Commercial Banking, Collections, and Bankruptcy

Bankruptcy Ct. did not err in upholding creditor’s unsecured claim for $945,000 arising out of agreement to purchase right to receive portion of net proceeds from sale of trust property controlled by debtors, where said agreement allowed creditor to elect to convert $700,000 (plus interest) purchase price under agreement into demand note if creditor gave debtors notice of said election on precise date set forth in agreement. Bankruptcy Ct. could properly find that creditor complied with terms of conversion option, where creditor sent said election certified mail on day before specified date in agreement. Moreover, Ct. rejected debtors’ contention that election had to be sent on specified date in order for election to be effective.

Dist. Ct. erred in dismissing defendant’s promissory estoppel counterclaim to plaintiff’s lawsuit alleging breach of contract arising out of defendant’s alleged default on four loans and in granting plaintiff’s motion for summary judgment on its claim against defendant. Defendant’s counterclaim, which alleged that plaintiff induced defendant to purchase equipment via plaintiff’s failed promise of $500,000 line of credit to fund such purchase, was sufficient to state claim of promissory estoppel that precluded Dist. Ct. from finding that such claim was “implausible” so as to support instant dismissal. Moreover, Dist. Ct. erred in granting plaintiff’s motion for summary judgment, where: (1) Dist. Ct. failed to explain rationale for said order; and (2) record suggested that said order was based on improper rejection of defendant’s promissory estoppel/prior breach of contract defenses.

Record contained sufficient evidence to support Bankruptcy Ct. order awarding Trustee $28,030.30 fee for services rendered during in instant bankruptcy petition over 4-year span. While debtors’ principal unsecured creditor alleged that said fee was excessive, said fee was within guidelines under section 326 of Bankruptcy Code based upon amount of recovered money that Trustee distributed to all creditors, and fact that $371,000 of recovered money went to secured creditors did not require subtraction in said amount so as to result in lower fee. Moreover, fee was reasonable given undisputed fact that Trustee spent at least 200 hours working on case.

Dist. Ct. did not err in granting defendants-financial institutions’ motion for summary judgment on plaintiffs-home owners’ action under Ill. Consumer Fraud and Deceptive Business Practices Act (ICFDBPA), as well as fraudulent possession and quiet title claims arising out of defendants’ foreclosure on plaintiffs’ home after plaintiffs had ceased making payments on their mortgage. Plaintiffs failed to establish any injury on their ICFDBPA claim arising out of one defendant’s statement that it could not locate plaintiffs’ account, since such statement would, if anything, be helpful to plaintiffs in any foreclosure action. Also, plaintiffs failed to state cause of action for fraudulent possession of their home, since said claim under 735 ILCS section 15-1701(a) does not apply where, as here, defendants’ conduct occurred before initiation of foreclosure proceedings. Finally, plaintiffs lacked standing to bring instant quiet title proceeding based on alleged untimely transfer of plaintiffs’ loan documents to trust entity after trust’s closing date, since: (1) any untimely transfer would be merely voidable; and (2) plaintiffs were not included in trust’s beneficiaries, who would have standing to contest said transfer.

Dist. Ct. did not err in granting defendant-law firm’s motion for summary judgment in action alleging that defendant violated Fair Debt Collection Practices Act (FDCPA) by seeking summary judgment in state court action to collect on underlying debt after plaintiff had sought arbitration on said claim, and by asserting interest rate on debt that was lower than rate that had applied to plaintiff’s credit card. Instant credit card agreement allowed for creditor to change rate of interest, and record showed that creditor had actually lowered plaintiff’s interest rate to level asserted by defendant. As such, there was no misrepresentation on part of defendant. Moreover, defendant’s prosecution on debt in state court had no FDCPA consequence.

Record contained sufficient evidence to support Dist. Ct.’s entry of judgment in favor of defendants in bench trial on plaintiff’s breach of contract action alleging that defendant failed to pay $200,000 break-up fee called for in Letter of Intent (LOI) when negotiations between parties failed to reach deal to sell defendants’ company prior to termination date set forth in LOI. Although plaintiff argued that defendants engaged in sham negotiations and made unrealistic demands to avoid paying break-up fee, Dist. Ct. could properly find that defendants continued to engage in bona fide negotiations through LOI termination date, where defendants did not send plaintiff notice of termination of negotiations that would otherwise trigger break-up fee, and where plaintiff failed to show that defendants lacked intention to complete sale by termination date, even though plaintiff presented evidence that: (1) president of company sent angry email prior to termination date indicating desire to end negotiations; (2) defendants refused to provide full scope of due diligence documents requested by plaintiff; and (3) defendants refused to perform certain environmental studies on company property that precluded plaintiff from obtaining financing to purchase company.

Bankruptcy Ct. did not err in denying debtor’s request to discharge $260,000 in student loan debt as part of debtor’s Chapter 7 bankruptcy petition, even though debtor, who was 56 years old and unemployed, argued that repayment of said amount would constitute undue hardship. Student loans are generally not dischargeable in bankruptcy, and debtor failed to show that his current inability to pay on student loans would likely persist over significant portion of instant repayment period, where: (1) Bankruptcy Ct. noted that debtor had MBA degree, was good writer and was able to earn living; and (2) record suggested that debtor was feigning psychological problems. Ct. further found that debtor failed to establish good faith element of applicable dischargeability test, where debtor favored certain creditors over others when making prior payments on his debt.

Dist. Ct. erred in granting defendant-passive debt buyer’s motion for summary judgment in action alleging that defendant’s activities in purchasing large quantities of Illinois consumers’ defaulted debt and referring collection of said debt to its related corporate entity qualified defendant as “collection agency” under Illinois Collection Agency Act (ICAA) that in turn subjected defendant to registration requirements under ICAA. Illinois Supreme Court, in LVNV Funding, LLC v. Trice, 32 N.E. 3d 553, concluded that passive debt buyer using third-party to collect on said debt qualified as collection agency, and thus Ct. of Appeals reversed contrary holding by Dist. Ct. and remanded case for further consideration of other issues raised by defendant.