Purchase Partners, LLC v. Carver Federal Savings Bank
Docket: No. 09 Civ. 9687(JMF)
Court: District Court, S.D. New York; December 12, 2012; Federal District Court
Two banks are engaged in a legal dispute over losses from a mortgage loan to Shaker Gardens, Inc., which defaulted. In March 2007, Carver Federal Savings Bank (the "Lender") provided a $6,080,000 loan to Shaker to purchase real estate in Monticello, New York, with Mariner’s Bank (the "Participant") acquiring a 50% interest in the loan through a Participation Agreement for $3,040,000. While it is contested whether Shaker made any payments, it is acknowledged that it defaulted by June 2008, leading Carver to foreclose in December 2010.
Mariner’s Bank initiated legal action against Carver in November 2009, alleging breaches of the Participation Agreement, breach of good faith, gross negligence, and fraud, seeking monetary damages, specific performance, and attorney’s fees. Following a transfer of claims to Purchase Partners, LLC, the court substituted Purchase Partners as the Plaintiff. Carver counterclaimed against Mariner's Bank and Purchase Partners, alleging breaches related to reimbursement for advances made on behalf of Shaker and the transfer of interest to Purchase Partners, seeking various forms of relief.
The court is currently considering cross-motions for summary judgment. Purchase Partners has also sought to amend its Complaint to include claims for negligent misrepresentation and to revise existing claims. The court has granted in part and denied in part the motions for summary judgment and the amendment, dismissing nearly all of Purchase Partners's claims except for the breach of contract and attorney’s fees claims, along with all claims against an individual member of Purchase Partners. Carver's counterclaim regarding the transfer of interest is granted as to liability, but damages will be determined at trial, and other counterclaims survive. The motion to amend the Complaint to expand on the breach of contract claim is permitted, but other amendments are denied.
A $6,080,000 loan was extended by Carver to Shaker for the purchase of a residential property in Monticello, New York, with Mariner’s Bank participating by contributing $3,040,000 through a Participation Agreement dated March 1, 2007, granting them a 50% interest. Carver was tasked with servicing the loan but had the discretion to delegate that responsibility without notifying Mariner’s Bank. The loan was secured by a mortgage giving Carver a lien on the property and collateral assignment of rent. Shaker’s repayment was personally guaranteed by Nelkenbaum, who had a prior lending relationship with Carver.
Shaker's initial payment on April 1, 2007, bounced due to a stop payment, and a subsequent payment on May 1, 2007, was returned for insufficient funds. A third payment due June 1, 2007, was not recorded. Carver and Mariner’s Bank were initially unaware of these missed payments; however, Carver covered payments for Shaker from an escrow account intended for property repairs and facilitated the distribution of funds to Mariner’s Bank. Carver claims that it was authorized to make such advances under the Participation Agreement to protect the rights of the lenders.
Carver made various advances on behalf of Shaker during the loan period to cover Shaker's missed payments, taxes, insurance, legal fees, and property repairs. The total amount of these advances is disputed: Carver claims $1,789,832.47, while Mariner’s Bank and Purchase Partners state it is only $798,076.68. Carver classified these advances as a "negative escrow," a receivable secured by the property, rather than applying them to Shaker's principal obligation. Shaker officially defaulted on the loan in early to mid-2008, approximately one year after initial payments were returned. The parties disagree on the extent of payments made by Shaker; while Carver presented checks indicating at least ten payments were made, Purchase Partners argues it is unclear if these payments were applied to this loan or others. In November 2008, Carver discovered that it did not receive the initial payments and reversed all prior payments except for the last two for accounting purposes. Carver notified Mariner’s Bank of the bounced payments, and they agreed to refund their share.
Carver initiated a civil action against Shaker and Nelkenbaum on June 2, 2008, after sending a notice of loan acceleration due to missed payments. Nelkenbaum was subsequently served. In court, Shaker and Nelkenbaum contended that the initial notice from Carver was invalid because it was sent by attorneys instead of Carver or a specified law firm. Carver attempted to remedy this by sending a second notice on January 7, 2009, but its content remained largely unchanged. While this civil action was ongoing, Carver opted to pursue foreclosure and filed a foreclosure action on January 27, 2009, subsequently moving to discontinue the earlier civil action in compliance with New York law, which requires a mortgagee to choose between legal action or foreclosure.
Carver’s motion to discontinue was granted despite Shaker's objections. On February 2, 2009, Carver sought to appoint a rent receiver for Shaker Gardens within a foreclosure action. The parties subsequently filed cross-motions for summary judgment, with Shaker's motion referencing a prior case where the court ruled that Carver failed to provide Shaker proper notice of default as required by the Mortgage. On July 8, 2009, the New York Supreme Court granted Shaker’s motion, dismissed Carver’s Complaint, denied Carver's summary judgment cross-motion and application for a rent receiver, citing a defective notice of default from Carver dated January 7, 2009. Although Carver contested the ruling, it opted to initiate a new foreclosure action instead of appealing. By December 2010, Carver obtained a Judgment of Foreclosure and Sale and became the high bidder at the foreclosure sale.
Mariner’s Bank commenced a separate action on November 20, 2009, with its Complaint including six counts: specific performance for loan principal application, breaches of the Participation Agreement, breach of good faith and fair dealing, gross negligence, fraud, and a claim for attorneys’ fees. After discovery, Purchase Partners sought to amend the Complaint to add negligent misrepresentation claims. On December 21, 2009, Mariner’s Bank transferred its interest in the litigation to Purchase Partners, leading to a substitution of parties. Carver responded with an Answer denying allegations and asserting nine counterclaims against both Mariner’s Bank and Purchase Partners, including breaches of the Participation Agreement, a request for declaratory judgments regarding the validity of the transfer, and requests for injunctions and attorneys’ fees against both entities.
On March 19, 2012, Carver filed a motion for summary judgment concerning the claims against it and its counterclaims. Two days later, Purchase Partners cross-moved for summary judgment on specific aspects of its breach of contract claim, on Carver's counterclaims related to advances made on behalf of Shaker, and on all counterclaims against Schmidt. Following oral arguments on September 7, 2012, Purchase Partners sought leave to amend its Complaint to include claims for negligent misrepresentation and to revise existing claims based on new discovery. During the proceedings, both parties withdrew certain claims: Purchase Partners dismissed its claims for specific performance and breach of the covenant of good faith and fair dealing, while Carver dismissed all claims against Paul Schmidt. The standard for summary judgment requires a demonstration that there is no genuine dispute over material facts, with the burden on the moving party to show this absence. The court must view evidence favorably for the non-moving party, and to counter a motion for summary judgment, the non-moving party must present more than minimal evidence and cannot rely solely on allegations or conclusions. Affidavits must be based on personal knowledge and admissible facts. When both parties move for summary judgment, the court evaluates each motion independently, drawing reasonable inferences against the party whose motion is being considered.
Carver seeks summary judgment on Purchase Partners's claims and its own counterclaims, while Purchase Partners cross-moves for summary judgment on part of its breach of contract claim and on Carver's counterclaims related to advances made to Shaker. The Court will first address Purchase Partners's claims and its request to amend its Complaint before considering Carver's counterclaims, applying New York law as per the Agreement.
In Count Two, Purchase Partners alleges multiple breaches of the Participation Agreement by Carver, specifically: (1) failing to notify and obtain Mariner’s Bank's consent prior to advancing funds to Shaker; (2) not adding these advances to the loan principal; (3) failing to notify and obtain consent before filing a civil action against Shaker; (4) issuing a defective notice of default and not acting promptly in obtaining a rent receiver; and (5) failing to detect Shaker’s initial payment defaults. Carver seeks summary judgment on all claims, while Purchase Partners seeks summary judgment on liability for claims (4) and (5), asserting that a trial is necessary for the remaining claims and damages.
Carver argues that its liability is limited to breaches characterized as bad faith, willful misconduct, or gross negligence under Sections 7.17(g) and 7.18 of the Participation Agreement. Section 7.17(g) states that Carver has no responsibility regarding actions tied to loan documents unless there is willful misconduct or gross negligence, while Section 7.18 limits liability for acts by others on behalf of the Lender unless those acts involved bad faith or gross negligence. The Court finds Carver's interpretation unpersuasive, agreeing with Purchase Partners that the phrase "taking of any other action" in Section 7.17(g) refers to actions similar to filing or recording loan documents.
The principle of ejusdem generis applies, indicating that general terms following specific examples are interpreted to include only items of the same category. This principle guides both contract and statutory interpretation, as evidenced by case law. The interpretation is essential for reconciling two sections of the Participation Agreement: Section 7.17(g), which addresses reliance on the lender, and Section 3.1, where Carver agrees to protect the Participant's interests with the same care as its own. Carver's reliance on Section 7.18, which limits liability for third-party acts, is misplaced since Purchase Partners' breach of contract claim does not concern third-party actions.
In specific allegations, Purchase Partners contends that Carver breached the Participation Agreement by failing to add advances to the principal of Shaker’s loan and treating them as a "negative escrow." They argue that these advances, being additional credit to a defaulting borrower, required written consent from Mariner’s Bank under Section 3.5(a)(iii) of the Agreement. Carver seeks summary judgment, asserting that Section 3.8(a) grants it discretion to make advances without triggering notice or consent requirements. Carver also claims that Purchase Partners suffered no damages from its accounting of the advances and that adequate notice was provided to Mariner’s Bank, which did not object.
However, the court finds that Carver has not met its burden. Despite Carver's argument regarding Section 3.8(a), the incorporated Mortgage mandates that charges paid by the Mortgagee on behalf of the Mortgagor be added to the secured indebtedness.
The Court is unable to determine the interpretation of "added to the indebtedness," whether it refers to an increase in principal or simply the total amount owed, which affects whether the written consent requirement was triggered by advances. Thus, summary judgment is deemed inappropriate. The Court cites Postlewaite v. McGraw-Hill, Inc. to emphasize that ambiguous contract language necessitates a factual inquiry, making summary judgment unresolvable.
Additionally, there is contention regarding whether Carver received interest on a negative escrow amount in a foreclosure action, which could affect Purchase Partners' claim for lost interest.
Regarding the breach of the Participation Agreement, Purchase Partners claims Carver failed to obtain Mariner’s Bank’s written consent before initiating legal action against Shaker, referencing Section 3.5(a) of the agreement. Carver counters that it provided adequate notice to Mariner’s Bank and argues that Purchase Partners' claims are barred by waiver or estoppel due to Mariner’s Bank not objecting after being informed.
Carver is found entitled to summary judgment based on the relevant provisions. Although initially discussed under Section 3.5(a), the Court points out that Section 3.6 allows Carver to act without Mariner’s consent upon Shaker’s default, as long as it acts in consultation with Mariner’s Bank. The Court does not support Purchase Partners’ argument that Carver required consent under Section 3.5 and additional consultation under Section 3.6, as this interpretation conflicts with the explicit language of Section 3.5.
Purchase Partners's argument that the interpretation of Section 3.6 undermines Section 3.5(a) is not convincing to the Court. Section 3.6 allows Carver to pursue legal remedies without Mariner’s Bank’s consent in case of default, facilitating prompt action, while Section 3.5 mandates written consent for legal actions in other situations. The two provisions can coexist. The evidence indicates that Carver did not breach Section 3.6; it pursued legal remedies in consultation with Mariner’s Bank, as shown by communications from 2008, including an e-mail from Carver notifying Mariner’s Bank of pending legal actions and discussions regarding legal strategy.
Carver’s decision to file a civil case instead of initiating foreclosure does not constitute a breach of the Participation Agreement, as there was no requirement to foreclose first. While hindsight may suggest that a foreclosure would have been preferable, the decision made by Carver was reasonable given the circumstances at the time, and Mariner’s Bank did not object to this approach.
Regarding the allegation of a defective notice of default, both parties seek summary judgment. Purchase Partners contends that collateral estoppel applies due to a ruling from the New York Supreme Court deeming Carver’s notice defective. It also references the Rooker-Feldman doctrine, which limits federal courts' ability to alter state court decisions. Conversely, Carver argues that its notice was valid and that the issues of loan mismanagement were not addressed in the state court, making both collateral estoppel and the Rooker-Feldman doctrine inapplicable.
Performance under the Participation Agreement is claimed to be distinct from the validity of the notice of default, which the state court addressed. Purchase Partners' assertions regarding the Rooker-Feldman doctrine are unfounded. The doctrine applies only when a federal plaintiff loses in state court, complains of injuries from a state-court judgment, seeks district court review of that judgment, and the judgment predates the federal proceedings. Here, none of the first three conditions are met: the defendant lost in state court, and Carver is not contesting the state-court judgment but rather defending against allegations of inaction. Consequently, the Rooker-Feldman doctrine is not applicable.
Additionally, Carver is not collaterally estopped from defending against Purchase Partners’ claims. Collateral estoppel, or issue preclusion, prevents a party from relitigating an issue that was fully litigated in a prior case. However, its application is discretionary and depends on fairness. The Supreme Court allows courts broad discretion in applying collateral estoppel, particularly when a plaintiff seeks to estop a defendant from relitigating an issue decided against a different plaintiff. In this case, the court would not apply the doctrine even if all requirements were met, as Carver opted for a new foreclosure action rather than appealing the previous decision, aiming for a faster resolution.
Moreover, Carver could not have anticipated that not appealing would have preclusive effects in a subsequent case. On the other hand, there are grounds for denying summary judgment to Carver, as a reasonable jury could determine that Carver acted imprudently in issuing defective notices, thus violating the Participation Agreement and causing damages to Purchase Partners. The issues of Carver’s breach of duty and the terms of the Participation Agreement remain factual questions for the jury.
Carver's compliance with its internal lending policy and its performance under the contract are issues for the jury, necessitating the denial of the parties’ cross-motions for summary judgment. Purchase Partners alleges that Carver breached the Participation Agreement by failing to timely detect and report Shaker’s loan payment defaults, specifically the initial three payments that were either missed or made with bounced checks. They reference deposition testimony from Charles Koehler, Carver's Executive Vice President, suggesting Shaker may not have made any payments. Carver counters that Shaker did make payments, presenting checks from All Star Management Group, though only three were marked as void. Carver maintains it had the unilateral right to waive or extend Shaker's payment obligations under Section 3.1 of the Participation Agreement. However, it did not act on this authority because it did not recognize Shaker's defaults until November 2008, meaning it could not have waived or extended obligations retroactively. The jury must resolve whether Carver should have detected the payment defaults earlier and whether Purchase Partners suffered damages, as well as whether Shaker made any subsequent payments. Carver's evidence of interim payments is challenged by Koehler's testimony, which raises doubt regarding the actual payments made by Shaker and suggests that the checks may pertain to a different loan.
Allegations regarding the handling of missed payments are deemed somewhat speculative but sufficient to raise a factual issue for the jury, leading to the denial of both parties' summary judgment motions. In Count Four, Purchase Partners claims Carver's gross negligence in managing a loan, necessitating proof of four elements under New York law: existence of a duty, breach of that duty, injury, and conduct reflecting reckless disregard for others' rights. A crucial aspect is that the duty must be independent of any contractual obligations, as tort claims cannot merely replicate breach of contract claims. Purchase Partners fails to establish an independent duty, as its allegations regarding injury and harm are identical to those in its breach of contract claim. Furthermore, the grossly negligent behavior cited aligns directly with the breach of contract allegations. Thus, the elements indicating a tort claim do not support the claim for gross negligence in this context.
Purchase Partners has not established a special relationship akin to that of a bailor and bailee, which would create an extracontractual obligation for Carver. The Second Circuit has determined that typical banking relationships do not imply a heightened duty of care. Specifically, in *Banque Arabe et Internationale D’Investissement v. Md. Nat’l Bank*, the court stated that no fiduciary relationship exists in loan participation agreements unless explicitly stated in the contract. The Participation Agreement in this case explicitly denies any fiduciary relationship, making it clear that the Lender does not owe a duty of care to the Participant. Purchase Partners argues for the opportunity to prove a duty of care based on banking industry standards, but any alleged actions and damages are merely reiterations of its breach of contract claim, which is insufficient to sustain a gross negligence claim. Citing various precedents, including *N.Y. Univ. v. Cont’l Ins. Co.*, the document emphasizes that if a plaintiff is seeking to enforce a bargain, the claim should be brought under contract law rather than tort law. Purchase Partners has not adequately identified an independent duty of care, and its assertion of a possible extracontractual duty does not suffice to prevent summary judgment. Consequently, Carver's motion for summary judgment regarding the gross negligence claim is granted. Additionally, Purchase Partners has a claim for fraud (Count Five) pending in the Complaint.
Purchase Partners alleges that Carver made significant misrepresentations to Mariner’s Bank regarding Shaker, Nelkenbaum, and the loan, which influenced the bank's decision to enter into the Participation Agreement. In its proposed Amended Complaint, Purchase Partners identifies three categories of misrepresentations: (1) Carver's failure to inform Mariner's Bank of its incompetence to service the loan and its intent to hire DMI for that role; (2) Carver's false claim that Nelkenbaum's entities were meeting their payment obligations; and (3) Carver's misrepresentation of the property’s purchase price as $7,600,000. Under New York law, a fraud claim requires proof of a material misrepresentation that the defendant knew was false and made to induce reliance, which the plaintiff reasonably relied upon, resulting in injury.
However, for a fraud claim to coexist with a breach of contract claim, the plaintiff must demonstrate a separate legal duty, a fraudulent misrepresentation outside the contract, or special damages not recoverable as contract damages. The Participation Agreement explicitly denies any fiduciary or trust relationship and confirms that Mariner’s Bank conducted its own independent analysis, disavowing reliance on Carver’s representations. This independent analysis undermines Purchase Partners' fraud claim, as Mariner’s Bank acknowledged it entered into the agreement based on its own evaluation rather than Carver's statements.
Mariner's Bank, in Section 7.17 of the Participation Agreement, explicitly disclaimed any representations regarding the premises, facilities, or assets related to the Borrower, stating that the Participant (Purchase Partners) should not rely on the Lender's evaluations or determinations. This disclaimer undermines Purchase Partners' claims that Carver owed a duty independent of the contract or that Mariner's Bank reasonably relied on any alleged misrepresentations. Relevant case law suggests that reliance on misrepresentations is unjustified when a party is put on notice or when clear disclaimers exist in an agreement.
Purchase Partners argues that Carver had a duty to disclose information due to its superior knowledge, claiming Carver misrepresented its ability to service the loan and intended to outsource that servicing. However, the Participation Agreement allowed Carver to delegate servicing rights, and Mariner’s Bank's senior officer testified that he was aware of this provision and did not inquire about Carver's servicing capacity. Consequently, claims of fraud related to loan servicing fail.
Additionally, allegations that Carver misrepresented the property's purchase price and Nelkenbaum's payment history are also unsupported because the Participation Agreement stated that Carver made no warranties regarding other assets and that Mariner’s Bank did not rely on Carver's representations regarding financial conditions. Mariner's Bank should have sought direct confirmation from Nelkenbaum regarding these matters if they were material to their decision to engage in the loan.
Purchase Partners failed to conduct adequate due diligence regarding alleged misrepresentations, as established in case law. New York courts hold that when both parties can ascertain the truth, reliance on representations is unjustifiable, leading to the conclusion that Carver is entitled to summary judgment on Purchase Partners's fraud claim. Additionally, attempts by Purchase Partners to amend the complaint to include claims of negligent misrepresentation and grossly negligent misrepresentation are futile because they cannot demonstrate that Carver owed a duty to provide accurate information, a necessary element under New York law. The court emphasizes that amendments should be granted unless they are unlikely to be productive, which is the case here.
Carver's counterclaims, which consist of nine claims divided into three categories, include: 1) claims related to Carver’s advances to Shaker, seeking damages from either Mariner’s Bank or Purchase Partners for breach of the Participation Agreement; 2) claims against Mariner’s Bank for the transfer of its interest in the Participation Agreement to Purchase Partners; and 3) requests for attorneys' fees.
A declaratory judgment is sought against Mariner’s Bank (Counterclaim 3) and Purchase Partners (Counterclaim 6) to declare the transfer of the Participation Agreement to Purchase Partners as null and void. Additionally, an injunction is requested to prohibit Mariner’s Bank (Counterclaim 4) and Purchase Partners (Counterclaim 7) from transferring their interests in the Participation Agreement. Carver also requests reasonable attorneys' fees and costs from both parties (Counterclaim 5 and Counterclaim 9).
Carver's first and eighth counterclaims focus on the failure of Mariner’s Bank and Purchase Partners to reimburse Carver for 50% of the advances made to Shaker. In Counterclaim One, damages are sought from Mariner’s Bank, while Counterclaim Eight seeks a declaratory judgment requiring Purchase Partners to pay its share if the transfer of interest is deemed valid. Both parties have filed for summary judgment on these claims, with no dispute that Mariner’s Bank, as the Participant, was obliged to reimburse half of the advances. This obligation is outlined in Section 3.8(a) of the Participation Agreement, which specifies that participants must pay their share of any advances made by the lender within five business days of demand to avoid interest charges.
Purchase Partners acknowledges the contractual obligation but questions the amount Carver claims to have advanced, which is undisputed to be at least $500,000. The disagreement arises from the latter part of Section 3.8(a), which states that failure to pay results in a proportional reduction of the defaulting participant's share. Purchase Partners argues that this provision provides a self-executing remedy for non-payment, suggesting that a failure to pay does not constitute a breach, particularly a material one.
Carver asserts the option to sue Mariner’s Bank (and Purchase Partners) for its share of advances plus interest, highlighting an ambiguity in the contractual language regarding consequences for non-payment. The Court cannot determine which of the conflicting interpretations of the Participation Agreement is correct, including a potential third interpretation suggesting that the lender could adjust the Participant's share and accrue interest upon non-payment. Consequently, both parties' motions for summary judgment regarding this issue are denied, as summary judgment is only appropriate when contract language is unambiguous.
Carver also seeks summary judgment on multiple counterclaims, alleging that Mariner’s Bank breached the Participation Agreement by transferring its interest to Purchase Partners without Carver's consent. The agreement explicitly prohibits such transfers without prior written consent from Carver. While Purchase Partners acknowledges the transfer occurred without consent, it contends that summary judgment is inappropriate due to factual disputes regarding whether Mariner’s Bank was released from obligations due to Carver's alleged breaches. However, under New York law, if a party continues to perform after a breach, it must notify the other party of the breach or waive its right to sue, making Purchase Partners' argument flawed.
Timely notice allows the non-breaching party to sue for breach, but if the non-breaching party does not terminate the contract at the time of the breach, it forfeits the right to terminate later based on that breach. In this case, Mariner’s Bank did not terminate the Participation Agreement following Carver’s alleged breaches, as evidenced by Mariner’s actions on November 18, 2009, when it sought Carver’s consent to sell its participation interest, indicating an ongoing contractual relationship. The only evidence Purchase Partners offers to show that Mariner’s Bank notified Carver of a breach is an undated letter expressing reluctance to pay without a full accounting; however, this letter suggests that the contractual relationship was still active. Furthermore, Mariner’s Bank requested information regarding future advances according to the Participation Agreement. Consequently, even if Carver breached the Agreement, Mariner’s Bank could not breach its own obligations under Section 7.15 since it chose to continue performance instead of terminating the contract. Mariner’s Bank's breach does not entitle it to declare the transfer null and void, as contractual provisions prohibiting assignments are typically personal covenants, making any assignment enforceable despite a breach, unless the contract explicitly states otherwise.
Section 7.15 of the Participation Agreement prohibits transfers and assignments without Carver's written consent but does not declare such transfers invalid or void. Consequently, the transfer in question is deemed valid, and Carver's potential remedy for Mariner’s Bank's breach is limited to monetary damages. Carver's motion for summary judgment on its second counterclaim for breach of the non-transfer provision is granted regarding liability. However, the extent of damages suffered by Carver due to the transfer is unclear and will proceed to trial, as Purchase Partners did not seek dismissal on this ground.
Carver's third, fourth, sixth, and seventh counterclaims, which sought declaratory judgments declaring the transfer null and void and injunctive relief against future transfers, lack legal basis and are dismissed. The court emphasizes that in summary judgment cases, it can grant judgment in favor of the nonmoving party if no material fact disputes exist.
Carver's motions for summary judgment on its fifth and ninth counterclaims for attorneys' fees are denied, as it is premature to determine the prevailing party under Section 7.9 of the Participation Agreement, given the court's denial of summary judgment on substantial parts of Purchase Partners's claims.
In conclusion, of the six counts in the Complaint, only Counts Two (Breach of Contract) and Six (Attorneys' Fees) survive. Summary judgment is granted on Counts One, Three, Four, and Five, which are dismissed. Count Two is partially granted concerning breaches related to Carver's actions without prior consent but denied in other respects, while Purchase Partners's summary judgment motion on Count Two is entirely denied.
Cross-motions for summary judgment regarding Carver's counterclaims are largely denied. Specifically, the court denies summary judgment for Carver's first, fifth, eighth, and ninth counterclaims. However, it grants Carver summary judgment on the second counterclaim for breach of contract, while dismissing the third, fourth, sixth, and seventh counterclaims. Purchase Partners' motion for summary judgment in favor of Paul Schmidt is granted, dismissing all counterclaims against him. A motion to amend the complaint from Purchase Partners is denied as moot, while a subsequent motion to amend is granted in part and denied in part. Purchase Partners may amend its complaint by January 11, 2013, to include allegations about Carver’s management of initial payment defaults but is not permitted to add claims for negligent misrepresentation, gross negligent representation, or to revise its fraud claim. The court orders the dismissal of Schmidt as a party and addresses various motions in the order. Carver’s assertion about the evidence in support of its motion is upheld, as the court recognizes the validity of affidavits submitted based on corporate knowledge and discovery evidence. Lastly, while Carver argues that Purchase Partners' claim regarding initial payment defaults is improperly pleaded, the court notes no demonstrated prejudice against allowing an amendment to the complaint.
The Court grants Purchase Partners permission to amend its claims and addresses the amended claim in the subsequent text. Carver argues that summary judgment should be issued due to Purchase Partners' failure to demonstrate non-speculative damages linked to the alleged breaches. However, the Court finds that Purchase Partners has sufficiently demonstrated that it incurred some pecuniary damage if Carver breached the Participation Agreement, with the exact amount to be determined at trial. The Court emphasizes that as long as some damages are established, summary judgment is appropriate, deferring the damages assessment to trial. Additionally, the Court addresses both fraud claims in the operative and proposed amended complaints together, noting complexities in determining entitlements if the Participant repaid its advances with interest, which could affect their share of loan proceeds.
