Bank of the Ozarks v. Perfect Health Skin & Body Center ( 2020 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 20a0642n.06
Case No. 19-2040
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
BANK OF THE OZARKS, ) Nov 12, 2020
) DEBORAH S. HUNT, Clerk
Plaintiff-Appellee,
)
) ON APPEAL FROM THE UNITED
v.
) STATES DISTRICT COURT FOR
) THE EASTERN DISTRICT OF
PERFECT HEALTH SKIN AND BODY
) MICHIGAN
CENTER, PLLC,
)
Defendant, )
)
THEODORE BASH, D.O., )
Defendant-Appellant. )
____________________________________/
Before: MERRITT, KETHLEDGE, and WHITE, Circuit Judges.
MERRITT, Circuit Judge. This is an appeal pursuant to the court’s diversity jurisdiction
regarding breach of contract claims under Michigan law relating to repayment of a bank loan for
medical equipment. Loan documents were executed among plaintiff Bank of the Ozarks, and
defendants Theodore Bash and Perfect Health Skin and Body Center, PLLC.1 The district court
granted partial summary judgment2 in favor of the Bank, imposing liability on Bash as a matter of
law as the personal guarantor of the loan. The crux of this appeal is whether Bash’s claim that his
signature was forged on a financing agreement and guaranty is a cognizable defense to his liability
1
Perfect Health had a default judgment entered against it below, and it is not a party to this appeal.
2
All other claims have since been dismissed or resolved, so the appeal is proper.
Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
under a later-executed payment deferral agreement. The payment deferral agreement, which Bash
does not dispute that he signed, stands on its own as a valid and enforceable contract that expressly
waived any reliance by Bash on defenses to the earlier agreements. For the reasons below, we
affirm the judgment of the district court as to Count III (Breach of the Deferral Agreement), and
dismiss as moot Bash’s appeal of the grant of summary judgment as to Count I (Breach of
Guaranty) because it seeks payment of the same debt owed in Count III.
I. Facts and Procedural History
Defendant Theodore Bash, D.O., is a physician in Michigan. In or around 2015, he became
involved as an investor in a number of clinics providing laser therapy for various disorders. He
first became involved though his friend Richard MacAuley, also a physician, who was operating
and investing in sleep clinics. MacAuley introduced him to other individuals interested in
investing in and managing “medical spa” clinics, including Andy Park and Pamela Lynch. A
number of apparently interrelated businesses were set up by these individuals over the course of
two years, and although Bash’s knowledge of them, and role in them, is not entirely clear from the
record, it appears he functioned mainly as an investor, not a physician. Bash contends that Park
and Lynch deceived him in the course of their business dealings, including forging Bash’s name
on several documents.3
Defendant Perfect Health did business as O Bella Aesthetics, a medical spa in Okemos,
Michigan. According to corporate formation documents dated October 14, 2009, Richard
MacAuley was the original registered agent and sole member of Perfect Health. Ex. B at Bash’s
3
According to Bash, Andy Park was convicted of a felony in 2010, and, as of September 2017, Park, his wife Sara,
and Pamela Lynch were under investigation by the FBI and the case was turned over to the U. S. Attorney’s Office in
Detroit. Bash’s Opening (Blue) Brief at 4 nn. 1&2. The current existence or status of any criminal proceeding is
unknown, but any proceeding has no bearing on this appeal.
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
Response to Motion for Summary Judgment. A corporate resolution dated June 17, 2015, and
affixed with Bash’s signature, provides that
Perfect Health Skin and Body Center, PLLC is owned 100% by Ted Bash. Richard
MacAuley has no ownership interest in the company. Richard MacAuley shall be
remove[d] from company bank account(s) effective as of June 1, 2015. Richard
MacAuley shall remain as a clinic medical director until further notice.
Ex. 1 to Motion for Summary Judgment. Bash denies any knowledge of this corporate resolution,
denies signing the resolution, and also denies that he has ever been a member, owner, managing
partner, managing director, employee, agent, or representative of Perfect Health. Bash Aff. ¶ 6.4
Bash was also listed as the “owner” of Perfect Health. Subsequent filings listed MacAuley as the
registered agent, but did not list members of the company.
In July 2016, Bank of the Ozarks, sometimes referred to as Bank OZK or the Bank,
executed an Equipment Finance Agreement with defendant Perfect Health, the debtor, and
defendant Bash, as the purported guarantor. The agreement bears the signature “Theodore Bash”
signing on behalf of Perfect Health as its “Managing Partner.” Pursuant to the financing
agreement, the Bank extended a loan to Perfect Health to finance the purchase of six laser machines
for use in Perfect Health’s medical clinic. The Bank also produced a Guaranty that was affixed to
the Equipment Finance Agreement that bears the signature “Theodore Bash,” and provides for
Bash to personally guarantee payment of Perfect Health’s obligations under the Financing
Agreement. In negotiating the contract, Perfect Health represented to the Bank that Bash was its
4
Bash claims that he was not a member or agent of Perfect Health. However, Bank of the Ozarks submitted a letter
from Bash’s prior counsel, Rita Lauer, enclosing a Financial Statement for Perfect Health prepared by Saginaw
Valley Business Services. That Financial Statement includes a “Comparative Balance Sheet” that clearly identifies
Bash as a “member” thereof, with capital contributions of $123,600 through year’s end 2016, and $137,240.51
through year’s end 2017. In addition, Bash admitted in his answers to interrogatories that he “invested in Park’s
Company O Bella Aesthetics, LLC” in 2015 by contributing $123,600 and two Fotona Lasers.
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owner. Bash’s personal guaranty on the loan was a condition of Bank of the Ozarks’ agreement
to enter into the Finance Agreement and extend the loan to Perfect Health. Bash claims that his
signature was forged on both the Financing Agreement and Guaranty by someone with no
authority to act on behalf of him or Perfect Health. Answer ¶¶ 15, 63. The Bank also produced a
Certificate of Acceptance, which Bash allegedly signed on July 12, 2016, reflecting that Perfect
Health had received delivery of the equipment subject to the financing agreement and inspected it.
Bash contends that this signature is a forgery as well. Bash Aff. ¶ 15, attached as Ex. A to Bash’s
Response to Motion for Summary Judgment.
Pursuant to the Equipment Finance Agreement, Perfect Health was obligated to repay the
loan to Bank of the Ozarks in 63 monthly installments of $2,922.47 plus three additional payments
of $99. The Bank was granted a security interest in the equipment and assets of Perfect Health.
In the event of default, the Bank was entitled to accelerate the amounts due. Perfect Health made
15 monthly payments to the Bank between July 2016 and October 2017. Martindale Decl. ¶ 6, Ex.
A to Motion for Summary Judgment.
In May 2017, Perfect Health’s monthly payment under the Finance Agreement, which was
made via an automatic clearing-house arrangement, failed to clear; the same problem was
encountered with the June 2017 payment. Beginning in July 2017, two alleged representatives of
Perfect Health, identified as Andy Park and Pamela Lynch, contacted Bank of the Ozarks, and
requested to enter into a deferral agreement for repayment of the loan due to a slowdown in
business. Id. ¶ 8. The Bank told Park and Lynch that Bash would have to contact the Bank
personally to arrange for any payment deferral. Id. On or about September 16, 2017, Bash
contacted Bank of the Ozarks and said that Andy Park was no longer with Perfect Health, and
directed the Bank not to discuss any of Perfect Health’s business with Park. Id. ¶ 9. Bash requested
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
to be told the full amount owed by Perfect Health and said he would try to make that payment by
September 28, 2017. Id. On or about September 20, 2017, Bash spoke with a Bank representative
and made arrangements to pay Perfect Health’s past due debt under the Financing Agreement with
a personal credit card. On or about October 23, 2017, a conference call was held between Bash’s
attorney and the Bank. Id. ¶ 10. Bash’s attorney requested Perfect Health’s payment history under
the Finance Agreement, and told the Bank he would confer with Bash. The attorney told the Bank
that Bash planned to keep the equipment and pay off the loan. The Bank advised Bash’s attorney
that Perfect Health was in default under the Agreement, and requested that the September payment
be made before October 28, 2017. On October 26, 2017, Bash’s attorney called Bank of the Ozarks
and indicated that he would arrange for Bash to speak with the Bank directly and make the
September payment. As a result of the negotiations between Bash, Bash’s wife, Patti, Bash’s
attorney and the Bank, an agreement was reached to enter into a payment deferral agreement.
Based on this understanding, on October 26, 2017, Patti Bash contacted the Bank to make the
September payment via personal credit card, and to request that the new agreement be sent to Bash
at his email address. On November 22, 2017, Bank of the Ozarks, Perfect Health, and Bash entered
into the Payment Deferral Agreement, whereby certain payments due under the Equipment
Financing Agreement were deferred until the end of the loan term. The Deferral Agreement
provides in full as follows:
PAYMENT DEFERRAL AGREEMENT
Contract #13764-001
This Payment Deferral Agreement (“Agreement”) is made and entered into by and
among Bank of the Ozarks (the “Secured Party”) Perfect Health Skin and Body
Center PLLC (the “Debtor”), and Theodore Bash (the “Guarantors”).
WHEREAS, the Secured Party and the Debtor are parties to that certain Equipment
Finance Agreement (the “Finance Agreement”) dated effective as of July 28, 2016
(i.e., the date the Finance Agreement was accepted by the Secured Party);
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
WHEREAS, Theodore Bash the Guarantors personally guaranteed the debts,
liabilities, and obligations of the Debtor to the Secured Party under the Finance
Agreement;
WHEREAS, the Debtor and the Guarantor have requested that two (2) of the
payments presently due under the Finance Agreement be deferred, and the Secured
Party has agreed to such deferral, on the terms and conditions set forth below;
NOW THEREFORE, the Secured Party, the Debtor, and the Guarantor hereby
agree as follows:
1. Deferral of Payment. The monthly payments presently due under the
Finance Agreement executed on July 28, 2016 in the amount of $2,922.47 shall be
deferred until the month following the end of the initial term of the Finance
Agreement, and the term of the Finance Agreement shall be extended two (2)
additional months. The deferred payment shall be due and payable, with interest
in the two (2) month[s] of the extended term of the Finance Agreement in the
amount of $2,944.38.
2. Interest Payment The Debtor shall pay the Secured Party interest on the
unamortized principal obligation evidenced by the Finance Agreement for the
deferral period, in the amount [of] $609.80 for October 2017 and $598.25 for
November 2017.
3. Consent of Guarantor. The Guarantor hereby consents to the payment
deferral as provided in this Agreement.
4. Reaffirmation of Obligations. The Debtor and the Guarantor hereby
reaffirm their respective obligations to the Secured Party under the Finance
Agreement, as modified hereby, and the Guarantor’s Guaranty thereof. The Debtor
and the Guarantor hereby confirm that their respective obligations to the Secured
Party are not subject to any disputes, defenses, or adjustments of any kind
whatsoever, and that neither the Debtor nor the Guarantor has any claims of any
kind whatsoever against the Secured Party.
5. Effect of this Agreement. In the event of a conflict between the terms of
this Agreement and the terms of the Finance Agreement, the provisions of this
Agreement shall prevail. Except as expressly set forth in this Agreement, however,
all of the provisions of the Finance Agreement shall remain unchanged and shall
continue in full force and effect. This Agreement is hereby incorporated into the
Finance Agreement for all purposes.
Bash’s signature appears on the document on behalf of debtor Perfect Health, but the title line is
blank because he contends he has no relationship with Perfect Health. Bash Aff. ¶ 24. Bash also
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signed in his capacity as guarantor. Bash does not dispute that he signed the Payment Deferral
Agreement.
Bash or his wife personally made four payments under the Finance Agreement, and then
under the Deferral Agreement, using their personal credit cards: one payment on September 20,
2017 for $2,922.47; another on October 26, 2017 also for $2,922.47; a third payment on November
21, 2017 for $1,208.10; and a final payment on January 22, 2018, for $500.00. The January 22,
2018 payment was the last payment Bank of the Ozarks received on the loan; a balance of
$139,822.38 remained at the time.5
On June 12, 2018, Bank of the Ozarks filed a complaint against defendants Perfect Health
and Bash. The complaint was amended on July 20, 2018. The amended complaint alleges that
Perfect Health is in default of its obligations under the Equipment Financing Agreement between
Bank of the Ozarks and Perfect Health, and that $139,822.38 remains due and owing. The Bank
filed a motion for partial summary judgment solely against Bash on Count I (Breach of Guaranty),
and against Bash and Perfect Health on Count III (Breach of Deferral Agreement) of its Amended
Complaint. Bash responded, and the Bank replied. The Bank’s motion was granted by the district
court. Bank of the Ozarks v. Perfect Health Skin and Body Ctr. PLLC, et al., No. 1:18-cv-1187,
2019 WL 316466 (E.D. Mich. Jan. 24, 2019). The district court denied Bash’s motion for
reconsideration on the ground it raised the same arguments rejected in the order granting partial
summary judgment. This timely appeal followed.
5
On June 20, 2018, shortly after filing its complaint in this case, Bank of the Ozarks filed an ex parte motion for
possession pending final judgment. The motion also requested an ex parte restraining order pending a hearing on the
motion for possession pending final judgment. On June 21, 2018, the district court entered an order denying the
Bank’s request for an ex parte restraining order, but scheduled a hearing. A hearing on the motion for possession
pending judgment was held on July 11, 2018. The motion was granted.
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
II. Discussion
On appeal, Bash challenges the district court’s order granting partial summary judgment to the
Bank on Counts I (Breach of Guaranty Against Bash) and III (Breach of Deferral Agreement
Against Bash and Perfect Health) of the Amended Complaint. Counts I and III relate to the same
underlying debt (about $140,000), and Bash and Perfect Health are jointly and severally liable to
the Bank on Count III. The Bank is therefore entitled to collect the debt for the amount due from
either defendant. The Bank sought entry of a default judgment against Perfect Health in February
2019, which was granted. Perfect Health is not a party to this appeal. Accordingly, we need only
reach the merits as to Bash on Count III, Breach of the Deferral Agreement, and Count I, Breach
of the Guaranty. All other counts in the Amended Complaint have been resolved or dismissed.
Bash’s main argument on appeal is that the district court failed to address the alleged forgeries
of Bash’s signature to the Equipment Finance Agreement and the attached personal Guaranty.6
Bash contends that the alleged forgeries raise a question of fact precluding summary judgment
because the forgeries, if proved, render the Equipment Finance Agreement and Guaranty void ab
initio. He argues he could not ratify or otherwise affirm nonexistent agreements by signing the
Payment Deferral Agreement. He also argues that the Payment Deferral Agreement is void
because an authorized representative of Perfect Health did not sign it.
A. Standard of Review
On review of a grant of summary judgment, a court views all evidence and draws all
inferences in the nonmoving party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
6
Contrary to Bash’s assertions in his briefs, the district court did not make any judgments regarding the credibility of
Bash’s claims of forgery in support of its finding that Bank of the Ozarks was entitled to judgment in its favor as Bash
has claimed; rather, the court’s determination that the Bank was entitled to summary judgment was based solely upon
the undisputed fact that Bash signed the Payment Deferral Agreement, the unambiguous terms of which validated the
Guaranty and waived the defense of forgery.
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(1986). Summary judgment is appropriate when there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The relevant
inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury
or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S.
at 251–52. To defeat a properly supported motion for summary judgment, the nonmoving party
must cite to evidence in the record. Fed. R. Civ. P. 56(c).
B. Breach of the Payment Deferral Agreement (Count III)
The elements of a valid contract under Michigan law, the contract law cited to and
discussed by both parties, are: (1) parties competent to contract; (2) proper subject matter;
(3) consideration; (4) mutual agreement; (5) mutual obligation. Thomas v. Leja, 468 N.W.2d 58,
60 (Mich. App. 1990). To recover for breach of contract under Michigan law, a plaintiff must
prove (1) that a contract existed between the parties; (2) the terms of the contract; (3) that the
defendant breached the contract; and (4) that the breach caused plaintiff’s injury. Platsis v. E. F.
Hutton & Co., 642 F. Supp. 1277, 1309 (W.D. Mich. 1986) (applying Michigan law). Bash has
not shown how the alleged unenforceability of the Finance Agreement or the Guaranty defeats any
of these elements with respect to the Deferral Agreement. Although the Deferral Agreement
references the Finance Agreement, the Deferral Agreement is a validly formed contract on its own.
Its express terms reaffirm the obligations in the Finance Agreement and Guaranty, and waive any
reliance or defenses to the earlier agreements:
4. Reaffirmation of Obligations. The Debtor and the Guarantor hereby
reaffirm their respective obligations to the Secured Party under the Finance
Agreement, as modified hereby, and the Guarantor’s Guaranty thereof. The Debtor
and the Guarantor hereby confirm that their respective obligations to the Secured
Party are not subject to any disputes, defenses, or adjustments of any kind
whatsoever, and that neither the Debtor nor the Guarantor has any claims of any
kind whatsoever against the Secured Party.
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The Deferral Agreement preserves the terms of the earlier agreements by reference, except as
modified by the Deferral Agreement:
5. Effect of this Agreement. In the event of a conflict between the terms of
this Agreement and the terms of the Finance Agreement, the provisions of this
Agreement shall prevail. Except as expressly set forth in this Agreement,
however, all of the provisions of the Finance Agreement shall remain unchanged
and shall continue in full force and effect. This Agreement is hereby incorporated
into the Finance Agreement for all purposes.
Under black letter Michigan law, a court is “obligated to accept as the agreement
of the parties the plain meaning of the words used.” Stine v. Cont’l Cas. Co., 349 N.W.2d 127,
138 (Mich. 1984). “In ascertaining the meaning of a contract, we give the words used in the
contract their plain and ordinary meaning that would be apparent to a reader of the instrument.”
Rory v. Cont’l Ins. Co., 703 N.W.2d 23, 28 (Mich. 2005). “[C]ourts must also give effect to
every word, phrase, and clause in a contract and avoid an interpretation that would render any part
of the contract surplusage or nugatory.” Klapp v. United Ins. Grp. Agency, Inc., 663 N.W.2d 447,
453 (Mich. 2003) (quoting State Farm Fire and Cas. Co. v. Old Republic Ins. Co., 644 N.W.2d
715 (Mich. 2002)). “If the language of the contract is clear and unambiguous, it must be enforced
as written.” McCoig Materials, LLC v. Galui Const., Inc., 818 N.W.2d 410, 416 (Mich. 2012).
In Whittlesey v. Herbrand Co., the Michigan Supreme Court stated that “‘[i]n a written contract a
reference to another writing, if the reference be such as to show that it is made for the purpose of
making such writing a part of the contract, is to be taken as a part of it just as though its contents
had been repeated in the contract.’” 187 N.W. 279 (Mich. 1922) (quoting Short v. Van Dyke,
52 N.W. 643 (Minn. 1892)); see also Forge v. Smith, 580 N.W.2d 876, 881 (Mich. 1998) (“Where
one writing references another instrument for additional contract terms, the two writings should
be read together.”).
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
Applying these basic contract concepts, the district court granted summary judgment to
Bank of the Ozarks on its breach of the Deferral Agreement claim because it found that the Bank’s
motion for summary judgment
posits a simple theory: (1) Dr. Bash signed the Deferral Agreement; (2) the Deferral
Agreement incorporates the Guarantee and the Equipment Financing Agreement
by reference and reaffirms the parties’ obligations thereunder; (3) Bash breached
those obligations; (4) Dr. Bash is liable.
2019 WL 316466, at *3. As the district court notes, Bash does not dispute that he signed the
Deferral Agreement, and because the unambiguous terms of that agreement reaffirmed the
obligations under the Equipment Finance Agreement and the Guaranty, a new, valid contract was
formed between Bash and the Bank. Furthermore, the Deferral Agreement expressly waives
Bash’s reliance on “any disputes, defenses, or adjustments of any kind whatsoever. . . .,” which
includes Bash’s allegations of forgery on the earlier contracts. See, e.g., Fourteen Corp. v.
Magnoli, No. 13-11803, 2013 WL 4551705, at *6 (E.D. Mich. Aug. 28, 2013) (granting summary
judgment after finding a guarantor’s affirmative defenses barred by a contractual waiver); Fifth
Third Bank v. Cleveland Imaging and Surgical Hosp., LLC, No. 1:10-cv-624, 2012 WL 13018600,
at *4-*5 (S.D. Ohio Mar. 27, 2012) (similar facts to this case regarding waiver of defenses, but
analyzed under Ohio law). Accordingly, the district court found Bash liable for the debt under the
express terms of the Payment Deferral Agreement without regard to the alleged forgery in the
earlier agreements.
Despite the express language of the Deferral Agreement, Bash presents two arguments
challenging his liability for breach of the Deferral Agreement: (1) the Deferral Agreement cannot
be valid because it is based on the Equipment Finance Agreement and Guaranty, which Bash
argues are void ab initio; and (2) he was not authorized to sign the payment Deferral Agreement
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
on behalf of Perfect Health because he was not a member, owner, managing partner, managing
director, employee, agent, or representative of Perfect Health, so the Deferral Agreement is invalid.
1. The District Court Did Not Need to Make a Finding as to the Validity of the
Guaranty and the Equipment Finance Agreement
Bash takes the position that the Equipment Finance Agreement and Guaranty are void ab
initio due to alleged forgery of his signature on the two contracts. See, e.g., Fed. Deposit Ins.
Corp. v. Fedorov, No. 10–11061, 2010 WL 2944569, at *4 (E. D. Mich. July 22, 2010) (finding
that forgery defeats a breach of contract claim because, if true, there is no mutuality of agreement).
He reasons that the Deferral Agreement therefore must be void as well because it incorporates and
reaffirms terms from nonexistent agreements. He then concludes that any alleged forgery of the
Equipment Finance Agreement and Guaranty creates a genuine issue of material fact defeating
summary judgment on the Bank’s claim of breach as to the Payment Deferral Agreement.
Bash’s affidavit attached to his response to the Bank’s motion for partial summary
judgment focuses solely on the allegedly forged signatures on the Equipment Finance Agreement
and Guaranty. But Bash fails to explain why he went ahead and signed the Deferral Agreement,
which ratified and reaffirmed the debt incurred by the terms of the Equipment Finance Agreement
and his responsibility for that debt under the Guaranty, if in fact the earlier contracts were forged.
Bash could have refused to enter into the Deferral Agreement, but he chose to sign it and thereby
agreed to its terms. He does not contend that at the time of signing the Deferral Agreement he was
unaware of the possible forgery of the Equipment Finance Agreement and Guaranty. Furthermore,
any defenses, such as forgery, to the validity of the Finance Agreement and Guaranty were waived
by the express terms of the Deferral Agreement. Therefore, any dispute over whether the earlier
contracts were forged is not material in determining whether the Deferral Agreement was
breached, and the guarantee of payment by Bash contained within it is binding. St. Francis Health
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Care Ctr. v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000) (irrelevant or unnecessary factual disputes
do not create genuine issues of material fact). A fact is “material” only if its resolution affects the
outcome of the lawsuit. Lenning v. Comm. Union Ins. Co., 260 F.3d 574, 581 (6th Cir. 2001).
Bash simply has not raised any genuine issue of material fact as to the breach of the Payment
Deferral Agreement.
Bash cites PNC Bank v. Goyette Mechanical Company, 140 F. Supp. 3d 623, 632 (E.D.
Mich. 2015), for the proposition that the Guaranty and Equipment Finance Agreement are
unenforceable due to forgery. Bash’s reliance on that case is ill-placed, as it supports the Bank’s
position rather than Bash’s. In Goyette, the plaintiff PNC Bank moved for summary judgment on
its claim for breach of contract against two defendant borrowers on a commercial line of credit.
In responding to the motion, defendant E.L. Mechanical argued that its president’s signatures on
the initial loan documents were forged and no contract was formed. The court rejected this
contention because, among other reasons, E.L. Mechanical’s president had admitted to signing a
Cash Collateral Agreement in which he “‘ratified and confirmed [the representations in those
documents] without condition as if made anew’ . . . [and] also ‘confirmed that its obligations under
the loan documents ‘remain outstanding without defense, set off, counterclaim, discount or charge
of any kind as of the date of this Agreement.’” Id. at 633 (first alteration in original). The court
concluded, “[t]here is no genuine dispute on the present record that [the president] signed the loan
documents . . . .” Id. (emphasis in original).
Furthermore, it is undisputed that the Bank granted a payment deferral to Bash under the
terms of the Deferral Agreement, and allowed him to continue using the equipment rather than
repossessing it. The Bank’s records clearly show that Bash personally made payments to the Bank
on the Deferral Agreement. As a general proposition, a party entering into a payment deferral
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agreement may not avail itself of the benefits of that contract, and then attempt to escape its
obligations thereunder by claiming the original contract was unenforceable. An instructive case
with similar facts from another jurisdiction is Agristor Leasing-II v. Pangburn, 557 N.Y.S.2d 183,
185 (N.Y.S. 1990) (internal citations omitted), in which the court held:
Additionally, the fact that defendant signed a payment deferral agreement bars him
from challenging the original agreement on the ground of fraud. Whether under a
waiver or ratification analysis, a party may not avoid an agreement on grounds of
fraud if, after acquiring knowledge of the fraud, he affirms the contract by accepting
a benefit under it. . . . By signing the payment deferral agreement, defendant was
allowed to continue using the equipment and his default in payments was excused.
Although not involving an alleged forgery, a similar case is presented in Osman v. Kaniuk,
No. 95-cv-1405, 1996 WL 1088914 (E.D.N.Y. Sept. 9, 1996). Despite an alleged fraud-in-the-
inducement defense in a suit to pay back a loan, Kaniuk ratified the loan agreement. The district
court found Kaniuk was bound by its terms and granted summary judgment to the lender:
A party ratifies a contract under which he might not otherwise be bound due to
duress or fraud where he accepts benefits under the contract, remains silent or
acquiesces in the contract for a long period of time after an opportunity exists to
have it declared void, or acts upon the contract by affirmatively acknowledging it
or performing under it. . . .
While this is not a case of duress, I am persuaded that the reasonableness standard
should apply here and I find that Kaniuk did not act reasonably if he was indeed
fraudulently induced into entering this loan agreement. First, this loan agreement
was between sophisticated businessmen who were continuously involved in
business deals and transactions. . . .
Second, Kaniuk knew that no other party had paid Osman the $100,000 after the
loan agreement was signed, and yet he executed two documents long after the
original agreement was entered that declared his intention to remain “jointly and
severally” liable on the loan. This is squarely inconsistent with Kaniuk's contention
that once the money was loaned, Kaniuk had no obligation to pay Osman. If Kaniuk
indeed believed that he was not liable to Osman on the loan once the money was
transferred, there is no rational explanation for his execution of these subsequent
documents other that he subsequently conceded his obligation to pay Osman.
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
Third, Kaniuk continued to benefit for several years from the use of the money in
a Northport, Long Island investment after knowing that the money had not been
paid back to Osman by the alleged third parties. Finally, and especially telling, is
the fact that Kaniuk does not contest in opposition papers Osman's contention
Kaniuk subsequently ratified his obligations under this loan agreement.
Id. at *2.
For the foregoing reasons, the district court did not err in finding that resolution of the
question of any alleged forgery on the Equipment Finance Agreement and the Guaranty is not
necessary to determine the validity of the enforceability of the Deferral Agreement.
2. Lack of signature by an authorized representative of Perfect Health
Bash also argues that he should be excused from any obligations under the Deferral
Agreement because he claims he was not authorized to execute that contract on behalf of Perfect
Health. Assuming that Bash was without authority to enter into the agreement on behalf of Perfect
Health, that would excuse only Perfect Health under the Deferral Agreement, not Bash. Bash
counters that the Deferral Agreement required the signatures of all three parties, not just Bash to
be enforceable. This argument was rejected by the district court:
With respect to Count III (breach of Deferral agreement), Dr. Bash argues that he
was not authorized to sign on behalf of Perfect Health because he was not a
member, owner, managing partner, managing director, employee, agent, or
representative of Perfect Health. Thus, he contends that his signature on behalf of
debtor Perfect Health was invalid. He concludes, therefore, that the entire Deferral
Agreement is invalid. He offers no support for this inferential suggestion. Bank
OZK has moved for summary judgment against Dr. Bash, not Perfect Health.
Irrespective of whether Dr. Bash’s signature on behalf of Perfect Health was
effective to bind Perfect Health, it is undisputed that he also signed on behalf of
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
himself in his capacity as Guarantor. Dr. Bash certainly had the authority to bind
himself.
2019 WL 316466, at *3.
Under the Deferral Agreement, Bash, as the guarantor of the debt, is liable for the default
of Perfect Health. As the district court points out, the Bank moved for summary judgment against
Bash only, not Perfect Health, as was its right. The signature of a principal—authorized or not—
is not a requirement for an enforceable guaranty; contracts of guaranty are routinely signed only
by the guarantor. See, e.g., Campbell v. Brower, 248 N.W. 581, 582 (Mich. 1933) (“It is not
necessary the principal sign the bond.”). The Michigan statute of frauds also supports this
conclusion; it only requires that a guaranty be signed “by the party to be charged with the
agreement, contract, or promise.” M.C.L. § 566.132(1). Although the agreement being enforced
is a deferral agreement rather than a stand-alone guarantee agreement, the same general principles
apply, given that the Bank is seeking to enforce the explicit guarantee terms contained in an
agreement signed by the guarantor. Therefore, Bash’s claim that he was not authorized to bind
Perfect Health has no effect on the enforceability of the Deferral Agreement on him as guarantor.
In their jointly filed Answer to the Amended Complaint, Bash and Perfect Health expressly
admitted that, “[a]s of January 22, 2018, Perfect Health has failed to make any monthly payments
to Bank as required by the [Equipment Finance] Agreement and the Deferral Agreement, and as
such, Perfect Health has defaulted on its obligations owed to Bank thereunder. . . .” Amended
Complaint at ¶ 31; Answer to Amended Complaint at ¶ 31. The district court specifically relied
on Bash’s admission to the default under the Finance Agreement and Deferral Agreement in
finding him liable. 2019 WL 316466, at *4. Judicial admissions “‘have the effect of withdrawing
a fact from issue and dispensing wholly with the need for proof of the fact.’” Cadle Co. II v.
Gasbusters Prod. I Ltd. P’ship, 441 F. App’x 310, 312-13 (6th Cir. 2011); see also Brown v. Tenn.
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Case No. 19-2040, Bank of the Ozarks v. Perfect Health Skin & Body Ctr., et al.
Gas Pipeline Co., 623 F.2d 450, 454 (6th Cir. 1980) (“Under federal law, stipulations and
admissions in the pleadings are generally binding on the parties and the Court.”). “A judicial
admission renders a fact ‘uncontested’ in a summary judgment proceeding.” Goyette, 140 F. Supp.
3d at 632. Because Bash expressly admitted Perfect Health’s liability under the Deferral
Agreement, and he is the guarantor on the loan, Bash’s authority to sign the Deferral Agreement
on behalf of Perfect Health is irrelevant.
C. Breach of Guaranty (Count I)
Counts I and III of the Amended Complaint cover the same debt, and, as expressly set out
in the Deferral Agreement, Bash reaffirmed his obligations under the Finance Agreement and the
Guaranty in that contract. By granting summary judgment to the Bank on the breach-of-the-
Payment-Deferral-Agreement claim (Count III), Bash was liable for the debt. Because the debt
owed by Bash under the Deferral Agreement in Count III is the same debt as that sought under the
Guaranty in Count I, we dismiss Bash’s appeal of Count I as moot.
For the foregoing reasons, the district court properly awarded partial summary judgment
to Bank of the Ozarks for breach of contract on the Payment Deferral Agreement (Count III), and
we therefore affirm the judgment of the district court. We dismiss the appeal of Count I as moot.
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