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Key Tidewater Ventures LLC v. PNC Bank, N.A.

United States District Court, D. Maryland

October 15, 2014

PNC BANK, N.A., Defendant.


JAMES K. BREDAR, District Judge.

Key Tidewater Ventures LLC, Tidewater Yacht Service Center, Inc., Tidewater Holdings LLC, Robert P. Brandon, and Jacqueline S. Brandon ("Plaintiffs") brought this suit against PNC Bank ("Defendant") for breach of contract and unjust enrichment under Maryland law. Now pending before the Court is Defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure (12)(b)(6), asserting that Plaintiffs failed to state a plausible claim for relief. (ECF No. 7.) The issues have been briefed (ECF Nos. 7, 9, 10), and no hearing is required, Local Rule 105.6. For the reasons explained below, Defendant's motion to dismiss is DENIED.


Plaintiffs obtained three loans from Mercantile Bank in June 2005.[2] (ECF No. 1 ¶ 10.) The first loan was for $5.5 million ("the Key Tidewater Loan") ( id. ¶ 6), the second was for $500, 000 ("the Original Equipment Line Loan") ( id. ¶ 7), and the third was for $1 million ("the Original Equipment Loan") ( id. ¶ 8). In November 2006, Plaintiffs' collective debt was consolidated into a single promissory note ("the Consolidated Note"), with Plaintiffs owing Mercantile Bank $7, 050, 000 over twenty years with a maturity date of October 31, 2025. ( Id. ¶ 10; ECF No. 1-1.) The Consolidated Note included a prepayment fee that could be triggered if Plaintiffs chose to prepay this note before its maturity date (the "Prepayment Premium Provision")[3]-the conditions under which this premium could be triggered are now in dispute. (ECF No. 1 ¶ 11; ECF No. 1-1 at 4-5.)

In April 2011, Plaintiffs defaulted on the Consolidated Note, but Defendant did not accelerate loan repayment. Instead, the parties agreed to refinance the loan "[a]t PNC Bank's insistence, " which culminated in "the Forbearance Agreement." (ECF No. 1 ¶¶ 15-16; ECF No. 1-2.) The Forbearance Agreement was reached in December 2012 to: (1) re-consolidate all loans; (2) set new maturity dates[4]; and (3) terminate the relationship between Plaintiffs and Defendant upon the loans' repayment. (ECF No. 1 ¶¶ 16-17.) The agreement does not explicitly reference the Prepayment Premium Provision or address its continued relevance. ( Id. ¶ 18.) It does, however, contain two contested provisions: Section 6 preserves Plaintiffs' existing defaults and establishes Defendant's obligation to forbear from "exercising and enforcing any rights, remedies, or recourse" associated with those defaults, (ECF No. 1-2 at 8-9); Section 28 acknowledges that the Forbearance Agreement does not alter the Consolidated Note unless expressly stated, ( id. at 18).

At some point prior to the Fall of 2013, Plaintiffs repaid both the Original Equipment Loan and the Original Equipment Line Loan, seemingly without incident. (ECF No. 1 ¶ 20.) Plaintiffs then sought refinancing from a new bank in order to repay the Key Tidewater Loan by the advanced maturity date of June 30, 2014. Before making their final payment, Plaintiffs asked Defendant to identify all monies owed. Defendant's accounting included, together with uncontested debts, a Prepayment Premium totaling over $117, 000, which was subsequently adjusted to $116, 462.84. ( Id. ¶¶ 20, 22.) Plaintiffs allege that a representative of Defendant apologized for the fee's inclusion, expressed his attempts to keep the fee off of Plaintiffs' final bill, and shared his belief that Plaintiffs could successfully challenge Defendant's application of the Prepayment Premium in court. Id.

Plaintiffs paid the Prepayment Premium under protest on February 21, 2014, along with a full repayment of all loans. ( Id. ¶¶ 23-24.) Plaintiffs now bring claims to retroactively recover the contested Prepayment Premium.[5] Plaintiffs' complaint includes two alternative legal theories: (1) a breach of contract claim ( id. ¶¶ 25-30); and (2) a claim for unjust enrichment ( id. ¶¶ 31-32). Defendant filed its motion to dismiss on July 29, 2014. (ECF No. 7.) Plaintiffs filed their response to the motion on August 15. (ECF No. 9.) All relevant contracts confirm, and the parties do not contest, that Maryland law applies. ( See ECF No. 1-1 at 9; ECF No. 1-2 at 14.)


A complaint must contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. An inference of a mere possibility of misconduct is not sufficient to support a plausible claim. Id. at 679. As the Twombly opinion stated, "Factual allegations must be enough to raise a right to relief above the speculative level." 550 U.S. at 555. "A pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'... Nor does a complaint suffice if it tenders naked assertion[s]' devoid of further factual enhancement.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557). Although when considering a motion to dismiss a court must accept as true all factual allegations in the complaint, this principle does not apply to legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.


A. Count I: Breach of Contract

Under Maryland law, a plaintiff suing for breach of contract must show simply "that the defendant had a contractual obligation and that the obligation was breached." Mathis v. Hargrove, 888 A.2d 377, 396 (Md. Ct. Spec. App. 2005). The Fourth Circuit instructs that "the construction of ambiguous contract provisions is a factual determination that precludes dismissal on a motion for failure to state a claim." Martin Marietta Corp. v. Int'l Telecomms. Satellite Org., 978 F.2d 140, 143 (4th Cir. 1992). A court must, however, make a threshold determination about whether a contract provision is ambiguous before it denies a motion to dismiss. See Diamond Point Plaza Ltd. P'ship v. Wells Fargo Bank, N.A., 929 A.2d 932, 952 (Md. 2007); see also Calomiris v. Woods, 727 A.2d 358, 362 (Md. 1999) (noting that "the question of whether a contract is ambiguous ordinarily is determined by the court as a question of law"). "A contract is ambiguous if, when read by a reasonably prudent person, it is susceptible of more than one meaning.'" Diamond Point Plaza, 929 A.2d at 951 (quoting United Servs. v. Riley, 898 A.2d 819, 833 (Md. 2006)). Courts may consider "the character of the contract, its purpose, and the facts and circumstances of the parties at the time of execution" in making such a determination. Calomiris, 727 A.2d at 363 (quoting Pac. Indem. v. Interstate Fire & Cas., 488 A.2d 486, 488 (Md. 1985)).

Maryland utilizes the objective interpretation principle in construing contracts. John L. Mattingly Co., Inc. v. Hartford Underwriters Ins. Co., 999 A.2d 1066, 1074 (Md. 2010). If the contract's language is unambiguous, then courts give effect to its plain, ordinary, and usual meaning, taking into consideration the context in which the language is used. Id. "Where the contract comprises two or more documents, the documents are to be construed together, harmoniously, so that, to the extent possible, all of the provisions can be given effect." Rourke v. Amchem Prods., Inc., 863 A.2d 926, 941 (Md. 2004).

Plaintiffs' complaint survives this motion to dismiss because the contested contracts-the Consolidated Note (ECF No. 1-1) and the Forbearance Agreement (ECF No.1-2)-do not clearly and unambiguously entitle Defendant to the Prepayment Premium. Key terms in the Prepayment Premium Provision are susceptible to multiple interpretations, and the Forbearance Agreement implies that it modified or perhaps ...

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