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Mikail v. PAM Management, Inc.

United States District Court, M.D. Pennsylvania

April 12, 2017

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

          MEMORANDUM

          MALACHY E. MANNION United States District Judge

         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 his statement 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 FACTS[1]

         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 its attorneys 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 ¶ 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 due by 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 the Drums 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 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 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 in due course.” (Doc. 39-8). In response to the letter, plaintiff wired £900, 000.00 to Shukla's bank account on September 7, 2015 and the Barclays Bank's payment confirmation referenced that his payment was made for “Truck Stops.” (Doc. 39-9).

         On September 17, 2015, Shukla sent a handwritten letter to plaintiff stating, in part: “Thank you very much for remitting the amount due to me under the promissory note[s] for the three truck stops in the U.S. [ ]. I am happy to proceed with assigning the debts to you.” (Doc. 39-10).

         On September 28, 2015, Shukla as “Assignor” executed two documents prepared by her attorney each titled “Deed”, (Doc. 22-7, Doc. 22-8), in which plaintiff was the “Assignee.” The first Deed pertained to the PAM debt and provided in part:

The Assignor is owed a debt of U.S. $320, 000 from [PAM], for the balance of capital payable under the stock purchase agreement dated January 1, 2009 for her sale to [PAM] of her sixty (60) shares of the capital stock in [PAM] (Debt). The Assignor has agreed to assign the Debt to the Assignee on the terms of this deed with effect from the date of this deed (Effective Date). The Assignor assigns all its rights, title, interest, and benefit in and to the Debt to the Assignee with effect from the Effective Date.
The second Deed pertained to the Drums debt and provided in part:
The Assignor is owed a debt of U.S. $80, 000 from [Drums], for the balance of capital payable under the stock purchase agreement dated January 1, 2009 for her sale to [Drums] of her thirty three and one third (33 1/3) shares of the capital stock in [Drums] (Debt). The Assignor has agreed to assign the Debt to the Assignee on the terms of this deed with effect from the date of this deed (Effective Date). The Assignor assigns all its rights, title interest, and benefit in and to the Debt to the Assignee with effect from the Effective Date.

         On December 11, 2015, Shukla executed Amended and Supplemental Assignments in favor of plaintiff “in order to alleviate any confusion that may have arisen due to the proportional application of the March 2015 Payment, and the inadvertent failure to account for unpaid Interest Amounts due under the PAM [Contract] and Drums [Contract].” (Doc. 22, ¶'s 54-55, Doc. 22-10, Doc. 22-11). The Amended Assignments stated:

[O]n or about September 28, 2015, Assignor assigned all of her rights under the [PAM Contract and Drums Contract] to Assignee. [T]he Assignor desires to confirm that she did grant, bargain, sell, assign, transfer, and set over to Assignee, his successors and assigns, any and all right, title, and interest the Assignor may have in and to [the PAM Contract and Drums Contract].

         In her Declaration, (Doc. 22, ¶'s 46-47, 50, 59), Shukla averred as follows: “In executing the Assignments, it was always my intent to transfer any and all rights, title, interest and benefit that I had under the 2009 [Contracts] to Mr. Mikail”; “It was not my intent to retain any interest in, or rights to, the 2009 [Contracts], nor any portion thereof”; “Any and all rights to payment under the 2009 [Contracts] belong to Mr. Mikail alone”; and “In the Amended Assignments, I confirmed that on September 28, 2015, I did grant, bargain, sell, assign, transfer, and set over to Mr. Mikail, any all of my rights, title, interest and benefit in and to the [Contracts].” (See also Doc. 23).[4]

         D. The Alleged Oral Modifications of the Contracts

         Defendants allege that there were subsequent oral modifications to both Contracts. Defendants also allege that all of the oral agreements to modify the Contracts were made between Darshan's husband, Amarjit S. Grewal (“Grewal”), and Balvinder S. Rattan (“Rattan”), Shukla's nephew, (see Doc. 23). However, defendants do not have any documents relating to the alleged oral agreements between Grewal and Rattan.[5] Defendants state that Grewal was acting on behalf of defendants and Rattan was acting on Shukla's behalf as her representative. In fact, when Manjit Shukla (“Manjit”) originally owned the stocks, he gave Rattan power of attorney over his affairs. Later, Rattan held himself out to Grewal as being attorney in fact under a durable power of ...


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