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Fifth Third Bank v. Mertz

United States District Court, E.D. Michigan, Southern Division

July 7, 2015

FIFTH THIRD BANK, Plaintiff,
v.
RICHARD C. MERTZ, JR., JAMES E. GRIMES, and GM SPORTS LLC, Defendants.

OPINION AND ORDER GRANTING PLAINTIFF'S RENEWED MOTION FOR SUMMARY JUDGMENT AGAINST DEFENDANT MERTZ

LINDA V. PARKER, District Judge.

Plaintiff Fifth Third Bank ("Fifth Third") initiated this lawsuit against Defendants on May 15, 2014, seeking to recover more than $3.5 million allegedly due under various loan agreements. Fifth Third asserts the following counts in its Complaint: (I) Breach of GM Sports Line of Credit Note by Defendant GM Sports LLC ("GM Sports"); (II) Breach of GM Sports Guaranty by Defendant Richard C. Mertz, Jr. ("Mertz"); (III) Breach of Restated Mertz Note by Mertz; (IV) Breach of Apollo Guaranty by Mertz; (V) Breach of Restated Note by Defendant James E. Grimes ("Grimes"); and (VI) Breach of Apollo Guaranty by Grimes. On January 13, 2015, Fifth Third filed a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure against all Defendants.

Defendants filed a response to Fifth Third's motion on February 6, 2015. (ECF No. 25.) Fifth Third filed a reply brief on February 23, 2015. (ECF No. 27.) Finding the facts and legal arguments sufficiently presented in the parties' pleadings, the Court dispensed with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f) on April 14, 2015.

Fifth Third and Grimes subsequently reached a settlement agreement, pursuant to which Fifth Third's claims against Grimes were dismissed with prejudice. (ECF No. 30.) On April 24, 2015, a notice was filed in this case, indicating that Mertz had filed a bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Michigan, resulting in an automatic stay of these proceedings. (ECF No. 31.) On May 20, 2015, this Court entered an Opinion and Order granting Fifth Third's motion as to GM Sports. (ECF No. 34.) When the bankruptcy court entered an order granting Fifth Third relief from the automatic stay on May 28, 2015, Fifth Third filed a notice renewing its motion for summary judgment against Mertz.[1] (ECF No. 36.) For the reasons that follow, the Court now grants Fifth Third's motion for summary judgment as to Mertz.

I. Factual Background

It is essentially undisputed in this litigation that Fifth Third negotiated various loan agreements with GM Sports and Mertz over the years which are now in default.

On July 26, 2007, Fifth Third and GM Sports entered into a Business Loan and Security Agreement ("GM Sports Loan Agreement"). Under the GM Sports Loan Agreement, Fifth Third extended a line of credit to GM Sports, as evidenced by, among other instruments, the Amended and Restated Line of Credit Note dated December 1, 2006, as amended by the First Amendment to Amended Restated Line of Credit Note dated November 1, 2007 (collectively "GM Sports Line of Credit Note"). (Pl.'s Mot., Ex. A ¶ 2.) The GM Sports Line of Credit Note matured on November 1, 2008, but GM Sports failed to pay Fifth Third the amounts due and owing.

On February 4, 2009, Fifth Third and GM Sports entered into a Forbearance Agreement in connection with GM Sports' obligations to Fifth Third, including the GM Sports Line of Credit Note. On March 25, 2010, Fifth Third, GM Sports, Mertz, and Grimes entered into an Amended and Restated Forbearance Agreement in connection with GM Sports' obligations to Fifth Third, including the GM Sports Line of Credit Note. ( Id. ¶ 3.) This agreement was amended eight times. ( Id. ) Grimes, acting as GM Sports' corporate representative, admitted at his deposition in this matter that GM Sports signed these various loan agreements (hereafter collectively "GM Sports Loan Documents"). (Pl.'s Mot., Ex. D at 9-10, 12-16.)

Pursuant to the terms of the GM Sports Line of Credit Note, Fifth Third could declare the unpaid balance immediately due and payable without notice to the debtor upon a default, as defined by the agreement. ( Id., Ex. A.1 at 2.) In the GM Sports Line of Credit Note, GM Sports agreed to pay Fifth Third's costs, expenses, and attorney's fees incurred in legal proceedings related to the GM Sports Loan Documents. ( Id. at 2-3.)

The GM Sports Line of Credit Note matured on April 18, 2014. (Pl.'s Mot., Ex. A ¶ 6.) GM Sports failed to pay the amounts due by that date, which constituted an event of default under the terms of the loan. On April 21, 2014, Fifth Third sent GM Sports, via Federal Express, a Notice of Default and Demand for Payment. ( Id., Ex. E.) GM Sports has failed to pay off the GM Sports Line of Credit Note. ( Id., Ex. A ¶¶ 6-7.)

According to Fifth Third, as of January 9, 2015, GM Sports owed the following amounts on the GM Sports Loan Documents: $135, 345.19 in principal, $5, 368.87 in interest, $19.50 per diem in interest every day after that date, plus Fifth Third's costs and attorney's fees. ( Id. ¶ 8.) Defendants do not dispute Fifth Third's calculations as to the amounts owed under the loan agreements; however, they do contest Fifth Third's entitlement to default interest. (Pl.'s Mot., Ex. D at 24-25; Ex. F at 24-25.) They acknowledge, however, that the express terms of the loan documents grant Fifth Third the right to charge default interest. ( Id. )

On February 4, 2009, Mertz signed a Continuing Guaranty Agreement in favor of Fifth Third ("GM Sports Guaranty") in which Mertz guaranteed payments of all amounts due and owing under the GM Sports Loan Documents. (Pl.'s Mot., Ex. A.3 at 1.) In the GM Sports Guaranty, Mertz also agreed to pay Fifth Third's expenses and attorney's fees incurred in legal proceedings related to the GM Sports Guaranty. ( Id. at 4.) At his deposition in this matter, Mertz admitted that he executed the GM Sports Guaranty. ( Id., Ex. F at 12.)

When the GM Sports Line of Credit Note matured on April 18, 2014, Fifth Third demanded payment from Mertz in accordance with the GM Sports Guaranty. Mertz has failed to pay the amounts due, although he admitted at his deposition that he is personally obligated to pay the amounts due under the GM Sports Loan Documents. (Ex. A. ¶¶ 6-7; Ex. F at 25-26.) Under the terms of the GM Sports Guaranty, Fifth Third is not obligated to exhaust its remedies against GM Sports before seeking the amounts due from Mertz as the guarantor. (Pl.'s Mot. Ex. A.3 at 2.)

In the meantime, in 2006, Fifth Third extended two lines of credit to Mertz, each evidenced by separate promissory notes (collectively "Original Mertz Line of Credit Notes"). On March 25, 2010, Fifth Third and Mertz entered into an Amended and Restated Forbearance Agreement in connection with Mertz's obligations to Fifth Third, which included the Original Mertz Line of Credit Notes, which was amended eight times ("Mertz Forbearance Agreement, as amended"). Pursuant to the fourth amendment, Fifth Third and Mertz entered into an Amended and Restated Note ("Restated Mertz Note") to replace and supersede the Original Mertz Line ...


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