140 F. Supp. 3d 623
E.D. Mich.2015Background
- PNC Bank sued E.L. Mechanical, Inc. (ELM), Goyette Mechanical, and related parties for breach of a $6 million line of credit and a $451,107 term loan, secured by broad security agreements and guaranties.
- Loan documents and multiple amendments were executed by Dominic Goyette for Goyette entities and by Gerald Peguese for ELM; the Bank perfected its security interest by UCC filings.
- Borrowers defaulted after covenant breaches in 2013; the Bank accelerated the debt, sought relief in federal court, and a receiver was appointed to marshal assets.
- ELM conceded in pleadings that Peguese’s signature appears on key loan documents and that ELM jointly borrowed funds, but later (in opposing summary judgment) asserted forgery and duress as defenses.
- The Bank moved for summary judgment on multiple counts (breach of the line of credit note, restated term note, guaranties, and claim-and-delivery) and sought indemnity for fees defending related litigation by Peguese; Goyette defendants only contest part of the indemnity demand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether forgery must be pleaded as an affirmative defense | Bank: ELM waived forgery by not pleading it as an affirmative defense | ELM: Forgery is a defense to enforcement; summary judgment should be denied | Forgery is not an affirmative defense under Michigan law for breach claims; burden to prove existence/authenticity of contract remains with plaintiff, so ELM did not waive the defense and need not amend affirmative defenses |
| Whether ELM can rescind/admit then retract judicial admissions about signing documents | Bank: ELM’s admissions are binding; allowing retraction would be prejudicial and untimely | ELM: New evidence/claims (forgery/duress) justify amendment/retraction | Court: ELM’s late reversal appears dilatory; admissions, prior communications, and the Cash Collateral Agreement confirm Peguese signed; amendment denied as futile and prejudicial |
| Whether ELM signed documents under duress | Bank: No evidence of unlawful coercion; parties negotiated the Cash Collateral Agreement with ELM’s counsel | ELM: Peguese was threatened (criminal complaint/contempt) and coerced into signing | Court: Economic duress not established—mere threat to cut financing or fear of financial ruin insufficient; duress claim fails |
| Whether PNC is entitled to indemnity for fees defending Peguese’s lawsuits | Bank: Broad indemnity in the Cash Collateral Agreement covers claims "arising out of or relating to" the loan obligations, including defense costs | Goyette defendants: The Peguese suits are unrelated to the loans, so indemnity shouldn't cover those fees | Court: The indemnity is broad and covers claims arising out of the loans; indemnity for defending Peguese’s suits is enforceable against defendants |
Key Cases Cited
- Erie R.R. v. Tompkins, 304 U.S. 64 (1938) (federal courts sitting in diversity apply state substantive law)
- Old Line Life Ins. Co. of Am. v. Garcia, 418 F.3d 546 (6th Cir. 2005) (failure to plead affirmative defense generally results in waiver)
- Hammel v. Foor, 359 Mich. 392 (Mich. 1960) (burden on plaintiff to prove existence and execution of contract)
- Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (standard for summary judgment; genuine dispute and materiality)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment principles and burdens of production)