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American Music Theater Festival, Inc., and Joint Theater Center, LLC v. Td Bank

January 9, 2012

AMERICAN MUSIC THEATER FESTIVAL, INC., AND JOINT THEATER CENTER, LLC, PLAINTIFFS,
v.
TD BANK, N.A., DEFENDANT.



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

MEMORANDUM AND ORDER

Before the Court are the Motion for Summary Judgment on Defendant's preclusion defenses (ECF No. 22), Defendant's brief in support thereof (ECF No. 26) and Plaintiffs' Reply in opposition thereto (ECF No. 27). For the reasons set forth in this Memorandum, the Motion is granted.

I. BACKGROUND

American Music Theater Festival, Inc. and Joint Theater Center, LLC (collectively, "Plaintiffs") are non-profit entities that operate the Prince Music Theater in Philadelphia. Commerce Bank--now known as TD Bank, N.A. ("Defendant")--was Plaintiffs' financing and banking service provider. In November 2001, Plaintiffs mortgaged the theater to secure a $5.3 million tax-exempt loan from Defendant (the "Tax-Exempt Loan"). Then in February 2003, Plaintiffs again mortgaged the theater to secure a $500,000 conventional, non-tax-exempt loan from Defendant (the "Conventional Loan"); the principal was later increased to $928,000.

In 2007 and 2008, a dispute arose following a check forgery incident committed by one of Plaintiffs' employees and the parties attempted to re-negotiate the repayment terms of the loans. Plaintiffs contend a binding agreement was reached on January 31, 2008 (the "January 31, 2008 Agreement") but Defendant refutes that any such agreement was reached. Defendant argues binding agreements were reached as a result of other discussions in April and August 2008, but Plaintiffs allege those agreements were induced by fraud and coercion. The parties continued to disagree over the repayment terms and on November 11, 2008, Defendant declared Plaintiffs were in default on both the Tax-Exempt and Conventional Loans. Confessions of judgment were entered by the Philadelphia Court of Common Pleas: on December 23, 2008, on the Conventional Loan, and on March 18, 2009, on the Tax-Exempt Loan. In February 2009, Defendant filed related foreclosure actions.

Plaintiffs filed a petition to open the confessed judgment on the Conventional Loan on March 20, 2009, Case No. 081204149 (the "4149 Action"), which the Court of Common Pleas denied on August 13, 2009.*fn1 The execution of the judgment was stayed pending appeal to the Pennsylvania Superior Court, and the Court of Common Pleas issued an opinion on July 6, 2010 explaining the denial of Plaintiffs' petition (the "4149 Opinion"). On February 23, 2010, the Court of Common Pleas granted Defendant summary judgment on its foreclosure action (the "3713 Action") on the Conventional Loan, Case No. 090203713 (the "3713 Opinion"). In that action, Plaintiffs filed an answer and new matter that incorporated the arguments in their petition to open.*fn2

On January 20, 2010, Plaintiffs filed a petition to strike or open the confessed judgment on the Tax-Exempt Loan, Case No. 090302930 (the "2930 Action"). The petition was subsequently denied on June 17, 2010 and an opinion was issued on September 7, 2010 ("2930 Opinion"). In the related foreclosure action, Case No. 090204008 (the "4008 Action"), Plaintiffs filed an answer and new matter that incorporated by reference its petition in the 2930 Action. Summary judgment was entered for Defendant on July 12, 2010 (the "4008 Opinion").

Plaintiffs filed the present action in the Philadelphia Court of Common Pleas on January 14, 2010 and Defendant subsequently removed the case to federal court. The Complaint contains ten counts:

Count I: Breach of Contract/Duty of Good Faith Count II: Promissory Estoppel Count III: Breach of Fiduciary Duty Count IV: Fraudulent Misrepresentation and Concealment Count V: Negligent Misrepresentation Count VI: Conversion Count VII: Breach of Duties Imposed by the Pa. U.C.C. Count VIII: Interference with Charitable Gifts Count IX: Interference with Business Relations Count X: Abuse of Process As a result of Defendant's Motion to Dismiss (ECF No. 6), the Court issued an Order (ECF No. 22) finding that the Rooker-Feldman doctrine did not apply to Plaintiffs' claims and converted the Motion to Dismiss into a Motion for Summary Judgment solely on Plaintiffs' affirmative defense of preclusion.

Pending Plaintiffs' appeals of the prior court decisions, the Court of Common Pleas stayed the execution of a sheriff's sale on the theater. The Plaintiffs have since filed bankruptcy and all state court litigation has been stayed.

II. LEGAL STANDARD

Upon considering a motion for summary judgment, the Court shall grant the motion "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In making a determination, "inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (alteration in original) (internal quotation marks omitted). "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

III. ANALYSIS

A federal court applying preclusion principles "must give a prior state judgment the same effect as would the adjudicating state." Gregory v. Chehi, 843 F.2d 111, 116 (3d Cir. 1988); see also U.S. Const. Art. IV § 1; 28 U.S.C. § 1738. Therefore, the Court applies the preclusion principles of the Pennsylvania common law. Preclusion comes in two forms. Claim preclusion gives dispositive effect in a later action to a prior judgment, including issues that could have but were not asserted in the prior action. See Chehi, 843 ...


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