Opinion
No. 215-2014-CV-18
11-02-2016
Woodsville Guaranty Savings Bank v. Passumpsic Savings Bank
ORDER
This case arises out of a 2008 loan made to Isaacson Structural Steel, Inc. ("Isaacson") by Woodsville Savings Bank ("Woodsville"), Passumpsic Savings Bank ("Passumpsic"), and Ledyard Savings Bank ("Ledyard"). Pursuant to the terms of a Loan Participation Agreement ("LPA"), Passumpsic, Woodsville, and Ledyard loaned Isaacson $10 million. Passumpsic loaned $5 million; Woodsville loaned $3 million; and Ledyard loaned $2 million. Under the LPA, Passumpsic was the Lead Bank. Arnold Hanson and Steven Griffin, respectively the President and CFO of Isaacson, falsified Isaacson's financial data in order to obtain the loan. Isaacson subsequently defaulted on the loan. David J. Driscoll ("Driscoll"), the principal of Driscoll & Co., an accounting firm, was a member of Passumpsic's Board of Trustees and was also the outside accountant for Isaacson. Woodsville has sued Passumpsic, alleging that it is liable for its losses. Its Complaint contains seven counts; Count I alleges a Breach of Warranty; Count II alleges Gross Negligence in Passumpsic's execution of its duties under the LPA; Count III alleges Breach of Contract; Count V alleges Intentional or Negligent Misrepresentation by Passumpsic; Count VI alleges a breach of the Implied Covenant of Good Faith and Fair Dealing; and Count VII alleges Breach of Fiduciary duty owed to Woodsville by Passumpsic as a result of the LPA.
Woodsville has voluntarily dismissed Count IV, which alleged violations of RSA 421-B.
Passumpsic has moved for summary judgment on Counts I, II, III, VI, and VII of the Complaint. Woodsville has objected on the grounds that genuine issues of material fact exist. For the reasons stated in this Order, the Court GRANTS Passumpsic's Motion for Summary Judgment with respect to Count VI, the Implied Covenant of Good Faith and Fair Dealing, because this claim is subsumed in the breach of contract claim, and Count VII, Breach of Fiduciary Duty, and DENIES the Motion with respect to all other Counts.
I. Background Facts
To prevail on a motion for summary judgment, the moving party must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." RSA 491:8-a, III. In order to defeat summary judgment, the non-moving party "must put forth contradictory evidence under oath, sufficient . . . to indicate that a genuine issue of fact exists so that the party should have an opportunity to prove the fact at trial . . . ." Phillips v. Verax, 138 N.H. 240, 243 (1994) (quotation omitted). A fact is material if it affects the outcome of the case under the applicable substantive law. Palmer v. Nan King Rest., Inc., 147 N.H. 681, 683 (2002). In considering a party's motion for summary judgment, the evidence must be considered in the light most favorable to the non-moving party, together with all reasonable inferences therefrom. Sintros v. Hamon, 148 N.H. 478, 480 (2002).
Discovery in this case is apparently not yet complete; for example, Driscoll's deposition has not been taken. The New Hampshire Superior Court Rules do not require the party to submit statements of agreed and disputed facts and it is very difficult to understand, from the papers, exactly what is genuinely disputed. The Court considers the evidence in the light most favorable to Woodsville, the nonmoving party.
The LPA, which is attached as Exhibit A to Passumpsic's Motion for Summary Judgment, between Passumpsic, Woodsville, and Ledyard, set forth the rights and obligations of the parties. It provided that "Passumpsic, as Lead Bank, shall act for the benefit of Woodsville to the extent of Woodsville's undivided interest in the [loan]." (LPA ¶ 15.) Passumpsic was required to collect the payments, interest, and other charges and fees on the loans for the benefit of itself and the other lenders. (LPA ¶ 18.) In addition, the LPA provided:
Passumpsic shall . . . (ii) endeavor to exercise the same care as [it] exercises in the care of loans in which it alone is interested . . .(LPA ¶¶ 17, 33.)
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Passumpsic, in performing obligations hereunder, will endeavor to exercise the same care that it exercises in the making and handling of loans and security for its own account, but Passumpsic does not assume any further responsibility.
Passumpsic also affirmatively represented that as of the date of execution of the agreement there was no default existing under any of the loan documents or under the terms of any other credit relationship now existing between Passumpsic and the Borrower or the Guarantors, nor was Passumpsic aware of any facts or circumstances that constitute or would result in such a default. (LPA ¶ 14.) The LPA acknowledged that each participant "reasonably relied on information furnished to it by Passumpsic regarding the Borrower, the Guarantors and the collateral." (LPA ¶ 35.) Passumpsic expressly agreed to:
[I]ndemnify and hold harmless each of the Participants for any loss or damage, costs and expenses (including reasonable attorneys fees) resulting directly or indirectly from Passumpsic's gross negligence or willful misconduct in administering, servicing or enforcing the Participated Loan and Passumpsic agrees that in performing such duties it shall be acting on behalf of each of the Participants as well as itself. Passumpsic will use reasonable efforts to ascertain the occurrence of any default under the Loan Documents and will take such other actions as are reasonably necessary in order to monitor and administer the Participated Loan.(LPA ¶ 17.)
Frank Stiegler ("Steigler"), Vice President and Commercial Loan Officer at Woodsville, testified that as a participating bank, Woodsville had no direct contact with the customer except through the lead bank, Passumpsic.
In April 2011, Passumpsic reported to Woodsville that there were significant and material irregularities and inconsistencies in Isaacson's financial statements. Isaacson's business was to fabricate steel commercial construction. This involved entering into construction contracts both to supply and to erect the steel. These contracts often involved changes. Change orders were a substantial portion of the value of Isaacson's business. Because change orders were eventually paid, they were accounted for as assets in Isaacson's financials. Traditionally, the change orders were listed as work in process ("WIP"). In 2006, however, Isaacson started to count change orders as inventory. The decision to account for change orders as inventory was made with the knowledge of Hanson, Griffin, and Driscoll. Based on Driscoll's oversight as Isaacson's outside accountant, Passumpsic believed that this change was consistent with Generally Accepted Accounting Principles ("GAAP").
In 2007, Issacson started to use this accounting change as a way to falsely inflate Isaacson's financial data. It began to treat the change orders as assets twice by listing them both as WIP and inventory. Additionally, Griffin would occasionally overstate the value of a certain change order by a large amount. Although Hanson was not directly involved in creating the false financial reports, he was aware Griffin was manipulating the financial data and condoned his actions. Isaacson regularly submitted the falsified financial records to Driscoll & Co. for review and audit, but neither Driscoll nor any other Driscoll & Co. employee noticed anything amiss. Hanson and Griffin used the false financial records to obtain the 2008 loan at issue here. Additionally, they submitted the falsified records to comply with their obligations under the loan agreement to provide periodic financial data so the Banks could monitor Isaacson's financial health.
The fraud was discovered in the spring of 2011. Shortly thereafter, Isaacson declared bankruptcy. In February 2015, Hanson pled guilty to violating 18 U.S.C. 1014, which prohibits false statements to a federally insured bank. Griffin pled guilty to a similar charge in February 2016. There appears to be no dispute that Hanson and Griffin intentionally defrauded Passumpsic and Woodsville. The issue in this case centers on Driscoll's role as outside accountant for Isaacson, and as a member of the Passumpsic Board of Directors.
Passumpsic knew that in addition to his role as an outside accountant for Isaacson, Driscoll served as a trustee of Isaacson family trusts. While Driscoll was never charged criminally, the State Board of Accountancy brought allegations of professional misconduct against Driscoll. Driscoll entered into a Settlement Agreement, which provided that:
As a result of his roles as (1) a trustee in the Isaacson Trust, (2) a trustee at Passumpsic Savings Bank, and (3) serving two positions of significant
influence with Passumpsic Savings Bank, while simultaneously performing accounting services for the Isaacson Trust, the trusts' beneficiaries, and Isaacson Structural Steel, the Respondent [David Driscoll] had a number of conflicts of interest that compromised his integrity, objectivity and independence.(Def.'s Mot. for Summ. J. Ex. K, ¶ 5 .)
What role Driscoll had when the Isaacson loan was approved by the Woodsville Board of Directors appears to be a critical disputed fact. For example, in Passumpsic's Motion for Summary Judgement at paragraph 29, citing deposition transcripts from James Impey and Peter Crosby, it states, in pertinent part, as follows:
Driscoll abstained from voting on any of the loans. Although Driscoll remained in the room when the [Issacson] loans were being discussed, he did not participate in the discussions in a substantive way, and his presence in the room had no effect on Passumpsic's decision as to whether to approve or deny any of the loans.
On the other hand, citing deposition transcript from the same individuals, and from Passumpsic Director Bishop, Woodsville recites at page 8 of its Opposition that:
However, despite having knowledge of Mr. Driscoll's competing roles and the conflict arising therefrom, Passumpsic not only allowed Mr. Driscoll to remain in the room during the discussions of the loan and the ultimate vote to accept the loan, but actively sought information from him with respect to [Issacson].
Woodsville also asserts that:
[T]he extent of the chilling impact Mr. Driscoll's presence had on the Board's discretion, especially in light of Mr. Driscoll's roles on the audit committee and the business he had brought to the bank, is not entirely known and always will be difficult to calculate. But the extent of that chilling impact is one that the factfinder in this matter must determine. Self-serving statements by defendant do not eliminate the issue.(Woodsville's Mem. Support of Opp. to Mot. for Summ. J. ("Woodsville Opp.") 1, 8.) This factual dispute is central to resolution of this case.
II. Woodsville's Claims
Although Woodsville has brought a number of different claims against Passumpsic based on different legal theories, the factual basis for all the claims is essentially the same and relates to Driscoll's knowledge and participation in the loan despite the recognized conflict of interest. The Court addresses the claims separately.
A. Breach of Fiduciary Duty
Woodsville claims that Passumpsic is liable to it for a breach of a fiduciary duty it asserts was imposed by law. Banking relationships generally "are not viewed as special relationships giving rise to a heightened duty of care." Banque Arabe et Internationale D'Investissement v. Maryland Nat. Bank, 57 F.3d 146, 157 (2d Cir. 1995); see also Lesser v. Wells Fargo Bank, N.A., No. 2015-0663, 2016 WL 3748683, at *1 (N.H. May 31, 2016). "In the case of arm's length negotiations or transactions between sophisticated financial institutions, no extra-contractual duty of disclosure exists." Banque Arabe et Internationale D'Investissement, 57 F.3d at 157; see also Banco Espanol de Credito v. Sec. Pac. Nat. Bank, 763 F. Supp. 36, 44 (S.D.N.Y. 1991). This principle applies to LPAs "in which there is deemed to be no fiduciary relationship unless expressly and unequivocally created by contract." Banque Arabe et Internationale D'Investissement, 57 F.3d at 157. Any fiduciary duty must be created by the language of the loan participation agreement. First Citizens Fed. Sav. & Loan Ass'n v. Worthen Bank & Trust Co., N.A., 919 F.2d 510, 514 (9th Cir. 1990).
The LPA required Passumpsic to "endeavor to exercise the same care as [it] exercises in the care of loans in which it alone is interested . . ." and provided that it would indemnify each of the participants for any loss or damage "resulting directly or indirectly from Passumpsic's gross negligence or willful misconduct in administering, servicing or enforcing the Participated Loans . . . ." (LPA ¶ 17.) This language does not create a fiduciary relationship. Such language has been held to be an "anti-discrimination standard, which requires the [lead bank] to treat the participant banks' loans the same way as it treated its own loans." Am. Bank & Trust of Coushatta v. Fed. Deposit Ins. Co., 49 F.3d 1064, 1068 (5th Cir. 1995). Courts have held that the duty of care created under the anti-discrimination standard does not establish a negligence standard, but merely requires that the lead bank treat loans subject to an LPA in the same way as it treats its own loans. More importantly, the limitation of liability to acts of "gross negligence" or "intentional misconduct" has been held to be "plainly inconsistent with the creation of a fiduciary relationship, which entails duties of the utmost loyalty and care." 330 Acquisition Co., LLC v. Regency Sav. Bank, F.S.B., 306 A.D.2d 154, 155 (2003).
Woodsville cites Women's Fed. Sav. & Loan Ass'n v. Nevada Nat'l Bank, 811 F.2d 1255 (9th Cir. 1987) for the proposition that a loan participation agreement creates fiduciary obligations between the lead bank and other participating banks. But that case is inapposite; the LPA at issue in that case specifically provided that the lead bank would "act as a trustee with fiduciary duties" to protect the participant bank's interest. Women's Fed. Sav. & Loan Ass'n, 811 F.2d at 1257. No such language exists in this case, and in light of the language providing that Passumpsic will, under the terms of the LPA, only be liable for gross negligence or willful misconduct, no fiduciary duty could exist. Since it owed to Woodsville no fiduciary duty under the LPA, Passumpsic is entitled to summary judgment on Woodsville's breach of fiduciary duty claim.
B. Breach of Contract and Breach of Warranty
The rights and obligations of the parties therefore flow solely from the LPA. The LPA is, of course, a contract and the interpretation of a contract is a question of law. Baker v. McCarthy, 122 N.H. 171, 174-75 (1982). The LPA provides for liability in the event that the lead bank acted with gross negligence or willful misconduct. This means that Woodsville agreed to exculpate Passumpsic from ordinary negligence but not from gross negligence or willful misconduct. See Official Comm. of Unsecured Creditors v. Donaldson, Lufkin & Jenrette Sec. Corp., No. 00 Civ. 8688(WHP), 2002 WL 362794, at *15 (S.D.N.Y. Mar. 6, 2002).
Woodsville does not argue that the exculpatory agreement is unlawful. --------
Passumpsic also provided express warranties as part of the LPA to Woodsville and Ledyard. Woodsville alleges that among the material terms of the LPA was Passumpsic's warranty that it was "not aware of any facts or circumstances indicating any deterioration in the financial condition" of Isaacson. (Compl. ¶ 26.) It alleges that this "warranty was made with the express intent (as stated in the LPA) of inducing Woodsville to enter into the LPA." (Compl. ¶ 26.) The warranty claim is essentially the same as the breach of contract claim, and is treated by the parties in the same way.
Passumpsic recognizes that it warranted that it was not aware of any circumstances that constitute a default and that it had an obligation to exercise the same care in making and handling of loans as it did with respect to loans for its own benefit. (LPA ¶¶ 17, 33.) However it points to paragraph 32 of the LPA, which it asserts significantly limits its contractual obligations:
32. Except as expressly set forth herein, Passumpsic shall have no other duties or responsibilities to Participants and shall not be responsible to
Participants for:(LPA ¶ 32 (a), (f); Def.'s Mot. for Summ. J. ¶ 60.)
a. any recitals, statements, representations or warranties made by the Borrower or any other person or guarantor contained in the Loan Documents or any certificate or other document referred to or provided for in, or received by, Passumpsic under any of the Loan Documents;
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f. the financial condition of the Borrower or any of the Guarantors.
However, this argument avoids the numerous contrary provisions in the LPA, including the affirmative obligations and warranties and the existence of an indemnification provision in the event Passumpsic failed in its duties.
Passumpsic also argues that "[t]he LPA further expressly provides that Passumpsic may rely upon information provided by independent accountants and shall not be held liable for doing so:
Passumpsic shall be entitled to consult with legal counsel, independent accountants and other experts and shall not be liable for any action taken or omitted to be taken in good faith by Passumpsic in accordance with the advice of such counsel, accountants or such other expert. Passumpsic shall not be liable or responsible for any action taken or omitted to be taken by Passumpsic in connection with the Participated Loan hereunder, except for Passumpsic's own gross negligence or willful misconduct.(LPA ¶ 34; Def.'s Mot. for Summ. J. ¶ 61.) The difficulty with Passumpsic's position is that Driscoll, Isaacson's accountant, was also a member of its board.
Finally, Passumpsic alleges that the warranties were not breached because the LPA specified that "the sale of the participating interest by Passumpsic to each of Woodsville and Ledyard shall be 'Without Recourse' (as such term is defined in Section 561.8 of the Code of Federal Regulations at 12 CFR 561.8 (1982))." (Def.'s Mot. for Summ. J. ¶ 63.) This nonrecourse language is flatly inconsistent with the express warranties created by the agreement, and the statement that Passumpsic would be liable if it acted with gross negligence or willfully. (LPA ¶ 17.)
i. The Anti-discrimination Claim
The LPA specifically required Passumpsic to exercise the same degree of care that it exercises with respect to the handling of its own loans that are not subject to a participation agreement. (LPA ¶¶ 17, 33.) This duty of care created by this anti-discrimination provision is not a negligence standard; it merely requires that Passumpsic act pursuant to its usual course of conduct, even if its usual course of conduct could be considered negligent in light of an industry standard. See In re Enron Corp., 292 B.R. 752, 766 (Bankr. S.D.N.Y. 2003).
However, Passumpsic also agreed that it would "indemnify and hold harmless each of the Participants for any loss or damage, costs and expenses (including reasonable attorneys fees) resulting directly or indirectly from Passumpsic's gross negligence or willful misconduct in administering, servicing or enforcing the Participated Loan . . . ." (LPA ¶ 17.) Although a few statutes distinguish between gross and ordinary negligence, New Hampshire common law does not distinguish causes of action based on ordinary and gross negligence: "the doctrine of definitive degrees of negligence is not recognized as part of our common law . . . ." Barnes v. N.H. Karting Ass'n, 128 N.H. 102, 108 (1986) (quotation omitted). Cases cited by Passumpsic involving definition of the term gross negligence generally referred to the substantive language of the jurisdiction whose law applies to the LPA. See, e.g. In re Enron Corp., 292 B.R. at 767 (applying New York law). The Court believes that the common law standard for gross negligence is set forth as follows:
Generally, gross negligence presupposes the existence of a composite of circumstances that, together, constitute an imminent or clear and present
danger amounting to more than normal peril. The distinction between ordinary and gross negligence amounts to a rule of policy that a failure to exercise due care in those situations where the risk of harm is great will give rise to legal consequences harsher than those arising from negligence in less hazardous situations. An allegation of gross negligence constitutes an allegation that the defendant failed to exercise the degree of care that even a careless individual would employ under the circumstances. In short, whether gross negligence exists must be ascertained from the facts and circumstances of each particular case, and not from any fixed definition or rule.57A Am. Jur. 2d Negligence § 228.
Willful misconduct has been generally held to require "an intentional act or an intentional failure to act, either with knowledge that serious injury is a probable result, or with a positive and active disregard for the consequences." 57A Am. Jur. 2d Negligence § 231.
Woodsville's argument in opposition to Passumpsic's Motion for Summary Judgment on both the anti-discrimination and the warranty claim is essentially a factual one: that there is "a material factual dispute over the sufficiency of the information [Passsumpsic] provided, and in particular, the impact of its failure to disclose Mr. Driscoll's initial and ongoing involvement in the loan despite his various conflicting roles." (Woodsville Opp. 1, 13, citing Stiegler Deposition at 30-31.) Woodsville claims that Passumpsic allowed Driscoll to remain in the room during the discussion of the loan with Isaacson and the vote to accept the loan and actively sought information from him with respect to Isaacson. (Woodsville Opp. 1, 8.)
Moreover, in support of its claim that Passumpsic breached its obligation to exercise the same care as it exercises in the care of loans in which it alone is interested, Woodsville points out that Passumpsic has sued Driscoll as a result of the loan to Issacson, and it asserted in its Complaint against Driscoll that Driscoll "'knew or should have known that Isaacson had not followed GAAP for much of the period of loans' that he 'knew or should have known [that] Isaacson was not in compliance with loan covenants for years' and that he 'knew or should have known that [Isaacson's] financial statements and reports have been inaccurate.'" (Woodsville Opp. 1, 10, citing Bishop deposition.) Woodsville cites Passumpsic's Complaint against Driscoll in which it claims that Driscoll "knew or should have known that Isaacson had not followed GAAP for much of the period of loans," that he "knew or should have known . . . Isaacson has not been in compliance with loan covenants for years," and that he "knew or should have known . . . the financial statements and reports have been inaccurate." (Woodsville Opp. 1, 10, citing Passumpsic Compl. ¶ 26.)
Passumpsic's conduct with respect to Driscoll, by instituting suit against him, and alleging he violated his obligations as a trustee raises a triable issue of fact as to whether or not Passumpsic violated the anti-discrimination provision of the LPA. At the very least, Passumpsic's complaint that Driscoll violated a fiduciary duty to it means that there is a genuine issue of material fact as to whether it treated the loan as it treated all its other loans.
ii Gross Negligence
With respect to this claim that Passumpsic was grossly negligent, Woodsville cites the determination by the New Hampshire State Board of accountancy that Driscoll had a number of conflicts of interest that compromised his integrity, objectivity, and independence. (Woodsville Opp. 1, 10; Def.'s Mot. for Summ. J. Ex. K, ¶ 5 .) Woodsville points out that Passumpsic's obligation to "endeavor to exercise the same care" it usually does with respect to this loan does not limit its affirmative obligation of the LPA that it will maintain complete and accurate books and will use "reasonable efforts to ascertain the occurrence of any default under the Loan Documents." (LPA ¶ 17, 20; Woodsville Opp. 1, 7, citing depositions of various Passumpsic employees that show they knew of Driscoll's competing roles and recognized the conflict of interest.) It argues that in allowing Driscoll to participate in the loan, despite his conflict of interest, Passumpsic acted in a grossly negligent manner.
Woodsville notes that Driscoll's deposition has yet to be taken due to the federal criminal investigation. Woodsville also argues that as a director, Driscoll's knowledge is imputed to the corporation. That determination is factual in nature, and cannot be decided on the record before the Court. See generally United States v. Josleyn, 206 F.3d 144, 159 (1st Cir. 2000); Dinco v. Dylex, Ltd., 111 F.3d 964, 971-72 (1st Cir. 1997).
Woodsville also relies upon the testimony of an expert witness, Douglas Branson, Chair of the Business Law Section at the University of Pittsburgh School of Law. Branson has extensive experience in both accounting and law. A witness, expert or otherwise, may not testify to pure conclusions of law. Saltzman v. Saltzman, 124 N.H. 515, 524 (1984). However, Branson appears to be a qualified expert in accounting and banking practice, and his testimony, while not relevant on what legal obligations the bank owes to other banks, which essentially calls for contract interpretation, may be relevant and admissible to establish custom and practice, and what conduct is considered reasonable in the banking industry. Branson opines that:
In syndicated loan transactions, such as the one at issue in this matter, it is the accepted and universal custom for participating banks to rely, largely or solely, upon the lead bank for due diligence and for otherwise working up a loan transaction . . . necessary because (a) the loan will have previously been made; (b) the putative participating bank is not and will not be in privity of contact with the borrower, and (c) a potential participating bank may face allegations of unfair competition or tortious interference if it attempts to deal directly with the borrower.(Woodsville Opp. 1, 17, citing Branson Report at ¶ 47.)
Branson opines that Passumpsic had a duty to disclose that Driscoll was present in the room when the loan was approved. To the extent this represents a legal conclusion, it is akin to a lawyer in a legal malpractice case expressing an opinion as to what reasonable professional care, skill, and knowledge constituted providing legal services to a client, and is admissible. Carbone v. Tierney, 151 N.H. 521, 527 (2004).
At this stage of the proceedings, where discovery has not been completed, the Court believes that there is a genuine issue of material fact regarding the issue of whether or not Passumpsic was grossly negligent in carrying out its obligations under the LPA or whether it violated the warranties it gave under the LPA.
C. Breach of the Implied Covenant of Good Faith and Fair Dealing
Woodsville has brought a separate Count in its Complaint based upon breach of the implied covenant of good faith and fair dealing. Passumpsic has moved for summary judgment, alleging that no implied covenant of good faith and fair dealing exists in an LPA. (Def.'s Mot. for Summ. J. 1, 18.) Woodsville objects, and insists it has a right to a stand-alone claim.
The Court disagrees with both parties' positions to this extent; the implied covenant of good faith and fair dealing can properly be considered an implied term of the contract, and breach of that term is simply a breach of contract, and not necessarily a separate cause of action. The New Hampshire Supreme Court "has not recognized a claim for breach of the implied covenant of good faith and fair dealing outside of the contractual context." J & M Lumber & Constr. Co. v. Smyjunas, 161 N.H. 714, 724 (2011). All contracts in New Hampshire contain an implied covenant of good faith and fair dealing and New Hampshire law is not significantly different from the law of other states. Cases cited by Passumpsic for the proposition that the implied covenant of good faith and fair dealing does not exist in an LPA merely state that the implied covenant cannot be used to rewrite the parties' agreement. In re Enron Corp., 292 B.R. at 783. This principle is entirely consistent with New Hampshire law. Moore v. Mortg. Elec. Registration Sys., 848 F.Supp.2d 107, 130 (D.N.H. 2012).
The New Hampshire Supreme Court defined the duty of good faith and fair dealing in the seminal decision of Centronics Corp. v. Genicom Corp., 132 N.H. 133 (1989). The Court stated that:
[U]nder an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement's value, the parties' intent to be bound by an enforceable contract raises an implied obligation of good faith to observe reasonable limits in exercising that discretion, consistent with the parties' purpose or purposes in contracting.Centronics Corp., 132 N.H. at 143.
Under the LPA, Passumpsic was charged with using reasonable efforts to identify any default under the loan agreement and under the warranties provided to Woodsville. The factual disputes with respect to Driscoll's role in the loan preclude summary judgment on the theory of breach of contract, which may well include breach of the implied covenant of good faith and fair dealing, although it may not continue as a separate Count.
In sum, while summary judgment is a useful tool to expedite litigation, it does not exist to eliminate a trial where issues of fact exist. Iannelli v. Burger King Corp., 145 N.H. 190, 192 (2000). Based on the foregoing, summary judgment is GRANTED on Count VII, Breach of Fiduciary Duty, and Count VI, Breach of the Implied Covenant of Good Faith and Fair Dealing, as a distinct cause of action, and DENIED with respect to all of the other Counts of the Complaint, as genuine issues of material fact exist.
SO ORDERED
11/2/16
DATE
s/Richard B . McNamara
Richard B. McNamara,
Presiding Justice RBM/