,000, and that the same Sublimit continued to appear even after Farash discovered the mistake. He also admitted that F&R never received any oral or written notice from Fleet (or Summit) that the Inventory Sublimit was being reduced and admitted that his earlier sworn statements to the contrary were false. Moreover, the testimony of Fleet’s witnesses and Fleet’s internal documents reveal that Fleet maintained the Inventory Sublimit at $1,250,000, notwithstanding the erroneous BBCs, and Fleet never denied a loan request based on the Sublimit error. Appellants admit that Fleet’s assertion that the Inventory Sublimit had never been reduced by Fleet is “technically accurate.” (Reply Br. at 8.) F&R tries to paint Farash’s October 2001 meeting with Wainwright and Dvorin as an overbearing encounter, stating that the loan officers “demanded that F&R give them a check to cover the overadvance” and indicated that Fleet had imposed a reduced Inventory Sublimit on F&R. (Appellants Opening Br. at 14.) The record reveals a different picture. Farash brought the supposed overadvance to Fleet’s attention in his October 11 letter and volunteered a payment. Wainwright’s testimony at trial implied that F&R’s payment, made at a meeting that Farash himself described as “cordial,” (App. at that a mistake has been committed. Commerce Nat’l Ins. Servs., Inc. v. Commerce Ins. Agency, Inc., 214 F.3d 432, 435 n.1 (3d Cir. 2000). 9 2479-80), was not out of the ordinary and would be no reason to trigger an internal investigation into whether F&R was actually overadvanced. Although Farash and Dvorin did discuss the Inventory Sublimit around the time of that meeting, the record just as clearly supports a conclusion that the discussion centered around whether the Sublimit was to be constrained by the inventory value, rather than whether the Sublimit had been improperly reduced to $625,000. Thus, the evidence supports the District Court’s conclusion that the reduced Inventory Sublimit was due to F&R’s mistakes, not Fleet’s actions. Appellants also make two legal arguments as to the District Court’s interpretation of the Loan Agreement.10 Appellants first argue that it was Fleet’s responsibility to correct errors in the BBCs. That argument does not withstand scrutiny. No provision in the Loan Agreement places such an obligation on Fleet. To the contrary, the BBCs themselves required F&R to certify that the information provided was correct. Appellants argue that Fleet was obligated to inform F&R of any errors in the BBC because Fleet generally reviewed BBCs to ensure that they were prepared correctly. Appellants fail, however, to provide us with any basis for imposing a legal obligation on Fleet to conduct those evaluations or to reveal their results to F&R. Second, Appellants argue that Fleet did not have the authority to require weekly, as opposed to monthly, BBCs from F&R. That argument is belied by the plain language of 10 We review a district court’s construction of contract terms de novo. Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 53 n.2 (3d Cir. 2001). 10 the Loan Agreement, which authorizes Fleet to require “such additional financial information, data, and documents, in form reasonably satisfactory to the Bank, as may be requested from time to time by the Bank in its sole discretion.” 11 (App. at 712 § 6.16.) Even if, as Appellants contend, F&R vigorously negotiated for monthly reporting requirements at the outset, it cannot avoid the unambiguous language of the Loan Agreement allowing Fleet to alter those requirements later. B. Liability for Breach of Covenant of Good Faith and Fair Dealing Under New Jersey law, F&R is required to show “bad motive or intention” as a part of its claim for breach of the covenant of good faith and fair dealing. Iliadis v. WalMart Stores, Inc., 922 A.2d 710, 722 (N.J. 2007). Appellants argue that there is sufficient evidence to support a conclusion that Fleet acted in bad faith because “it created a reasonable belief on the part of F&R that its loan availability had been reduced.” (Reply Br. at 10.) But the District Court found that it was F&R’s own errors that created that reasonable belief, not any representation made by Fleet. As discussed above, that finding is supported by the record. 11 There is no support for F&R’s contention that the additional information clause should be interpreted “as applying to financial information of [sic] borrower, except for BBCs.” (Appellants Opening Br. at 31.) Contrary to Appellants’ assertion, the doctrine of ejusdem generis does not assist them. In fact, as Fleet notes, applying it here may be viewed as having the opposite effect: the term “additional financial information, data, and documents” should include BBCs because they are specifically listed earlier. (Answering Br. at 37.) The clear language of that clause also forecloses Appellants’ argument that Fleet was not authorized to demand actual inventory counts. 11 Appellants argue that Fleet’s silence as to the actual Inventory Sublimit was in bad faith. See Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 864 A.2d 387, 397 (N.J. 2005) (holding that a commercial entity may claim a breach of the duty of good faith and fair dealing where another remains silent in the face of a known mistake “with the purpose of exploiting the terms of the contract without regard to the harm caused to plaintiff.”). That argument fails. Even if we assume that Fleet’s loan officers realized that the BBCs erroneously stated the Inventory Sublimit, there is no evidence that Fleet was exploiting the terms of the contract. To the contrary, F&R received virtually all the money that it was allowed under the Loan Agreement, and there is no evidence that Fleet ever denied F&R’s request for funds based on the erroneous BBCs. Although F&R’s interest rate ultimately increased, that was a direct result of F&R’s subsequent default for nonpayment, not Fleet’s silence. Appellants also argue that the District Court should have inferred a bad motive based on the “complete absence of rationale for demanding weekly reports.” (Reply Br. at 16.) Again, however, the District Court justifiably found that Fleet had a rationale, including a belief that weekly BBCs would assist F&R by improving its cash flow and reducing borrowing costs with accumulated interest. Moreover, Fleet routinely requested weekly BBCs from its other customers. To the extent that these findings were based on credibility determinations, we must give them deference. Further, the record supports another good-faith reason for Fleet’s request: F&R’s inventory turnover, which relied 12 heavily on the tourism industry, was adversely affected by the events of September 11, 2001.12 The District Court’s determination that Fleet acted in good faith is adequately supported by the record.13 C. F&R’s Tort Claims We may affirm the District Court’s pre-trial dismissal of F&R’s tort claims on different grounds than those on which the District Court relied. See Donahue v. Gavin, 280 F.3d 371, 372 n.2 (3d Cir. 2002) (“An appellate court may affirm a result reached by the District Court on different reasons ... as long as the record supports the judgment.” (citations omitted)). Because F&R failed to establish that Fleet acted outside of the terms of the Loan Agreement, it is unable to establish, as the stated premise for its tort claims, that Fleet falsely represented that it did not intend to change the terms of the parties’ agreement. Thus, the District Court’s dismissal of F&R’s tort claims was appropriate. D. Fleet’s Breach of Contract Claims Appellants do not directly contest the District Court’s ruling on Fleet’s breach of contract claims in favor of Fleet. Had F&R succeeded on either of its breach of contract claims, that might have affected Fleet’s right to recover for breach of contract. Appellants do not state their theory as to what that effect would be, however, and, 12 As Wainwright and Dvorin both testified, Fleet was concerned that about 80 percent of F&R’s business came from the cruise ship industry. 13 Because we conclude that F&R failed to prove that Fleet breached the Loan Agreement, we need not address Appellants’ arguments relating to damages. 13 because we have determined that the District Court correctly ruled against F&R on its breach of contract claims, we need not dwell on it any further. Suffice it to say that Appellants do not dispute the District Court’s conclusions that Fleet loaned F&R $1.5 million, that the Loan Agreement sets the default interest rate and assesses F&R attorneys’ fees and costs, that Farash is a guarantor of the loan up to $350,000, and that F&R has failed to repay any of the outstanding balance since October of 2002. Thus, we will affirm the District Court’s judgment in favor of Fleet and against F&R for breach of the Loan Agreement in the amount of $4,498,051.40 and against Farash for breach of the Limited Guarantee in the amount of $350,000.00.