Clark Motor Company, Inc.; Robert W. Clark; David Clark v. MANUFACTURERS AND TRADERS TRUST CO. d/b/a M & T Bank

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 08-4831
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CLARK MOTOR COMPANY, INC.;
ROBERT W. CLARK; DAVID CLARK,
Appellants
v.
MANUFACTURERS AND TRADERS TRUST CO. d/b/a M & T Bank
____________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. No. 07-cv-00856)
District Judge: Honorable James F. McClure
____________
Submitted Pursuant to Third Circuit LAR 34.1(a)
December 15, 2009
Before: FISHER, HARDIMAN and VAN ANTWERPEN, Circuit Judges.
(Filed: January 7, 2010)
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OPINION OF THE COURT
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FISHER, Circuit Judge.
Clark Motor Company, Inc. (“Clark Motor”) and its officers, Robert and David
Clark, appeal from an order of the District Court granting summary judgment to

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Manufacturers and Traders Trust Company (“M&T”). See Clark Motor Co., Inc. v.
Manufacturers and Traders Trust, Co., No. 4:07-CV-856 (M.D. Pa. Nov. 20, 2008).
Clark Motor filed suit claiming damages for breach of contract, negligent
misrepresentation, negligence, breach of fiduciary duty, and aiding and abetting breach of
fiduciary duty. We will affirm.
I.
We write exclusively for the parties, who are familiar with the factual context and
legal history of this case. Therefore, we will set forth only those facts necessary to our
analysis.
In June 2003, Clark Motor entered into an agreement with M&T for a floor plan
line of credit. Under the agreement, M&T provided financing for Clark Motor’s purchase
of new, used, and program vehicles. When Clark Motor purchased a vehicle, it would
enter information, including the vehicle identification number (“VIN”) and the vehicle’s
purchase price, into M&T’s Dealer Access System (“DAS”). M&T would then deposit
funds for the purchase of the vehicle into Clark Motor’s checking account to allow for the
purchase of the vehicle. After the vehicle was sold to a customer, Clark Motor would
repay M&T with interest.
Clark Motor was owned by brothers Robert and David Clark. Robert Clark was
the President and majority owner of Clark Motor, while David Clark was its minority
owner and Vice-President. In July 2001, Clark Motor hired Sally Smith (“Smith”) to

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serve as office manager. Smith had been previously employed by Mifflin County
Coalition to Prevent Teen Pregnancy (“Coalition”) and Lazer Pro Digital Media Group
(“Lazer Pro”). (Appellant Br. at 7.) On January 8, 1999, Smith pleaded guilty to charges
of fraudulently endorsing checks payable to the Coalition. Later, on May 14, 2001, Smith
pleaded guilty to 22 counts of forgery, theft, and receiving stolen property relating to
actions she took at Lazer Pro. (J.A. A237-240.)
No one at Clark Motor was aware of Smith’s criminal record when she was hired.
Robert Clark became aware of Smith’s criminal past, at the latest, on February 10, 2003,
when a restitution order was served on Clark Motor requiring it to deduct money from
Smith’s salary.
Notwithstanding Smith’s history, Clark Motor gave Smith the pin number to the
DAS after it entered into its agreement with M&T. Smith was therefore able to enter new
and used cars into the system and cause funds to be transferred from the line of credit to
Clark Motor’s checking account.
All parties agree that Smith acted fraudulently in her use of the DAS. Beginning
in 2005, using information from a separate Chrysler Dealer Information System, Smith
entered new vehicles into the DAS which were owned by other dealers. Smith also
overvalued used cars, inflating the amount Clark Motor paid for those vehicles. All told,
Smith entered over 35 new vehicles into the DAS that were never owned by Clark Motor.

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This fraud caused M&T to loan Clark Motor some $1.5 million more than it otherwise
would have in order to fund Clark’s purchases.
The parties agree that Smith used roughly $100,000 of the fraudulently loaned
money herself. While M&T asserts in its brief that the most likely scenarios are that the
remaining $1.4 million was either taken by Robert and/or David Clark or used to cover
Clark Motor’s operating losses, there is little by way of evidence in the record to show
what happened to the remaining funds.
The agreement authorized M&T to audit Clark Motor’s inventory. M&T did carry
out audits of Clark Motor’s inventory, but Clark Motor argues on appeal that these audits
should have been more detailed. When performing an audit, M&T would check each
vehicle entered into the DAS against the vehicles on the lot. When vehicles were missing
from the lot, auditors would seek an explanation from Smith. There were several
legitimate reasons why a vehicle might appear on the list for financing but not be
physically present on Clark Motor’s lot at the time of the audit. Some vehicles were
loaned by Robert Clark to his family and to other individuals. Other vehicles had been
ordered from other dealers but had not yet arrived or had been taken by customers before
Clark Motor remitted payment to M&T.
On December 19, 2006, M&T and Clark Motor executed a new agreement for
financing with a substantially increased line of credit. Smith’s fraud was subsequently
uncovered in January 2007.

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II.
The District Court had jurisdiction over this matter pursuant to 28 U.S.C. § 1332.
This Court has jurisdiction pursuant to 28 U.S.C. § 1291. We review a District Court’s
order granting summary judgment de novo applying the same standard as the District
Court. Alcoa, Inc. v. United States, 509 F.3d 173, 175 (3d Cir. 2007). Summary
judgment is appropriate only where there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law. Saldana v. Kmart Corp., 260
F.3d 228, 232 (3d Cir. 2001).
We exercise plenary review over the District Court’s interpretation of state law.
Chem. Leaman Tank Lines, Inc. v. Aetna Cas. & Sur. Co., 89 F.3d 976, 983 (3d Cir.
1996).
III.
The District Court entered summary judgment for M&T. On appeal, Clark Motor
claims that there were genuine issues of material fact with regards to several of its claims.
Before the District Court, Clark Motor raised five claims, two of which, the breach of
contract and negligent misrepresentation claims, are at issue in this appeal. We will
consider each of the plaintiffs’ claims in turn.
A.
A plaintiff alleging breach of contract under Pennsylvania law must prove the
existence of a contract between the parties, a breach of a duty imposed by the contract,

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and resulting damages. Ware v. Rodale Press, Inc., 322 F.3d 218, 225 (3d Cir. 2003); see
also CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999). There
is no dispute that the parties had a contract, so we will consider whether the contract was
breached.
Clark Motor claims that M&T breached the contract by funding its loan requests
without proper documentation, failing to properly conduct required audits, breaching the
duty of good faith and fair dealing, and providing loans in excess of the maximum
amount set by the agreement.
We first consider whether the use of the DAS complied with the agreement’s
documentation requirements. The Pennsylvania Supreme Court has stated that course of
performance can be “perhaps the strongest indication of what the writing means.”
Atlantic Richfield Co. v. Razumic, 390 A.2d 736, 741 (Pa. 1978). In this case, the District
Court found that “the parties employed the DAS both before and after the 2004 and 2006
agreements governed their relationship. Therefore, the course of dealing and course of
performance indicate that both parties agreed the submission of the required information
via the DAS would satisfy the agreements.” (J.A. A33.)
There is strong evidence in the record that suggests that Clark Motor not only
consented to the use of the DAS, but did so enthusiastically. The agreement allowed loan
money to be advanced to Clark Motor at the request of any person authorized by the
President, Vice President, or Treasurer of Clark Motor. Because Smith was provided

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with a PIN by Clark Motor to use the DAS, her use of the system was authorized by the
agreement.
Clark Motor benefitted from the use of the DAS to promptly receive financing for
its vehicle inventory. According to Clark Motor’s Sales Manager, Jeff Hollingshead, the
loss of the ability to receive prompt financing using the DAS, after Smith’s fraud was
uncovered, contributed to Clark Motor’s failure as a business. (J.A. A551-52.)
Plainly the use of the DAS was considered by both parties to be an efficient and
convenient way of doing business to which both parties acquiesced over a period of three
years. Clark Motor cannot now decide that the conduct in which it voluntarily
participated constituted a breach on the part of M&T. Cf. Agathos v. Starlite Motel, 977
F.2d 1500, 1509 (3d Cir. 1992) (“[A] course of performance by one party accepted or
acquiesced in without objection by the other may be evidence of an agreed modification
or waiver of a written term.”).
We find that based on the course of performance it is clear both parties agreed that
the information logged into the DAS satisfied the requirements of the agreement.
We also concur with M&T that even if the DAS did not satisfy the documentation
requirement, there was, nonetheless, no breach of contract. The documentation was a
condition precedent to M&T’s obligation to loan money. See Am. Leasing v. Morrison
Co., 454 A.2d 555, 559 (Pa. Super. Ct., 1982) (citing Mellon Bank, N.A. v. Aetna Bus.
Credit Corp., 619 F.2d 1001, 1116 (3d Cir. 1980)). Without the required paper work,

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M&T was under no obligation to loan money to Clark Motor. See Keystone Tech. Group,
Inc. v. Kerr Group, Inc., 824 A.2d 1223, 1227-28 (Pa. Super. Ct. 2003) (citing Acme
Mkts., Inc v. Fed. Armored Express, Inc., 648 A.2d 1218, 1220 (Pa. Super. Ct. 1994).
M&T, in its discretion, could waive the paperwork requirement and loan money without
it. See Prima Medica Assocs. v. Valley Forge Ins. Co., 970 A.2d 1149, 1156-57 (Pa.
Super. Ct. 2009).
The condition precedent only existed to protect M&T from fraud. The requirement
that paperwork be sent to M&T cannot possibly be interpreted as a provision designed to
protect both parties because there is no way in which sending paper work to M&T would
protect Clark Motor against fraud perpetrated by M&T. Clark Motor could have
employed internal procedures to protect itself against employees like Smith who would
steal from the company. M&T’s decision to waive a condition precedent to loaning
money cannot constitute a breach.
B.
Clark Motor asserts that M&T breached its contract by failing to thoroughly audit
Clark Motor’s inventory. M&T relied on explanations provided by Clark Motor
employees as to why vehicles on the Floor Plan were not physically present on Clark
Motor’s lot. In Clark Motor’s view, M&T should not have accepted these explanations
and should have undertaken a more thorough audit.

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The District Court found no duty imposed by any of the agreements between the
parties for M&T to audit Clark Motor’s inventory and we likewise find no such duty
existed. While the financing agreements between the parties gave M&T the right to
conduct an audit, the agreements did not require the audits. M&T had the right to audit
but not the duty to do so. See Morena v. South Hills Health Sys., 462 A.2d 680, 684 (Pa.
1983).
Because there was no duty to perform the audits in the first place, we concur with
the District Court that there is no reason to examine whether M&T was negligent in
performing the audits.
C.
Clark Motor next argues that M&T breached the agreement by providing financing
for used vehicles in excess of their NADA values.
The 2003 and 2004 Agreements state that financing for used vehicles was subject
to restrictions set by M&T. Among these restrictions was “the percentage of NADA
value. . . .” 2003 Floor Plan Agreement, ¶4.2.2 (J.A. A251); 2004 Floor Plan Agreement
¶4.2.2 (J.A. A265.) A precise percentage, however, was not defined. With regard to used
cars, the 2006 Agreement provided that M&T would loan the lesser of “(I) the
Borrower’s acquisition price” or “(II) one hundred percent (100%) of the current NADA
wholesale/trade value for such Used Motor Vehicle.” 2006 Loan Agreement ¶1.3(b)
(J.A. A278.)

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We agree with the District Court that M&T could not have breached on these
terms. Because there was no percentage given in the 2003 or 2004 agreements, M&T
could not have breached by financing more than 100 percent of the NADA value.
Instead, the NADA value was only one factor in determining whether M&T would
finance the vehicles. Even after the 2006 Agreement was signed and the 100 percent cap
was in place, M&T did not breach because the record shows that Clark Motor requested
the increased financing. The District Court cited a number of Pennsylvania cases,
including Byrne v. Kanig, 332 A.2d 472, 475 (Pa. Super. Ct. 1974), which make clear one
party to a contract may not request that the other party breach an agreement and then
claim a breach of contract on the breach he himself requested.
Additionally, the cap on the amount of a vehicle’s value that M&T would finance
was in place solely for the protection of M&T. If M&T were to loan more than a vehicle
was worth, then it would find itself unsecured for the difference between the amount it
loaned and the vehicle’s actual value. M&T relied on this contract provision to protect
itself from being placed in an unsecured position. Clark Motor, on the other hand, did not
need to rely on this provision because it was the party purchasing the vehicle. If a vehicle
was priced higher than Clark Motor could sell it, then Clark Motor could refuse to make
the purchase. It needed no protection from the financing agreement.
M&T’s willingness to waive the provision to aid Clark Motor does not constitute a
breach of contract. Formigli Corp. v. Fox, 348 F. Supp. 629, 646 (E.D. Pa. 1972) (citing

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Mayer Bros. Constr. Co. v. Am. Sterilizer Co., 101 A. 1002 (Pa. 1917); McKenna v.
Vernon, 101 A. 919 (Pa. 1917)). For these two reasons, M&T did not breach the contract
by loaning amounts in excess of the NADA value for used cars.
M&T also did not breach the agreements by temporarily increasing Clark Motor’s
credit limit. The 2004 Agreement states that “[M&T] may, at the request of the Borrower
and in [M&T]’s sole discretion, make Loans to the Borrower . . . in excess of the
Approved Principal Amount.” (J.A. A264 ¶2.2.) The District Court concluded that this
provision allowed M&T to make a loan in excess of the credit limit if such a loan was
requested by Clark Motor. The District Court declined to read into the provision a
requirement that M&T “provide Clark Motor written notification of something it recently
requested and of which it was already aware.” (J.A. A41.) Additionally, because M&T
sent Clark Motor both daily floor plan activity reports and summaries each month
showing how much credit was available, Clark Motor cannot claim it was unaware that its
loan requests were in excess of its credit limit under the agreement. We thus find M&T
did not breach the agreement by failing to provided written notification that it was
providing financing in excess of Clark Motor’s credit limit.

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Although the District Court did not reach this issue, we may affirm the District1
Court on any grounds supported by the record. See Rodriguez v. Our Lady of Lourdes
Med. Ctr., 552 F.3d 297, 303 (3d Cir. 2008).
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D.
There is a second basis for affirming the District Court’s grant of summary
judgment on the breach of contract counts. In a breach of contract case, damages are a1
necessary element of the claim. Ware, 322 F.3d at 225. In this case, M&T actually paid
Clark Motor all of the money that Clark is now claiming as damages. Clark Motor had
control over the funds from the date they were requested in the DAS to the present. Even
if M&T breached the contract by loaning money to Clark Motor, Clark Motor could have
avoided all damages by simply repaying the amount loaned in breach of the contract.
E.
We quickly dispose of Clark Motor’s claim that M&T violated the implied duty of
good faith and fair dealing in the contract. As the District Court put it, Clark Motor is
“essentially arguing that M&T breached the implied covenant of good faith and fair
dealing by acquiescing to Clark Motor’s request for additional funding.” (J.A. A44.)
Clark Motor could have put additional procedures in place to ensure that its employees
did not request financing either above the existing credit limit or for vehicles Clark Motor
did not purchase. Clark Motor requested financing that went beyond M&T’s duty to
perform under the contract, and in fact M&T performed beyond what the contract
required.

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While the Pennsylvania Supreme Court has never adopted the gist of the action2
doctrine, the Pennsylvania Superior Court has applied the doctrine. Pittsburgh Constr.
Co. v. Griffith, 834 A.2d 572, 577 (Pa. Super. Ct. 2003); eToll, Inc. v. Elias/Savion
13
In Pennsylvania, implied covenants do not impose an obligation to perform beyond
what a contract requires. Cable & Assocs. Ins. Agency v. Commercial Nat’l Bank of Pa.,
875 A.2d 361, 364 (Pa. Super. Ct. 2005). Because M&T breached no contractual duty, it
likewise did not violate the duty of good faith and fair dealing.
F.
Clark Motor’s negligent misrepresentation claim alleges that M&T provided false
information in its audit summaries and failed to exercise reasonable care in conducting
and communicating the audit results to Clark Motor.
The District Court held that the gist of the action doctrine barred Clark Motor’s
negligent misrepresentation claim. The gist of the action doctrine exists “to maintain the
conceptual distinction between breach of contract claims and tort claims.” eToll, Inc. v.
Elias/Savion Adver., Inc., 811 A.2d 10, 14 (Pa. Super. Ct. 2002). Under the gist of the
action doctrine, a plaintiff may not through artful pleading attempt to frame a breach of
contract claim as a tort claim. The differences between tort and contract claims in
Pennsylvania have been described as follows: “Tort actions lie for breaches of duties
imposed by law as a matter of social policy, while contract actions lie only for breaches of
duties imposed by mutual consensus agreements between particular individuals.” Bash v.
Bell Tele. Co., 601 A.2d 825, 829 (Pa. Super. Ct. 1992).2

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Adver., Inc., 811 A.2d 10, 14 (Pa. Super. Ct. 2002). This Court previously applied the
gist of the action doctrine applying Pennsylvania law in Bohler-Uddeholm America, Inc.
v. Ellwood Group, Inc., 247 F.3d 79, 103-04 (3d Cir. 2001).
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On appeal Clark Motor argues that the negligent misrepresentation claim should
have been permitted in light of the District Court’s ruling on the breach of contract claim.
Because the District Court found that there was no duty to audit imposed by the contract,
Clark Motor contends that the gist of the action doctrine should not be a barrier to
proceeding with a tort action.
The social duty needed to maintain a tort claim arises, according to Clark Motor,
from Section 552 of the Restatement (Second) of Torts, which provides in part:
One who, in the course of his business, profession, or employment, or in
any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information.
Restatement (Second) of Torts § 552. According to Clark Motor, because M&T had the
right to audit the vehicle inventory and provided the results of these audits to Clark Motor
in the course of its business and in its pecuniary interest, the duty to exercise reasonable
care and competence arose from the Restatement provision rather than the contract itself.
Clark Motor’s argument fails for two reasons. First, applying the gist of the action
doctrine, M&T’s right to conduct audits of Clark Motor’s vehicle inventory arose only
because of the contract between the parties. Any obligation on M&T’s part to ensure the

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accuracy of the information arose from the implied duty of good faith between parties to a
contract, not the Restatement of Torts.
Next, we find, as the District Court suggested in a footnote, that Clark Motor is the
source of the false information. (J.A. A48, n.7.) When M&T found vehicles missing
from Clark Motor’s inventory, they sought an explanation from Clark Motor employees.
M&T accepted the explanations and then provided a courtesy copy of the audit to Clark
Motor. The Restatement provides liability against one who “supplies false information
for the guidance of others.” Restatement (Second) of Torts § 552 (1). In this case, the
false information was supplied by Clark Motor when it provided M&T with inaccurate
explanations regarding the missing vehicles. There is no evidence to suggest that M&T
believed Clark Motor provided it with false information in the audit, and, therefore,
nothing to suggest that M&T believed it was repeating false information when it provided
courtesy copies of the audits to Clark Motor. It is also difficult to construe the audit
forms M&T gave Clark Motor as providing guidance, when they merely restated the
(false) information that Clark Motor already had its disposal. In sum, we share the
District Court’s skepticism of a claim where “a party . . . wishes to be compensated for
deceiving itself.” (J.A. A48, n.7.) M&T was therefore entitled to summary judgment on
the negligent misrepresentation claim.
IV.
For the foregoing reasons, we will affirm the order of the District Court.

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