Mikail v. Pam Mgmt., Inc., CIVIL ACTION NO. 3:15-2437

SAMUEL MIKAIL, Plaintiff v. PAM MANAGEMENT, INC. and DRUMS FUEL STOP, INC., Defendants

CIVIL ACTION NO. 3:15-2437

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF PENNSYLVANIA

April 12, 2017

(JUDGE MANNION)

MEMORANDUM

Pending before the court is the motion for summary judgment of plaintiff Samuel Mikail, (Doc. 38), pursuant to Fed.R.Civ.P. 56, with respect to his breach of contract claims raised in his complaint, (Doc. 1), against defendants PAM Management, Inc. ("PAM"), (Count I), and Drums Fuel Stop, Inc. ("Drums"), (Count II). Plaintiff seeks judgment in his favor and against PAM on his breach of contract claim in Count I in the principal amount of $1,300,000. Regarding the breach of contract claim in Count II, plaintiff seeks judgment in his favor and against Drums in the principal amount of $325,000. Plaintiff contends that he is entitled to summary judgment since the undisputed evidence shows that defendants failed to make the required payments owed under the contracts to his assignor for the sale of her stock shares in defendant truck stops and, since there is no clear and convincing evidence that the parties agreed to oral modifications of the written contracts postponing the payments which were due. Based upon the court's review of the motion and related materials, plaintiff's motion for summary judgment will be GRANTED since there are no disputed material facts that the written contracts were breached and since the evidence is not sufficient to prove that the contracts were orally modified to allow for annual postponements of the monies due under them.

I. PROCEDURAL BACKGROUND

Plaintiff is an adult individual residing in London, United Kingdom. Defendant PAM is a Pennsylvania corporation with an address of Hickory Run Travel Plaza, Interstate 80, Exit 274, White Haven, PA 18661. Defendant Drums is a Pennsylvania corporation with an address of Hickory Run Travel Plaza, Interstate 80, Exit 274, White Haven, PA 18661. PAM and Drums basically operate as a truck stop. Plaintiff filed this action on December 18, 2015, (Doc. 1), regarding the assignment to him of two promissory notes and two stock purchase agreements involving PAM and Drums to satisfy debts owed to him. On February 2, 2016, defendants jointly filed a motion to dismiss the complaint under Rules 12(b)(7) and 19 for failure to join necessary and indispensable parties. (Doc. 16). After defendants' motion was briefed and exhibits were submitted, the court issued a memorandum and order on August 23, 2016 denying the motion to dismiss. (Doc. 33, Doc. 34). On August 30, 2016, defendants filed their answer to the complaint with affirmative defenses. (Doc. 37).

Following discovery, plaintiff filed a motion for summary judgment on November 15, 2016. (Doc. 38). Plaintiff also simultaneously filed hisstatement of material facts with exhibits and his brief in support of his motion. (Doc. 39, Doc. 40). On December 6, 2015, defendants filed their response to plaintiff's statement of material facts and additional material facts along with exhibits and their brief in opposition of his motion. (Doc. 41, Doc. 42). On December 20, 2016, plaintiff filed his reply brief in support of his motion for summary judgment with additional exhibits. (Doc. 43).

This court has diversity jurisdiction over this case under 28 U.S.C. §1332.

II. MATERIAL FACTS¹

A. PAM Contract

On January 1, 2009, PAM, through its president, Darshan K. Grewal ("Darshan"), executed a stock purchase agreement (the "PAM Agreement") and promissory note (the "PAM Note") with Kathleen S. Shukla ("Shukla"). Manjit Shukla was the original owner of the PAM stocks and his wife Kathleen Shukla acquired his shares of stock when he died. The PAM Note and PAM Agreement are collectively referred to as the "PAM Contract." PAM's attorneys drafted the PAM Contract and PAM was represented by itsattorneys regarding the execution of this contract. The parties agree that the PAM Contract is governed by Pennsylvania law.

The PAM Contract provided that in exchange for Shukla's shares of stock in PAM, Shukla was to receive five annual interest-only payments at a 6% per year rate, and one principal payment in the amount of $1,000,000 due on February 20, 2014.² (Doc. 22-1, Doc. 22-2). The PAM Note also provided that as security for PAM's obligations to Shukla, PAM's counsel would hold her PAM stock shares in escrow until she was paid in full by PAM. Further, the PAM Note stated that if PAM did not pay Shukla in full, PAM's counsel "shall" deliver her stock shares back to her. Shukla then delivered her shares of stock to PAM's counsel to be held in escrow.

The first annual interest-only payment of $60,000 was to be made on February 20, 2010, and that all subsequent interest-only payments for $60,000 were to be made on the first day of February thereafter, for a total of $300,000 in interest over the life of the PAM Contract. The total amount due to Shukla for her shares of PAM stock under the contract was $1,300,000 dueby February 20, 2014. While denying that any payments are due, defendants indicate that since plaintiff's complaint was filed on December 18, 2015, the payments which plaintiff alleges were due in February of 2010 and February of 2011 under the PAM Contract are barred by the 4-year statute of limitations applicable to contract actions under Pennsylvania law.

It is undisputed that defendants have not made any payments to either Shukla or plaintiff under the PAM Contract. Defendants have offered to return the PAM stock shares to Shukla but she has refused to accept them. Defendants also state that after the PAM Contract was executed, the parties verbally modified the contract "so that any and all interest payments under the [PAM Contract] would be postponed until such time as PAM had sufficient cash flow from the business operations to make interest payments." Additionally, defendants contend that their evidence shows Shukla orally agreed, through Rattan, if she had not been paid from the cash flow of the PAM business pursuant to the contract, she would be paid from the sale proceeds if the business was sold. (Doc. 41, ¶'s 7, 9, Doc. 39-2).

The parties agree that there have been no written modifications or amendments to the PAM Contract. The parties dispute whether the PAM Contract was verbally modified subsequent to its execution.

B. Drums Contract

On January 1, 2009, Drums, through its president, Darshan, executed a stock purchase agreement (the "Drums Agreement") and promissory note (the "Drums Note") with Shukla. Manjit Shukla was the original owner of theDrums stocks and his wife Kathleen Shukla acquired his shares of stock when he died. The Drums Note and Drums Agreement are collectively referred to as the "Drums Contract." Drums' attorneys drafted the Drums Contract and Drums was represented by its attorneys regarding the execution of this contract. The parties agree that the Drums Contract is governed by Pennsylvania law.

The Drums Contract provided that in exchange for Shukla's shares of stock in Drums, Shukla was to receive five annual interest-only payments at a rate of 6% per year, and one payment of principal on February 20, 2014, in the amount of $250,000. (Doc. 22-3, Doc. 22-4). The Drums Note also provided that as security for Drums' obligations to Shukla, Drums' counsel would hold her Drums stock shares in escrow until she was paid in full by Drums. Further, the Drums Note stated that if Drums did not pay Shukla in full, Drums' counsel "shall" deliver her stock shares back to her.

Shukla then delivered her shares of Drums stock to defendants pursuant to the Drums Contract to be held in escrow until she was paid in full under the contract.

The first interest-only payment of $15,000 to Shukla was due by Drums on February 20, 2010, and all subsequent interest-only payments of $15,000 were to be made on the first day of February thereafter, for a total of $75,000 in interest over the life of the Drums Contract. Thus, Shukla should have been paid a total of $325,000 by February 20, 2014 for her shares of stock in Drums. While denying that any payments are due, defendants indicate thatsince plaintiff's complaint was filed on December 18, 2015, the payments which plaintiff alleges were due in February of 2010 and February of 2011 under the Drums Contract are barred by the 4-year statute of limitations applicable to contract actions under Pennsylvania law.³

It is undisputed that defendants have not made any payments to either Shukla or plaintiff under the Drums Contract. Defendants have offered to return the Drums stock shares to Shukla but she did not accept them. Defendants also state that after the Drums Contract was executed, the parties verbally modified the contract "so that any and all interest payments under the [Drums Contract] would be postponed until such time as Drums had sufficient cash flow from the business operations to make interest payments." Additionally, defendants maintain that their evidence shows Shukla orally agreed, through Rattan, if she had not been paid from the cash flow of the Drums business pursuant to the contract, she would be paid from the sale proceeds if the business was sold. Defendants also point out that the Drums business was closed from 2001 to 2014 and since it was not operational, it was not making any money. (Doc. 41, ¶'s 17, 19).

The parties agree that there have been no written modifications or amendments to the Drums Contract. The parties dispute whether the Drums Contract was verbally modified after it was executed.

C. The Assignments of PAM Contract and Drums Contract

On August 24, 2015, Shukla sent an handwritten letter to plaintiff concerning the outstanding balance on the PAM and Drums Contracts, and wrote, in part, that: "Whatever you can pay me from this debt that [defendants] owe me, on whatever terms suit you, I will be in agreement and will be most grateful [ ]. I understand I might have to notarize a few documents so they can be assigned to you...