The opinion of the court was delivered by: ROBERT L. CARTER
ROBERT L. CARTER, District Judge
Plaintiff Chrysler Capital Corporation ("Chrysler") seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 construing a loan participation agreement that it entered into with defendant Bankers Trust Company ("Bankers Trust"). Chrysler now moves for summary judgment pursuant to Rule 56, F.R.Civ.P.. Bankers Trust opposes Chrysler's motion and cross-moves for summary judgment.
Plaintiff Chrysler is a Delaware corporation with its principal place of business in Connecticut. Defendant Bankers Trust is a New York corporation with its principal place of business in New York.
In July 1990, Chrysler entered into a Loan and Security Agreement with Henry I. Siegel Company, Inc. ("HIS"), providing for a $ 120 million loan. The loan is structured as a $ 30 million senior term loan, a $ 30 million subordinated term loan, and a $ 60 million revolving credit facility. Chrysler conditioned its loan to HIS on the participation of other lenders.
The Participation Agreement between Chrysler and Bankers Trust defines the parties' rights and obligations with respect to three categories of revolving loan proceeds: "Advances," "overadvances," and "CC Overadvances." An "Advance" is a loan made for HIS's general operating expenses for an amount that falls within the lending limits described in Chrysler's Loan and Security Agreement with HIS. An "overadvance" is an Advance that exceeds the lending limits described in the Loan and Security Agreement. A "CC Overadvance" is an Advance made at the discretion of Chrysler for the purpose of enabling HIS to make a payment of principal, interest or other amounts owed to Chrysler on the subordinated debt component of the $ 120 million loan. Bankers Trust is obligated to purchase 18.75% of the principal amount of each Advance and overadvance made by Chrysler to HIS up to a total of $ 7.5 million; however, it is under no obligation to purchase a participating share of any CC Overadvance made by Chrysler to HIS.
Between January and March of 1991, the parties dispute the actual date, Chrysler made a CC Overadvance for the first time. The CC Overadvance is still outstanding.
The parties contest the meaning of a phrase in Section 8(b) of the Participation Agreement dealing with the parties' rights and obligations when a CC Overadvance is outstanding. At issue is the meaning of the following phrase "Participant shall have no further obligations to purchase additional participations hereunder". Bankers Trust has interpreted this phrase to mean that once a CC Overadvance has occurred, Bankers Trust is excused from its obligation to purchase its specified share (18.75%) of any new Advances and overadvances made pursuant to the revolving credit facility until the conditions giving rise to the CC Overadvance are cured.
Based on its interpretation of the phrase, Bankers Trust has refused to participate in any new Advances or overadvances made by Chrysler to Siegel since about April 1991. Chrysler contends that Bankers Trust's refusal has caused Chrysler, as of July 12, 1991, to place $ 1,285,000 of its own funds at risk which should have been provided by Bankers Trust.
Section 14 of the Participation Agreement provides that the Agreement shall be governed by the laws ...