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Westdale Construction, Ltd v. Liberty State Financial Holdings Corp.

April 1, 2010

WESTDALE CONSTRUCTION, LTD, PLAINTIFF,
v.
LIBERTY STATE FINANCIAL HOLDINGS CORPORATION, LIBERTY STATE BENEFITS OF PENNSYLVANIA, INC., MICHAEL ERHARD, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

This matter has come before the Court on plaintiff's motion for partial summary judgment on its breach of contract claim against defendants Liberty State Benefits of Pennsylvania, Inc. ("Liberty Benefits") and Liberty State Financial Holdings Corporation ("Liberty Financial").*fn1 For the reasons expressed below, and at oral argument held on March 17, 2010, plaintiff's motion will be granted as to Liberty Benefits and denied as to Liberty Financial.

BACKGROUND

Plaintiff, Westdale Construction Company, Ltd., claims that in November 2008, defendant Michael Erhard, president of defendant Liberty Benefits, contacted Cliff Oliver by telephone to request a loan in the amount of $2,306,120.00 in order to purchase the beneficial interests in certain irrevocable life insurance trusts ("ILLTs"). After their conversation, Erhard drafted a "Loan Request Letter," dated November 18, 2008, which provided,

We herewith request a loan in the amount of $2,306,120.00 to purchase the beneficial interests of the ILITs who own the below mentioned in force life insurance policies. The 3 ILITs will be used as collateral for the term of the loan. It is agreed to pay you an interest of 5% per month for the duration of the loan. The repayment of the loan will be no later than March 2009, and in fact probably will be paid off earlier entirely . . . in a lump sum as listed below. . . .

The total Purchase Price/Loan amount for all policies is $2,306,120.00 5% interest per months $115,306.00 Loan Repayment amount per 12/08 $2,421,426.00 Loan Repayment amount per 01/09 $2,536,732.00 Loan Repayment amount per 02/09 $2,652,038.00 Loan Repayment amount per 03/09 $2,767,344.00 (Pl. Ex. A. to Oliver Cert., Docket no. 19-1.)

Oliver presented the letter to Ron Kimel, President of Westdale, to determine Westdale's interest in funding the requested loan. Westdale complied with Liberty Benefits' request and agreed to issue a loan in the amount of $2,306,120.00, to be repaid at 5% interest per month, no later than March 2009. On November 20, 2008, Liberty Benefits assigned its beneficial interests in the three ILITs to Westdale.

On February 13, 2009, Erhard wrote a letter to Westdale to inform it of Liberty Benefits' efforts to repay the loan. Erhard explained Liberty Benefits' financial situation, and stated, "We thus expect to have these funds available by the end of this month but worst case not later than the end of March 09. The first use of these funds will be the repayment of the loan inclusive [of] the agreed interest. You can rest assure[d] of that. We appreciate your patience and trust." (Id., Ex. C.) Westdale, via Cliff Oliver, received another letter from Erhard, dated February 17, 2009, which was essentially identical to the letter Erhard sent four days previously, and reiterated that "we still feel that we will be able to pay off the loan well in advance of that [March 2009] date." (Id., Ex. D.)

Despite these assurances, by the end of March 2009, Liberty Benefits had failed to repay Westdale's loan. In June 2009, Westdale filed suit against Liberty Benefits, Liberty State Financial, which owns 100% of the stock of Liberty State Benefits, and Ehard, asserting several causes of action, including one for breach of contract.*fn2 In September 2009, plaintiff filed the instant motion for partial summary judgment on its breach of contract claim. As noted above, after several hearings concerning plaintiff's motion for prejudgment attachment, during the March 17, 2010 proceedings the Court granted plaintiff's motion with regard to Liberty Benefits, but denied its motion with regard to Liberty Financial. This Opinion, as indicated by the Court at the hearing, supplements the Court's decision expressed on the record.

DISCUSSION

A. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000.

B. Summary Judgment Standard

Summary judgment is appropriate where the Court is satisfied that "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of ...


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