JPMorgan Chase Bank, N.A. v. Winget, 602 F. App'x 246

Background

Larry Winget and the Larry J. Winget Living Trust (the Trust) were guarantors under an amended credit package (Eighth Amendment, Guaranty, and Pledge Agreements) for Venture’s loans for which JPMorgan Chase (Chase) is the administrative agent.
The Guaranty’s Section 3 limited recovery against Larry Winget personally to pledged stock per the pledge agreements; the Trust was listed as a separate defined “Guarantor” in the opening paragraph but not named in Section 3’s limitation.
The Pledge Agreements granted security interests in PIM and Venco stock, contained a $50 million termination/termination-trigger (Section 10), a “Last Resort” clause requiring reasonable efforts to collect from “other collateral” first, and a Section 12 “sole purpose” clause limiting the PIM pledge’s purpose.
After Venture’s bankruptcy sale left a large remaining deficiency, Chase sued (2008) to enforce the Guaranty and Pledges (Counts I–III). The Trust sought reformation to make the Trust’s exposure coextensive with Winget’s; the district court reformed Section 3 accordingly after a bench trial.
The district court later granted Chase summary judgment on Winget’s defenses (unenforceability of the Winget–PIM pledge and a “delay”/Last Resort defense), entered final judgment for Chase, denied sanctions against Chase’s counsel, and awarded fees; the Sixth Circuit reviews and reverses the reformation, affirms remaining rulings.

Issues

Issue	Plaintiff's Argument (Winget/Trust)	Defendant's Argument (Chase)	Held
Whether Guaranty should be reformed for mutual mistake to cap the Trust’s exposure coextensively with Winget	Parties intended Trust’s exposure to be limited like Winget’s; omission was mutual/scrivener error	Guaranty is unambiguous, integrated, and was the sole agreement; no prior binding agreement; reformation inappropriate	Reformation reversed — court must enforce the unambiguous Guaranty as written and enter judgment for Chase on Count I
Whether the Winget–PIM pledge became unenforceable after PIM’s pledge of BV (enforceability defense)	Section 12’s “sole purpose” and negotiation history show Winget–PIM pledge was placeholder and terminated/is unenforceable after PIM–BV pledge	Pledge text (Sections 7.14 & 10) unambiguously preserves PIM pledge until $50M satisfaction; Section 12 limits remedies, not the security interest	Summary judgment for Chase affirmed — pledge unambiguously enforceable until contractually terminated
Whether Chase violated the Last Resort clause by unreasonably delaying liquidation (delay defense) and whether res judicata bars it	Chase unreasonably delayed liquidation (and obstructed Hyundai deal), lowering value; Stern/Waldman resurrect defenses	Challenge to reasonableness of disposition of bankruptcy assets goes to the bankruptcy sale and is barred by res judicata; Hyundai proposal never became collectible collateral	Summary judgment for Chase affirmed — delay challenge to bankruptcy asset disposition is barred by res judicata and Last Resort does not cover the Hyundai LOIs
Whether sanctions (§1927/Rule 11) and entry of final judgment were improper	Litigation positions defending enforcement were frivolous in light of parol evidence/reformation holding; final judgment deprived development of other defenses	Counsel’s positions were not frivolous; scheduling order limited issues; final judgment appropriate after reformation and summary judgment	Sanctions denial affirmed; entry of final judgment affirmed (scheduling order, waiver of unraised defenses, and no abuse of discretion)

Key Cases Cited

Rory v. Cont’l Ins. Co., 473 Mich. 457, 703 N.W.2d 23 (Mich. 2005) (unambiguous contracts must be enforced as written)
In re Smith Trust, 480 Mich. 19, 745 N.W.2d 754 (Mich. 2008) (an unambiguous contract reflects parties’ intent as a matter of law)
Quality Prods. & Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362, 666 N.W.2d 251 (Mich. 2003) (contract interpretation requires reading provisions in context)
Ford Motor Co. v. City of Woodhaven, 475 Mich. 425, 716 N.W.2d 247 (Mich. 2006) (mutual mistake as to a fact contemplated by the agreement can warrant reformation)
Scott v. Grow, 301 Mich. 226, 3 N.W.2d 254 (Mich. 1942) (scrivener’s error doctrine permitting reformation when instrument fails to express prior agreement)
Sherwood v. Walker, 66 Mich. 568, 33 N.W. 919 (Mich. 1887) (mutual mistake going to substance of transaction may justify rescission/reformation)
Stern v. Marshall, 564 U.S. 462 (U.S. 2011) (limits on bankruptcy court constitutional authority to enter final judgment on certain state-law claims)
Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012) (synthesizing Stern on bankruptcy jurisdiction limits)
JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577 (6th Cir. 2007) (Winget I) (inspection rights case distinguishing enforcement issues)
Winget v. JPMorgan Chase Bank, N.A., 537 F.3d 565 (6th Cir. 2008) (Winget II) (res judicata and premature challenge to Last Resort compliance)