Bank of America, N.A. v. Third Avenue Imaging LLC

Background

Bank of America, N.A. sued Third Avenue Imaging LLC (TAI), Unique Third Ave LLC (UTA), Unique Imaging Services LLC (UIS), Distinguished Diagnostic Imaging, P.C. (DDI), and Joel Reisman. The bank alleged that the defendants breached loan, security, and guaranty agreements connected to a $5,240,000 loan made to TAI to finance its purchase of a diagnostic imaging business.

TAI was required to make monthly payments and failed to make payments due on September 1, October 1, and November 1, 2019. The bank declared a default, accelerated the loan, and demanded payment. As of December 21, 2022, the outstanding principal was $2,414,835.50, plus interest, fees, and other charges. The defendants had not turned over the collateral.

The security agreement gave the bank a security interest in the defendants’ assets, including deposit accounts, contract rights, inventory, and equipment. The bank also obtained guaranties from UTA, UIS, DDI, and Reisman. The central dispute involving DDI was whether Reisman had authority to sign the security agreement and guaranty for DDI. DDI’s sole shareholder, officer, and director, Dr. John Rigney, said he had not authorized Reisman to guarantee the loan. The parties presented conflicting evidence about corporate resolutions, the documents’ signature pages, and whether DDI’s attorneys authorized or approved Reisman’s actions.

Motion for Partial Summary Judgment

Summary judgment is a decision without a trial when the evidence shows that no genuine dispute over an important fact requires a jury’s decision and the moving party is entitled to judgment under the law.

TAI’s breach of contract

The court granted summary judgment to Bank of America on its breach of contract claim against TAI. The undisputed evidence showed that the parties entered into the loan agreement, the bank provided the loan proceeds, and TAI failed to make the required payments. TAI did not dispute the breach; instead, Reisman requested additional time for refinancing and settlement discussions. The court held that TAI’s desire to settle did not create a factual dispute. The court stated that the bank had proven damages consisting of the unpaid principal, plus applicable interest and fees.

Enforcement of the security interest

The court granted summary judgment to Bank of America on its claim to foreclose or enforce its security interest against TAI, UTA, UIS, and Reisman. The bank produced the signed security agreement, financing statements showing that it had perfected its security interest, and evidence of TAI’s default. The court stated that Reisman’s authority to enter the security agreement for himself and the LLC defendants was undisputed.

The court denied summary judgment against DDI on this claim. Evidence created a genuine factual dispute about whether Reisman was authorized to sign the security agreement for DDI. The court pointed to inconsistencies between the incomplete text on one page of the corporate resolutions and the text on the signature pages, the possibility that Rigney’s signature page came from a different resolution, Rigney’s statement that he never signed resolutions authorizing Reisman, and conflicting evidence about DDI’s relationship with attorney Stanley Schutzman. The court did not consider the bank’s argument that Reisman had apparent authority because the bank raised that argument for the first time in its reply brief.

Breach of guaranties

The court granted summary judgment to Bank of America on its breach of guaranty claim against UTA, UIS, and Reisman. It was undisputed that those defendants entered into guaranties, that TAI defaulted, and that some principal remained unpaid.

The court denied summary judgment against DDI. For the same reasons involved in the security agreement, a reasonable jury could find that Reisman lacked authority to execute the guaranty for DDI. A factual dispute therefore remained about whether DDI entered into the guaranty.

Motion to Strike the Answers

The bank also moved to strike the answers filed by the LLC defendants, Reisman, and DDI. A motion to strike asks the court to remove an insufficient, irrelevant, or otherwise improper defense from a pleading.

The court denied the motion to strike. It held that the motion was filed more than five months after the answers, even though the applicable rule generally requires such a motion within 21 days after service of the pleading. The court also held that the bank had not shown prejudice from leaving the defenses in place.

Disposition

The court stated that the motion for partial summary judgment was GRANTED IN PART and DENIED IN PART. Summary judgment was granted on TAI’s breach of contract, on enforcement of the security interest against TAI, UTA, UIS, and Reisman, and on breach of guaranties against UTA, UIS, and Reisman. Summary judgment was denied on enforcement of the security interest and breach of guaranties against DDI. The motion to strike the defendants’ answers was DENIED. The court scheduled a case-management conference to address a trial date, pretrial submissions, and settlement efforts.