Opinion
Civil Action No. CCB-07-2255.
March 20, 2009
MEMORANDUM
Now pending before the court are cross motions for summary judgment. Plaintiff PNC Bank, National Association, the successor to Mercantile-Safe Deposit and Trust Company ("PNC"), is suing Defendant Richard C. Mroz for breach of contract, stemming from Mroz's collection of a consulting agreement debt owed him by United Crane Rigging Co., Inc., formerly known as United Rental Equipment Co., Inc. ("UCR"), in apparent violation of a previous subordination agreement between Mroz and PNC. Mroz has responded by counterclaiming that PNC tortiously interfered with the performance of that consulting agreement. The issues in this case have been fully briefed and no hearing is necessary. For the reasons stated below, PNC's motion will be granted and Mroz's motion will be denied.
Although some of the transactions involved in this matter occurred before Mercantile-Safe Deposit and Trust Company came under the control of PNC, in the discussion that follows all such transactions will be described as PNC transactions.
Also pending is a motion by Mroz for leave to file an amended answer and counterclaim in order to add the defense of res judicata. See Fed.R.Civ.P. 15(a); Local Rule 103.6. This motion will be denied. The motion was submitted over three months after the close of discovery, and over eleven months after Mroz first admits awareness of the res judicata defense (Mroz Mot. to Amend at 2), and allowing addition of this new defense now would be unduly prejudicial to PNC. See Foman v. Davis, 371 U.S. 178, 182 (1962) (denial of leave to amend is appropriate where there is "undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment"); HealthSouth Rehab. Hosp. v. American Nat'l Red Cross, 101 F.3d 1005, 1010 (4th Cir. 1996); Deasy v. Hill, 833 F.2d 38, 41 (4th Cir. 1987) (leave to amend a complaint to include a new issue was properly denied when motion was made after close of discovery, prejudicing discovery on the new issue).
Moreover, amending the answer to include the res judicata defense would be futile here. Res judicata operates to "bar[] a party from relitigating a claim that was decided or could have been decided in an original suit." Laurel Sand Gravel, Inc. v. Wilson, 519 F.3d 156, 161 (4th Cir. 2008). Mroz claims that previous litigation in Florida to enforce payment on a consulting agreement between Mroz and UCR precludes PNC from litigating breach of a separate agreement between Mroz and PNC. However, under Florida law, which controls here, id. at 162, res judicata only applies to suits involving identical parties, claims, and requested relief. See Gilbert v. Florida Power Light Co., 981 So.2d 609, 613 (Fla.Dist.Ct.App. 2008). Since this suit involves distinct parties, claims, and requested relief, res judicata cannot apply to preclude this action.
BACKGROUND
The following facts are presented in the light most favorable to Richard Mroz. Mroz was the former owner of UCR, a company specializing in the rental of mobile cranes. Sometime in late 1993, Mroz stepped down as owner of the company and agreed to sell his stock ownership interest — worth $6,024,227.57 — to UCR. As partial payment for the sale of his ownership interest, UCR signed a promissory note with Mroz ("Mroz-UCR Note" or "Note") on January 7, 1994, promising to pay him a total of $5,874,227.58 in equal monthly installments over fourteen years.In early 1996, UCR sought to extend its line of credit with PNC in the amount of $5.1 million dollars. Apparently to induce PNC to extend this line of credit, Mroz agreed to sign a subordination agreement with PNC ("Subordination Agreement" or "Agreement"), under the terms of which he would subordinate UCR's indebtedness to him to UCR's indebtedness to PNC, thereby making PNC the senior creditor. PNC executed a loan and security agreement with UCR for $5.1 million dollars ("PNC-UCR Loan") on February 2, 1996, and then executed the Subordination Agreement in Maryland on February 8, 1996.
Because the terms of the Subordination Agreement are crucial to the legal determinations in this case, they are described in detail here. Under § 1.5 of the Agreement, Mroz's subordinated debt is defined to mean the following:
The Agreement defines Mroz as the "Subordinating Creditor," PNC as the "Lender," UCR as the "Borrower," Robert Hileman and Gary Hileman of UCR as the "Guarantors" of the PNC-UCR Loan, and both UCR and the Hilemans as the "Obligors." (Mroz S.J. Mot. at Ex. 8, p. 1.) These contractual labels will be replaced in the excerpted material to follow by bracketed names of parties where such replacements will ease discussion.
all indebtedness, obligations and liabilities now or hereafter owed by any OBLIGOR to [Mroz], whether absolute or contingent, direct or indirect, joint or several, contemplated or uncontemplated, secured or unsecured, including but not limited to all indebtedness, obligations, and liabilities under the SUBORDINATED LOAN, and any replacements, renewals, or refinancing thereof.
(Mroz S.J. Mot. at Ex. 8, § 1.5.) In essence, Mroz's subordinated debt under the Agreement encompasses both the Mroz-UCR Note and any future debt obligations between UCR and Mroz.
Section 3 of the Agreement sets out the conditions of subordination. Specifically, it requires Mroz "not [to] take any COLLECTION ACTION unless and until the SENIOR DEBT has been fully and indefeasibly paid in cash," and dictates that "[a]ny . . . pledge of or into any of the assets of [UCR]" made "in favor of or for the benefit of [Mroz], both now existing or arising in the future are hereby expressly made subordinate and junior in priority and right of enforcement" to any UCR assets, pledges, etc. securing any of the senior debt, "regardless of the record priority or dates." ( Id. § 3.) Section 3 further states that, "[i]f [Mroz] in violation of this AGREEMENT shall attempt any COLLECTION ACTION, [UCR, the Hilemans, or PNC] may interpose as a defense or plea the making of this AGREEMENT and . . . [PNC] may by virtue of this AGREEMENT restrain the enforcement thereof in the name of an OBLIGOR or [itself]." ( Id.; see also id. § 10 ("[Mroz] shall not take or permit any action prejudicial to or inconsistent with [PNC]'s priority position over [Mroz] that is created by this AGREEMENT.").) In short, under § 3 of the Agreement, PNC's right to enforce UCR payments on its debts is superior to Mroz's right, Mroz cannot take steps to collect on his debts from UCR — as defined by § 1.5 — until all of the PNC-UCR Loan has been fully paid, and, if he does, PNC may choose to prevent enforcement of that collection action.
The Agreement defines "collection action" to include any action to
(a) . . . sue for, take or receive from or on behalf of any OBLIGOR, by set-off or in any other manner, the whole or any part of any monies which may now or hereafter be owing by any OBLIGOR to [Mroz] on the SUBORDINATED DEBT, (b) initiate or participate with others in any suit, action or proceeding against any OBLIGOR to enforce payment of or to collect the whole or any part of the SUBORDINATED DEBT, or (c) initiate or participate with others in any action to realize upon any of the assets of any OBLIGOR.
( Id. § 1.1.)
Section 16, consistent with § 3's permissive language regarding PNC's enforcement, declares that PNC "shall be entitled to manage and supervise the SENIOR DEBT in accordance with applicable law and its usual practices, modified from time to time as [PNC] may deem appropriate under the circumstances." ( Id. § 16.)
Several other provisions of the Agreement are relevant to the events that follow. Sections 4 and 11 set out important notice obligations. Section 4 of the Agreement states that, until PNC gives Mroz notice that UCR is in default on its debt obligation to PNC, Mroz may accept or receive payments from UCR, provided those payments do not result in UCR defaulting on its debt obligation to PNC. Section 11 requires Mroz to "provide [PNC] with notice prior to taking any action to enforce any of [his] rights or remedies" under the Mroz-UCR Note, and requires PNC to "provide [Mroz] with notice of all EVENTS OF DEFAULT" on the PNC-UCR Loan at least ten days before it decides either to accelerate the maturity date of the PNC-UCR Loan or to enforce any of its rights or remedies against the assets of UCR. ( Id. § 11; see also id. § 19 ("Any notice required or permitted by or in connection with this AGREEMENT shall be in writing").)
This notice is defined by the Agreement as "written notice of the occurrence of an EVENT OF DEFAULT." ( Id. § 1.7.)
Finally, Section 15 sets out the duration of the Agreement. It states:
This AGREEMENT shall constitute a continuing agreement between [Mroz] and [PNC], and [PNC] may continue, without notice to [Mroz], to lend monies, extend credit, [etc. to UCR]. . . . This AGREEMENT shall be irrevocable by [Mroz] until all of the SENIOR DEBT shall have been paid and fully satisfied . . . or until the SUBORDINATED DEBT shall have been paid and fully satisfied, whichever first occurs. This AGREEMENT and the obligations of [Mroz] under this AGREEMENT shall continue to be effective, or be reinstated, as the case may be, if at any time any payment in respect of the SENIOR DEBT is rescinded or must otherwise be restored or returned by [PNC] by reason of any bankruptcy, reorganization, [etc.] . . ., all as though such payment had not been made.
( Id. § 15.) Section 15 thus establishes no defined end point for the Agreement, and further establishes that the Agreement cannot end before either the PNC-UCR Loan is fully paid or the Mroz-UCR Note and any other debts from UCR to Mroz are fully paid; at that point the Agreement will still continue, but will become revocable. Section 15 also binds Mroz to return to subordinating creditor status after full payment of the PNC-UCR Loan if, for some reason, circumstances lead to that payment being rescinded or revoked.
In late December 1998, Mroz entered into a consulting agreement with UCR ("Consulting Agreement") in connection with UCR's refinancing of the Mroz-UCR Note. Under this new agreement, Mroz would provide consulting services to UCR over a period of seven years, and would be paid approximately $6,000 per month for these services, totaling $500,000 over the life of the agreement. Concurrently, Mroz agreed to accept $3.5 million from UCR as satisfaction of the Mroz-UCR Note. On January 4, 1999, UCR paid this sum to Mroz, and the Consulting Agreement commenced. PNC provided additional financing to UCR to enable it to pay this sum, and PNC's Senior Vice President, C. Douglas Sawyer III, was a witness to the execution of the agreement.
Mroz's consulting arrangement continued until late 2002, at which point PNC, claiming that UCR was in default on the PNC-UCR Loan, invoked its right under § 3 to subordinate UCR's debt obligations to Mroz to its debt obligations to PNC. ( See PNC S.J. Mot. at Ex. 18, Sawyer Aff. ¶¶ 15-16.) The result was that UCR payments to Mroz under the Consulting Agreement were halted, and Mroz was notified of this development by Robert Hileman, the president of UCR. (PNC S.J. Mot. at Ex. 17, Mroz Dep. at 117.) From 2002 to 2006, Mroz did not challenge PNC's prohibition. Then, in late 2006, Mroz commenced an arbitration proceeding against UCR in Florida to collect money owed him under the Consulting Agreement ("arbitration proceeding"), pursuant to that agreement's dispute resolution provision. As part of that proceeding, PNC insisted that UCR submit affidavits from PNC employees explaining why payments on the Consulting Agreement had been halted. On May 14, 2007, an arbitrator awarded Mroz $337,440.00, representing the balance of payments owed under the Consulting Agreement plus interest, as well as $7,680.00 in arbitration fees and expenses.
According to Mroz, this was because Hileman begged him, through tears, not to take any action. (Mroz S.J. Mot. at Ex. 5, Mroz Dep. at 137-39.)
Section 8 of the Consulting Agreement reads: "Any dispute or controversy arising under this Agreement shall be determined and settled by arbitration conducted in Naples, Florida under the rules of the American Arbitration Association. The arbitration award shall be final and binding and judgment on the award may be entered by any court having competent jurisdiction." (Mroz S.J. Mem. at Ex. 3, § 8.)
On June 7, 2007, having learned of this arbitration award, PNC sent Mroz and his counsel a letter, reminding them that the Subordination Agreement "prohibits Mr. Mroz from taking any action to realize upon any of the assets of United Crane," and warning them that, if Mroz were to attempt to enforce the award, "Mercantile shall exercise its rights and remedies under the Subordination Agreement, including, but not limited to, obtaining an injunction to prevent such enforcement." (PNC S.J. Mot. at Ex. 14.) Nevertheless, one week later, on June 14, 2007, Mroz filed suit in the Circuit Court for the Twentieth Judicial Circuit in and for Collier County, Florida, Case No. 07-1888-CA ("Florida lawsuit"), seeking to obtain a judgment against UCR for the arbitration award. PNC responded by filing suit in the Circuit Court for Baltimore City, Case No. 24-C-07-004668 CN, on June 28, 2007, seeking a temporary restraining order and subsequent injunction against Mroz, and requesting that Mroz remit all monies he received from UCR in violation of the Subordination Agreement to PNC. That lawsuit was removed to this court on August 24, 2007, and a schedule was set for discovery and motions.
On October 6, 2007, while the present lawsuit was pending, Mroz was awarded a judgment in the Florida lawsuit of $359,890.72, representing the amount owed from arbitration plus interest and related fees ("Florida judgment"). This judgment was an event of default for UCR, affecting its ability to service its debt obligations to PNC and conduct further business. Given both the requirement to comply with a court order and PNC's interest in enabling UCR to restore its ability to meet its other debt obligations, PNC agreed to allow UCR to use the proceeds from the sale of a crane (sold after the Florida judgment was entered) to pay the Florida judgment. This sum was paid to Mroz on November 15, 2007, and Mroz's counsel filed a Statement of Satisfaction to reflect in the record that this payment was made. As of this date, UCR still has not fully paid its debt to PNC.
ANALYSIS
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment:
should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law.
Fed.R.Civ.Pro. 56(c). The Supreme Court has clarified that this does not mean any factual dispute will defeat the motion:
By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original). In cases involving contract disputes, "summary judgment is appropriate when the contract in question is unambiguous or when an ambiguity can be definitively resolved by reference to extrinsic evidence." Washington Metro. Area Transit Auth. v. Potomac Inv. Props., Inc., 476 F.3d 231, 235 (4th Cir. 2007).
"A party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must `set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 644-45 (4th Cir. 2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).
A. PNC's Breach of Contract Claim
PNC contends that Mroz has breached his obligations under the Subordination Agreement by instituting a collection action to obtain monies owed under the Consulting Agreement — first through the arbitration proceeding and then through the Florida lawsuit — before the PNC-UCR Loan was fully paid, actions it claims are clearly prohibited by the Subordination Agreement. (PNC Compl. ¶¶ 18-19.) Mroz's principal response is that there is no breach because the Subordination Agreement does not encompass monies owed by UCR under the Consulting Agreement.
"Construction of a written contract is ordinarily an issue of law for resolution by the court." Nat'l Mortgage Warehouse, LLC v. Bankers First Mortgage Co., Inc., 190 F. Supp. 2d 774, 782 (D. Md. 2002) (citing cases). In adjudicating disputes over contract terms, Maryland courts follow the objective theory of contract law to determine their proper construction. Washington Metro. Area Transit Auth., 476 F.3d at 235; Walton v. Mariner Health of Maryland, Inc., 894 A.2d 584, 594 (Md. 2006). Construing contracts under the objective theory means "look[ing] at what a reasonable person in the same position would have understood as the meaning of the agreement." Walton, 894 A.2d at 594 (citing Aetna Cas. Sur. Co. v. Ins. Comm'r, 445 A.2d 14, 19 (Md. 1982)). In this examination, the language of the contract is the best guide as to its meaning. See St. Lawrence Cement, Inc. v. Spivey, 815 F.2d 965, 967 (4th Cir. 1987); General Motors Acceptance Corp. v. Daniels, 492 A.2d 1306, 1310 (1985). Accordingly, where the language is clear and unambiguous, "the intention expressed thereby controls [the contract's] interpretation," Spivey, 815 F.2d at 967, and extrinsic evidence of the contracting parties' intent is not to be considered. See General Motors Acceptance Corp, 492 A.2d at 1310.
To determine whether payments under the Consulting Agreement are covered by the Subordination Agreement, the natural starting point is the latter agreement's definition of subordinated debt. As detailed above, § 1.5 of the Subordination Agreement states that debt owed to Mroz by UCR for purposes of subordination is "not limited to" debt owed under the Mroz-UCR Note. (Mroz S.J. Mot. at Ex. 8, § 1.5.) The Agreement also explicitly includes within its reach "all indebtedness, obligations and liabilities . . . hereafter owed by any OBLIGOR to [Mroz]." ( Id. (emphasis added).) A reasonable person would understand this language to include the Consulting Agreement because that agreement created for UCR a future obligation to pay Mroz $500,000 over a period of seven years. ( See Mroz S.J. Mot. at Ex. 3, § 4; Ex. 6, ¶ 3.) Accordingly, this court concludes that payments under the Consulting Agreement are covered by the Subordination Agreement.
Whether Mroz believed the Subordination Agreement to cover a future consulting agreement when he signed it is of no moment; the Agreement's definition of subordinated debt includes "uncontemplated" debt. (Mroz S.J. Mot. at Ex. 8, § 1.5.)
Because these payments are covered by the Subordination Agreement's definition of subordinated debt, Mroz is contractually forbidden from taking any collection action to compel them to be made until the PNC-UCR Loan is fully paid. This much is made plain by the language of the Agreement, which prohibits "any COLLECTION ACTION unless and until the SENIOR DEBT has been fully and indefeasibly paid in cash" (Mroz S.J. Mot. at Ex. 8, § 3), and defines "collection action" to include any "suit, action or proceeding" against UCR "to enforce payment of or to collect the whole or any part of the SUBORDINATED DEBT." ( Id. § 1.1.) Because it is undisputed that the PNC-UCR Loan is not fully paid, Mroz's efforts to collect Consulting Agreement payments through arbitration and then the Florida lawsuit constitute a flagrant breach of the Subordination Agreement.
Assuming the court's above construction is correct, Mroz still maintains there is no breach because the Subordination Agreement only prohibits collection actions in a certain circumstance that does not exist here, i.e. UCR's default on the PNC-UCR Loan, and furthermore because the Subordination Agreement contains a termination provision that has been triggered. In support of the first argument, Mroz points out that § 4 of the Subordination Agreement specifically allows Mroz to accept or receive payments from UCR unless PNC has notified him that UCR is in default on its PNC-UCR Loan obligations, and UCR is not in default on those obligations. (Mroz S.J. Mot. at Ex. 1, Elias Dep. at 30.) This argument conflates "payments," which are allowed under the Subordination Agreement unless UCR is in default ( see Mroz S.J. Mot. at Ex. 8, § 4), and "collection actions" to enforce payments, which are flatly disallowed until the PNC-UCR Loan debt is fully satisfied ( see id. § 3). It also obfuscates the relevant time periods in this case. While it is true that UCR is currently not in default on its debt obligations to PNC, what matters for purposes of § 4 is whether it was in default at the time Mroz attempted to obtain payment of the arbitration award, namely June 2007. As evidenced by PNC's April 3, 2007 letter to Mroz (PNC S.J. Mot. at Ex. 11), Mroz was on written notice that UCR was in default when he filed suit in Florida to collect the arbitration award, and Mroz admits he did not become aware that UCR was no longer in default until June 2008, well after he had received and cashed the UCR payment from the Florida judgment. ( See Mroz S.J. Mot. at 21; PNC S.J. Mot. at Ex. 15.) Additionally, there is no evidence that UCR was not in default through at least sometime after the Florida judgment was paid. ( See Mroz S.J. Mot. at Ex. 1, Elias Dep. at 30; PNC S.J. Mot. at Ex. 19, Elias Aff. ¶¶ 5 13.)
Regarding the expiration argument, Mroz asserts that § 15 of the Subordination Agreement "expressly provides that the Subordination Agreement terminates when `the Subordinated Debt shall have been paid and fully satisfied'" (Mroz Opp. at 2 (quoting Mroz S.J. Mot. at Ex. 8, § 15)), and that UCR's debt to Mroz under the Mroz-UCR Note was satisfied by January 1999. This contention is wrong in two respects. First, as previously discussed, "subordinated debt" under the Agreement includes more than the Mroz-UCR Note, so satisfaction of the Note does not necessarily constitute full satisfaction of all subordinated debt. Second, and more importantly, § 15 does not expressly provide that the Agreement "terminates" when the subordinated debt is paid as Mroz suggests; the word "terminate" never appears in the Agreement. ( Compare Mroz S.J. Mot. at Ex. 8, § 15 with Mroz S.J. Mot. at Ex. 3, § 6 ("Unless otherwise agreed to in writing, this Agreement may be terminated upon the mutual agreement in writing between UNITED and MROZ.").) Rather, § 15 only states that the Agreement becomes revocable after full payment of either the senior debt or the subordinated debt, and that otherwise it is a "continuing agreement." (Mroz S.J. Mot. at Ex. 8, § 15.) Therefore, the argument that PNC's contractual rights to prevent UCR payments to Mroz have expired does not withstand scrutiny, particularly since there is no evidence to suggest that either party took steps to revoke.
Mroz finally argues that, even if the Consulting Agreement is covered by the Subordination Agreement and PNC's right to prevent Mroz from collecting Consulting Agreement payments is still in force, the court should not allow PNC to exercise this right at this date on grounds of laches and equitable estoppel. Neither of these doctrines is applicable here.
The doctrine of laches applies to stop a party from asserting his rights "when there is an unreasonable delay in the assertion of [those] rights and that delay results in prejudice to the opposing party." Liddy v. Lamone, 919 A.2d 1276, 1283 (Md. 2007) (quoting Frederick Rd. Ltd. P'ship v. Brown Sturm, 756 A.2d 963, 985 (2000) (alteration added)). Here, Mroz argues that laches ought to apply because PNC unreasonably failed to intervene in the arbitration proceeding with UCR and later the Florida lawsuit against UCR. In fact, PNC did intervene in the arbitration proceeding to the extent it was able as a non-party by insisting that UCR submit affidavits from PNC employees explaining that PNC had prohibited UCR from making further Consulting Agreement payments. ( See Mroz S.J. Mot. at Ex. 10, Elias Aff. ¶¶ 8-9; Sawyer Aff. ¶¶ 8-9.) As to the Florida lawsuit, PNC took immediate action, filing this lawsuit just two weeks after the Florida complaint was filed, seeking a permanent injunction requiring Mroz to dismiss the Florida lawsuit. It also reminded Mroz two months prior to the lawsuit's commencement that its ability to prohibit payments from UCR to Mroz was covered by the Subordination Agreement (PNC S.J. Mot. at Ex. 11), and reminded Mroz one week before he filed the lawsuit that "any action" to enforce the arbitration award was prohibited by the Subordination Agreement. (PNC S.J. Mot. at Ex. 14.) These actions show a frequent and diligent assertion of rights by PNC; laches therefore does not apply to bar PNC's claims.
Equitable estoppel may be appropriate where the party seeking estoppel relied to its detriment on a previous voluntary action or representation by the other party. See Knill v. Knill, 510 A.2d 546, 549-50 (Md. 1986). The doctrine usually is not invoked unless the voluntary action of the party to be estopped amounts to fraud. Id. at 549 ("wrongful or unconscionable conduct is generally an element of estoppel"); Benson v. Borden, 198 A. 419, 427 (Md. 1938). Here Mroz argues that PNC's decision to allow UCR to pay the Florida judgment equitably estops it from seeking a disgorgement of that sum now. This decision, however, can hardly be described as wrongful or unconscionable, let alone voluntary. UCR had been ordered by a court to pay to Mroz the amount owed from an arbitration proceeding; failure to pay could have resulted in monetary and other sanctions for contempt of court. Therefore, PNC's decision to allow UCR to pay the judgment was not truly a free decision. Also, as UCR's senior creditor, PNC had an interest in allowing UCR to pay the judgment so as to prevent it from incurring further liabilities and court sanctions that could affect its ability to conduct business in the future. Nothing in PNC's decision would justify the application of equitable estoppel to this matter.
In exceptional cases, "an estoppel may arise even where there is no intent to mislead, if the actions of one party cause a prejudicial change in the conduct of the other." Id.
Mroz admits as much in his motion for summary judgment when he writes, "Of course UCR was forced to pay [the arbitration award]. The Arbitrators entered the Arbitration Award against UCR, and the Florida Court, in turn, entered a Judgment against UCR which UCR was obliged to satisfy." (Mroz S.J. Mot. at 15.)
For all of the above reasons, PNC has validly asserted a breach of its Subordination Agreement warranting relief.
B. Mroz's Tortious Interference with Contract Counterclaim
Mroz counterclaims that PNC tortiously interfered with the Consulting Agreement by preventing UCR from making payments to Mroz under that agreement from 2002 onward without providing Mroz any notice. (Mroz Counterclaim ¶¶ 18-19.) This claim is time-barred. In Maryland, the statute of limitations for a tortious interference claim begins to accrue on the date the interference induced a breach of the underlying contract, absent specific facts showing fraud or concealment. Cf. Dual Inc. v. Lockheed Martin Corp., 857 A.2d 1095, 1104 (Md. 2004). Given that the statute of limitations for civil actions in Maryland is three years, Md. Code Ann., Cts. Jud. Proc. § 5-101, Mroz's tortious interference counterclaim was raised over two years too late. It will therefore be denied.
Mroz is not helped by claiming that he was not on notice of this alleged interference, since he admits he learned in 2002 that PNC was preventing UCR from making payments under the Consulting Agreement. (PNC S.J. Mot. at Ex. 16, Mroz Dep. at 117.) Nor is Mroz helped by arguing that UCR's acknowledgment of its debt during the 2006-07 arbitration proceeding tolls the statute of limitations. ( See Mroz Opp. at 13-14.) Acknowledgment of a debt by the debtor tolls the statute of limitations for actions brought by the creditor to recover on that debt. See Jenkins v. Karlton, 620 A.2d 894, 904-05 (Md. 1993). It certainly does not toll the statute of limitations for related actions brought by the creditor against a third party. UCR's recent acknowledgment of its debt thus does not toll the statute of limitations for Mroz's claim of tortious interference by PNC.
Mroz's counterclaim would fail even if it were not time-barred. In Maryland, to succeed on a claim of intentional interference with contract, the claimant must show:
(1) an intentional or wilful act; (2) calculated to cause damage to the plaintiffs in their lawful business; (3) done with the unlawful purpose to cause such damage and loss, without right or justifiable cause on the part of the defendants; and (4) actual damage or loss resulting to the plaintiff.PPM America, Inc. v. Marriott Corp., 853 F. Supp. 860, 879 (D. Md. 1994) (citing Natural Design, Inc. v. Rouse Co., 485 A.2d 663, 675 (1984)). The third element — absence of right or justification — is a crucial element to be established; a tortious interference claim is not actionable if the interference is "justified or excused in some way." Fowler v. Printers II, Inc., 598 A.2d 794, 803 (Md.Ct.Spec.App. 1991) (citing Sharrow v. State Farm Mutual Auto Ins. Co., 511 A.2d 492 (Md. 1986)). Here PNC has shown that it was within its rights under the Subordination Agreement to interfere as senior creditor with the Consulting Agreement ( see Mroz S.J. Mot. at Ex. 8, § 3), and that, at the time it halted payments from UCR to Mroz under the Consulting Agreement, UCR was in default on its PNC-UCR Loan obligations, justifying PNC's interference. ( See PNC S.J. Mot. at Ex. 18, Sawyer Aff. ¶ 15.) Accordingly, its interference with the Consulting Agreement was not tortious.
CONCLUSION
For the foregoing reasons, PNC's motion for summary judgment will be granted and Mroz's motion will be denied. A separate Order follows.ORDER
For the reasons stated in the accompanying Memorandum, it is hereby ORDERED that:
1. The plaintiff's motion for summary judgment (docket entry no. 30) is GRANTED;
2. The defendant's motion for summary judgment (docket entry no. 31) is DENIED;
3. The defendant's motion for leave to file an amended answer and counterclaim (docket entry no. 37) is DENIED;
4. Judgment is entered in favor of the plaintiff, PNC Bank, N.A., successor to Mercantile-Safe Deposit Trust Company, against the defendant Richard C. Mroz, in the amount of $295,095.00; and
5. The Clerk shall CLOSE this case.