Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in dismissing for failure to state valid cause of action instant class action lawsuit alleging that defendants violated Illinois Consumer Fraud and Deceptive Business Practices Act, when it filed more than 3,000 small claims actions against class members in Cook County to enforce personal guaranties on leases of credit-card machines. While most class members did not reside in Illinois, defendants could file said lawsuits in Cook County since leases contained forum-selection clause that required that all disputes be litigated in Cook County. Moreover, although class members argued that defendants had failed to register as debt collection agency, said Act required registration by collectors of consumer debts and not by collectors of instant commercial debts. Ct. further rejected class members’ contention that: (1) defendants’ attempt to collect $3,000 owed on each lease violated Act because credit-card processing machines were worth only $250 apiece; and (2) instant guaranties were unenforceable, where guarantor was same person as individual named in lease.

Record contained sufficient evidence to support Dist. Ct.’s judgment in favor of plaintiff in breach of contract action alleging that defendants failed to provide operational refrigeration control system (RCS) in plaintiff’s plant. Record showed that: (1) plaintiff experienced initial problems with RCS after defendants had installed system and experienced additional problems after system went through subsequent startup process that included frequent communication failures with other equipment in plaintiff’s plant; and (2) plaintiff ultimately replaced defendants’ RCS at cost of $113,500. Ct. rejected defendant’s argument that judgment against them was improper because: (1) Dist. Ct. had accepted opinion of defendants’ expert that external factors unrelated to RCS could have been cause of communication problems; and (2) RCS functioned properly for one month prior to start of communication problems.

Dist. Ct. did not err in granting plaintiff’s motion for summary judgment in action seeking to enforce personal guaranty signed by defendants-owners of corporation for $3.5 million in corporation’s debts to plaintiff. Ct. rejected defendants’ claim that language in guaranty did not cover corporation’s debts that occurred four years after execution of guaranty, where Ct. noted that instant guaranty expressly contemplated liability for future debts of unknown magnitude. Ct. also rejected defendants’ contention that instant lawsuit could not be filed in Indiana due to their lack of contacts with Indiana, since forum-selection clause in guaranty allowed for any lawsuit to enforce guaranty to be filed in Indiana. Dist. Ct. also properly dismissed defendant-corporation’s Sherman Act counterclaim where: (1) relevant limitations period is four years; (2) corporation waited seven years to file counterclaim after it had been dismissed from class action that had raised same issue as instant counterclaim; and (3) corporation could not rely on equitable tolling to render instant counterclaim timely, where it should have been aware of class action dismissal and yet took no steps to assert Sherman Act claim until filing instant counterclaim.

Ct. of Appeals denied debtor’s motion to stay mandate pending resolution of debtor’s petition for writ of certiorari. Ct. concluded that stay was not warranted because: (1) it doubted whether four Supreme Court Justices would vote to grant debtor’s certiorari petition that challenged Ct. of Appeal’s finding that debtor lacked prudential standing to assert that trust that held mortgage note on debtor’s home violated terms of Pooling and Service Agreement; and (2) there was no conflict among circuits with respect to instant decision by Ct. of Appeals. Fact that debtor claimed that she would incur simultaneous legal expenses while litigating in Bankruptcy Ct. and Supreme Ct. issue regarding whether certain assignments of instant mortgage note were void did not require different result.

Dist. Ct. did not err in granting defendant-bank’s motion for summary judgment in review of Bankruptcy Judge's order in adversary proceeding in which plaintiff-Trustee attempted to avoid bank’s mortgage lien on debtors’ property, where such property was subject to land contract in which debtors sold property to third-party with understanding that debtors would obtain mortgage in their own name, and that buyers of said property would pay off mortgage at future date. Trustee argued that: (1) under Wisc. law instant mortgage attached lien to nothing, since debtors’ interest in instant land contract, which consisted of future payments from buyers, was only personal property that could not be subject to any real estate mortgage; and (2) payments under said contract accordingly would be available to unsecured creditors rather than bank. Ct. of Appeals, though, found that: (1) debtors’ interest as vendors under land contract was sufficient to secure bank’s mortgage loan as matter of law; and (2) while bank did not perfect its security interest under UCC procedures, it did properly record instant mortgage in county land records, which was sufficient to preclude Trustee from using strong-armed powers to avoid bank’s lien on debtors’ interest under land contact.

Dist. Ct. erred in granting defendants’ motion for summary judgment in plaintiff-debtor’s action under section 1692g(a)(2) of Fair Debt Collective Practice Act, alleging that defendants improperly failed to disclose identity of actual creditor in either its initial communication with plaintiff or in written notice sent within next five days. While Dist. Ct. properly found that language in instant dunning letter was ambiguous as to identify of current creditor, it erred in finding that any ambiguity was immaterial, since failure to clearly identify current creditor constitutes violation of section 1692g(a)(2) without need of plaintiff to prove additional materiality element or having to present extrinsic evidence of consumer confusion.

Bankruptcy Ct. did not err in rejecting creditors’ claim that debtor was not entitled to discharge of debts generated when creditors loaned money to debtor upon debtor’s representations that money would be repaid once debtor sold condominium units that had been converted from apartments, even though creditors claimed that debtor made fraudulent misrepresentations regarding his intention to repay said loans and subsequently transferred units to different entities that had no legal obligation to them. While Bankruptcy Code does not discharge debts for money obtained by false premises, relevant Ill. statute of limitations for fraud claims is five years, and record showed that limitations period had expired by time creditors had filed instant adversary action. Ct., though, held out possibility that Dist. Ct. could deny discharge of debt of one creditor based on argument that debtor committed fraud when he subsequently transferred units within limitations period to other entities in effort to keep proceeds out of hands of creditor, but could only so hold if U.S. Supreme Ct. ultimately finds in pending case in that Court that there can be fraud claim without allegation that individual made overt fraudulent statement to victim.

Dist. Ct. did not err in granting defendant’s (manufacturer of lubricant) motion for summary judgment in plaintiff’s fraud/breach of contract claim alleging that distributor of defendant’s lubricant improperly substituted inferior additive to lubricant without knowledge of plaintiff before selling said lubricant to plaintiff. Record showed that distributor was not agent of defendant so as to render it liable for distributor’s conduct, where: (1) at time of improper substitution defendant had severed ties with distributor; and (2) plaintiff failed to present any evidence that defendant had told plaintiff that distributor was anything other than distributor of its product so as to make distributor its agent. Also, plaintiff did not present evidence establishing that it had special relationship with defendant, so as to require that defendant inform plaintiff that distributor was supplying inferior additive, where defendant had no contractual relationship with plaintiff.