M&T Bank v. Guthrie, Jr.

• Court: Superior Court of Delaware
• Decided: April 24, 2020
• Docket: N19C-07-179 FWW
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

M&T BANK, ) ) Plaintiff ) ) v. ) ) MARK T. GUTHRIE, JR., ) N19C-07-179 FWW ) Defendant, Third-Party Plaintiff ) ) v. ) ) JOHN BROOKS, ) ) Third-Party Defendant. ) )

Submitted: January 31, 2020 Decided: April 24, 2020

Upon Plaintiff M&T Bank’s Motion for Summary Judgment GRANTED, in part, and DENIED, in part.

John E. Tarburton, Esquire, Orlans P.C., 512 East Market Street, Georgetown, Delaware 19947; Attorney for Plaintiff M&T Bank.

Elwood T. Eveland, Jr., Esquire, Eveland Law Firm, 715 King Street, Suite 200, Wilmington, DE, 19801; Attorney for Defendant Mark T. Guthrie.

WHARTON, J. I. INTRODUCTION

Plaintiff M&T Bank (“M&T Bank”) brings this breach of contract and debt

collection action against Defendant Mark T. Guthrie (“Guthrie”) for what it alleges

is an outstanding amount due under an installment contract and security agreement

(“Agreement”) for the purchase of a motor vehicle. Before the Court is M&T Bank’s

Motion for Summary Judgment (the “Motion”). This is the Court’s decision on the

Motion.

The Motion seeks an order that Guthrie is in default under the Agreement and

M&T Bank is entitled to damages in a sum certain. Here, however, the issues of

breach and damages must be considered separately. It is clear that Guthrie breached

the agreement in a variety of ways, but because the record must be developed further

concerning whether the sale of the vehicle was commercially reasonable under

Hicklin v. Onyx Acceptance Corp.,1 M&T Bank’s request for a full determination as

to breach and damages in this Motion can be granted only in part. Accordingly,

M&T Bank’s Motion for Summary Judgment is GRANTED on the issue of breach

of contract, but is DENIED as to damages.

1 Hicklin v. Onyx Acceptance Corp., 970 A.2d 244 (Del. 2009). Guthrie’s Answer to M&T Bank’s Complaint asserts affirmative defenses concerning commercial reasonableness and mitigation of damages. 2 II. FACTUAL AND PROCEDURAL CONTEXT

In April 2017, M&T Bank entered into an Agreement whereby M&T Bank

provided Guthrie with a loan in the original principal amount of $29,953.00 for the

purchase of a 2017 Chevrolet Malibu (the “Vehicle”).2 In return, Guthrie granted

M&T Bank a security interest in the vehicle as collateral for the loan,3 agreed to pay

M&T Bank “[i]f the vehicle is damaged, destroyed, or missing,”4 agreed that M&T

Bank could accelerate the loan should Guthrie fail to make his payments,5 and agreed

that he would insure the vehicle.6

According to Guthrie, he only signed the Agreement to assist his cousin John

Brooks (“Brooks”) because Brooks “was down on his luck, and had no credit, and

needed transportation to get back on his feet.”7 Guthrie purchased the vehicle and

gave it to Brooks,8 however Guthrie required Brooks to make the installment

2 Pl.’s Compl. at ¶ 3, D.I. 1; see also Def.’s Ans. at ¶ 3, D.I. 8. 3 Pl.’s Compl. at ¶ 4, Ex. A at § 2(c), D.I. 1; see also Def.’s Ans. at ¶ 4, D.I. 8. 4 Pl.’s Compl., Ex. A at § 2(a). (“If the vehicle is damaged, destroyed, or missing[, you] agree to pay us all you owe under contract [...].”), D.I. 1. 5 Pl.’s Compl., Ex. A at § 3(b) (“You may have to pay all you owe at once. If you break your promises (default) we may require that you pay all you owe on the contract at once [...].”), D.I. 1. 6 Pl.’s Compl., Ex. A at § 2(d). (“You agree to have physical damage insurance [...].”), D.I. 1. 7 Def.’s Third-Party Compl. at ¶ 3, D.I. 8. 8 Id. 3 payments and insure the vehicle.9 After receiving the vehicle from Guthrie, Brooks

moved to Florida and remains a resident there.10

Shortly after relocating, Brooks damaged the vehicle in a collision, “resulting

in a total loss.”11 Although M&T Bank and Guthrie dispute whether M&T Bank

repossessed the vehicle voluntarily, the vehicle was sold by M&T Bank after

repossession.12 The parties also dispute the amount recovered from the sale.13 After

deducting the sale proceeds from the total amount owed under the Agreement, M&T

Bank claims it is still owed damages, and seeks a total of $31,309.17, with interest,

counsel fees, late charges and costs permitted under the Agreement.14

On July 23, 2019, M&T Bank filed this Complaint against Guthrie.15 Guthrie

filed a Motion to Quash Service of Summons (“Motion to Quash”),16 which this

Court denied on September 9, 2019.17 Guthrie filed an Answer to M&T Bank’s

Complaint on September 30, 2019.18 In it, he denies breaching the Agreement,

9 Id. at ¶ 4. 10 Id. at ¶ 5. 11 Id. at ¶ 7. 12 Pl.’s Compl. at ¶ 6-7, D.I. 1; see also Def.’s Ans. at ¶ 6-7, D.I. 8. 13 Id. at ¶ 5-6. (M&T Bank states in its Complaint that $513.50 was applied to Guthrie’s arrears. D.I. 1. In his Answer, Guthrie challenges that amount. D.I. 8.) 14 Pl.’s Compl., D.I. 1. 15 Id. 16 D.I. 4. 17 D.I. 6. 18 D.I. 8. 4 asserts five affirmative defenses, and adds a third-party complaint against Brooks.19

On December 26, 2019, M&T Bank filed this Motion,20 and on January 31, 2020,

Guthrie responded.21 On February 26, 2020, Guthrie moved for default judgment

against Brooks,22 which this Court granted on March 16, 2020.23

III. STANDARD OF REVIEW

Under Superior Court Civil Rule 56(c), a party is entitled to summary

judgment if the moving party can show that there is no genuine issue as to any

material fact and the moving party is entitled to a judgment as a matter of law.24

When material facts are in dispute or “it seems desirable to inquire more thoroughly

into the facts to clarify the application of the law to the circumstances,” summary

judgment will not be appropriate.25 The party moving for summary judgment bears

the initial burden of showing no material issues of fact are present.26 When a moving

party meets his initial burden of showing that no material issues of fact exist, the

burden shifts to the nonmoving party to show that such issues do exist.27

19 Id. 20 D.I. 15. 21 D.I. 19. 22 D.I. 20. 23 D.I. 23. 24 Del. Super. Ct. Civ. R. 56(c). 25 Ebersole v. Lowengrub, 180 A.2d 4678, 468-69 (Del.1962) (citing Knapp v. Kinsey, 249 F.2d 797 (6th Cir. 1957)). 26 Moore v. Sizemore, 405 A.2d 679, 681 (Del. 1979). 27 Del. Super. Ct. Civ. R. 56(c). 5 IV. THE CONTENTIONS OF THE PARTIES

M&T Bank asserts that “[t]he Agreement provides that upon [Guthrie’s]

failure to pay when due [...], the loan shall be in default and [M&T Bank] may

accelerate [...] the outstanding principal balance and accrued interest together with

any additional amounts payable shall be immediately due and payable without

demand.”28 As a result of Guthrie’s failure to make payments on the Agreement and

failure to obtain insurance, M&T Bank argues that Guthrie has breached the

Agreement and requests this Court to grant the Motion and award damages.29

Guthrie, in his Answer, denies that he breached the Agreement by failing to

make the required payments.30 However, in Guthrie’s Third-Party Complaint against

Brooks, Guthrie alleges that “John Brooks breached his agreement with [Guthrie] by

failing to make payments on the installment loan and by failing to [insure] the

[v]ehicle.”31

V. DISCUSSION

The Court first addresses whether M&T Bank has met its summary judgment

burden as to its breach of contract claim. It then addresses any relevant affirmative

28 Pl.’s Mot. for Summ. J. at ¶ 2, D.I. 15. 29 Id. at ¶ 5. 30 Def.’s Ans. at ¶ 10, D.I. 8. 31 Def.’s Third-Party Compl. at ¶ 9, D.I. 8. 6 defenses. To meet its burden under this Motion, M&T Bank must show that no

genuine issues of material fact are present.32

A. Breach of Contract

The record establishes that Guthrie did not make payments or obtain

insurance, as required under the Agreement, but instead delegated these duties to his

cousin.33 That delegation does not absolve Guthrie of liability under the Agreement

between himself and M&T Bank. In fact, it violates another term of the

Agreement.34

Under the Agreement, Guthrie, as the named party to the contract, was

responsible for insuring the vehicle and making monthly payments.35 He did not do

either. By failing in those responsibilities, Guthrie breached the Agreement and

M&T Bank is entitled to summary judgment, at least in part.

B. Affirmative Defenses

In his Response to the Motion, Guthrie relies upon the affirmative defenses

set out in his Answer,36 which the Court now addresses. First, Guthrie asserts that

32 Del. Super. Ct. Civ. R. 56(c). 33 Def.’s Third-Party Compl. at ¶¶ 8,9, D.I. 8. 34 See Pl.’s Compl., Ex. A. § 2(b). (“You agree not to [...] sell, rent, lease, or transfer any interest in the Vehicle [...] without our written permission”), D.I. 1. 35 See Pl.’s Compl., Ex. A, D.I. 1. 36 Def.’s Resp. to Mot. for Summ. J., D.I. 19; Def.’s Ans. at 1-2, D.I. 8. 7 “[M&T Bank’s] complaint fails to state a claim upon which relief can be granted.”37

This affirmative defense is without merit. M&T Bank’s Complaint very clearly sets

forth a claim for breach of contract for which relief can be granted.

Second, Guthrie claims that “[M&T Bank’s] claims may be barred and/or

reduced by [M&T Bank’s] failure to make a reasonable sale under the Uniform

Commercial Code.”38 Under Hicklin v. Onyx Acceptance Corp.,39 the failure to

establish a commercially reasonable sale of secured collateral bars a recovery of any

deficiency.40 This affirmative defense goes to the issue of damages, indeed, whether

M&T Bank is entitled to damages at all. Because the record on the question of

whether the sale of the vehicle was commercially reasonable is undeveloped, M&T

Bank is not entitled to summary judgment as to damages.

Third, Guthrie argues that “[M&T Bank] failed to mitigate its damages.”41

This affirmative defense also involves the issue of damages as well, and, similarly,

M&T Bank is not entitled to summary judgment on that issue.

37 Id. at 1. 38 Id. 39 Hicklin v. Onyx Acceptance Corp., 970 A.2d 244 (Del. 2009). 40 Id. at 254. 41 Def’s Ans. at 2, D.I. 8. 8 Fourth, Guthrie contends that “[M&T Bank] made improper service of process

upon [Guthrie].”42 The Court previously resolved this issue.43 Guthrie asserts

service should be made according to Superior Court Civil Rule 4(f)(1)(I) 44 and

contends that M&T Bank attempted to provide service according to Superior Court

Civil Rule 4(f)(1)(II) by leaving service of process materials with Guthrie’s eleven

year old daughter at their residence.

Guthrie misinterprets Rule 4(f)(1)(I). Here, service was made on an adult,

Guthrie, in accordance with Superior Court Civil Rule 4(f)(1)(I). Although a copy

of the summons, complaint and affidavit were left with Guthrie’s eleven year old

daughter, in effect, service was made on Guthrie. By leaving the materials “at

[Guthrie’s] usual place of abode with some person of suitable age and discretion then

residing therein,”45 M&T Bank served Guthrie. There is no indication, under

Delaware Superior Court Service of Process rules or Delaware case law, that

42 Id. 43 D.I. 6. 44 Del. Super. Ct. R. 4(f)(1)(I). (“Upon an individual other than an infant or incompetent person by delivering a copy of the Summons, Complaint and Affidavit, to that individual personally or by leaving copies thereof at that individuals dwelling house or usual place of abode with some person of suitable age and discretion then residing therein, or by delivering copies thereof to an agent authorized by appointment or by law to receive service of process.”) (emphasis added). 45 See Id. 9 Guthrie’s eleven year old daughter was a person of unsuitable age and discretion for

purposes of accepting service under Rule 4(f)(1)(I). This affirmative defense is

without merit, and does not prevent summary judgment.

Last, Guthrie asserts that “[Guthrie] reserves his right to file additional

affirmative defenses upon the close of discovery.” 46 This affirmative defense

requires no response nor does it require this Court to withhold judgment at this

juncture.

The Court finds that Guthrie has failed to raise any relevant affirmative

defense that would bar M&T Bank’s breach of contract. Further, the Court finds that

there are no genuine issues of material fact as to that claim. Guthrie’s failure to make

the monthly payments under the Agreement, his failure to insure the vehicle as

required under the Agreement, and his failure to abide by the Agreement’s transfer

restriction mean that M&T Bank is entitled to summary judgment on the issue of

breach of contract.

C. Damages

In order to recover damages, M&T Bank must establish that the sale of the

vehicle was commercially reasonable. It can show commercial reasonableness in

one of two ways - either by establishing that every aspect of the sale was conducted

46 Def.’s Ans. at 2, D.I. 8. 10 in a commercially reasonable manner, or by showing that it sold the vehicle in

accordance with the accepted practices of reputable dealers in that type of property.47

The current record before the Court establishes neither, and it seems desirable to

inquire more thoroughly into the facts surrounding the sale. For that reason, and for

now, the Court must deny the portion of the Motion seeking summary judgment as

to damages.

VI. CONCLUSION

For the reasons stated above, M&T Bank’s Motion for Summary Judgment is

GRANTED as to breach of contract and DENIED as to damages.

IT IS SO ORDERED.

/s/ Ferris W. Wharton Ferris W. Wharton, J.

47 Hicklin at 250. 11