Commercial Banking, Collections, and Bankruptcy

Dist. Ct. erred in entering judgment in favor of plaintiff in breach of contract action alleging that defendant’s failure to confirm or ship plaintiff’s orders for carbon black sold by defendant violated parties’ contract that Dist. Ct. construed as requirements contract calling for defendant to sell as much carbon black to plaintiff as plaintiff needed. While contract stated that intent of parties was for defendant to sell 1.8 million pounds of carbon black to plaintiff annually, such contract could not be viewed as requirements contract, where plaintiff was not obligated to purchase any amount of carbon black from defendant and was not prohibited from buying carbon black from any other seller.

Record contained sufficient evidence to support jury’s $2.23 million net verdict in favor of plaintiff in breach of contract action alleging that defendant failed to make payments on rental agreement calling for defendant’s use of industrial cutter, even though defendant argued that plaintiff was wrong party to bring instant lawsuit since instant cutter was built and delivered by plaintiff’s parent corporation. Plaintiff was appropriate party to bring instant lawsuit since rental agreement was between plaintiff and defendant. Fact that plaintiff served as middleman between its parent and defendant was irrelevant. Ct. also rejected defendant’s contention that plaintiff failed to provide “new” cutter as promised in rental agreement, where: (1) both parties were aware at time of agreement's signing that subject cutter had been used previously; and (2) jury could properly have found that prior 7-hour use of cutter’s software did not age cutter for purposes of instant use by defendant. Dist. Ct. erred, though, in denying plaintiff’s request for pre-judgment interest even though defendant had asserted colorable defenses to instant lawsuit.

Dist. Ct. did not err in granting defendant-casino’s motion for summary judgment in Chapter 11 bankruptcy proceeding in which plaintiff-plan administrator sought to avoid and recover over $8 million that original owners of corporate debtor had fraudulently obtained from corporate debtor, where original owners had transferred/spent said funds at casino in form of payments on gambling debts or on chips that original owners had passed to third parties to cash in. Proper inquiry required focus on what casino knew about transfer of funds from corporate debtor to original owners, and defendant could properly raise good faith defense as set forth in 11 USC section 550(b)(1), where record showed that casino accepted said funds without knowledge of fraud committed by original owners on corporate debtor. Fact that casino was aware that one original owner had erratic gambling habits, had made false statements on credit application, and had received money from corporate debtor did not require different result.

Dist. Ct. did not err in denying creditor-law firm’s objection to distribution of assets of receivership, even though creditor argued that its lien on estate property (i.e., settlement proceeds of medical-malpractice claim) that arose out of its claim to legal fees owed to it by debtors entitled it to be paid in full directly from settlement proceeds, rather than sharing same with other creditors. Record showed that Dist. Ct. had previously entered stay order that prevented all creditors from proceeding against debtors, and that although creditor had received limited lifting of said order in order to obtain judgment against debtors based on amount of fees owed to it, creditor obtained lien on settlement proceeds in violation of said stay order. As such, Dist. Ct. could properly ignore instant lien and make pro rata distribution of receivership assets. Ct. also imposed Rule 38 sanctions against creditor for filing frivolous appeal.

Dist. Ct. erred in dismissing for failure to state cause of action plaintiff’s breach of contract action alleging that defendant breached its mortgage agreement with him by using payout from his homeowner’s insurance policy to pay down his loan rather than use payout to repair plaintiff’s damaged home that was subject to said mortgage. While Dist. Ct. found that plaintiff was barred from pursuing his contract claim because he had materially defaulted on his own contractual obligations by missing several mortgage payments prior to defendant’s purported breach, Ct. of Appeals found that plaintiff had viable contract claim, where mortgage required that defendant apply insurance proceeds to restoration of home if it was economically feasible to do so, and defendant never indicated that repairing plaintiff’s home was economically infeasible. Fact that defendant had missed certain mortgage payments did not require different result since remedy provision in mortgage agreement for missed payments did not include application of insurance proceeds to loan balance. Moreover, result is same even if defendant could have accelerated plaintiff’s loan in response to missed mortgage payments.

Dist. Ct. did not err in granting defendants’ motion for summary judgment in plaintiff-bank’s action seeking to foreclose on mortgage where defendants had defaulted on underlying note. Record showed that plaintiff had previously filed action on two occasions against defendants to recover on instant note and had voluntarily dismissed both actions, and thus plaintiff was barred from filing instant action where it could not enforce underlying promissory note under Illinois “single re-filing” rule as set forth in 735 ILCS 5/13-217. Ct. found that plaintiff had waived any argument that Wisconsin law applied to instant action where it had failed to raise said argument in Dist. Ct. Moreover, Ct. held that plaintiff could not get around single re-filing rule by arguing that instant action was different from prior actions seeking to enforce promissory note.

Dist. Ct. erred in reversing Bankruptcy Ct. determination that defendant violated automatic stay provisions by continuing to withhold Medicaid reimbursements from plaintiff to satisfy plaintiff’s obligation to pay Hospital Assessment Fee after plaintiff had filed Chapter 11 bankruptcy petition. Said fee was pre-petition claim under applicable “conduct test,” where calculation of said fee had taken place prior to filing of bankruptcy petition, and thus defendant’s efforts to collect on said fee were subject to automatic stay provisions of Bankruptcy Code. Ct. rejected defendant’s claim that relevant conduct was plaintiff-hospital’s operations that occurred after date of bankruptcy petition.