Federal Deposit Insurance Corporation v. Fyre Lake Ventures LLC et al

Filing 74

ORDER entered by Judge Sara Darrow on September 27, 2013, DENYING Defendant's #23 Motion to Dismiss, and #53 Motion to Dismiss the Amended Complaint.(MRD, ilcd)

E-FILED

Friday, 27 September, 2013 10:36:05 AM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
ROCK ISLAND DIVISION
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver of
COUNTRY BANK,
Plaintiff,
v.
FYRE LAKE VENTURES LLC, BLAIR
MINTON, GREGORY YATES, KENNETH
HOFFMAN, JR., PAUL VAN
HENKELUM, GERALD LEE, JEROME
EPPING, JEFFREY FRYE, JAMES
GAUGERT, U.S. DEPARTMENT OF THE
TREASURY – INTERNAL REVENUE
SERVICE, DIRECTOR OF
EMPLOYMENT SECURITY OF THE
STATE OF ILLINOIS, 3-D CONCRETE,
INC., MIDWEST GOLF DEVELOPMENT,
INC. D/B/A GOLF CREATIONS, QC SILT
FENCE, INC., ROCK RIVER ELECTRIC,
INC., VAN HENKELUM, LYNCH &
ASSOCIATES, LLC, V2G SURVEYING,
LLC, and UNKNOWN OWNERS AND
NON-RECORD CLAIMANTS,
Defendants.

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Case No. 4:13-cv-04001-SLD-JAG

ORDER
Plaintiff FDIC-Receiver alleges that Defendant Kenneth Hoffman, Jr. breached an
agreement under which Hoffman personally guaranteed, up to a specified amount, a loan made to
Fyre Lake Ventures LLC (“FLV”). FDIC-Receiver claims that Hoffman is liable for the amount
specified in his guaranty agreement because FLV’s loan is in default. At issue is Defendant
Hoffman’s Motion to Dismiss, ECF No. 23, and Motion to Dismiss the Amended Complaint,

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ECF. No. 53.1 For the reasons set forth below, Defendant Hoffman’s Motion to Dismiss, ECF
No. 23, and Motion to Dismiss the Amended Complaint, ECF No. 53, are DENIED.

BACKGROUND
At the motion to dismiss stage, well-pleaded facts alleged in the complaint are taken as
true. Accordingly, for the purpose of these Motions, the Court rests its decision on the following
factual allegations: Country Bank was an Illinois state-chartered nonmember bank until October
2011 when the Illinois Department of Financial and Professional Regulation’s Division of
Banking closed Country Bank. After Country Bank closed, the Federal Deposit Insurance
Company was appointed as receiver for Country Bank (“FDIC-Receiver”). Plaintiff FDICReceiver has succeeded to all rights, titles, powers, and privileges of Country Bank, including the
power to foreclose on properties that secure loans made by Country Bank.
Country Bank made two loans to Defendant FLV. The first loan was for $6,500,000 and
was executed on approximately September 27, 2007, and the second loan was for $2,500,000 and
was executed on approximately February 27, 2009. In April 2009, Country Bank and FLV
consolidated the two loans into a single loan for $9,000,000 (“FLV Loan”). FLV used the FLV
Loan to acquire and develop real estate located in Mercer County, Illinois. The terms of the FLV
Loan required FLV to pay Country Bank quarterly payments of accrued interest as well as all
accrued principal by December 31, 2011, the maturity date.

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This Order applies equally to Defendant Hoffman’s Motion to Dismiss, ECF No. 23, and
Motion to Dismiss the Amended Complaint, ECF No. 53. Defendant Hoffman filed his first
motion to dismiss before Plaintiff FDIC-Receiver amended its complaint. While the amended
complaint added additional defendants, its allegations regarding Defendant Hoffman are
identical to the original complaint. Defendant Hoffman’s bases for dismissal in the motions to
dismiss and the supporting memoranda are also identical.
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The FLV Loan is secured by a real estate mortgage as well as personal guaranty
agreements made by eight individuals (the “Guarantors”). In the event that FLV defaults on the
FLV Loan, the personal guaranties individually obligate the Guarantors to pay FLV’s debts and
liabilities under the FLV Loan up to a certain amount. Under Hoffman’s guaranty agreement,
Hoffman is personally liable for a maximum of $900,000.
On December 5, 2011, after the FDIC became receiver for Country Bank but just before
the FLV Loan reached its maturity date, FDIC-Receiver notified FLV and the Guarantors that
the FLV Loan was in default. According to FDIC-Receiver, the FLV Loan was in default
because FLV had failed to make quarterly interest payments. As a result of the default, FDICReceiver demanded immediate payment of the principal and interest. FDIC-Receiver sent a
second notice of default and request for immediate payment to FLV and the Guarantors on
October 30, 2012.

As of May 24, 2013, the date that FDIC-Receiver filed its amended

complaint, FDIC-Receiver alleges that FLV and the Guarantors, including Defendant Hoffman,
have not paid the accrued principal and interest.

DISCUSSION
A motion to dismiss under Rule 12(b)(6) does not resolve the merits of a particular claim.
Instead, it tests only the sufficiency of the allegations set forth in the complaint. To state a claim,
a complaint must contain “a short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a). A court will accept the factual allegations in the
complaint as true, but they must give “‘fair notice of what . . . the claim is and the grounds upon
which it rests.’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)). “While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, . . . a plaintiff’s obligation to provide the
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‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions” and the
“[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id.
(citations omitted).

In sum, the plaintiff’s allegations must demonstrate that the claim “is

plausible, rather than merely speculative.” Tomayo v. Blagojevich, 526 F.3d 1074, 1083 (7th
Cir. 2008).
In ruling on a defendant’s motion to dismiss under Rule 12(b)(6), the court must “accept
all well-pleaded allegations in the complaint as true and draw all reasonable inferences in favor
of the plaintiff.” Forseth v. Vill. of Sussex, 199 F.3d 363, 368 (7th Cir. 2000). In doing so, the
facts set forth in the complaint are viewed “in the light most favorable to the nonmoving party.”
GATX Leasing Corp. v. Nat’l Union Fire Ins. Co., 64 F.3d 1112, 1114 (7th Cir. 1995). Facts in
the complaint that disprove the asserted claim should be considered, and the court need not
accept unsupported conclusions of law. N. Ind. Gun & Outdoor Shows v. City of South Bend,
163 F.3d 449, 452 (7th Cir. 1998) (quoting R.J.R. Servs., Inc. v. Aetna Cas. & Sur. Co., 895 F.2d
279, 281 (7th Cir. 1989)); see also Ashcroft v. Iqbal, 556 U.S. 662, 680–81 (2009) (citing
Twombly, 550 U.S. at 554–55) (conclusory allegations are “not entitled to be assumed true”).
While a district court will dismiss a complaint that fails to state a claim, a court will not
dismiss a complaint because of an affirmative defense raised by the defendant in its motion to
dismiss. Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 901 (7th Cir. 2004). Such a
dismissal under Rule 12(b)(6) would be inappropriate because “[c]omplaints need not contain
any information about defenses and may not be dismissed for that omission.” Id. “Only when
the plaintiff pleads itself out of court—that is, admits all the ingredients of an impenetrable
defense—may a complaint that otherwise states a claim be dismissed under Rule 12(b)(6).” Id.
Under Rule 12(d), a court has discretion to consider materials outside the pleadings and convert a

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motion to dismiss into a motion for summary judgment after giving all parties “a reasonable
opportunity to present all the material that is pertinent to the motion.” Fed. R. Civ. P. 12(d); see
Hecker v. Deere & Co., 556 F.3d 575, 582–83 (7th Cir. 2009) (noting that a district court has
discretion to convert a motion to dismiss into a motion for summary judgment). The Court
declines to convert this motion to dismiss into a motion for summary judgment. Accordingly,
when ruling on this motion to dismiss, the Court will not consider the exhibits that Hoffman
attached to his motion or the exhibits that FDIC-Receiver attached to its response.
Defendant Hoffman makes no effort in his Motions, ECF Nos. 23 and 53, or supporting
memoranda, ECF Nos. 24 and 54, to explain why Plaintiff FDIC-Receiver’s complaint fails to
state a claim. Instead of arguing that FDIC-Receiver’s complaint lacks adequate allegations to
support a claim for relief, Hoffman merely asserts a defense. Hoffman claims that a prior
settlement agreement that he had with Country Bank fully and completely releases him from the
current dispute.

But resolving whether or not this alleged settlement agreement releases

Hoffman from liability for the FLV Loan would be inappropriate at this time. It would be
inappropriate because a plaintiff is not required to anticipate defenses in the complaint, and
Hoffman has not alleged that the complaint itself establishes his defense. In other words, the
defense that Hoffman raises does not challenge the sufficiency of FDIC-Receiver’s allegations
against him, and this is not a case where the plaintiff has pleaded itself out of court. The Court’s
task at this stage is to test the sufficiency of FDIC-Receiver’s allegations regarding Hoffman.
FDIC-Receiver’s allegations against Hoffman sufficiently state a claim that Hoffman failed to
honor the guaranty agreement that made him personally liable for the FLV Loan. Thus, FDICReceiver has plausibly stated a claim for breach of guaranty against Hoffman.

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CONCLUSION
For the reasons set forth above, the Court DENIES Defendant’s Motion to Dismiss, ECF
No. 23, and Motion to Dismiss the Amended Complaint, ECF No. 53.

Entered this 27th day of September, 2013.
s/ Sara Darrow
SARA DARROW
UNITED STATES DISTRICT JUDGE

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