                            RECOMMENDED FOR FULL-TEXT PUBLICATION
                                 Pursuant to Sixth Circuit Rule 206
                                       File Name: 07a0453p.06

                    UNITED STATES COURT OF APPEALS
                                   FOR THE SIXTH CIRCUIT
                                     _________________


                                                      X
                                                       -
 COMMERCIAL MONEY CENTER, INC.; COMMERCIAL
                                                       -
 SERVICING CORPORATION,
                                                       -
                                    Plaintiffs,
                                                       -
                                                           Nos. 06-3767/4190/4301/4492

                                                       ,
 CITIBANK, N.A.; JP MORGAN CHASE BANK, NA,              >
                               Plaintiffs-Appellees, -
                                                       -
                                                       -
                                                       -
           v.

                                                       -
                              Defendant-Appellant. -
 ILLINOIS UNION INSURANCE COMPANY,
                                                       -
                                                      N
                       Appeal from the United States District Court
                      for the Northern District of Ohio at Cleveland.
                          Nos. 02-16007; 02-16009; 02-16000—
                      Kathleen McDonald O’Malley, District Judge.
                                   Argued: September 10, 2007
                             Decided and Filed: November 14, 2007
                   Before: GUY, ROGERS, and McKEAGUE, Circuit Judges.
                                       _________________
                                            COUNSEL
ARGUED: Stephen A. Cozen, COZEN & O’CONNOR, Philadelphia, Pennsylvania, for Appellant.
Barry R. Ostrager, SIMPSON, THACHER & BARTLETT, New York, New York, for Appellees.
ON BRIEF: Stephen A. Cozen, Richard C. Mason, COZEN & O’CONNOR, Philadelphia,
Pennsylvania, for Appellant. Barry R. Ostrager, George S. Wang, SIMPSON, THACHER &
BARTLETT, New York, New York, for Appellees.
                                       _________________
                                           OPINION
                                       _________________
        RALPH B. GUY, JR., Circuit Judge. This case concerns one of a number of disputes
transferred to the Northern District of Ohio as part of the multidistrict litigation captioned In re:
Commercial Money Center, Inc. (CMC) Equipment Lease Litigation (No. 02-16000), which arose
out of the collapse of CMC’s equipment leasing business in what is alleged to have been a Ponzi-
type scheme. When CMC filed for bankruptcy, the district court was left to sort out the claims and
counterclaims of nearly twenty banking institutions and a half-dozen insurance companies arising


                                                 1
Nos. 06-3767/4190/4301/4492                   Commercial Money Center, et al.                                    Page 2
                                              v. Illinois Union Ins. Co.


out of various lease-backed transactions with CMC and CMC-related entities. These consolidated
appeals involve the dispute between several parties to one such transaction—specifically, the dispute
between Illinois Union Insurance Company on one hand, and Citibank, N.A., and JP Morgan Chase
Bank, N.A., as trustee for Citibank, on the other, concerning Illinois Union’s obligations under an1
insurance policy containing a negotiated Collateral Security Insurance Endorsement (Coverage E).
        On appeal, Illinois Union contends that the district court erred in finding, on a 12(c) motion
for judgment on the pleadings: (1) that Illinois Union’s policy was “in substance” a surety contract;
(2) that Chase, as trustee for Citibank, was the obligee under that surety contract such that it was
entitled to recover without regard to the alleged fraud of the principal obligor; and (3) that Illinois
Union was precluded by the negotiated waiver of defenses from avoiding the obligations under the
Policy on the grounds of fraudulent inducement. Second, Illinois Union argues that, even if correct
on these issues of liability, the district court erred in calculating the damages by reference to the
lease payments as opposed to the debt those payments secured. Finally, Illinois Union argues that
the district court abused its discretion in denying the motion for leave to amend its pleadings. After
review of the record and the arguments presented on appeal, we affirm in part, reverse in part, and
remand for further proceedings consistent with this opinion.
                                                           I.
        CMC was purportedly in the business of leasing equipment and vehicles to numerous lessees
in exchange for lease payments. It is alleged by the banks and insurance companies that the majority
of CMC’s lease business was a sham as many leases were nonexistent, nonperforming, or actually
disguised usurious loans. Problems with the leases were apparently concealed by CMC’s use of a
Ponzi-type scheme in which early investors were paid with funds obtained from later investors.
Overall, the banks advanced more than $400 million secured in some way by the lease payments,
while the insurance companies provided assurances of payment on the leases. Most of the insurance
companies issued explicit surety contracts called “Lease Bonds” that identified CMC as the obligee.
Illinois Union, which was in the minority of insurers, issued insurance policies that included
collateral security insurance coverage under varying endorsements.
        The financing transactions took four basic forms: (1) some banks purchased the income
stream directly from CMC; (2) some banks purchased the income stream from third parties who
purchased from CMC; (3) some banks lent funds to third parties who purchased the income stream
from CMC or its related entities; and, finally, (4) several banks purchased notes from CMC special
purpose entities that were secured by and to be repaid from the income stream from the leases. The
transaction in this case fell under this last category and was essentially a “securitization” of the lease
payments.
        Specifically, CMC sold pools of leases to its special purpose entity, CMC Lease Funding
2000-220, LP (Lease Funding),2 and Lease Funding issued notes under the terms of an Indenture
to Chase, as Trustee for Citibank, that were secured by and to be repaid from the lease payments.
Under the Sales and Servicing Agreement (SSA) entered into between CMC as “Seller,” Lease
Funding as “Issuer,” Chase as “Trustee,” and Illinois Union as both “Credit Insurer” and “Servicer,”
the leases were conveyed from CMC to Lease Funding, Lease Funding confirmed its pledge of a

         1
          Although Chase/Citibank refers to the insurance policy as the Surety Contract, the legal issue before us is
whether the insurance contract established a surety relationship. Accordingly, we will refer to Illinois Union’s insurance
contract as the “Policy” or the “Endorsement.” Likewise, we do not refer to Illinois Union as one of the “Sureties.”
         2
        The sole general partner of Lease Funding was CMC Lease Funding, LLC, a limited liability company of
which CMC was the sole member.
Nos. 06-3767/4190/4301/4492            Commercial Money Center, et al.                         Page 3
                                       v. Illinois Union Ins. Co.


security interest in the lease payments to the noteholders, and Commercial Servicing Corporation
(CSC), a CMC-related entity, was identified as an approved “Sub-servicer” for the leases. The SSA
and the Indenture required issuance of the credit insurance, in which the Indenture granted a further
security interest.
         Illinois Union had provided property and casualty insurance for CMC’s leasing business, but
had declined to provide collateral security insurance in the past. Illinois Union alleges that CMC
continued to solicit such coverage and that Illinois Union relented based on representations that
Illinois Union now contends were materially false. Although the collateral security insurance issued
by Illinois Union varied in language, we are concerned with the endorsement negotiated with the
heavy involvement of counsel for Citibank.                  That Collateral Security Insurance
Endorsement—issued on the same date that the Indenture and SSA were executed—named “CMC
Lease Funding 2000-220, LP” as the “Insured” and Chase as trustee for “the holders of notes issued
under the Indenture” as the “Additional Insured/Loss Payee.” Illinois Union has also alleged that
several written indemnity agreements were executed in its favor by CMC, CMC entities, and CMC
principals Anita and Sterling Pirtle.
         After the transaction closed on January 18, 2001, additional notes were issued under the
Indenture, those notes were secured by additional leases, and those leases were added to the
Schedule A of the Policy. Chase stopped receiving payment in full in December 2001, and Chase’s
claims under the Policy were denied by Illinois Union. Among the host of lawsuits spawned by the
collapse of the leasing business were CMC’s action against Illinois Union, Illinois Union’s
counterclaims seeking rescission and adding Chase as a party, and Chase/Citibank’s action against
Illinois Union and others including CMC, Lease Funding, and CSC. Bankruptcy filings followed,
and cases from all over were consolidated and transferred to the United States District Court for the
Northern District of Ohio.
        Illinois Union’s Second Amended Counterclaims sought, in pertinent part, rescission of the
Policy and the SSA for fraud, as well as declaration that preexisting losses were not covered and that
the Policy was void as against public policy. (Counterclaims 7, 8, and 9). Illinois Union specifically
alleged that CMC made material misrepresentations that induced it to issue collateral security
insurance. Those misrepresentations included: that the underlying leases were valid; that strict
underwriting guidelines were used in granting the leases; that an independent third party was
retained to verify the leases; that the lease default rates were below certain levels; that losses from
defaults were minimized by repossession and re-leasing of equipment; and that no claims had been
made for defaults on the leases. Some of these representations were also the subject of CMC’s
written warranties in the SSA. It is alleged that a significant number of the leases were either
nonexistent or in default even before Illinois Union issued the Policy.
         Coordination of the proceedings led to the filing in January 2003 of a collective motion by
all of the banks for judgment on the pleadings against all of the sureties and insurers that sought
rescission on the grounds of fraud. That consolidated motion was granted in part and denied in part
in two orders entered on August 19, 2005. In the “Lead Opinion,” the district court addressed the
banks’ claims against the sureties that had issued Lease Bonds and concluded, inter alia, that
additional evidence would be necessary to determine whether the banks were the true intended
obligees despite the express designation of CMC as the obligee. The second order, on the other
hand, pertained specifically to the claims of the seven banks seeking to recover from Illinois Union
(IU Order). The district court not only concluded that all of the insurance policies were in essence
surety contracts under which the banks were the intended obligees, but also singled out the
transaction with Chase/Citibank as most clearly providing a suretyship for the benefit of
Chase/Citibank and for waiver of Illinois Union’s defenses.
Nos. 06-3767/4190/4301/4492                  Commercial Money Center, et al.                                  Page 4
                                             v. Illinois Union Ins. Co.


         The district court’s conclusions led Chase and Citibank to seek entry of final judgment
against Illinois Union on their complaint and partial final judgment in their favor on Illinois Union’s
counterclaims (Nos. 02-16009/02-16007). Illinois Union protested, contested the calculation of
damages proposed by Chase/Citibank, argued that the damage theory was inconsistent with
treatment of the transaction as a suretyship, and complained that it should be allowed to amend its
counterclaims before entry of judgment. A stay of proceedings precluded Illinois Union from
seeking leave to amend until March 2006, at which time Illinois Union filed its motion to amend.
In an order entered April 20, 2006, the district court rejected Illinois Union’s arguments, refused to
defer entry of judgment in order to allow Illinois Union to amend its pleadings, determined that the
damages would be based on the scheduled payments on the underlying leases, and concluded that
partial final judgment should be entered on the counterclaims under Fed. R. Civ. P. 54(b).
       Partial final judgment was entered against Illinois Union on its 7th, 8th and 9th counterclaims
on August 4, 2006, and final judgment was entered against Illinois Union on the Chase/Citibank
complaint on August 31, 2006. On October 3, 2006, as part of an omnibus order addressing a litany
of motions to amend, the district court denied Illinois Union’s motion to amend the counterclaims
with respect to Chase/Citibank but allowed amendment as to other parties. The final judgment
declared that:
                  Illinois Union Policy FIC-700241 (the “Policy”) is valid and enforceable and
         Illinois Union is not entitled to rescind the Policy on the basis of CMC’s alleged
         fraud, illegality of the Leases, certain Leases already being delinquent when the
         Policy was issued, or on any other ground, and judgment is granted in favor of
         Plaintiffs on the [First, Second, and Third] Causes of Action[.]
Illinois Union was ordered to pay to Chase, as trustee for Citibank, $46,063,297.45 in damages,
$10,959,912.39 in prejudgment interest, and reasonable attorney fees to be determined separately.
The judgment was also subject to set-off for any unaccounted for lease payments received by Chase,
as well as the interest on any such payments. Illinois Union appealed separately from the orders and
judgments entered against it.3
                                                         II.
         Illinois Union challenges the decision to grant judgment on the pleadings to Chase/Citibank
as both wrong on the merits and procedurally flawed. As to the latter, Illinois Union argues that the
district court’s consideration of matters outside the pleadings improperly converted the motion to
one for summary judgment under Fed. R. Civ. P. 56(c). Max Arnold & Sons, LLC v. W.L. Hailey
& Co., Inc., 452 F.3d 494, 503 (6th Cir. 2006).
        As the district court noted and even Illinois Union concedes, however, documents attached
to the pleadings become part of the pleadings and may be considered on a motion to dismiss. FED.
R. CIV. P. 10(c). In addition, when a document is referred to in the pleadings and is integral to the
claims, it may be considered without converting a motion to dismiss into one for summary judgment.
Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999). Somewhat disingenuously, Illinois
Union argues that the Indenture and so-called “estoppel letters” attesting to the validity of the
insurance policy were not attached to its counterclaim. In fact, the Policy, the SSA, and the
Indenture were attached to the Chase/Citibank complaint, the letters were attached to the



         3
         The district court noted in the April 2006 Order that Illinois Union had resolved its disputes with all of the
banks except Chase/Citibank in court-ordered mediation.
Nos. 06-3767/4190/4301/4492                    Commercial Money Center, et al.                                    Page 5
                                               v. Illinois Union Ins. Co.


Chase/Citibank answer to the counterclaims, and the letters were apparently also among the
“Referenced Documents” listed in the Policy.
        Illinois Union also argues that Chase/Citibank’s submission of a copy of an amicus brief
filed by an insurance organization in another case converted the 12(c) motion to a Rule 56(c)
motion. A court may consider matters of public record in deciding a motion to dismiss without
converting the motion to one for summary judgment. Lynch v. Leis, 382 F.3d 642, 648 n.5 (6th Cir.
2004); Kostrzewa v. City of Troy, 247 F.3d 633, 644 (6th Cir. 2001). This brief was a public record
and was offered not to establish any disputed facts, but to incorporate the arguments articulated in
an analogous situation. Indeed, Illinois Union’s objection at the time was to Chase/Citibank’s
reliance on the arguments made in “an irrelevant ‘lawyer’s brief’ prepared in an unrelated matter,”
but was not that its submission resulted in conversion of the motion to one for summary judgment.
Failure to expressly exclude these materials in deciding the motion under Rule 12(c) did not convert
the motion to dismiss into one for summary judgment. Song v. City of Elyria, 985 F.2d 840, 842
(6th Cir. 1993).
        Illinois Union also argues that a finding of suretyship was improper on a 12(c) motion
because it contradicted the allegations of Chase/Citibank that Illinois Union was an “insurer” and
the assertion of a claim for breach of the implied duty of good faith and fair dealing. We find that
the assertion of insurance contract claims did not constitute “purposeful admission” of facts that
should preclude Chase/Citibank from arguing that the substance of the transaction was to create a
surety relationship. MacDonald v. Gen. Motors Corp., 110 F.3d 337, 340-41 (6th Cir. 1997).
Judicial admissions of fact must be deliberate and clear, while legal conclusions are rarely
considered to be binding judicial admissions. Id. at 341. We are not persuaded that these averments
should preclude Chase/Citibank from arguing that the transaction as a whole created a surety
contract as a matter of law. See Roger Miller Music, Inc. v. Sony/ATV Publ’g, LLC, 477 F.3d 383,
394-95 (6th Cir. 2007). This brings us to the merits of the district court’s decision.
A.       Standard of Review
        We review the district court’s decision granting a Rule 12(c) motion for judgment on the
pleadings under the same de novo standard as one granting a motion to dismiss under Fed. R. Civ.
P. 12(b)(6). Ziegler v. IBP Hog Market, Inc., 249 F.3d 509, 511-12 (6th Cir. 2001). Under that
standard, we construe the complaint in the light most favorable to the nonmoving party, accept the
well-pled factual allegations as true, and determine whether the moving party is entitled to judgment
as a matter of law. United States v. Moriarty, 8 F.3d 329, 332 (6th Cir. 1993). We need not accept
the plaintiff’s legal conclusions or unwarranted factual inferences as true. Gregory v. Shelby
County, 220 F.3d 433, 446 (6th Cir. 2000). To state a valid claim, a complaint must contain direct
or inferential allegations respecting all the material elements under some viable legal4 theory.
Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005), cert. denied, 547 U.S. 1111 (2006).
        At the heart of this appeal is the district court’s conclusion that, although the Endorsement
took the form of an insurance policy, the substance of the transaction as a whole was
indistinguishable as a matter of law from the express surety contracts issued by other banks and
insurance companies. Illinois Union maintains that the Endorsement was simply “credit insurance,”
which is distinct from a surety contract and is subject to insurance defenses. The parties do not

         4
          We have noted some uncertainty concerning the scope of Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955,
1974 (2007), in which the Supreme Court “retired” the “no set of facts” formulation of the Rule 12(b)(6) standard and
dismissed an antitrust-conspiracy complaint because it did not contain facts sufficient to “state a claim to relief that is
plausible on its face.” Id.; see Weisbarth v. Geauga Park Dist., 499 F.3d 538, 541-42 (6th Cir. 2007). Because the
decision in this case was not based on the adequacy of the factual allegations, we need not resolve this uncertainty.
Nos. 06-3767/4190/4301/4492                 Commercial Money Center, et al.                                Page 6
                                            v. Illinois Union Ins. Co.


quarrel with the determination that California law governs, except where documents contain an
express choice of law provision to the contrary, because the Policy specified California law and
California has the most substantial connection to the litigation.5
B.      Suretyship
        To affirm we must find that the transaction as a whole unambiguously established a
suretyship with Chase/Citibank as the intended obligee. Surety contracts are construed using the
same rules that govern the interpretation of other contracts. Cates Constr., Inc. v. Talbot Partners,
980 P.2d 407, 413 (Cal. 1999); Superior Wholesale Elec. Co. v. Cameron, 70 Cal. Rptr. 636, 638
(Cal. Ct. App. 1968). The language of the contract governs if it is clear and does not result in an
absurdity; and the intention of the parties is to be ascertained, if possible, from the writing alone.
See CAL. CIV. CODE §§ 1638 and 1639. In discussing California law, this court explained that a
policy is ambiguous if its terms are reasonably susceptible of more than one construction, and that
extrinsic evidence is admissible if it is “‘relevant to prove a meaning to which the language of the
instrument is readily susceptible.’” Meridian Leasing, Inc. v. Associated Aviation Underwriters,
Inc., 409 F.3d 342, 346-47 (6th Cir. 2005) (quoting Pac. Gas & Elec. Co. v. G.W. Thomas Drayage
& Rigging Co., 442 P.2d 641, 644 (Cal. 1968)); see also Dore v. Arnold Worldwide, Inc., 139 P.3d
56, 60-61 (Cal. 2006) (“‘When a dispute arises over the meaning of contract language, the first
question to be decided is whether the language is “reasonably susceptible” to the interpretation urged
by the party. If it is not, the case is over.’”) (citation omitted).
        Surety contracts and insurance contracts are conceptually and legally distinct. Airlines
Reporting Corp. v. U.S. Fid. & Guar. Co., 37 Cal. Rptr. 2d 563, 567 (Cal. Ct. App. 1995). The
distinction, generally speaking, is that:
        An insurer undertakes to indemnify another “against loss, damage, or liability arising
        from an unknown or contingent event,” whereas a surety promises to “answer for the
        debt, default, or miscarriage of another.” The surety relationship is a tripartite one;
        it is a third party (the obligee), not the principal, who is protected, although the
        principal pays the premium. Furthermore, an insurer has no right of subrogation
        against its insured; a surety, on the other hand, is entitled to reimbursement by its
        principal.
Id. (citation omitted.) The fact that the Endorsement purports to be part of an insurance policy
providing collateral security insurance coverage is not dispositive, as no particular form of
agreement is required to establish a suretyship as long as the agreement establishes the intention to
create a surety contract. Superior Wholesale, 70 Cal. Rptr. at 639 (citing 46 Cal.Jur.2d, Suretyship
and Guaranty, § 23). It is the substance of the transaction, not the form, that controls. Id.; see also
Cates Constr., 980 P.2d at 413 (holding bond and contract should be construed together); Chem.
Bank v. Meltzer, 712 N.E.2d 656, 660 (N.Y. 1999) (“The existence of suretyship status depends
upon the respective roles of the parties and the nature of the underlying transaction.”).
       The Restatement similarly provides that when the criteria for suretyship are fulfilled, the
secondary obligor has surety status regardless of, among other things, the form of the transaction,
the terms used to describe the secondary obligor or the secondary obligation, or whether the
secondary obligation is conditional or unconditional. RESTATEMENT (THIRD) OF SURETYSHIP AND
GUAR. § 1(3); see also Rhode Island Recr. Bldg. Auth. v. Indus. Nat’l Bank, 494 A.2d 537 (R.I.


        5
         Although not material to the outcome, the district court noted that the SSA provided for application of New
York law except that questions of a true sale would be governed by Texas law.
Nos. 06-3767/4190/4301/4492                    Commercial Money Center, et al.                                     Page 7
                                               v. Illinois Union Ins. Co.


1985) (affirming determination that agreement, although styled as an insurance contract, was a
contract of suretyship). The Restatement also explains that a secondary obligor has the status of a
surety when:
         (a) pursuant to contract (the “secondary obligation”), an obligee has recourse against
         a person (the “secondary obligor”) . . . with respect to the obligation (the “underlying
         obligation”) of another person (the “principal obligor”) to that obligee; and
         (b) to the extent that the underlying obligation or the secondary obligation is
         performed the obligee is not entitled to performance of the other obligation; and
         (c) as between the principal obligor and the secondary obligor, it is the principal
         obligor who ought to perform the underlying obligation or bear the cost of
         performance.
RESTATEMENT (THIRD) OF SURETYSHIP AND GUAR. § 1(a) (1996). Suretyship is described as
involving a tripartite relationship consisting of a principal obligee who is owed a debt or duty; a
principal obligor who is responsible for payment of the debt or performance of the duty; and a
secondary obligor or surety who agrees to answer for the primary obligor’s debt or duty. See Cruz-
Mendez v. ISU/Ins. Servs., 722 A.2d 515, 521 (N.J. 1999).
C.       Substance of Transaction
        The district court concluded that the substance of the interrelated transactions was
indistinguishable as a matter of law from the surety contracts issued by other insurance companies.6
That is, the transactions taken together demonstrated that Chase/Citibank was the principal obligee
with recourse against Illinois Union with respect to the underlying obligation of Lease Funding to
Chase/Citibank.
       The Endorsement, which named Lease Funding as the Insured and Chase as an Additional
Insured/Loss Payee on behalf of the noteholders under the Indenture, provided the following
“coverage”:
         Coverage E: LEASE COVERAGE – The Company will indemnify the Insured, its
         successors and assigns, for all Scheduled Payment Amounts on a Lease due on each
         Scheduled Due Date as set forth in the applicable Lease Agreement without
         deduction or set off of any kind, subject to the terms and conditions herein [as
         Paragraphs 1-15.]
This provision was followed by relevant definitions, including that “Scheduled Payment Amounts”
meant the “amounts due on each Scheduled Due Date on each Lease as specified on the attached
Schedule A.” These are the payments due under the leases which were transferred by and to be
serviced under the SSA and were pledged to secure the notes issued under the Indenture. “Date of
Loss” was defined as “the first date on which any Scheduled Payment Amount on a Lease is


         6
             An example of a typical Lease Bond provided in part: “That we, [], as principal, and [the surety company]
. . . as Surety, are hereby firmly bound unto [CMC] as Obligee and its successors and assigns in the amount of [$__] . . . .
The Obligee accepts the bond and [the surety company], as Surety, agrees to pay to the Obligee any amounts due and
owing by the principal with regards to the lease . . . .” Under the Lease Bonds, which were issued for each individual
lease, the lessee was the principal obligor, the insurer was the surety, and CMC was named as the obligee. The banks
claimed to also be intended obligees, but the district court concluded that the contracts could not be reformed to
contradict their express provisions on a motion for judgment on the pleadings.
Nos. 06-3767/4190/4301/4492            Commercial Money Center, et al.                             Page 8
                                       v. Illinois Union Ins. Co.


contractually due but not paid . . . .” The conditions were negotiated and substituted for Illinois
Union’s standard conditions.
       Of those conditions, the most important to the issues before us are found in paragraphs 1, 6,
and 7, which provided in pertinent part as follows:
       1.      The issuance of this Policy shall represent the Company’s approval of the
               individual underwriting of each Lease (including the applicable lessee
               thereunder), including but not limited to, all relating credit matters,
               issues of fraud, insolvency, bankruptcy and timely performance by the
               Insured, any transferee of the Leases or any interest therein or by any
               servicer or sub-servicer designated by the Company, and the Company shall
               assert no defenses to any claim under the Policy as a result of any of the
               foregoing. Coverage hereunder shall not be affected by (i) a
               determination that the Lease is a secured financing or not a true Lease, is
               subject to usury, or is not valid, binding or enforceable, (ii) any financial
               difficulties, including bankruptcy, insolvency or similar proceedings,
               involving the Insured or any of the parties to the Sale and Servicing
               Agreement . . . , the Indenture . . . and the documents listed on Schedule B
               attached hereto (collectively the “Referenced Documents”), (iii) any failure
               by the Insured or any party to the Referenced Documents to comply with its
               obligations thereunder, . . . .
                       ....
       6.      If (a) the Insured fails to receive all or a portion of a Scheduled Payment
               Amount on the Scheduled Due Date as specified in Schedule A attached
               hereto, . . . or (b) any Scheduled Payment Amount previously made on a
               Scheduled Due Date or otherwise to any of [CMC], the Insured, or otherwise
               (x) is not paid over to and received by the Additional Insured/Loss Payee for
               any reason whatsoever or (y) is paid over to the Additional Insured/Loss
               Payee and is required to be rescinded, reclaimed, voided or recovered from
               the Additional Insured/Loss Payee for any reason, . . . then a default under
               the Lease with respect to the payment of such Scheduled Payment Amount
               shall be deemed to occur and the date of such occurrence of any such default
               shall be the applicable Date of Loss. . . .
       7.      The Company acknowledges that [CMC] has sold the Leases to the Insured
               (and granted a back-up security interest therein to the Insured) and that the
               Insured has pledged all of its rights hereunder with respect to the Leases
               to secure the obligations of the Insured under the Indenture and that it
               is intended that such pledge shall constitute a first priority perfected security
               interest therein. To give effect to the foregoing, the Company
               acknowledges that unless and until otherwise notified by the Trustee
               acting under the Indenture, the Company shall make all payments
               hereunder to the Trustee on behalf of the Additional Insured/Loss Payee
               and not the Insured within thirty (30) days of receipt of written notice of a
               default of a Lease in accordance with its terms . . . . The Company agrees
               that all payments required to be made by it in respect of a Scheduled
               Payment Amount on a Lease shall be made notwithstanding (i) any
               transactions entered into by the Insured, [CMC], or any other person in
               connection therewith, including any transactions or purported transactions
Nos. 06-3767/4190/4301/4492             Commercial Money Center, et al.                          Page 9
                                        v. Illinois Union Ins. Co.


                under the Sale and Servicing Agreement, the Indenture, or otherwise, and (ii)
                the involvement or noninvolvement of the Company in any matters
                contemplated by clause (i) above. . . .
(Emphasis added.) Also, in paragraph 13, Illinois Union acknowledged, among other things, that
it reviewed and had full knowledge of the transactions contemplated in the “Referenced Documents”
(including the SSA, the Indenture, and the Policy), and that it did not rely on any communication
(written or oral) from Lease Funding or Chase in deciding to issue the Policy and enter into any of
the “Referenced Documents.”
         Insisting that the Endorsement provided nothing more than credit insurance, Illinois Union
argues that it was error to find as a matter of law that the intended obligee was Chase and not Lease
Funding because “default” is defined in terms of the underlying leases only. We find, as did the
district court, that the plain meaning of paragraph 1 refutes Illinois Union’s argument that it
undertook only to guarantee matters of credit and fraud on the part of the lessees because Illinois
Union’s approval of the underwriting for the leases specifically included “all relat[ed] . . . issues of
fraud, insolvency, bankruptcy and timely performance by the Insured, any transferee of the Leases
or any interest therein, or by any servicer or sub-servicer[.]” This clearly extends beyond fraud on
the part of the lessees.
        Further, the Endorsement itself makes plain not only the interrelated nature of the
transactions, but also the intention that Lease Funding would retain no right to payment under the
Endorsement. Paragraph 7 provides that in order to “give effect” to Lease Funding’s pledge of the
lease payments as security for the notes issued under the Indenture, Illinois Union would be required
to make any and all payments under the Endorsement to Chase, on behalf of the noteholders, and
not to Lease Funding. We agree with the district court that Illinois Union undertook obligations
beyond those of the lessees to make payment to Lease Funding by promising to answer for Lease
Funding’s obligations to Chase. As will be discussed below, the district court later clarified that this
principal obligation was Lease Funding’s obligations under the SSA, although neither the district
court nor Chase/Citibank have identified the provisions governing the extent of this obligation.
       Illinois Union disputes this interpretation, arguing that Lease Funding remained a “genuine”
insured with an insurable interest because it had a contingent right under the Indenture to receive
any “excess” lease payments. Specifically, sums collected or advanced under the terms of the SSA
were to be deposited in an account from which Chase, as trustee, would distribute the payments
pursuant to the priority set forth in § 8.3 of the Indenture. After all disbursements were made, any
remainder was to be remitted to Lease Funding. Indeed, the proffers made in connection with the
Chase/Citibank motion for final judgment showed that this contingent right may not have been
purely hypothetical. Apparently because interest rates were lower for later-issued notes, the
aggregate of scheduled lease payments exceeded the principal and interest due under the Indenture
by approximately $6 million. Be that as it may, however, Lease Funding’s contingent interest in the
“excess” under the Indenture in no way contradicts the clear directive that Illinois Union’s obligation
was to make any and all payments to Chase unless or until Chase directed otherwise. Nor does it
undermine the district court’s determination that Illinois Union’s obligations were to Chase as an
intended obligee.
        This conclusion is further bolstered, as the district court observed, by Illinois Union’s
asserted right to indemnification. While an insurer generally does not have a right of subrogation
against its insured, a suretyship confers rights of recourse to the surety against the principal obligor.
RESTATEMENT (THIRD) SURETYSHIP AND GUAR. § 18. In fact, it is quite common for an indemnity
agreement to be entered into between a principal obligor and the secondary obligor. Id. at comment
b; see also Airlines Reporting, 37 Cal. Rptr. 2d at 567. Illinois Union alleged that, as part of the
Nos. 06-3767/4190/4301/4492                   Commercial Money Center, et al.                                 Page 10
                                              v. Illinois Union Ins. Co.


inducement to issue the various collateral security insurance policies, CMC and CMC-related
entities and principals agreed in writing on more than one occasion to indemnify Illinois Union from
any losses and claims under the policies. In response to the Chase/Citibank motion for judgment,
Illinois Union argued that one of the indemnity agreements purported to exclude CMC’s special
purpose entities from the obligation to indemnify Illinois Union. While declining to revisit the issue
of suretyship, the district court noted that this would not alter its conclusions because CMC, the sole
owner of Lease Funding, had undisputedly agreed to indemnify Illinois Union. The absence of any
dispute that Illinois Union secured indemnity agreements allowing recourse against CMC, its
subsidiaries and its principals if called upon to pay under the Endorsement undermines the claim that
this was a traditional insurer-insured relationship. 7
       Despite being written as insurance coverage, the terms of the negotiated Endorsement,
examined in the context of the larger integrated transaction, established a surety relationship as a
matter of law, with Illinois Union as the secondary obligor, Lease Funding as the principal obligor,
and Chase as the intended obligee.
D.       Fraud of the Principal
        The finding of a suretyship is significant in this case because “[t]he rule is well settled and
generally followed that fraud of the principal debtor will not relieve the guarantor or surety who
acted at the request of the debtor from liability, if the creditor did not have notice of the fraud and
did not participate therein.” Simon Newman Co. v. Tully, 88 P.2d 131, 132 (Cal. 1939); 59 CAL.
JUR. 3D SURETYSHIP & GUAR. § 75 (“It is also no defense to an action by the creditor that the
principal committed fraud in securing the bond, unless the surety can establish that the creditor had
notice of such fraud and participated in it.”); see also Am. Mfg. Mut. Ins. Co. v. Tison Hog Mkt., Inc.,
182 F.3d 1284, 1288 (11th Cir. 1999) (explaining that under common law of suretyship, fraud or
misrepresentation by the principal alone, without the knowledge or participation of the obligee, in
inducing the surety to enter into a surety contract will not affect the liability of the surety). Here,
Illinois Union has never claimed that Chase/Citibank either had notice of or participated in the
alleged fraud. That being the case, Illinois Union was precluded from denying liability to Chase on
the grounds of fraudulent inducement. In an effort to avoid this result, Illinois Union argues that the
fraud may be imputed to Chase under agency principles, that policies induced by fraud are void, and
that the express waiver of fraud defenses was ineffective.
         1.       Agency
        “Indicia of an agency relationship are the agent’s power to alter legal relations between the
principal and others, a fiduciary relationship, and the principal’s right to control the agent’s
conduct.” Valley Inv., LP v. BancAmerica Commercial Corp., 106 Cal. Rptr. 2d 689, 698 (Cal. Ct.
App. 2001). The district court found that Illinois Union failed to allege the necessary elements of
either actual or ostensible authority, and Illinois Union has shown no error in this regard. While
Illinois Union alleged that the Endorsement was required by Chase/Citibank as part of the
transaction, there is no claim that CMC or Lease Funding was given authority to act for
Chase/Citibank, or that Chase/Citibank acted in a manner that could lead Illinois Union to
reasonably believe that CMC or Lease Funding was acting as an agent for Chase/Citibank.
       Moreover, Illinois Union’s reliance on insurance broker cases is misplaced. Specifically,
in Century Sur. Co. v. Crosby Ins., Inc., 21 Cal. Rptr. 3d 115, 120 (Cal. Ct. App. 2004), the court

         7
           The written indemnity agreements contemplated that they would cover “any instrument of guarantee, whether
in the form of a surety bond or insurance policy, or an endorsement to an insurance policy, including but not limited to
any guaranty of lease payment obligations referred to as Collateral Security Endorsement.”
Nos. 06-3767/4190/4301/4492             Commercial Money Center, et al.                          Page 11
                                        v. Illinois Union Ins. Co.


recognized an insurer’s remedy against an insurance broker for fraud where the broker was an agent
of the insured. Purcell v. Pac. Auto. Ins. Co., 64 P.2d 1114, 1115 (Cal. Ct. App. 1937) (insurance
agent requesting insurance from a company he does not represent is acting for the insured). Neither
CMC nor Lease Funding were brokers procuring insurance for an insured.
        2.      Void for Fraud
        Illinois Union also argues that California, like other jurisdictions, does not permit a waiver
of fraud to be effective against a party whose own fraud induced the contract. Danzig v. Jack
Grynberg & Assocs., 208 Cal. Rptr. 336, 342 (Cal. Ct. App. 1984) (“‘A party to a contract who has
been guilty of fraud in its inducement cannot absolve himself from the effects of his fraud by any
stipulation in the contract, either that no representations have been made, or that any right which
might be grounded upon them is waived.’”) (citation omitted). As the district court concluded, this
principle is inapplicable here because Illinois Union does not seek rescission on the grounds of
Chase/Citibank’s “own” fraud.
       Relying on California insurance law, Illinois Union argues that rescission for material
misrepresentation voids the policy as to all insureds unless the policy provides to the contrary.
Admiral Ins. Co. v. Debber, 442 F. Supp. 2d 958, 966 (E.D. Cal. 2006); see also TIG Ins. Co. of
Mich. v. Homestore, Inc., 40 Cal. Rptr. 3d 528, 533 (Cal. Ct. App. 2006) (holding insurer could
rescind directors and officers liability policy against innocent insured). Because we have already
concluded that the Endorsement created a surety contract, Illinois Union may not avoid liability to
Chase/Citibank on account of misrepresentations by Lease Funding.
        3.      Waiver of Defenses
         The district court further found that Illinois Union had effectively waived the defenses it was
asserting in its counterclaims. As outlined earlier, the Endorsement not only disavowed reliance on
any oral or written representations by the Insured or Additional Insured, but also specifically waived
the right to assert defenses “including but not limited to all relat[ed] credit matters, issues of fraud,
insolvency, bankruptcy and timely performance by the Insured[.]” Illinois Union further agreed that
its obligation to pay would not be affected by the validity or enforceability of the leases or the failure
of Lease Funding to comply with its obligations under the SSA and the Indenture.
        Illinois Union relies on two cases, neither of which applies California law, to argue that
fraudulent inducement may not be waived absent a specific disclaimer of reliance on the particular
misrepresentations. The argument for a specificity requirement is rooted in the Plapinger line of
cases, including Manufacturers Hanover Trust Co. v. Yanakas, 7 F.3d 310, 316 (2d Cir. 1993)
(discussing Citibank, N.A. v. Plapinger, 485 N.E.2d 974, 976 (N.Y. 1985)). In Yanakas, an
“absolute and unconditional” guaranty in boilerplate language on a preprinted form was held not to
waive a claim of fraudulent inducement. The waiver in Plapinger stated that the guaranty was
“absolute and unconditional” irrespective of any lack of validity of the loan agreement or other
circumstances that might constitute a defense. There, the waiver was upheld in part because the
guaranty was not generalized boilerplate, but was the product of extended negotiations between
sophisticated parties.
        The Third Circuit rejected similar arguments in MBIA Insurance Corp. v. Royal Indemnity
Co., 426 F.3d 204, 214-16 (3d Cir. 2005), and distinguished Yanakas as less applicable when a
sophisticated party is arguing that a negotiated waiver is too broad. The court concluded that the
Delaware courts would enforce the waivers negotiated by sophisticated parties to bar a claim for
Nos. 06-3767/4190/4301/4492                   Commercial Money Center, et al.                                  Page 12
                                              v. Illinois Union Ins. Co.


rescission on the grounds of fraud under circumstances noticeably similar to this case.8 The
agreement in MBIA provided that the obligation to pay was “absolute and unconditional” without
specifying that it included fraud or misrepresentation, and disclaimed reliance on any
extracontractual representations. The court in MBIA held that the scope of the insurer’s obligation
under the credit insurance policies “turn[ed] not on a boilerplate merger clause but on waivers
sculpted by parties of exquisite legal and financial sophistication[.]” Id. at 215. This is equally true
in this case, where the parties “sculpted” provisions that not only disclaimed reliance on any oral
or written representations, but also specifically waived the right to assert defenses including all
issues of fraud.
        In the other case relied upon by Illinois Union, JP Morgan Chase Bank v. Liberty Mut. Ins.
Co., 189 F. Supp. 2d 24 (S.D.N.Y. 2002), the court held that the general waiver did not preclude the
surety from avoiding payment on the grounds of fraud. That decision was distinguished by the court
in MBIA because JP Morgan, an “Enron” case, involved an extreme case of fraud that bordered on
fraud in the factum. 426 F.3d at 217 (“[W]here the party does not even know the ‘true nature’ of
what it is signing, it is unsurprising that the standards for effective waiver would be stricter, if
waiver is possible at all.”). In contrast, the fraud at issue in MBIA did not call into question the
nature of the transactions covered by the insurer’s credit risk policies. That is, despite allegations
that the student loan business was a sham, it was a fairly obvious risk of issuing credit risk policies
that the insured would misrepresent the validity and/or quality of the underlying loans. Because the
same is true in this case, we are not persuaded that JP Morgan would apply here.
      For the foregoing reasons, we conclude that the district court did not err in finding that
Chase/Citibank was entitled to judgment on the pleadings under Rule 12(c).
                                                          III.
        In its next claim of error, Illinois Union challenges the district court’s award of damages on
Chase/Citibank’s motion for entry of final judgment. Illinois Union argues first that it was error to
award $46 million in damages based on a “conclusory two-page declaration.” Our review of the
record reveals that although Illinois Union submitted evidence asking for reconsideration of the
suretyship issue, Illinois Union did not dispute the calculations proffered in that declaration by
Chase/Citibank. Nor has Illinois Union made any showing that the calculations were inaccurate or
based on incorrect information. Rather, Illinois Union contends that the difference between the
Scheduled Lease Payment Amounts and the sums received by Chase/Citibank was not a proper
measure of its liability as a surety. This is a question of contract interpretation and application of
surety principles.
        While the extent of a secondary obligation is generally determined from the surety contract,
the obligations of a surety must not be greater than that of the principal. CAL. CIV. CODE § 2809
(“The obligation of a surety must neither be larger in amount nor in other respects more burdensome
than that of the principal; and if in its terms it exceeds it, it is reducible in proportion to the principal
obligation.”); U.S. Leasing Corp. v. DuPont, 444 P.2d 65, 75 (Cal. 1968) (“since the liability of a
surety is commensurate with that of the principal, where the principal is not liable on the obligation,
neither is the guarantor”). It is also true, however, that “the effect of suretyship status may be varied


         8
           There, student loans were originated, bundled, and sold to special purpose trusts against which banks lent
money and sold shares in the trusts. Insurers issued credit risk policies insuring either the bundled student loans or the
loans held by the banks. The student loan originator allegedly misrepresented the risks associated with the student loans,
participated in altering or forging of student loan documents, and masked defaults on the student loans by diverting
proceeds of later loans. Royal claimed that the student loan securitization business was a sham and sought to avoid its
obligations on the grounds of fraudulent inducement.
Nos. 06-3767/4190/4301/4492            Commercial Money Center, et al.                         Page 13
                                       v. Illinois Union Ins. Co.


by contract between the parties subject to it.” RESTATEMENT (THIRD) OF SURETYSHIP AND GUAR.
§ 6. California law recognizes that a surety may waive its right to limit its liability to that of the
principal. CAL. CIV. CODE § 2856(a)(1); Bloom v. Bender, 313 P.2d 568, 575 (Cal. 1957).
        The district court rejected Illinois Union’s contention that its obligation as a surety should
be limited to the amounts due under the notes, finding that—despite the “inherent appeal” of the
argument—the secondary obligor did not promise to answer for the obligation to pay under the
notes. Rather, the district court concluded that the Endorsement defined the secondary obligation
as a guaranty of all lease payments not received by the trustee irrespective of the principal obligation
to Chase/Citibank. Particular emphasis was placed on the provision in paragraph 7 that all payments
to be made with respect to a Scheduled Payment Amount shall be made notwithstanding “any
transactions entered into by the Insured, [CMC], or any other person . . . , including any transactions
or purported transactions under the [SSA], the Indenture, or otherwise[.]” Morever, even when the
SSA and the Indenture were considered, the district court explained that
       the transaction documents grant[ed] Lease Funding only a tenuous interest—
       subordinate to the rights of virtually all other parties to the transaction—and that
       interest does not affect the duties imposed upon Illinois Union. Whether Chase as
       Trustee ultimately will be required to distribute some portion of its recovery to Lease
       Funding (or to other parties) is a question governed by the transaction documents,
       and it is of no concern to Illinois Union. Illinois Union’s obligation, as set forth in
       the Policy, is to pay all Scheduled Payments due and unpaid to the Trustee.
We find that it was error to first construe the transaction documents together to find that a suretyship
was created as a matter of law, but to then divorce that Endorsement from the other transaction
documents to determine the extent of the surety’s liability. In addition, given the structure of the
transaction as a whole, the language in paragraph 7 cannot be read as a waiver of a surety’s right to
limit its liability to that of the principal.
        To be sure, we agree that the Endorsement defines Illinois Union’s obligations in terms of
the Scheduled Lease Payment Amounts, and nothing in the Endorsement can be understood as a
direct guaranty of the amounts due under the notes. Nonetheless, the notes were both secured by
and to be repaid from the lease payments. The Endorsement, issued as an integral part of the larger
transaction, expressly recognized the interrelationship between the SSA and the Indenture. In their
simplest terms, the SSA and the Indenture operated together such that the lease payments would be
collected under the terms of the SSA and transferred to Chase as trustee for distribution under the
terms of the Indenture. In essence, the lease payments were also the note payments.
        Moreover, as already discussed, the parties contemplated that if the lease payments collected
exceeded the note payments (and other expenses), Lease Funding would be entitled to receive the
remainder. While Lease Funding had no residual right to the proceeds from the Endorsement, Lease
Funding’s retention of the right to any “excess” under the Indenture is not extraneous to the issue
before us. Rather, it completes the picture of the extent of Lease Funding’s obligation to Chase, as
trustee for Citibank, pursuant to the SSA and the Indenture. While Illinois Union participated in the
SSA as both credit insurer and servicer, judgment was entered against Illinois Union as surety for
Lease Funding’s principal obligations to Chase as trustee for the noteholders.
        Because we find that Illinois Union’s liability as surety should not exceed the principal
obligation due to Chase as the intended obligee, we reverse the award of damages and remand for
further consideration consistent with this opinion.
Nos. 06-3767/4190/4301/4492             Commercial Money Center, et al.                         Page 14
                                        v. Illinois Union Ins. Co.


                                                  IV.
         We review the denial of a motion to amend for abuse of discretion, except to the extent that
it is based on a legal determination that the amendment would not withstand a motion to dismiss.
Wade v. Knoxville Utils. Bd., 259 F.3d 452, 459 (6th Cir. 2001). Leave to amend a pleading shall
be freely given “when justice so requires.” FED. R. CIV. P. 15(a). Factors that may affect that
determination include undue delay in filing, lack of notice to the opposing party, bad faith by the
moving party, repeated failure to cure deficiencies by previous amendment, undue prejudice to the
opposing party, and futility of the amendment. Wade, 259 F.3d at 458-59 (quoting Head v. Jellico
Hous. Auth., 870 F.2d 1117, 1123 (6th Cir. 1989)).
         Illinois Union maintains that leave should have been granted to allow amendment of its
counterclaims and answers with respect to Chase/Citibank to reflect evidence obtained in discovery.
Except for its insistence that it relied on extensions of the deadlines for seeking leave to amend,
Illinois Union offers no explanation for having waited until after resolution of the 12(c) motions to
argue that the issue could not be decided without reference to extrinsic evidence concerning the
subjective intentions of the individuals involved in negotiating the Endorsement. Although the
deadlines for filing such a motion had not expired, the district court made clear that it viewed Illinois
Union’s request with respect to Chase/Citibank as nothing more than an attempt to reargue failed
theories and get a new “bite at the apple.” The district court explained that Illinois Union had plenty
of time in which it could have moved to supplement the response to the motion for judgment on the
pleadings, but instead persisted in arguing that the issue could be decided as a matter of law.
        The district court then entered a stay of all proceedings to allow for mediation, but excepted
the disputes between Illinois Union and Chase/Citibank. Upon Illinois Union’s request for
clarification, the district court reiterated that Illinois Union would not be permitted to seek leave to
amend at that time and added that
        it would be grossly inequitable to Citibank to delay its pursuit of final judgment by
        permitting Illinois Union to seek to amend itself out from under the Court’s August
        19, 2005 ruling. This is especially true given that Illinois Union had more than
        ample opportunity to amend its pleadings before [the] Court issued an order in favor
        of Citibank, but chose not to do so.
In March 2006, as soon as the stay was lifted, Illinois Union filed a motion for leave to file its
proposed amended pleadings against Chase/Citibank as well as others. The district court discussed
but did not decide the motion to amend in the order granting the motion of Chase/Citibank for final
judgment. While reserving the issues of prejudice and futility for a later time, the district judge took
the opportunity to emphasize that the parties had been advised that motions to amend could be filed
without derailing decision on the 12(c) motions and that the vast majority of matters raised by the
proposed amendment had already been decided. In October 2006, after entry of judgment in favor
of Chase/Citibank, Illinois Union’s motion to amend was denied as moot with respect to claims
involving Chase/Citibank.
        First, there can be no question that the district court viewed Illinois Union’s delay in seeking
leave to amend as “undue delay” motivated by an attempt to reargue its failed theories and get a new
“bite at the apple.” Delay alone will ordinarily not justify the denial of leave to amend; however,
delay will at some point become “undue,” “placing an unwarranted burden on the court,” or
“prejudicial,” “placing an unfair burden on the opposing party.” Morse v. McWhorter, 290 F.3d 795,
800 (6th Cir. 2002). Also, in the post-judgment context, “competing interests in finality of
judgments and the expeditious termination of litigation” require that courts be mindful of not only
Nos. 06-3767/4190/4301/4492            Commercial Money Center, et al.                       Page 15
                                       v. Illinois Union Ins. Co.


prejudice to the opposing party but also the reasons the movant failed to seek leave to amend earlier.
Id. at 800; PR Diamonds, Inc. v. Chandler, 364 F.3d 671, 698-99 (6th Cir. 2004).
         The question of whether the Endorsement was an insurance policy or a surety contract was
squarely presented by the 12(c) motions, but Illinois Union chose to rely on the pleadings to argue
that it was clearly and unambiguously intended as an insurance contract. Illinois Union was not
entitled to wait in the wings for an adverse decision before asserting that the issue should not have
been determined from the documents alone. Id. at 699 (party not entitled to an advisory opinion and
an opportunity to cure those deficiencies). The district court’s assessment that it would be grossly
inequitable to allow Illinois Union to amend itself out from under the judgment of liability certainly
suggests its view that to allow amendment would place an unfair burden on the opposing party.
        Moreover, even when a district court fails to articulate the basis for denying a motion to
amend, the error may be harmless if the proposed amendment would be futile. Jet, Inc. v. Sewage
Aeration Sys., 165 F.3d 419, 425 (6th Cir. 1999); Moore v. City of Paducah, 790 F.2d 557, 559 (6th
Cir. 1986). Asserting that the amendment would not have been futile, Illinois Union argues that,
under California law, extrinsic evidence is admissible if it is relevant to prove a meaning to which
the language of the contract is reasonably susceptible. Dore v. Arnold Worldwide, Inc., 139 P.3d
56, 60-61 (Cal. 2006). Without suggesting that the language was susceptible of more than one
interpretation, Illinois Union argues that the absence of ambiguity cannot be determined without
considering extrinsic evidence of the parties’ intentions.
         The extrinsic facts it proposed adding to its pleadings included evidence that the parties
described and referred to the Endorsement as credit insurance, Citibank’s attorney expected an
insurance policy, Illinois Union’s underwriter advised bank representatives that the endorsement was
not a surety bond, and Citibank did not insist on “absolute and unconditional” language because
Illinois Union would have “walked away from the deal.” Such facts, while newly alleged, simply
lend support to the claim that the parties subjectively understood the Endorsement to be an insurance
policy as opposed to a surety contract. As the district court explained, the finding of a suretyship
was based on the structure and substance of the transaction as a whole and not on the absence of any
facts that could be established in discovery. It is the substance of the transaction, and not the form
or terminology used, that controls. Because the proposed amendment would be futile, we affirm the
denial of Illinois Union’s motion to amend.
                                                 V.
        For the reasons set forth above, we AFFIRM the order granting the 12(c) motion in favor
of Chase/Citibank and against Illinois Union with respect to liability, and AFFIRM the denial of
Illinois Union’s motion to amend its pleadings with respect to Chase/Citibank. Further, we
REVERSE the award of damages and REMAND for further consideration consistent with this
opinion.
