United States District Court, E.D. Pennsylvania
FEDERAL DEPOSIT INSURANCE CORP. as RECEIVER for NOVA BANK, Plaintiff,
HILARY G. MUSSER, Defendant.
B. BRODY, J.
it is understood that a person who borrows money must
eventually return that money, with interest, to the lender.
This case falls well outside that ordinary lender-borrower
paradigm. Defendant Hilary Musser borrowed $3 million from
Nova Bank. All parties agree that Musser remains in
possession of the $3 million and that she has not paid
interest since August 2010. The Plaintiffs in this
case-originally Nova Bank and then, following Nova Bank's
failure, the Federal Deposit Insurance Corporation (FDIC) as
receiver-seek the return of the $3 million, plus interest.
The FDIC's Second Amended Complaint asserts four counts
against Musser, each of which is brought in the alternative.
ECF No. 71. Counts I and II each allege breaches of different
express contracts. Count III alleges breach of an implied in
fact contract. Count IV alleges unjust enrichment, assuming
the absence of a contract.
believes she is entitled to keep the $3 million and that she
owes the FDIC nothing. She argues that the $3 million is
merely a fractional offset to the millions of dollars that
Nova Bank and its executives fraudulently procured from her.
In her Answer, Musser has asserted the following nine
affirmative defenses: (1) breach of fiduciary duty; (2)
fraud; (3) violation of the Pennsylvania Unfair Trade
Practices and Consumer Protection Law (“UTPCPL”);
(4) setoff; (5) unclean hands; (6) lack of subject matter
jurisdiction over Counts I-III; (7) non-execution of the
negotiable instrument(s); (8) recoupment; and (9) failure of
consideration. ECF No. 72.
FDIC moved for summary judgment on Count I, which, if
granted, would have disposed of the case. Pl.'s Mot.
Summ. J., ECF No. 73. The FDIC also moved to strike or, in
the alternative, for summary judgment on each of Musser's
affirmative defenses. Pl.'s Mot. to Strike, ECF No. 74.
For the reasons explained below, I denied Plaintiff's
Motion for Summary Judgment, without prejudice to raise the
motion again after the close of discovery. I granted in part
and denied in part Plaintiff's Motion to Strike or, in
the Alternative, for Summary Judgment on Each of
Defendant's Affirmative Defenses.
October of 2005, Musser's lender-borrower relationship
with Nova Bank began, when she signed a promissory note and
opened a $3 million line of credit with the bank (the
“2005 Line”). The 2005 Line was assigned Loan
Number 53800028. Musser subsequently borrowed money using the
2005 Line and paid interest and principal. By early 2007,
Musser had completely paid down the 2005 Line to a balance of
zero. In March of 2007, Nova Bank closed the 2005 Line and
re-documented Musser's $3 million line of credit with a
new Promissory Note and other loan documents (the “2007
Line”). Musser contends that she did not actually sign
any of these documents. The 2007 Line was assigned Loan
Number 53800314. After the creation of the 2007 Line, Musser
knew that she continued to have a $3 million line of credit
with Nova Bank, and she drew down on and made payments on her
line of credit after March 2007.
in mid-2009, Musser and Nova Bank began discussing a renewal
of Musser's line of credit. On November 16, 2009, Musser
directed her investment advisory firm, Ballamor Capital
Management (“Ballamor”), to transfer the
remaining balance of the 2007 Line, $1.97 million, to her
personal account at Nantucket Bank. Ballamor then transferred
the $1.97 million into Musser's Nantucket account. At
that point, Musser had withdrawn the full amount from Nova
Bank. Two days later, Musser received a letter from Thomas
Patterson, a loan officer at Nova Bank, informing her that
Nova Bank had approved a renewal of the 2007 Line, with
modifications to the interest rate and maturity date (the
“2009 Line”). The letter also stated, in relevant
part, “If you do not agree to the terms as outlined in
this letteror [sic] to remit the applicable fee, please
contact [Thomas Patterson] immediately . . . to receive a
loan payoff statement and make arrangements to pay your
balance in full . . . .” ECF No. 76-1 at 68. Musser
never objected to the terms of the letter. From January 2010
to August 2010 Musser made interest payments at the new
interest rate, as stated in the 2009 Line renewal letter.
Since August 2010, Musser has made no payments on the 2009
Line, and she remains in possession of the $3 million.
concedes to all of the facts as stated above. She contends,
however, that she never signed any of the 2007 Line
documents, and that the signatures on those documents are
forgeries. She argues that these forgeries constitute fraud
in the factum as to the 2007 Line and the 2009 Line, which
was a renewal of the 2007 Line. Musser also alleges that
there was fraud in the factum as to the 2005 Line, because
Nova Bank executives entered into an illegal kickback
arrangement to conceal the loan's true interest rate.
Ultimately, Musser faults Barry Bekkedam-an individual who
served as chairman of Nova Bank and, separately, as
Musser's investment advisor with Ballamor-for defrauding
her in order to prop up the failing Nova Bank.
subject matter jurisdiction over this matter pursuant to 12
U.S.C. § 1819(b)(2)(A), which, with limited exception,
provides for federal court jurisdiction over matters to which
the FDIC is a party, and pursuant to 28 U.S.C. §
1331. I have personal jurisdiction because, at
the time this Action was first filed, Musser resided in
Pennsylvania, and the lawsuit arises out of Musser's
purposeful contacts with Pennsylvania. Venue is proper
because, at the time this Action was first filed, Musser
resided in the Eastern District of Pennsylvania, and a
substantial part of the events giving rise to the claims in
this Action occurred in the Eastern District of Pennsylvania.
MOTION FOR SUMMARY JUDGMENT ON COUNT I
judgment shall be granted “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). A fact is “material” if it
“might affect the outcome of the suit under the
governing law . . . .” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A factual dispute is
“genuine” if the evidence would permit a
reasonable jury to return a verdict for the nonmoving party.
Id. In ruling on a motion for summary judgment, the
court must draw all inferences from the facts in the light
most favorable to the nonmoving party. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
moving party “always bears the initial responsibility
of informing the district court of the basis for its
motion.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). After the moving party has met its initial
burden, the nonmoving party must then “make a showing
sufficient to establish the existence of [every] element
essential to that party's case, and on which that party
will bear the burden of proof at trial.” Id.
at 322. Both parties must support their factual positions by:
“(A) citing to particular parts of materials in the
record . . .; or (B) showing that the materials cited do not
establish the absence or presence of a genuine dispute, or
that an adverse party cannot produce admissible evidence to
support the fact.” Fed.R.Civ.P. 56(c)(1). The materials
in the record that parties may rely on include
“depositions, documents, electronically stored
information, affidavits or declarations, stipulations
(including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials.”
Fed.R.Civ.P. 56(c)(1)(A). In opposing a motion for summary
judgment, the nonmoving party may not “rely merely upon
bare assertions, conclusory allegations or suspicions.”
Fireman's Ins. Co. of Newark, N.J. v. DuFresne,
676 F.2d 965, 969 (3d Cir. 1982).
essence, the inquiry at summary judgment is “whether
the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one
party must prevail as a matter of law.”
Anderson, 477 U.S. at 251-52.
FDIC sought summary judgment on Count I, which alleges a
breach of the 2009 Line. The FDIC argued that the November
18, 2009 letter constituted an offer to enter into a new
contract, which Musser accepted by retaining the $3 million
and paying interest from January 2010 through August 2010.
Musser argued that the 2009 Line was a renewal of the 2007
Line, rather than a new contract, and was therefore subject
to any defenses that may have been asserted against the 2007
Line. See Hitchner Wall Paper & Paint Co. v.
Shoemaker, 75 Pa. Super. 520, 523 (1921) (“[A]
renewal note is open to all defenses which might have been
made against the original note.”). Musser further
asserted that the 2007 Line is void, due to, among other
reasons, fraud in the factum resulting from a forged
signature. Resolving this dispute over renewal is a necessary
first step to resolving the FDIC's summary judgment
question whether a renewal note operates as a discharge of
the original note depends on the intention of the
parties.” Peterson v. Crown Fin. Corp., 661
F.2d 287, 291 (3d Cir. 1981). The issue of intent is a
factual determination to be made by the factfinder. See
id. at 291 n.6 (citing Brown v. Scott, 51 Pa.
357, 363 (1865)). Musser identified a number of facts that
show the factfinder could reasonably conclude that the
Parties intended the 2009 Line to be a renewal of the 2007
Line rather than a separate new contract. Among other things,
the 2009 Line bore the same loan number as the 2007 Line, the
2009 Line expressly incorporated all of the terms of the 2007
Line, but with a modified interest rate and maturity date,
and the Parties used the term “renewal” in
discussing the 2009 Line. The question of the Parties'
intent to effect a renewal is a disputed issue of material
fact. I thus denied the FDIC's motion for summary
judgment on Count I.
MOTION TO STRIKE DEFENDANT'S AFFIRMATIVE