PNC Bank Nat'Lass'N v. MB Wholesale, Inc.
| Decision Date | 03 August 2018 |
| Docket Number | Case No. 17-11295 |
| Parties | PNC BANK NATIONAL ASSOCIATION, Plaintiff, v. MB WHOLESALE, INC. and ABED MEHANNA, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
Plaintiff PNC Bank, N.A. filed this lawsuit to enforce three contracts: a promissory note representing a $1.1 million loan to Defendant MB Wholesale, Inc., a personal guarantee of the loan signed by Defendant Abed Mehanna (MB Wholesale's owner), and a security agreement purportedly granting Plaintiff a security interest in all of MB Wholesale's assets.
Defendants do not contest that they signed the loan agreement and the guarantee. Plaintiff now moves for summary judgment on that basis,1 andDefendants raise two arguments in opposition. First, they argue that Plaintiff cannot prove damages, because the officer who signed the affidavit evidencing those damages gave deposition testimony suggesting a lack of personal knowledge as to how they were calculated. Second, they argue that the loan documents are unconscionable under Michigan law. Neither argument has merit, and Plaintiff is entitled to summary judgment as to Defendants' liability under the loan agreement and the guarantee.
Plaintiff PNC Bank, N.A. ("PNC" or "Plaintiff") is a national bank chartered under the laws of the United States, with its home office in Delaware. Defendant MB Wholesale, Inc. ("MB Wholesale") is a warehousing company incorporated under Michigan law, whose principal place of business is in Michigan. (ECF No. 9, Answer ¶ 2.) Defendant Abed Mehanna owns MB Wholesale, and is domiciled in Michigan.
On December 30, 2015, Plaintiff entered into a Loan Agreement with MB Wholesale. (ECF No. 16, Pl.'s Mot. Ex. 1, Loan Agreement.) In the Loan Agreement, Plaintiff agreed to extend a "committed revolving line of credit" to MB Wholesale, from which Plaintiff agreed to "make advances to the Borrower from time to time until the Expiration Date, in an aggregate amount outstanding at any time not to exceed $1,100,000.00." (Id. at 1, Pg ID 220.) The "Expiration Date" under the Loan Agreement was December 30, 2016. (Id.)
Above the signature lines on the Loan Agreement was the following language: "The Borrower acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate." (Id. at 11, Pg ID 230.)
The parties also executed a Committed Line of Credit Note ("Note") on December 30, 2015. (Pl.'s Mot. Ex. 2, Note.) In the Note, MB Wholesale agreed to pay Plaintiff $1,100,000 "or such lesser amount as may be advanced to or for the benefit of the Borrower hereunder, together with interest accruing on the outstanding principal balance" from the date of the Note's execution. (Id. at 1, Pg ID 233.) As to the interest rate, the Note provided that "[a]mounts outstanding under this Note willbear interest at a rate per annum which is at all times equal to (A) the Daily LIBOR2 Rate plus (B) two hundred seventy-five (275) basis points (2.75%)." (Id. (emphasis in original).) Any outstanding principal and accrued interest was due and payable on the "Expiration Date," which was December 30, 2016. (Id. at 1-2, Pg ID 233-34.)
Above the signature lines on the Note was the following language: "The Borrower acknowledges that it has read and understood all the provisions of this Note, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate." (Id. at 7, Pg ID 239.)
Repayment of Defendants' obligation was secured by a security interest in MB Wholesale's personal property, granted pursuant to a Security Agreement executed December 30, 2015. (Pl.'s Mot. Ex. 4, Security Agreement.) The Security Agreement defined the "Collateral" as "all personal property of the Grantor [i.e., MB Wholesale], . . . whether now owned or hereafter acquired or arising and wherever located," and set forth a list of categories of such property, ranging from securities and deposit accounts to inventory to equipment to "general intangibles." (Id. at 1, Pg ID 243.) Above the signature lines on the Security Agreement was thefollowing language: "The Grantor acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate." (Id. at 7, Pg ID 249.) A UCC Financing Statement covering the same collateral was filed with the Michigan Secretary of State on January 25, 2016. (Pl.'s Mot. Ex. 5.)
Contemporaneously with the Loan Agreement, the Note, and the Security Agreement, Mehanna executed a Guaranty and Suretyship Agreement ("Guaranty"), under which Mehanna agreed to personally guarantee repayment of MB Wholesale's obligations to Plaintiff under the Note or otherwise. (Pl.'s Mot. Ex. 6, Guaranty.) In the Guaranty, which defined Plaintiff as "the Bank" and MB Wholesale as "Borrower," Mehanna "unconditionally guarantee[d] . . . (i) the prompt payment and performance of the Obligations and (ii) the prompt payment of all costs and expenses of the Bank (including reasonable attorneys' fees and expenses) incurred in the documentation, negotiation, modification, enforcement, collection and otherwise in connection with the Obligations." (Id. at 1, Pg ID 258.) The Guaranty then defined "the Obligations" broadly to include "all loans, advances, debts, liabilities, obligations, covenants and duties owing by the Borrower to the Bank or to any other direct or indirect subsidiary of The PNC Financial Services Group, Inc., of any kind or nature, present or future," whether "evidenced by anynote, guaranty or other instrument" or not, and whether "arising under any agreement, instrument or document" or not. (Id.)
Above the signature lines on the Guaranty was the following language: "The Guarantor acknowledges that it has read and understood all the provisions of this Guaranty, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate." (Id. at 6, Pg ID 263.)
As of 2015, MB Wholesale was in substantial debt, and Mehanna avers in an affidavit that he "would not have been able to continue operating MB without PNC's loan and . . . had no alternative sources for funding or ability to pay off MB's debts." ( By Mehanna's account, he met with a PNC representative on December 30, 2015 to sign the loan and guaranty documents. (Id. ¶ 3.) Mehanna avers that he had never seen the documents before, that the meeting lasted between 30 and 60 minutes, and that he did not have time to read the loan documents at the meeting. (Id. ¶ 4-5.) Mehanna was, he avers, "under the impression that the terms of the Loan Documents were non-negotiable," and therefore that he "could either take them or leave them." (Id. ¶ 6.)
Gregory Eichbrecht, the PNC employee who met with Mehanna, was deposed on October 25, 2017. ( At the relevant time, Eichbrecht was a "[r]elationship manager" for Plaintiff, and hisresponsibilities as such included "[b]usiness development, bringing in new clients, servicing new clients on all aspects, work[ing] with our product partners and then provid[ing] customer service . . . to our clients." (Eichbrecht Dep. 9:1-15.) Eichbrecht had worked with Mehanna to arrange the "terms of the closing," and estimated that he had had "four or five" in-person meetings and "at least a dozen phone calls" with Mehanna. (Eichbrecht Dep. 11:9-21.) Eichbrecht testified that Mehanna signed a series of documents at the closing, including the Loan Agreement, Note, Security Agreement, and Guaranty discussed above. (Eichbrecht Dep. 13:9-15:4.) Mehanna also signed three other documents at the closing: a set of Resolutions for Extensions of Credit And Incumbency Certificate; a Delegation and Email Authorization Letter; and a Working Cash, Line of Credit, Investment Sweep Rider that was incorporated into the Note. (Eichbrecht Dep. 12:3-13:5, 15:8-18.)
Eichbrecht testified that his usual practice was to email or otherwise provide loan documents to clients for their review before closings, but he could not recall whether he did so with Mehanna. (Eichbrecht Dep. 15:19-16:3.) He also testified that he did not believe Mehanna went through the documents "word by word" at the closing, and could not remember whether Mehanna asked any questions about them. (Eichbrecht Dep. 16:4-19.) Eichbrecht further testified that per his common practice, clients would review terms of loans both at and prior to closings:
(Eichbrecht Dep. 16:20-17:10.) Eichbrecht also testified about what he generally discussed with clients regarding documents like the Note in this case:
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