Southport Bank v. Miles et al

Filing 260

MEMORANDUM Opinion and Order Entered by the Honorable John W. Darrah on 3/27/2014. Mailed notice (tlm)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SOUTHPORT BANK,
Plaintiff,
v.
CHARLES V. MILES,
RANDOLPH S. MILES, and
GOEKEN GROUP CORP.,

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Case No. 10-cv-8321
Judge John W. Darrah

Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff Southport Bank (“Southport”) has brought this post-trial Motion for Judgment as
a Matter of Law, pursuant to Federal Rule of Procedure 50(b)(3), with respect to Defendant
Goeken Group Corp. (“Goeken”). For the following reasons, this Motion is granted.
BACKGROUND
On December 31, 2010, Southport filed a five-count Complaint alleging two counts each
against the individual Defendants, Charles Miles and Randolph Miles (Counts I through III), and
one count of “Claim on Promissory Note Against Goeken Group” (Count IV). (Compl. ¶¶ 3036.) Specifically, as more fully discussed below, Southport alleged that Goeken had entered into
a promissory note and loan agreement with Defendant Randolph Miles (“Miles”); subsequently,
Miles assigned the promissory note to Southport, and Goeken made no payment to Southport as
assignee. After failed settlement negotiations, the case proceeded to jury trial on
October 21, 2013.

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After Goeken had presented its case, Southport moved for judgment as a matter of law
pursuant to Federal Rule of Civil Procedure 50(a)(2), which the Court took under advisement.
The jury found in Southport’s favor with respect to the individual defendants on Counts I
through III. However, they found in favor of Goeken with respect to Count IV. After the
verdict, Southport moved for judgment as a matter of law pursuant to Federal Rule of Civil
Procedure 50(b)(3).
LEGAL STANDARD
When a party’s motion for judgment as a matter of law under Rule 50(a) is denied, it is
considered submitted to the jury “subject to the court's later deciding the legal questions raised
by the motion.” Fed. R. Civ. Pro. 50(b). After judgment, the party may renew its motion and the
court may direct entry of judgment as a matter of law. Id.
Weighing evidence and determining credibility are the obligations of the jury, not the
court. Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). A court “may not step in and
substitute its view of the contested evidence for the jury's.” Mathur v. Bd. of Trs.of S. Ill. Univ.,
207 F.3d 938, 941 (7th Cir. 2000) (citations and quotation marks omitted). Therefore, a Rule 50
motion will only be granted when the evidence is construed “strictly in favor of the party who
prevailed before the jury” and still will not support the verdict rendered. Passananti v.
Cook Cnty., 689 F.3d 655, 659 (7th Cir. 2012) (citing Tart v. Illinois Power Co., 366 F.3d 461,
464 (7th Cir. 2011)).

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ANALYSIS
The parties do not dispute that on March 31, 2004, Goeken executed the note and loan
agreement in which it promised to pay Miles a sum of $2,000,000, plus interest, in accordance
with the terms of the note and the incorporated loan agreement. (Compl. Ex. 5.) 1
Subsequently, on November 7, 2008, Miles entered into a “Hypothecation Agreement”
and an “Assignment” with Southport, both of which purported to assign to Southport the
obligations of Goeken to Miles up to $4,000,000. (Pl.’s Tr. Exs. 13-14.) On
November 17, 2008, Miles issued a letter of direction to Goeken, instructing Goeken to make
any payment due to Miles directly to Southport. (Pl.’s Tr. Ex. 15.) Goeken consented to the
letter of direction. (Id.) None of these documents – the Hypothecation Agreement, Assignment,
or the letter of direction – provided a date by which payment was due.
On February 13, 2009, Goeken executed, signed, and sent to Miles a letter (“Goeken
Letter”) stating:
Dear Randy,
This letter serves as a summary of the outstanding undocumented consolidated loan (the
“Loan”), between Goeken Group Corp. (the “Borrower”) and Randolph Miles (the
“Lender”).
According to our records, for the purposes of the Loan, the Lender has loaned the
Borrower, in numerous distinct disbursements, dating from May 6, 2003 to February 2,
2007, Ten Million Three Hundred Seventy One Thousand Five hundred dollar[s]
($10,371,500.00). Appendix A attached, shows the amount and date of each
disbursement from Lender to Borrower.

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The note and loan agreement were not included in Southport’s admitted trial exhibits.
However, neither party argues the note and loan agreement were not admitted at trial, and each
was attached to the original and Amended Complaint as Exhibit 5 (note) and Exhibit 6 (loan
agreement), as well as to Southport’s Motion for Judgment as a Matter of Law as Exhibit G.
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The Loan Consolidates all of Lender[’]s undocumented loans referred to above. The
Loan also consolidates the Lender[‘]s One (1) documented loan (the “Documented
Loan”) with Borrower, dated March 31, 2004 for Two Million dollars ($2,000,000.00),
which through its being included in said Loan, must be considered cancelled and of no
force or effect. (Emphasis Added)
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The Loan, in part, consists of two separate Loan Agreements between the Lender and the
Borrower. The first dated April 1, 2004 cancels and consolidates the Documented Loan
and creates a line of credit (the “Retroactive Loan”) for Ten Million Three Hundred
Seventy One Thousand Five hundred dollars ($10,371,500.00).
The Second Loan Agreement dated with today’s date, February 13, 2009, date extends
the Retroactive Loan Agreement to December 31, 2010, when all interest and principal
will be due and payable.
(Tr. Ex. 24.) The Goeken Letter was not signed by Miles or Southport.
The November 7, 2008 assignment provides “[t]o the extent [Miles] is due to receive
funds” from Goeken, they should be directed to Southport. Goeken argues that the jury’s verdict
was reasonable because the assignment of November 7, 2008, and the letter of direction of
November 17, 2008, did not provide a date upon which payment was due. Therefore, Goeken
argues that, without such date, no funds are “due” to Miles, or Southport by assignment.
Southport contends that the Goeken Letter of February 13, 2009, as set out above, was
clearly intended by Goeken to modify the note to provide December 31, 2010, as the date
payment was due. Goeken responds that the Goeken Letter was a unilateral modification of the
note, signed only by Goeken, and is therefore invalid.
Resolving whether a particular instrument becomes binding only with both parties’
signatures requires a determination of the parties’ intent. Consol. Bearings Co. v.

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Ehret-Krohn Corp., 913 F.2d 1224, 1231 (7th Cir. 1990) (citing Lynge v. Kunstmann, 418
N.E.2d 1140, 1144 (1981)). The underlying March 31, 2004 loan agreement provided in Section
8.05 that “[t]his Agreement and the other agreements to which it refers constitute the complete
agreement between the parties with respect to the subject matter and may not be changed,
modified, waived, amended or terminated orally, but only by writing signed by the party to be
charged.” (Compl. Ex. 6.) Southport argues that Goeken, as the obligor on the note, was the
“party to be charged,” and, therefore, the parties expressly reserved the right to Goeken to
unilaterally modify the loan agreement.
Goeken argues that the Goeken Letter was never assented to by Miles or Southport.
However, their assent is unnecessary. Goeken executed the Goeken Letter and signed it as the
party to be charged. Goeken, in support of its position that such unilateral contract modifications
are not valid, cites Kinkel v. Cingular Wireless LLC, 857 N.E.2d 250, 260 (Ill. 2006). Yet,
Kinkel clearly states that “[o]ne party to a contract may not unilaterally modify a contract
term . . . after the contractual relationship between the parties has ended and the original
contract is the subject of a dispute.” Id. (emphasis added). There was no evidence that the
relationship between Southport and Goeken had ended before February 13, 2009
As mentioned above, it is clear from the face of the loan agreement that the parties
intended that Goeken could unilaterally modify the agreement. The Letter signed by Goeken is
a clear and unambiguous modification of the terms of the loan agreement and was so intended by
Goeken. No evidence was offered to the contrary. It is also undisputed that Goeken never paid
Southport on the assignment of the March 31, 2004 note.

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The verdict form for Count IV makes clear that the jury found Southport “had a right to
receive payments from the Goeken Group.” (Jury Instructions p. 37.) However, the jury then
found that Goeken had not “breached its obligation under the Letter of Direction to make
payments directly to Southport.” (Id.) The jury, in reaching this verdict, could only have
determined that the Goeken Letter of February 13, 2009 was not intended to modify the loan
agreement to make the funds due and payable on December 31, 2010. However, the evidence
does not reasonably support this conclusion.
Both parties confine their argument to whether the Goeken Letter legally could modify
the agreement. Although it is true that “[t]he acts relied upon to modify a prior contract must be
unequivocal in character,” Carnes Co. v. Stone Creek Mech., Inc., 412 F.3d 845, 853 (7th Cir.
2005), Goeken does not argue that the Goeken Letter was equivocal. Instead, Goeken argues
only that the assignment, hypothecation agreement, and letter of direction did not contain a
payment due date and that the unilateral nature of the Goeken Letter makes it unenforceable as a
modification of those three documents. As set out above, this contention is legally incorrect.
Therefore, the Goeken Letter is enforceable as a modification of the loan agreement, and it
establishes a payment due date of December 31, 2010. It is uncontested no payment has been
made by Goeken.
A jury’s verdict must be upheld unless the jury lacked a legally sufficient evidentiary
basis. Fed. R. Civ. Pro. 50(a)(1). In order to be legally sufficient, the evidence does not have to
be “overwhelming, but it must be more than a mere scintilla.” Filipovich v.
K & R Express Sys., Inc., 391 F.3d 859, 863 (7th Cir. 2004) (citations and quotation marks
omitted). There is not more than a scintilla of evidence here that the Goeken Letter was not

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intended as a modification, and Goeken does not argue to the contrary. The unilateral
modification by Goeken is enforceable and provided a due date on the March 31, 2004 note of
December 31, 2010. Once the date was proved, and that Goeken failed to pay the note on or
before that date, no reasonable jury could find in favor of Goeken.
CONCLUSION
For the reasons set forth above, Southport’s Motion for Judgment as a Matter of Law
[213] is granted.

Date:

3/27/2014

______________________________
JOHN W. DARRAH
United States District Court Judge

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