The opinion of the court was delivered by: Naomi Reice Buchwald United States District Judge
Plaintiff Bank of America, National Association ("Bank of America"), successor in interest to Merrill Lynch Bank & Trust Co., FSB ("Merrill Lynch") and First Republic Bank ("FRB"), brings this action against William V. Schmidt Co., Inc. ("Wm. V. Schmidt") and Melvyn Douglas Weintraub alleging breach of contract. Pending before the Court is plaintiff's motion for summary judgment on its contract claim and dismissing defendant's counterclaim. For the following reasons, plaintiff's motion is granted.
The relevant facts are not in dispute. On April 8, 2008, Wm. V. Schmidt and FRB entered into a Business Loan Agreement.*fn1
Pursuant to the agreement Wm. V. Schmidt, a jewelry company, provided two promissory notes to FRB. The notes were exchanged for a $1,000,000 line of credit and a $1,000,000 term loan. The term loan obligated Wm. V. Schmidt to make monthly payments of principal and interest, with a final payment due March 31, 2012.*fn2
The line of credit required monthly payments of accrued interest and a payment of all outstanding principal plus any remaining accrued unpaid interest on the maturity date of January 31, 2009.*fn3 Under the Business Loan Agreement, a failure to make timely payments on either loan constituted an Event of Default. Other Events of Default included the "dissolution or termination of [Wm. V. Schmidt's] existence as a going business" or any "material adverse change" suffered by Wm. V. Schmidt. A consequence of any default was the acceleration of the entire outstanding indebtedness under both loans. Melvyn Douglas Weintraub, the President and a principal of Wm. V. Schmidt, personally guaranteed the loans pursuant to a commercial guaranty agreement.*fn4 The guaranty provided, among other things, that Weintraub would not dispose of or otherwise transfer all or substantially all of his assets without prior written consent of FRB. The parties also executed a commercial security agreement by which Wm. V. Schmidt offered "all personal property assets" as collateral.*fn5 Wm. V. Schmidt represented that it would not transfer or remove the collateral from its premises other than in the ordinary course of business. A default of this agreement also permitted FRB to accelerate the entire indebtedness owed by Wm. V. Schmidt.
Defendants claim that FRB, which was based in California, was eager to tap into the New York market and sought out Wm. V. Schmidt's business in an effort to access Melvyn Weintraub's business contacts. M. Weintraub Aff. ¶ 9. To support this assertion, they note that Weintraub brought Leonard Moscatelli, an agent of FRB who was integral to establishing the loan relationship, to the "exclusive Bull and Bear Club for the 24 Carat Club soiree where Moscatelli was introduced to many influential and well-to-do individuals." Id. ¶ 10. Defendants argue that both parties assumed that the loans were only the start of a "long-term relationship" and that, from their perspective, the loans were similar to opening a bank account.*fn6
According to defendants, sometime "shortly after" the 24 Carat Club soiree on January 10, 2009, Moscatelli advised Weintraub "not to worry" about the January 31 maturity date of the line of credit because it would be extended. M. Weintraub Aff. ¶ 11. Whether in reliance of this statement or otherwise, it is undisputed that Wm. V. Schmidt did not pay the outstanding principal on the line of credit when it matured on January 31. However, defendants claim that despite the fact that they made "no principal payment...against the [line of credit] up to and including January 31," FRB "continued to accept the monthly payment of interest due." Defs.' Statement of Facts ("Defs.' SF") ¶ 21.
On July 14, 2009, over four months after the original maturity date,
the parties entered into a modification agreement which extended the
maturity date of the line of credit to September 30, 2009.*fn7
The modification agreement included an integration clause
"This Agreement and other Loan Documents contain the entire agreement and understanding among the parties concerning the matters covered by this Agreement and other Loan Documents and supersede all prior and contemporaneous agreements, statements, understandings, terms, conditions, negotiations, representations and warranties, whether written or oral, made by the Lender or Borrower concerning the matters covered by this Agreement and other Loan Documents."
The modification agreement also included a provision which set forth that nothing in the agreement "shall be construed to obligate the Lender to extend the time for payment of the Note or otherwise modify any of the Loan Documents in any respect, except as expressly set forth in this Agreement," and a clause which established that the agreement may be modified "only by a written agreement signed by borrower and the lender." The agreement further acknowledged that the borrower carefully read all terms and conditions and entered into it voluntarily. Defendants point out, however, that the modification agreement obligated Wm. V. Schmidt to provide financial statements on a semi-annual basis. They believe this is noteworthy because there would be no reason to require such disclosures if the parties truly intended the loan to mature two and a half months after the modification.
On July 29, 2009, Weintraub signed a reaffirmation of guaranty in connection with the extension of the maturity date for the line of credit.*fn8 The reaffirmation stated that the borrower was not in default under the line of credit, despite the fact that it had not been paid off by its original maturity date of January 31. It also obligated Weintraub to provide annual personal financial statements "no later than October 31st of each year," even though the maturity date for the underlying line of credit was September 30, 2009.
As the September 30, 2009 maturity date approached, Wm. V. Schmidt attempted to get the line of credit "in order." M. Weintraub Aff. ¶ 19. In an email dated August 27, Weintraub wrote to Stephen Szanto, a Managing Director at FRB, regarding an overdraft of Wm V. Schmidt's account. In this email, Weintraub informed Szanto that he was working on a mortgage application.*fn9 Ex. 8 to Defs.' SF. Szanto responded that FRB was "looking forward to getting [the overdraft problem] behind us and to receiving the HELOC application." Id. On September 24, less than a week before the maturity date, Szanto wrote another email to Wm. V. Schmidt in which he informed that he was "working on getting a 30-day maturity extension done to give you more time, but will need some updated financial information to support the request" and sought financial statements from the end of 2008 and June 2009. Ex. 9 to Defs.' SF. Richard Weintraub, Melvyn's son and the Vice President of Wm. V. Schmidt, responded that the statements and tax returns were being finished by the accountants and that FRB would receive them shortly.*fn10 Szanto merely replied, "ok." Id.
The September 30 maturity date passed without an extension or payment. Defendants claim that once again FRB continued to accept the monthly payment of interest despite the fact that no principal payment had been made. Defs.' SF ¶ 29. The record demonstrates that in the months that followed, FRB worked with Wm. V. Schmidt to resolve the loan situation before turning to litigation. On December 28, Szanto emailed the Weintraubs asking if it would be possible to meet sometime "this week" to "discuss the loan situation." Ex. 11 to Defs.' SF. A meeting was scheduled for January 4, 2010. While the outcome of that meeting is unknown to the Court, the record reflects that on February 1 Richard Weintraub wrote an email to Szanto in which he informed him that, while FRB was "expecting to ...