On Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civil No. 90-498).
Before: Greenberg and Roth, Circuit Judges, and VanARTSDALEN, District Judge * * Honorable Donald W. VanArtsdalen, Senior United States District Judge for the Eastern District of Pennsylvania, sitting by designation.
GREENBERG, Circuit Judge.
USX Corporation appeals the district court's grant of summary judgment to Prime Leasing, Inc. on all three counts of USX's complaint. USX's predecessor, USX Credit Corporation,*fn1 had made a loan to Prime for the purchase of telecommunications equipment that Prime had leased to MBank Alamo of San Antonio, Texas. MBank later was declared insolvent, and the purchaser of its assets, Bank One, Texas, N.A., disaffirmed the equipment leases. USX then repossessed and sold the telecommunications equipment, and subsequently brought this diversity action under 28 U.S.C. § 1332 to recover the difference between the unpaid debt from the original financing transaction and the resale price of the equipment. USX predicated its claims on Prime's failure to notify it of developments concerning the MBank leases. Prime's defense, which the district court found persuasive, was that nonrecourse provisions in certain agreements between USX and Prime precluded USX from seeking any remedies beyond the repossession and resale of the leased equipment.
The facts relating to the formation of the transaction are not in dispute. On February 26 and 27, 1987, USX and Prime entered into the various agreements providing for USX's financing of Prime's purchase of the telecommunications equipment leased to MBank. The agreements between USX and Prime included a Loan Agreement, Installment Note ("Note"), Master Security Agreement and Assignment ("Security Agreement"), and two Collateral Assignments of Lease.*fn2
The Note and the Security Agreement both contained nonrecourse provisions. The Note provided:
This Note is made pursuant to and in connection with the [Loan] Agreement and is to be paid from payments due or to become due and judgments recovered under the Master Lease Agreement between [Prime], as Lessor, and MBank Alamo as Lessee, and in the event of default, from the remarketing proceeds of the Equipment covered thereby. All the terms, conditions and covenants of the [Loan] Agreement and Security Agreement, including a full description of the rights of the holder hereof and the definitions set forth therein, are incorporated herein by reference. The Obligations of [Prime] under this Note shall be without recourse or liability against [Prime] for payment of the Note or any related costs or expenses except as to a breach by [Prime] of any assignment, representation, covenant, or warranty described in Sections 4, 5(b) or 6 of the Security Agreement.*fn3
Similarly, the Security Agreement provided:
[USX] shall only have recourse with respect to the Collateral as set forth in Section 1 herein,*fn4 except that [USX] shall have recourse to the general assets of [Prime] for any representation or warranties of [Prime] which shall have been false when made and for material misrepresentations or omissions made by [Prime] in any document provided by [Prime] to [USX] in connection with this transaction.
Further, and this is the crux of USX's claims in this action, the Collateral Assignments of Lease contained provisions requiring Prime to communicate to USX certain notices pertaining to the leases:
[Prime] hereby agrees . . . (iii) to notify promptly [USX] or any subsequent assignee of any default or alleged default (of which [Prime] has knowledge) by any party to the Lease or any termination or alleged termination thereof, (iv) without prior written consent of [USX] or any subsequent assignee, not to extend, amend, supplement or terminate (except as expressly permitted therein), or agree to, or permit, any modifications, waiver or other alteration of the terms thereof, and (v) to ...