FirstMerit Bank, N.A. v. Frasca
Filing
69
MEMORANDUM Opinion and Order: The Court grants plaintiff's motion for summary judgment 31 on the merits but not as to damages. The Court grants plaintiff 56 days in which to file a motion for summary judgment as to damages. Signed by the Honorable George M. Marovich on 12/17/2013:Mailed notice(clw, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FIRSTMERIT BANK, N.A., a national
banking association, as successor in interest
to the FDIC, as receiver for Midwest Bank
and Trust Company,
Plaintiff,
v.
DANIEL N. FRASCA,
Defendant.
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) No. 13 C 3
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) Judge George M. Marovich
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MEMORANDUM OPINION AND ORDER
Plaintiff FirstMerit Bank, N.A. (“FirstMerit”), a national banking association, as
successor in interest to the FDIC, as receiver for Midwest Bank and Trust Company, filed a
complaint against defendant Daniel N. Frasca (“Frasca”) to enforce a guaranty.1 FirstMerit has
filed a motion for summary judgment against defendant Frasca, and Frasca has failed to respond.
For the reasons set forth below, the Court grants the motion for summary judgment as to the
merits but denies it as to the damages.
I.
Background
Local Rule 56.1 outlines the requirements for the introduction of facts parties would like
considered in connection with a motion for summary judgment. As the Court notes on its
website, the Court enforces Local Rule 56.1 strictly. To be considered, facts must be included in
1
The Court has diversity jurisdiction over this case, because plaintiff FirstMerit is a
citizen of Ohio, defendant Frasca is a citizen of Illinois, and the amount in controversy is greater
than $75,000.00.
a party’s statement of undisputed facts. Facts argued in briefs but not included in a party’s
statement of undisputed facts are not considered by the Court, because to do so would rob the
other party of his or its opportunity to show such facts are disputed. Local Rule 56.1 states that
“[a]ll material facts set forth in the statement required of the moving party will be deemed to be
admitted unless controverted by the statement of the opposing party.” Local Rule 56.1(b)(3)(C).
In this case, defendant Frasca did not respond to plaintiff’s statement of undisputed facts.
Accordingly, those facts are deemed admitted. Accordingly, the following facts are undisputed.
On or about May 15, 2008, Isabella Northfield, LLC (“Isabella” or the “Borrower”)
executed a note (the “Isabella Note”) to evidence a construction loan in the amount of
$3,974,000.00. The Isabella Note sets out an interest rate of 6% and a default interest rate of
11%. (Isabella Note at 1, 3). At about the same time that Isabella executed its note, Frasca
executed a guaranty (the “Frasca Guaranty”), pursuant to which he guaranteed a portion of the
“Indebtedness” evidenced by the Isabella Note. The Isabella Note and the Frasca Guaranty are
now owned by FirstMerit.
The Frasca Guaranty states, in relevant part:
1.
Guaranty. Guarantor absolutely, unconditionally and irrevocably
guarantees to Lender:
(a)
The full and prompt payment when due, whether at stated
maturity, upon acceleration or otherwise, and at all times thereafter, of any
and all debts, liabilities and obligations of the Borrower for the payment
of money to Lender under or related to the Loan, however created, arising
or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, due or to become due, known or unknown to Guarantor
at the time of the execution of this Guaranty, including, without limitation,
all debts, liabilities and obligations of Borrower to Lender under the Note,
the Loan Agreement or any of the other Loan Documents, plus interest at
the Default Rate under the Note, from and after demand from Lender to
Guarantor for payment;
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(b)
The full and prompt payment upon demand by Lender of
all amounts required to be paid pursuant to the Mortgage or the Loan
Agreement with respect to the Project . . .
(c)
The full and prompt payment upon demand by Lender of
all amounts required by Lender under the Loan Agreement to keep the
loan in balance;
(d)
defined);
The payment of all Enforcement Costs (as hereinafter
* * *
All amounts due, debts, liabilities and payment obligations described in
subparagraphs (a), (b), (c) and (d) of this Paragraph 1 are referred to herein as the
“Indebtedness.” . . . Guarantor’s liability under this Guaranty with respect to the
Indebtedness shall not exceed twenty-five percent (25%) of the original Loan
amount, plus interest on the foregoing at the default rate under the Note after
written demand from Lender to Guarantor for payment, plus all Enforcement
Costs.
2.
Lender’s Remedies. (a) During the continuance of an Event of
Default by Borrower under the Note, Mortgage, Loan Agreement or any of the
other Loan Documents, Guarantor agrees, on written demand by Lender, to pay
all sums guaranteed or due hereunder regardless of any defense, right of set-off or
claims which Borrower or Guarantor may have against Lender. This is an
absolute, irrevocable, present and continuing guaranty of payment and not of
collection.
* * *
7.
Enforcement Costs. If . . . this Guaranty, the Note or any Loan
Document is placed in the hands of one or more attorneys for collection or is
collected through any legal proceeding; . . . then Guarantor shall pay to Lender
upon demand all reasonable attorneys’ fees, costs and expenses, including,
without limitation, court costs, filing fees . . . and all other costs and expenses
incurred in connection therewith (all of which are referred herein as
“Enforcement Costs”) . . .
Frasca Guaranty at 1, 2, 5.
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In January 2010, the Borrower and Frasca executed documents that extended the maturity
of the Isabella Note to May 5, 2010. Later, the parties agreed to extend the maturity of the
Isabella Note to May 5, 2012.
Ultimately, the borrower defaulted. On May 5, 2011, the Borrower failed to make a
payment on the Isabella Note. The next day, on May 6, 2011, FirstMerit sent notice to the
Borrower and Frasca that the Note was in default. When the Note matured on May 5, 2012,
Borrower failed to pay the remaining principal balance.
In the meantime, Frasca has not made any payment to FirstMerit. As of April 28, 2013,
the outstanding principal balance was $650,000.00 and the accrued interest (at the default rate)
was $420,186.11. Interest has continued to accrue at $198.61 per day. FirstMerit has incurred
enforcement costs of $37,770.70.
II.
Summary Judgment Standards
Summary judgment should be granted when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law” Fed. R. Civ. P. 56(a).
When considering a motion for summary judgment, the Court must construe the evidence and
make all reasonable inferences in favor of the non-moving party. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986). “A genuine issue of material fact arises only if sufficient
evidence favoring the nonmoving party exists to permit a jury to return a verdict for that party.”
Brummett v. Sinclair Broadcast Group, Inc., 414 F.3d 686, 692 (7th Cir. 2005).
III.
Discussion
“A guaranty, of course, is a contract, so we apply general rules of contract interpretation
to the dispute.” AAR Aircraft & Engine Group, Inc. v. Edwards, 272 F.3d 468, 470 (7th Cir.
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2001) (citing McLean Cty. Bank v. Brokaw, 119 Ill.2d 405, 412 (Ill. 1988)). Under Illinois law,
“a guaranty is a legally enforceable contract that must be construed according to its terms, so
long as they are clear and unambiguous.” Federal Dep. Ins. Corp. v. Rayman, 117 F.3d 994, 998
(7th Cir. 1997). Waivers of defenses, within a guaranty, are enforceable under Illinois law. See
Chrysler Credit Corp. v. Marino, 63 F.3d 574, 577 (7th Cir. 1995).
In this case, FirstMerit has put forth undisputed evidence that defendant Frasca breached
the Frasca Guaranty. FirstMerit put forth undisputed evidence that Frasca executed the Frasca
Guaranty, which states that Frasca “absolutely, unconditionally and irrevocably guarantees . . .
[t]he full and prompt payment when due . . . of any and all debts, liabilities and obligations of the
Borrower . . . . plus interest at the Default Rate under the Note, from and after demand from
Lender to Guarantor for payment.” FirstMerit has put forth undisputed evidence that the
Borrower defaulted and that FirstMerit gave notice to Frasca on May 6, 2011. Accordingly,
FirstMerit has shown that Frasca breached the guaranty.
FirstMerit has also shown that Frasca’s affirmative defense fails as a matter of law.
Frasca, in his answer, asserted the defense of failure to mitigate. Frasca, however, agreed “to
pay all sums guaranteed or due hereunder regardless of defense, right or set-off or claims which
Borrower or Guarantor may have against Lender.” (Frasca Guaranty at 2) (emphasis added).
Such waivers of defenses are enforceable under Illinois law. Chrysler Credit Corp. v. Marino,
63 F.3d 574, 577 (7th Cir. 1995). Thus, Frasca’s affirmative defense fails as a matter of law.
FirstMerit has, thus, shown that there is no genuine issue of material fact and that it is
entitled to judgment as a matter of law as to the merits of its claim for breach of guaranty against
Frasca. Thus, the Court grants summary judgment to FirstMerit on the merits of its claim.
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Next, the Court turns to the matter of damages. The terms of the guaranty limit Frasca’s
liability. The Frasca Guaranty states that Frasca’s “liability under this Guaranty with respect to
the Indebtedness shall not exceed twenty-five percent (25%) of the original Loan amount, plus
interest on the foregoing at the default rate under the Note after written demand from Lender to
Guarantor for payment, plus all Enforcement Costs.” (Frasca Guaranty at 2) (emphasis added).
“Indebtedness” is the amount due under Paragraph (1) parts (a)-(d) of the Frasca Guaranty.
FirstMerit does not explain how damages are to be calculated based on the language in the
Frasca Guaranty. FirstMerit did, however, ask for the opportunity to file a subsequent
submission to establish the amount of liability. That request is granted.
IV.
Conclusion
For the reasons set forth above, the Court grants plaintiff’s motion for summary judgment
on the merits but not as to damages. The Court grants plaintiff 56 days in which to file a motion
for summary judgment as to damages.
ENTER:
George M. Marovich
United States District Judge
DATED: December 17, 2013
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