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January 12, 1996


The opinion of the court was delivered by: YOHN

 Yohn, J.

 January 12, 1995

 This court is but one of many forums to host the parties' disputes, all of which ultimately date back to events resulting from the October 1987 stock market crash. First Options is suing Mrs. Kaplan for breach of a contract entered into by Mrs. Kaplan, her husband, Manuel Kaplan, and First Options in March of 1989. The terms of the contract encompassed the couple's 1987 tax refunds, the amount of which First Options claims it is due. Currently before the court are plaintiff's motion for summary judgment, defendant's cross-motion for summary judgment, and the responses thereto. The court will grant plaintiff's motion for summary judgment with respect to defendant's counterclaim. The remaining portions of plaintiff's motion and defendant's cross-motion for summary judgment will be denied.

 I. Background

 First Options is a clearing firm and member of the Philadelphia Stock Exchange (the "Exchange"). First Options acted as the clearing firm for MKI, an options market maker on the Exchange from 1984 through January 1989. *fn1" At all relevant times, Manuel Kaplan, Carol Kaplan's husband, was the president and sole shareholder of MKI. A Market Maker's Agreement, dated November 15, 1984, governed the relationship between MKI and First Options. *fn2" MKI maintained its trading accounts with First Options subject to this agreement.

 The October 19, 1987 stock market crash created substantial losses in MKI's trading account. Five days before the crash, the MKI trading account had a net equity of $ 10.6 million. By the end of trading on October 19th, the account had fallen about $ 12 million dollars, to a deficit of $ 2 million.

 First Options Market Maker's Agreement with MKI allowed it to liquidate MKI's positions "whenever in [First Options'] discretion [First Options] deemed it necessary." (Letter Agreement, P 4). Over the next two months, First Options took control of the MKI account and proceeded to liquidate those positions which it felt posed significant unacceptable risks. First Options' liquidation of MKI's positions increased MKI's deficit to about $ 5.1 million.

 In the meantime, First Options and MKI had entered into settlement negotiations, with the intention to allow MKI to continue trading and recoup some of its losses for the benefit of First Options and MKI. The negotiations produced a "Workout Agreement." The Workout Agreement consisted of four documents: (1) a letter agreement executed by First Options, MKI, Mr. Kaplan, Mrs. Kaplan, and certain other entities and individuals (the "Letter Agreement"); (2) a guaranty executed only by MKI; (3) a subordinated loan agreement executed by First Options, MKI, and a separate entity; and (4) a subordinated promissory note executed by MKI.

 Under the terms of the Workout Agreement, MKI agreed to repay a total of $ 6,227,188, the full amount of its trading deficits, including the deficit incurred when First Options took over its accounts. Pursuant to the Workout Agreement, MKI also immediately transferred four Exchange memberships to First Options; MKI and Mr. Kaplan contributed $ 900,000 to a new trading account, and MKI resumed trading in April 1988; Mr. Kaplan paid First Options $ 800,000; and Mr. and Mrs. Kaplan agreed to remit their 1987 tax refund to First Options upon receipt. *fn3" MKI also agreed to split its trading profits with First Options.

 Since then, the parties have looked to a variety of adjudicatory bodies for vindication of their respective positions. First Options first submitted its claims to the arbitration process of the Exchange. In that forum, First Options brought claims against MKI for accelerated indebtedness under the Workout Agreement, claims against Mr. Kaplan as MKI's alter ego, and claims against Mr. and Mrs. Kaplan for the amount of their 1987 federal tax refund. Mr. Kaplan and MKI filed counterclaims against First Options for breach of contract, interference with prospective business opportunities, and libel and slander.

 In May 1992, after eight days of hearings, the seven-member arbitration panel voted five to two in favor of First Options, entering an award for more than $ 5 million against MKI and Mr. Kaplan jointly and severally. The panel ordered Mr. and Mrs. Kaplan to remit their 1987 tax refund to First Options, and also found for First Options on MKI and Mr. Kaplan's counterclaim.

 MKI and the Kaplans filed a petition to vacate the award in federal district court; First Options filed a cross-petition seeking confirmation of the award. Another judge of this district confirmed the award. On appeal, the Third Circuit reversed the award in part, finding that the Exchange's arbitration panel had no jurisdiction over Mr. and Mrs. Kaplan. The Supreme Court agreed. Kaplan v. First Options of Chicago, 19 F.3d 1503 (3d Cir. 1994), aff'd, U.S. , 131 L. Ed. 2d 985, 115 S. Ct. 1920 (1995).

 On February 2, 1993, while the parties contested the arbitration award, Mr. Kaplan filed for bankruptcy relief under Chapter 11 of the Bankruptcy Code; on November 23, 1993, the case was converted to Chapter 7. On August 31, 1994, First Options filed a proof of claim against Mr. Kaplan's bankruptcy estate for recovery of the Kaplans' $ 346,342 federal tax refund, based on the Letter Agreement in which Mr. Kaplan agreed to remit such refunds to First Options upon their receipt. On November 9, 1994, Mr. Kaplan instituted an adversary proceeding to challenge First Options' claim and to assert his own counterclaims against First Options. The bankruptcy court found in favor of First Options on the counterclaim, concluding that First Options did not breach any contractual obligation to MKI or Mr. Kaplan. In re Kaplan, 1995 Bankr. LEXIS 1140, 1995 WL 500599, at * 6, 9 (Bankr. E.D. Pa. Aug. 22, 1995). The bankruptcy court also found that Mr. Kaplan had an "absolute" obligation to remit the tax refund to First Options, id. at * 9 n.7, and that Mr. Kaplan was individually "liable to First Options in the amount of the refund plus applicable interest." Id. at * 11. *fn4"

 While First Options pursued its remaining claim for the Kaplans' 1987 tax refund against Mr Kaplan in the adversary proceeding, it filed this action against Mrs. Kaplan, raising the same claim and seeking the same damages. On November 15, 1995, First Options filed a motion for summary judgment as to both its claim against Mrs. Kaplan and Mrs. Kaplan's counterclaim against it. On December 5, 1995, Mrs. Kaplan responded to that motion, filing, in addition, her own cross-motion for summary ...

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