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DAVIS v. MERRILL LYNCH BUSINESS FINANCIAL SER.

February 12, 2004.

W.E. DAVIS, DONALD R. DAVIS, and W.E. DAVIS & SONS CONSTRUCTION COMPANY, INC, Plaintiffs
v.
MERRILL LYNCH BUSINESS FINANCIAL SERVICES, INC., Defendants



The opinion of the court was delivered by: JOHN W. DARRAH, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs, W.E. Davis, Donald R. Davis, and W.E. Davis & Sons Construction Company, Inc. ("Davis Construction"), filed suit against Defendant, Merrill Lynch Business Financial Services, Inc. ("Merrill Lynch"), for breaching a financial services agreement. Presently before the Court is Merrill Lynch's Motion for Summary Judgment on Counts I and II. For the following reasons, that motion is Granted.

LEGAL STANDARD

  Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., Inc., 40 F.3d 146, 150 (7th Cir. 1994). "One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses. . . ." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Thus, although the moving party on a motion for summary judgment is responsible for demonstrating to the court Page 2 why there is no genuine issue of material fact, the non-moving party must go beyond the face of the pleadings, affidavits, depositions, answers to interrogatories, and admissions on file to demonstrate, through specific evidence, that a genuine issue of material fact exists and to show that a rational jury could return a verdict in the non-moving party's favor. Celotex, 477 U.S. at 322-27; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254-56 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Waldridge v. American Hoechst Corp., 24 F.3d 918, 923 (7th Cir. 1994).

  Disputed facts are material when they might affect the outcome of the suit. First Ind. Bank v. Baker, 957 F.2d 506, 507-08 (7th Cir. 1992). When reviewing a motion for summary judgment, a court must view all inferences to be drawn from the facts in the light most favorable to the opposing party. Anderson, 477 U.S. at 247-48; Popovits v. Circuit City Stores, Inc., 185 F.3d 726, 731 (7th Cir. 1999). However, a metaphysical doubt will not suffice. Matsushita, 475 U.S. at 586. If the evidence is merely colorable or is not significantly probative or is no more than a scintilla, summary judgment may be granted. Anderson, 477 U.S. at 249-250.

  BACKGROUND

  The undisputed facts, for the purposes of this motion, taken from the pleadings, and the parties' Local Rule 56.1(a) & (b) statements of material facts (referred to herein as "Pl's 56.1" and "Defs 56.1") and exhibits, are as follows.

  On or about January 11, 2000, Merrill Lynch entered into a loan agreement with Davis Construction called a Working Capital Management Account*fn1 Loan and Security Agreement (the Page 3 "Loan Agreement"). Def's 56.1 ¶ 5. W.E. Davis and Donald R. Davis executed unconditional guarantees in connection with the Loan Agreement. Def.'s 56.1 ¶ 7. The original term of the Loan Agreement was to expire on January 31, 2001. Def.'s 56.1 ¶ 6.

  Davis Construction did not always maintain the requisite loan amount as required by the terms of the Loan Agreement. PL's 56.1 ¶ 5. Merrill Lynch honored checks written by Davis Construction from January 2000 through December 2000, even though the maximum credit line specified in the loan agreement had been exceeded. Pl.'s 56.1 ¶ 7. Under the terms of the Loan Agreement, Merrill Lynch had discretion as to whether it would honor checks written by Davis Construction even where the maximum amount of the loan had been exceeded. PL's 56.1 ¶ 8.

  Sometime in late December 2000 or early January 2001, Merrill Lynch determined that Davis Construction had non-bonded accounts less than 90 days old that amounted to $317,961.44. Therefore, according to the terms of the Loan Agreement, the maximum line of credit available to Davis Construction for this account amount was $254,369.15. Def.'s 56.1 ¶ 11. On or around January 9, 2001, Davis Construction had outstanding loan amounts from Merrill Lynch totaling $756,434.00. PL's Resp. to Def.'s 56.1 ¶ 13.

  On January 11, 2001, Merrill Lynch notified Davis Construction that it would not honor certain checks made by Davis Construction totaling $85,693.32. Def.'s 56.1 ¶ 14. On January 12, 2001, Merrill Lynch notified Davis Construction that it would not honor certain checks made by Davis Construction totaling $36,091.70. Def.'s 56.1 ¶ 15. On January 17, 2001, Merrill Lynch notified Davis Construction that it would not honor certain checks made by Davis Construction totaling $50,025.83. Def.'s 56.1 ¶ 16. At no time after January 2001 did Davis Construction have access to its account line of credit with Merrill Lynch. Pl.'s 56.1 ¶ 11. Page 4

  On August 6, 2001 Merrill Lynch and Davis Construction entered into an agreement called the "WCMA Termination and Payment Plan" (the "Original Termination Agreement"). Def.'s 56. ¶ 17. On November 12, 2001, Merrill Lynch and Davis Construction agreed to an amendment to the Original Termination Agreement which adjusted the outstanding balance payments that Davis Construction was to pay Merrill Lynch. Def.'s 56.1 ¶ 19. Both the Amended Termination Agreement and the Original Termination Agreement provided that the "[l]oan Documents shall continue in full force and effect upon all of their terms and conditions."

  Def.'s 56.1 ¶ 18, 20.

  Section 1.1(r) of the Loan Agreement provides:
"Maximum WCMA Line of Credit" shall mean, as of any date of determination thereof, an amount equal to the less of: (A) $1,000,000 or (B) 80% of Customer's Accounts and Chattel Paper, as shown on its regular books and records (excluding accounts over 90 days old, Accounts arising out of bonded jobs, retainage, directly or indirectly due from any person or entity not domiciled in the United States or from any shareholder, officer, or emplyoee of Customer of any affiliated entity).
Section 2.2(b)(i) of the Loan Agreement states:
Subject to the terms and conditions hereof, during the period from and after the Activation Date to the first to occur of the Maturity Date or the date of termination of the WCMA Line of Credit pursuant to the terms hereof, and in addition to WCMA Loans automatically made to pay accrued interest, as hereafter provided: (i) [Merrill Lynch] will make WCMA Loans to Customer in such amounts as Customer may from time to time request in accordance with the terms hereof, up to an aggregate outstanding amount not to exceed the Maximum WCMA Line of Credit. . . .
Section 2.2(c) of the Loan Agreement provides:
  Notwithstanding the foregoing, [Merrill Lynch] shall not be obligated to make ...

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