In Wester Americredit Fin. Servs. v. Adams Motor Co., No. C18-4067-LTS, 2019 U.S. Dist. LEXIS 141889, at *2-5 (N.D. Iowa Aug. 20, 2019), the District Court threw out counter-claims filed against a floorplan lender. The facts were not atypical:
GM Financial acted as AMC’s floorplan lender and entered into a term loan and revolving line of credit with AMC on June 15, 2015. Doc. No. 27-2 at 2. The terms of the parties’ agreements were governed by a Master Loan Agreement (Loan Agreement) and a Revolving Line of Credit Promissory Note (RLOC), both of which are in the record. Id. at 2-3. The balance [*3] of the RLOC (approximately $280,972.22) was converted into a term loan on May 5, 2017 (the First Term Loan). The First Term Loan provides that AMC will repay GM Financial $280,972.22, plus interest at the rate of 6.25 percent. Id. at 3. AMC agreed that its payments under the First Term Loan would comply with the payment provisions set forth in Section 5 of the First Term Loan. Id. AMC also agreed that it would be in default under the First Term Loan if it failed to make payment when due or if it otherwise committed an “Event of Default” under the Loan Agreement. Id. An “Event of Default” under the Loan Agreement is defined as “fail[ure] to comply with or perform under any term, condition or covenant of this Agreement” including the failure to pay any sums as required. Id. at 2-3. It is also an “Event of Default” if any Borrower, entity Borrower, or Guarantor is indicted or convicted of either a felony or misdemeanor involving fraud. Id. On July 1, 2015, GM Financial and AMC entered into a Term Loan Promissory Note for the sum of $800,000 (the Second Term Loan). Id. at 3. The Second Term Loan provides that AMC will repay GM Financial $800,000.00 plus interest at the rate of 4.25 percent. Id. at 4. AMC agreed that its payments would comply with the payment provisions set forth in Section 5 of the Second [*4] Term Loan. Id. It further agreed that it would be in default if it failed to make any payment under the Second Term Loan when due or if it committed an “Event of Default” under the Loan Agreement. Id. Adams guaranteed all of AMC’s obligations to GM Financial. Id. The Continuing Guaranty provides that Adams “unconditionally and absolutely guarantees the prompt and punctual payment, when due, upon maturity, by acceleration, or otherwise, of all of the Obligations that [GM Financial] may now and in the future extend to [AMC].” Id. GM Financial performed all of the terms and conditions of the Loan Agreement, term loan promissory notes and Continuing Guaranty. Id. AMC failed to pay as required by the Loan Agreement, First Term Loan and Second Term Loan. Id. at 5. GM Financial sent defendants Notices of Default on December 13, 2017; January 3, 2018; January 10, 2018; January 30, 2018; February 13, 2018; February 22, 2018; March 7, 2018; March 13, 2018; March 21, 2018 and April 3, 2018. Id. On April 23, 2018, GM Financial terminated AMC’s credit lines and demanded immediate payment of the outstanding balances of the Loan Agreement, First Term Loan and Second Term Loan in the amount of $2,377,608.35. [*5] As of January 31, 2019, GM Financial asserts that defendants are indebted in the amount of $1,103,107.37, plus interest and legal fees. Id. On January 17, 2018, GM Financial filed a Petition for Replevin with the District Court of Crawford County, Iowa, which sought possession of vehicles financed by GM Financial. Id. at 6. GM Financial filed a motion for summary judgment in that action, which was granted on August 14, 2018. Id. The court found that GM Financial was entitled to permanent possession of certain vehicle collateral due to AMC’s breach of the Loan Agreement. It also found that GM Financial did not waive its right to enforce the terms of the Loan Agreement. Id.
The District Court declined to allow claims of promissory estoppel or breach of the implied covenant of good faith and fair dealing. As to promissory estoppel, the Court held,
In support of their counterclaim of promissory estoppel, defendants allege that GM Financial and defendants had a clear and definite agreement that GM Financial would provide defendants with credit for new and used vehicles. Doc. No. 9 at 12. They allege that GM Financial made a clear promise that it would continue lending to defendants through February 16, 2018. Id. They allege they acted to their substantial detriment in reasonable reliance on the lending agreement and subsequent promise to continue lending to defendants through February 16, 2018. Id. Defendants allege that GM Financial refused to follow through on its promises outlined in the agreement and its promise to continue lending to defendants through February 16, 2018, despite defendants’ efforts to reduce indebtedness and follow the loan modification requests. Id. Defendants allege they were placed in an extremely difficult financial position without the necessary operating cash by GM Financial’s abrupt and unwarranted refusal to continue the lending timeline as agreed upon by the parties. Id. Due to GM Financial’s refusal to continue lending through February 16, 2018, defendants allege they were forced to seek financing [*10] from other institutions offering less-favorable terms, suffered cash flow problems that prevented them from timely repaying GM Financial and ultimately had to cease operating. Id. at 13. GM Financial argues defendants have not alleged sufficient facts to state a claim of promissory estoppel because the parties’ relationship is governed by written agreements. . . . Additionally, defendants’ promissory estoppel claim fails because it does not allege facts constituting detrimental reliance. Defendants have not stated any facts to suggest they changed their position in reliance on the alleged promise that lending would continue through February 16, 2018. They have not alleged any action or [*13] inaction they took in reliance on the alleged promise that was to their detriment. While they allege they had to seek financing from other institutions with less favorable terms, the alleged facts do not support a finding that this was due to GM Financial’s broken promise rather than defendants’ defaults. In other words, they have not alleged they were worse off as a result of relying on the promise as opposed to the position they would have been in otherwise.
As to the claim of breach of the implied covenant, the District Court held
They allege that the purpose of the parties’ agreement was to provide defendants with the necessary cash-flow financing to operate their car dealership. In exchange, defendants paid interest on that financing and sold GM branded vehicles. Id. at 13-14. Defendants allege the [*14] implied covenant was breached by GM Financial when it abruptly reduced defendants’ used-vehicle floor plan and refused to make loans for used vehicles. Id. They allege this caused damage as they were forced to seek financing from other institutions with less-favorable terms, suffered cash flow problems that prevented defendants from timely repaying GM Financial and ultimately had to cease operating due to its financial position. Id. at 14. . While the agreement contained an implied covenant of good faith and fair dealing, defendants have failed to allege sufficient facts to suggest a breach of that implied covenant that is attached to a contract term. See Bagelmann, 823 N.W.2d at 34 (concluding there was no breach of implied covenant of good faith and fair dealing by mortgagee’s failure to notify or update mortgagors concerning flood zone status because any allegation of bad faith lacked a contract term to which it could be attached). They have not alleged that GM Financial’s early termination unfairly prevented defendants from receiving the benefits of the contract. As noted above, the implied covenant of good faith and fair dealing cannot create new substantive terms. Moreover, any “benefit” of the contract that defendants were deprived of was the result of defendants’ own defaults, not GM Financial’s actions.