The opinion of the court was delivered by: WERKER
This action arises out of an agreement which renegotiated the terms of a defaulted debt instrument. Plaintiff United Brands Company ("United"), as a creditor of defendant Metals Holding Corporation ("Metals"), has made a motion under Rule 56 of the Federal Rules of Civil Procedure for summary judgment against co-defendant Intermediate Credit Corporation ("Intermediate"), which it seeks to hold liable as Metals' guarantor. United has not joined Metals in this motion.
Intermediate opposes the motion on numerous grounds. First, without adequate explanation, it relies upon nine affirmative defenses asserted in its answer to the complaint. These defenses may be summarized as follows: Intermediate contends (1) that the underlying agreement and the contract of guaranty are void as to Intermediate for lack of consideration; (2) that the contract of guaranty is so ambiguous and unconscionable that enforcement should be denied; (3) that acquiescence in any default of Metals or representations by United prevent it from asserting a claim against Intermediate as a matter of estoppel or waiver; and (4) that there has been an accord and satisfaction. Second, Intermediate contends in its papers in opposition to the instant motion that it has fully performed; that Metals was never given due notice of default; and that United has not supported its motion on the basis of admissible evidence adduced from persons with knowledge of the facts.
Contractual arrangements. In 1969, Marion Malleable Iron Works, Inc. ("Marion"), a wholly-owned subsidiary of Metals, purchased a foundry from the AMK Corporation ("AMK"). As part of the transaction, Marion gave AMK a note in the amount of $1,518,000 secured by a second security interest in Marion's machinery, equipment, land and buildings, and Intermediate lent Marion cash in return for an $850,000 note secured by an interest in Marion's real and personal property, as well as certain shares of Marion stock. Intermediate further agreed to purchase 200 shares of Marion common stock. The agreement between Marion and Intermediate expressly provided that the Intermediate security interest was subordinate to that held by AMK.
AMK was merged into United Fruit (now United) sometime during 1970. By June 26, 1973, Marion had defaulted on its note to AMK and therefore owed United, as the holder of that note, an unpaid principal balance of $1,312,557.07. At that time, it was also indebted to Intermediate in the amount of $740,746.57.
On June 26, 1973, United, Metals and Intermediate entered into an agreement (the "Agreement") whereby United sold the Marion note to Metals at a discount in return for Intermediate's written promise to guarantee the transaction (the "Guaranty").
The Agreement called for Metals to pay $900,000 for the Marion note. Of this sum, $500,000 was to be paid immediately, with the remaining $400,000 due in quarterly installments payable within 45 days after the end of each quarter of Marion's (calendar) fiscal year ("FY"). Payments were to begin with the quarter ending September 30, 1973 and were to continue until March 31, 1978. Each installment was to be in an amount equal to eight percent of Marion's pre-tax earnings for the prior quarter and, if eight percent of Marion's annual pre-tax earnings proved to be greater than the sum of the quarterly payments, Metals was obligated to pay United the difference. Moreover, if the entire $400,000 had not been paid by the end of the last contract quarter, the difference was due on June 30, 1978. The Agreement also provided for the assessment of interest on the outstanding balance until the full $400,000 was paid.
Paragraph 8 of the Agreement states, in part, that
"The entire unpaid balance . . . including accrued interest may be declared to be immediately due and payable upon fifteen (15) days written notice from United upon the happening of any one of the following events of default:
d. Default by Metals in the performances of [ sic ] observance of any of the representations, warranties, covenants, conditions or agreements other than with regard to payments of principal and interest to be made by Metals pursuant to the terms hereof and such default shall have continued for a period of thirty (30) days or fifteen (15) days after written notice by United, whichever is earlier. . . ."
As long as any portion of the $400,000 remained unpaid, Metals was required by paragraph 9 of the Agreement to deliver to United:
"a. As soon as reasonably possible and in any event, within 120 days after the close of each fiscal year of Marion, a balance sheet of Marion and its subsidiaries, if any, as of the end of such fiscal year, and a statement of income (loss) and retained earnings (deficit) for such fiscal year all ...