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Byrd v. Johnston

May 29, 2009


The opinion of the court was delivered by: DuBOIS, J.



In 2005, defendant Daniel W. Johnston ("defendant Johnston") was the sole shareholder, officer, and director of defendant Daniel Johnston, Inc., which owned and operated a General Motors Chevrolet dealership, including service and maintenance and body shop facilities, in Jeannette, Pennsylvania. (Letter of Intent and Confidentiality Agreement ("Agreement") 1, Ex. B to Pl.'s Mot.) On October 24, 2005, defendant Johnston and plaintiff entered into the Agreement, pursuant to which plaintiff was to acquire all of the common stock of defendant Daniel Johnston, Inc., and, thus, the dealership, for a base purchase price of seven hundred thousand dollars ($700,000). (Id. ¶ 2.)

The Agreement provided that on November 7, 2005, plaintiff was to make an initial down payment of seventy-five thousand dollars ($75,000). (Id.) This down payment was nonrefundable unless "General Motors Chevrolet Division fails to approve the Buyer as an authorized franchise owner" or unless "the Seller defaults . . . and fails to convey the shares to the Buyer . . . . " (Id.; Johnston Dep. 78:14--21, Dec. 19, 2008.*fn1) Plaintiff made the down payment shortly after signing the Agreement. (Johnston Dep. 69:18--70:4.)

According to the Agreement, closing was to occur on or before February 6, 2006. (Agreement ¶ 6.) The parties, however, did not close by that date; the reason for the failure to timely close is currently in dispute. (Statement of Material Facts in Support of Pl. Karen Byrd's Mot. for Summ. J. ("Statement of Material Facts") ¶¶ 10--11; Johnston Dep. 79:2--15.) On February 10, 2006, plaintiff's counsel sent a letter to defendant Johnston requesting the return of plaintiff's seventy-five thousand dollar ($75,000) down payment as she had not been approved by General Motors. (Letter from Robert L. Arangio to Daniel W. Johnston (Feb. 10, 2006), Ex. C to Pl.'s Mot.) Defendant Johnston received the letter but did not return the down payment. (Johnston Dep. 86:24--89:19.)

In the summer of 2006, as the closing had still not occurred, defendant Johnston made plans to sell the dealership to Kevin Cook. (Johnston Dep. 44:19--45:1.) Defendant Johnston and Cook entered into an Asset Purchase Agreement to effect the transfer of certain of the dealership's assets on July 5, 2006. (Asset Purchase Agreement, Ex. D to Pl.'s Mot.) The total purchase price was three hundred thousand dollars ($300,000). (Id. ¶ 1.1.) The following day, plaintiff sent a letter to defendant Johnston thanking him for "advising [her] that [he would] be able to make payment of the $75,000.00 deposit to [her] upon conclusion of the sale to a third party." (Letter from Karen Byrd-Lewis to Daniel W. Johnston (July 6, 2006), Ex. E to Pl.'s Mot.) At his deposition, defendant Johnston disagreed with this statement, explaining that "that conversation was not you're going to get your $75,000 back. That conversation was, when am I getting my $75,000 back? And I said, hey, Karen, when the dust settles and we'll see what position I'm in, if there is $75,000 back, you'll get it." (Johnston Dep. 92:11--16.) Plaintiff's counsel made another written request for the return of the down payment on August 30, 2006. (Letter from Robert L. Arangio to Daniel W. Johnston (Aug. 30, 2006), Ex. F to Pl.'s Mot.)

The Agreement also provided that plaintiff was to serve as interim General Manager of the dealership beginning on November 7, 2005 and continuing through the closing. (Agreement ¶ 5.) Although the parties failed to close by February 6, 2006, plaintiff continued to work as interim General Manager. (Countercl. ¶ 9; Answer to Countercl. ¶ 9.) In the spring of 2006, defendant Johnston discovered that a dealership employee, Ronald Miller, was charging unauthorized purchases to the dealership. (Countercl. ¶ 10; Answer to Countercl. ¶ 10.) These purchases included jewelry and tuition for a member of Miller's family. (Def. Johnston's Answers to Pl.'s First Set of Interrogatories ("Answers to Interrogatories") ¶ 10 & Ex. B.) In response to the unauthorized charges, defendant Johnston terminated Miller. (Countercl. ¶ 12; Answer to Countercl. ¶ 12.) The parties dispute whether plaintiff approved or had prior knowledge of these charges by Miller. The parties also dispute whether plaintiff purchased up to two hundred thousand dollars ($200,000) of direct mail advertising without prior approval during her tenure as interim General Manager.


On July 19, 2007, plaintiff filed a Complaint seeking, inter alia, damages and injunctive relief. (Compl. 8.) Jurisdiction is based on diversity of citizenship pursuant to 28 U.S.C. § 1332 as plaintiff is a citizen of New Jersey and defendants are citizens of the Commonwealth of Pennsylvania, and the amount in controversy exceeds seventy-five thousand dollars ($75,000).

(Id. ¶¶ 2--4.) The Complaint alleged the following causes of action:

Count I Fraud and Misrepresentation

Count II Conversion

Count III Breach of Contract (and Breach of the Covenant of Good Faith & Fair Dealing)

Count IV Equitable ...

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