Celtic Bank, Corporation v. Executive Title, Inc. et al

Filing 73

MEMORANDUM Opinion and Order Signed by the Honorable Young B. Kim on 5/27/2016. (ma,)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CELTIC BANK CORPORATION, a
Utah Chartered Bank,
Plaintiff,
v.
EXECUTIVE TITLE, INC., f/k/a
Protect 1 Title, Inc., an Illinois
corporation, MARTHA TOVIAS, and
FERRANDO R. CARRANZA &
ASSOCIATES,
Defendants.

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No. 15 CV 30

Magistrate Judge Young B. Kim

May 27, 2016

MEMORANDUM OPINION and ORDER
In this diversity suit Plaintiff Celtic Bank Corporation (“Celtic Bank”) alleges
that Defendants Executive Title, Inc. (“Executive Title”) and Fernando R. Carranza
& Associates breached their obligations under a promissory note secured by a
mortgage loan agreement and that Defendant Martha Tovias breached her
unconditional guarantee of the promissory note.

Claiming that Defendants

defaulted on their obligations under the promissory note and unconditional
guarantee, Celtic Bank seeks a judgment of foreclosure and an order of sale on the
commercial property that is the subject of the mortgage. Before the court is Celtic
Bank’s motion for summary judgment. For the following reasons, the motion is
granted:

Procedural History
Celtic Bank filed its three-count complaint against Defendants in January
2015. (R. 1.) Count one is a claim for mortgage foreclosure, count two is a claim for
foreclosure of liens and security interests, and count three is a claim against Tovias
for breach of the commercial guarantee. Executive Title and Tovias included a
counterclaim in their answer, alleging that Celtic Bank breached the promissory
note by refusing to accept payments from Executive Title in October and November
2014. (R. 13, Ans. at 7-9.)
After the parties consented to this court’s jurisdiction, see 28 U.S.C. § 636(c);
(R. 20), they informed the court that Executive Title had filed for bankruptcy,
(R. 25). Celtic Bank sought and was granted leave to proceed with discovery with
respect to its claim against Tovias during the pendency of Executive Title’s
bankruptcy proceedings despite the automatic stay. (R. 46.) After discovery closed
Celtic Bank filed the current motion, seeking summary judgment on all three of its
counts. (R. 52.) The court initially denied the motion without prejudice because the
docket did not reflect that the stay had been lifted in Executive Title’s bankruptcy
proceedings. (R. 65.) Celtic Bank moved to reinstate the motion, notifying the court
that the Executive Title bankruptcy proceeding was dismissed on January 5, 2016.
(R. 66.) The court reinstated the current motion for summary judgment on April 29,
2016, and the motion is now ripe for resolution. (R. 68.)

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Local Rule 56.1
Before describing the factual background in this case, the court notes that
Defendants’ response to Celtic Bank’s Local Rule 56.1 statement of facts and their
statement of additional material facts, (R. 57), do not conform to Local Rule 56.1’s
requirements governing the submission of facts at the summary judgment stage.
Local Rule 56.1 requires the moving party to submit a statement of material facts
comprised of short, numbered paragraphs that are supported by citations to
admissible evidence. L.R. 56.1(a); Smith v. Lamz, 321 F.3d 680, 682 (7th Cir. 2003).
Celtic Bank did that here. Accordingly, Defendants as the non-moving parties were
required “to respond particularly to each numbered paragraph and, in the case of
disagreement, provide citations to supporting evidentiary material.” Smith, 321
F.3d at 682; L.R. 56.1(b). Here, Defendants admitted 30 out of Celtic Bank’s 42
factual assertions, and simply wrote “disagreed” or “denied in part” next to 10 of the
12 assertions they disputed without citing any evidence to support the
disagreement. (R. 57, Defs.’ Resp. to Pl.’s Facts.) They cited evidence to support
only two of their responses to Celtic Bank’s facts.

(Id. ¶¶ 22, 27.)

Similarly,

Defendants failed to cite to any evidence in support of 15 out of the 39 factual
assertions listed in their Local Rule 56.1 statement of additional facts, (id. at 5-13),
despite the local rule’s requirement that the non-moving party’s statement of
additional facts must include “references to the affidavits, parts of the record, and
other supporting material relied upon,” see L.R. 56.1(b)(3)(B). Celtic Bank argues
that based on Defendants’ non-compliance this court should deem admitted most of

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the facts set forth in Celtic Bank’s statement of facts, and argues that most of the
facts set forth in Defendants’ statement of additional facts should be stricken.
(R. 60, Pl.’s Reply at 2-3.)
The Seventh Circuit has consistently held that trial courts are entitled to
“strict compliance with Local Rule 56.1.” Cichon v. Exelon Generation Co., LLC, 401
F.3d 803, 809 (7th Cir. 2005). Accordingly, where the non-moving party fails to
dispute the moving party’s statement of facts in the manner set forth in Local Rule
56.1, those facts are deemed admitted for purposes of the summary judgment
motion. Smith, 321 F.3d at 683. Similarly, the court is within its discretion to
ignore the additional facts submitted by the non-moving party if its submission does
not conform to the rule by providing proper citations to the record. Cichon, 401 F.3d
at 809-10; Friend v. Valley View Cmty. Unit Sch. Dist. 365U, 789 F.3d 707, 710 (7th
Cir. 2015).

The purpose of imposing these fairly harsh consequences for non-

compliance with the rule is to prevent trial courts from having to wade through the
record or dig through insufficiently supported denials to determine whether a fact is
genuinely in dispute. Smith, 321 F.3d at 683.
Here Defendants’ “efforts cannot be considered compliant, let alone strictly
compliant, with the requirements of Rule 56.1.” See Friend, 789 F.3d at 711. With
respect to their response to Celtic Bank’s statement of facts, Defendants simply
wrote “disagreed” next to the number that corresponds with six of their fact
statements. (R. 57, Defs.’ Resp. to Pl.’s Facts ¶¶ 31, 34-35, 37-38, 42.) That is
plainly insufficient to render the facts in dispute under Local Rule 56.1.

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In

response to four other facts, Defendants provided a sentence stating why they
disagree with Celtic Bank’s statement but failed to support their response with any
citation to evidence.

(Id. ¶¶ 18, 20, 28, 29.)

Those responses are similarly

insufficient to raise a genuine fact dispute. See Smith, 321 F.3d at 683 (noting that
“a mere disagreement with the movant’s asserted facts is inadequate if made
without reference to specific supporting material”). Only Defendants’ responses to
paragraphs 22 and 27 cite record evidence, and accordingly, only those two
paragraphs are genuinely in dispute. Celtic Bank’s statement of facts is otherwise
deemed admitted in its entirety.
Turning to Defendants’ statement of additional facts, Celtic Bank argues that
the court should strike 15 paragraphs from that statement because they are
unsupported by references to the record. (R. 60, Pl.’s Reply at 3.) For the most part,
the paragraphs in Defendants’ statement of additional facts track and reference an
affidavit submitted by Fernando Carranza, Defendants’ attorney. Because of this
close tracking, the court is able to see that paragraphs 10, 20, 22, and 29 of
Defendants’ additional facts are supported by paragraphs 8, 21, 23, and 30,
respectively, of Carranza’s affidavit.

Because the court can identify the record

support without resorting to the kind of “truffle-hunting” that Rule 56.1 is designed
to prevent, see Smith, 321 F.3d at 683, the court will exercise its discretion to allow
those paragraphs to stand. Moreover, paragraphs 38 and 39 simply describe the
complaint and Defendants’ answer, so they will be disregarded as unhelpful rather
than as being unsupported. The remaining nine paragraphs lacking citation either

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have no obvious support in Carranza’s affidavit, rest on nothing more than an
assertion that something is true “upon information or belief,” or are improperly
comprised of legal, rather than factual assertions. Accordingly, the court will not
consider paragraphs 11-13, 15, 18-19, 21, 28, and 36 from Defendants’ statement of
additional facts in resolving the current motion for summary judgment.
Facts
Having winnowed out the fact statements that fail to conform with Local
Rule 56.1, the remaining facts are undisputed unless otherwise indicated.
A.

The Loan Documents
On May 18, 2007, Executive Title entered into a Promissory Note with First

National Bank of Arizona in the amount of $450,000 and entered into a Mortgage
and Security Agreement, a Security Agreement, and an Assignment of Rents and
Leases to secure payment of the principal, interest, and other charges provided for
in the Promissory Note. (R. 54, Pl.’s Facts ¶¶ 7-8.) The mortgage gave a security
interest to First National Bank of Arizona in the real commercial property and
improvements located at 5814 West Cermak, Cicero, Illinois 60804 (“the Property”).
(Id. ¶ 9.) The Security Agreement and Assignment of Rents also gave it a security
interest in certain collateral owned by Executive Title and in the rents, income, and
profits generated from any leases on the Property. (Id. ¶¶ 10-11.) Also on May 18,
2007, Tovias signed an Unconditional Guarantee in which she guaranteed the
payment of all of the amounts due and owing under the Promissory Note. (Id. ¶ 13.)
After a second bank succeeded to First National Bank of Arizona’s interest in the

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Promissory Note, Mortgage, Security Agreement, Assignment of Rents, and
Unconditional Guarantee (collectively, “the Loan Documents”) and was put into
receivership by the FDIC, Celtic Bank acquired the servicing rights for the Loan
Documents on September 30, 2009. (Id. ¶¶ 14-16.) Celtic Bank is currently the
legal holder of all of the rights, title, and interest in the Loan Documents. (Id. ¶ 16.)
B. The Forbearance Agreements
When Celtic Bank acquired its interest in the Loan Documents Defendants’
obligations under those documents were current, but Executive Title failed to make
its monthly principal and interest installment payments from May through October
2011. (Id. ¶¶ 17-18.) Under the terms of the Promissory Note, a default occurs if
Executive Title fails to make a payment when due or if it fails to pay real estate
taxes on the Property when due.

(Id. ¶¶ 24, 32.)

A default occurs under the

Mortgage if Executive Title fails to make a payment required by the Promissory
Note or Mortgage, and a default occurs under the Security Agreement if Executive
Title fails to make a payment when due under the Promissory Note or Security
Agreement. (Id. ¶¶ 25-26.) Upon an event of default on the Promissory Note, the
entire debt becomes immediately due and payable.

(Id. ¶ 33.)

In fact, the

Promissory Note states that if there is a default, Celtic Bank may “[r]equire
immediate payment of all amounts owing under this Note” and “[c]ollect all
amounts owing from any Borrower or Guarantor” without notice or demand and
without forfeiting any of its rights. (Id. Ex. 1A, Prom. Note § 5.) Celtic Bank also
has the right upon default of the Promissory Note or Mortgage to collect all rents

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accruing from leases on the Property and to evict tenants. (Id. ¶ 36.) Defendant
Fernando R. Carranza & Associates, LTD is a tenant of the Property. (Id. ¶ 4.)
Because Executive Title failed to make its monthly payments, Executive Title
and Celtic Bank entered into a written forbearance agreement (“the First
Forbearance Agreement”) on October 20, 2011, in which Celtic Bank agreed to
forbear its rights and remedies under the Loan Documents until October 20, 2013,
in exchange for Executive Title paying reduced monthly payments through the
payment due in September 2013. (Id. ¶ 8; R. 54, Pl.’s Facts ¶ 19.) After the First
Forbearance Agreement expired, Executive Title did not make its monthly
payments due for the remainder of 2013. (R. 54, Pl.’s Facts ¶ 20.) On December 18,
2013, the parties entered into a second written forbearance agreement, under which
Celtic Bank again agreed to forbear its rights and remedies under the Loan
Documents in exchange for reduced monthly payments from Executive Title, this
time through the period ending on October 1, 2014 (“the Second Forbearance
Agreement”). (Id. ¶¶ 20-21 & Ex. G at 2.) The Second Forbearance Agreement
states that Celtic Bank “shall have no obligation to forbear hereunder past October
01, 2014.” (Id. Ex. G at 2.)
C.

Request for a Third Forbearance Agreement
What happened after the Second Forbearance Agreement expired on October

1, 2014, is partly disputed. The parties agree that in early October 2014 Carranza,
Executive Title’s attorney, spoke with Skyler McClure, a Loan Portfolio Manager at
Celtic Bank, by phone during which Carranza asked whether it would be possible to

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enter into a third forbearance agreement. (R. 61, Pl.’s Resp. to Defs.’ Add’l Facts
¶ 23.)

No agreement was reached during this phone conversation as to future

payments under the loan.

(Id. ¶ 24.)

On October 22, 2014, McClure emailed

Carranza and wrote, “The previous forbearance agreement expired this month, I
need to discuss renewing this with you as soon as possible. I have called your office
and left multiple messages.” (Id. ¶ 25; R. 58-1, Carranza Aff. Ex. 10.) Twenty-four
hours later McClure emailed Carranza again and wrote, “This will be my last
attempt to contact you regarding offering an additional forbearance agreement.
The full payment is due and owing for October and the account is approaching 30
days past due.” (R. 58-1, Carranza Aff. Ex. 11.) On October 31, 2014, Carranza
emailed McClure documents McClure had requested in order to process the request
for a third forbearance agreement. (R. 61, Pl.’s Resp. to Defs.’ Add’l Facts ¶ 27.) On
November 3, 2014, Celtic Bank processed Executive Title’s request for a third
forbearance agreement. (Id. ¶ 31.) Carranza and McClure spoke on the phone
three days later and McClure told Carranza that his request was under
consideration. (Id. ¶ 32.)
According to Defendants, but disputed by Celtic Bank, during this phone
conversation McClure verbally agreed to allow Executive Title to make monthly
payments of $2,888.73 to cover payments due in October and November 2014 and
for the monthly payments going forward. (R. 57, Defs.’ Add’l Facts ¶ 32.) It is
undisputed, however, that Celtic Bank ultimately declined Defendants’ request for
a third written forbearance agreement. (R. 61, Pl.’s Resp. to Defs.’ Add’l Facts ¶ 34.)

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On November 7, 2014, Executive Title sent Celtic Bank a check in the amount of
$2,888.73. (Id. ¶ 35.) Celtic Bank did not accept the check. Instead, on November
14, 2014, Celtic Bank sent Executive Title a notice of default and intent to
accelerate the loan based on Executive Title’s failure to pay the October and
November 2014 monthly payments and late fees. (Id. ¶ 37.) Executive Title and
Tovias failed to pay the outstanding balance due under the Promissory Note,
including accrued late fees, in response to the notice of default. (R. 54, Pl.’s Facts
¶ 31.)
Also according to Defendants, but disputed by Celtic Bank, on November 3,
2014, Carranza and McClure exchanged emails regarding the payment of real
estate taxes, and “reached an agreement” that the outstanding taxes would be paid
“within the next subsequent months.”

(R. 57, Defs.’ Add’l Facts ¶ 29.)

It is

undisputed that Defendants did not pay the real estate taxes until after this lawsuit
was filed. Specifically, on July 14, 2015, Executive Title paid the 2013 real estate
taxes that were due back in March and August 2014.

It then paid the 2014 real

estate taxes that were due in March and August 2015 on October 28, 2015, the day
after it was ordered by the bankruptcy court to make the taxes current. (Id. ¶ 30;
R. 61, Pl.’s Resp. to Defs.’ Add’l Facts Exs. A, C & E.)
Analysis
Celtic Bank argues that summary judgment is appropriate with respect to all
of its claims because, according to it, the undisputed facts demonstrate that
Defendants defaulted on the loan documents by failing to make timely payments in

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October and November 2014, and by failing to timely pay the 2013 and 2014 real
estate taxes. (R. 53, Pl.’s Mem. at 7.) In response, Defendants argue that the
parties engaged in a course of conduct that modified the loan agreement.
Specifically, they argue that in November 2014 McClure verbally agreed on behalf
of Celtic Bank to accept monthly payments of $2,888.73 to cover the October and
November 2014 payments and all subsequent monthly payments. (R. 58, Defs.’
Resp. ¶ 34.) They also argue that any default based on failure to timely pay real
estate taxes was cured by an agreement reached by Carranza and McClure by email
on November 3, 2014, in which Celtic Bank agreed to allow Executive Title to pay
the outstanding taxes “within the next subsequent months.” (Id. ¶ 32.) According
to Defendants, Celtic Bank breached the “modified” loan agreement by refusing to
accept Executive Title’s November 2014 payment of $2,888.73.

Tovias joined

Defendants’ response to the motion for summary judgment and has not raised any
arguments denying her liability under the commercial guarantee that are separate
or distinct from Defendants’ arguments regarding their underlying liability.
In a diversity case this court applies federal procedural law and state
substantive law.

Liu v. T&H Mach., Inc., 191 F.3d 790, 794 (7th Cir. 1999).

Summary judgment is appropriate where the moving party shows “that 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).

In considering a motion for summary

judgment this court must view the evidence in the light most favorable to the nonmoving parties, drawing all reasonable inferences in their favor. See Anderson v.

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Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A genuine issue of material fact exists
where “the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Id. at 248. In evaluating a motion for summary judgment the
court will limit its analysis of the facts “to evidence that is properly identified and
supported in the parties’” Local Rule 56.1 statements. See Bordelon v. Chicago Sch.
Reform Bd. of Trs., 233 F.3d 524, 529 (7th Cir. 2000).
As an initial matter, Defendants argue that Celtic Bank’s summary judgment
motion should be denied because it was not filed within 30 days of the close of
discovery under Rule 56(b). Rule 56(b) states that the 30-day rule applies unless
“the court orders otherwise.” Fed. R. Civ. P. 56(b). Here the court ordered Celtic
Bank to file its motion by February 29, 2016, and Celtic Bank filed the motion on
that day. (R. 51; R. 52.) Defendants’ procedural argument is frivolous.
Turning to the substance of this dispute, Celtic Bank’s motion rests on its
assertion that Defendants breached their obligations under the Loan documents by
failing to make the required monthly payments in October and November 2014 and
by failing to timely pay the 2013 and 2014 real estate taxes. The parties do not
dispute that under the terms of the Loan Documents Illinois law governs the
substance of this foreclosure action.

See Auto-Owners Ins. Co. v. Websolv

Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009) (“Courts do not worry about
conflict of laws unless the parties disagree on which state’s law applies.” (citation
omitted)).

Under Illinois law “a mortgagee may foreclose its interest in real

property upon either the debt’s maturity or a default of a condition in the

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instrument.” See PNC Bank, Nat’l Ass’n v. Zubel, 24 N.E.3d 869, 874 (Ill. App. Ct.
2014) (internal quotation and citation omitted). Defendants admit that they were in
default under the Loan Documents for failure to make monthly payments on several
occasions. (R. 57, Defs.’ Resp. to Pl.’s Facts ¶¶ 5-6, 14.) But they characterize these
defaults as “technical defaults,” and argue that any default was cured first by the
two forbearance agreements and then by a course of conduct culminating in an oral
agreement reached between Carranza and McClure. (R. 58, Defs.’ Resp. at 5-9.)
To the extent Defendants argue that their default was cured by the First and
Second Forbearance Agreements, that argument is belied by the plain language of
those documents. The First Forbearance Agreement states that Celtic Bank “agrees
to forbear from pursuing remedies with respect to the Default . . . until or after
October 20, 2013.” (R. 54, Pl.’s Facts Ex. F at 2.) It further states that the First
Forbearance Agreement does not waive Executive Title’s “obligation to cure the
Default and perform all of [its] obligations under the Loan Documents” and that
accordingly, except as Celtic Bank “has agreed to forbear there from by this
Agreement,” it “shall have the discretion to enforce fully any and all of its rights
under the Loan Documents at any time.” (Id. at 3.) It further states that the First
Forbearance Agreement “is not intended to effect any modification or amendment to
any of the Loan Documents but instead merely sets forth the terms and conditions
pursuant to which [Celtic Bank] will forbear from enforcing its rights there under.”
(Id. at 4.) Accordingly, the undisputed evidence shows that the First Forbearance
Agreement did not cure past defaults or waive Celtic Bank’s right to pursue

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remedies for past defaults, but rather simply outlined the terms by which it agreed
to temporarily forbear those rights.
The Second Forbearance Agreement includes similar language precluding
Defendants’ argument that their past defaults were cured. It states that the parties
agreed that the loan was 78 days past due on payments as of December 18, 2013,
because Executive Title had missed its payments from October through December
2013. (Id. Ex. G at 1.) It further states that Celtic Bank agreed to forbear from
pursuing its claims only until October 1, 2014, and that it did so “[w]ithout waiving,
or being estopped from later asserting, or otherwise in any manner prejudicing, any
and all claims Lender may have against Borrower or Guarantor.” (Id. at 2.) Again,
on its face the Second Forbearance Agreement states that Celtic Bank was only
temporarily forbearing its rights, and nothing in the document states that it would
be precluded from later pursuing its rights based on Defendants’ past defaults.
Nor could any reasonable jury conclude, as Defendants argue, that the fact
that Celtic Bank was twice willing to enter into written forbearance agreements of
limited durations establishes a course of conduct by which they modified the
payment schedule under the Loan Documents and were bound to negotiate and
enter into a third forbearance agreement.

Under Illinois law, a contract

modification is one “which introduces new elements into the details of the contract
and cancels others but leaves the general purpose and effect undisturbed.” Int’l
Bus. Lists, Inc. v. AT&T Co., 147 F.3d 636, 641 (7th Cir. 1998). Whether there was
an oral modification, including through a course of conduct, is a question of fact.

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Household Fin. Servs., Inc. v. Costal Mortg. Servs., Inc., 152 F. Supp. 2d 1015, 1022
(N.D. Ill. 2001). A modification is only valid if it satisfies the criteria for forming a
valid contract, including offer, acceptance, and consideration. Int’l Bus. Lists, 147
F.3d at 641. Because mutual assent is essential to contract modification, one party
cannot modify a contract without the knowledge and consent of the other.

See

Leavitt v. John Hancock Life Ins. Co., No. 04 CV 7451, 2007 WL 625636, at *8 (N.D.
Ill. Feb. 23, 2007). But one party can show a valid contract modification where the
“party which did not propose the changes is shown to acquiesce in the modification
through a course of conduct consistent with acceptance.” Int’l Bus. Lists, 147 F.3d
at 641.
Defendants argue that what they call the “technical default” stemming from
their late installment payments was cured by a course of conduct culminating in an
oral agreement entered into by McClure and Carranza on November 6, 2014.
According to Defendants, those negotiations began on October 1, 2014, the day after
the Second Forbearance Agreement expired, when Carranza asked McClure in a
telephone conversation for an extension of Celtic Bank’s forbearance in exchange for
payments of $2,888.73 per month. Defendants assert that after forwarding Celtic
Bank documents to support its request, on November 6, 2014, McClure verbally
agreed with Carranza that Celtic Bank would accept payments of $2,888.73 for the
payments due in October and November 2014, and that those payments would cure
the default. Defendants forwarded a $2,888.73 check to Celtic Bank the next day,
but on November 14, 2014, Celtic Bank sent Executive Title a notice of default

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based on Executive Title’s failure to make payments on October 1 and November 1,
2014. (R. 54, Pl.’s Facts Ex. H at 1.) According to Defendants, Carranza’s and
McClure’s oral agreement modified Executive Title’s obligations under the
Promissory Note, cured any default, and obligated Celtic Bank to accept the
$2,888.73 payment Carranza tendered.
To the extent Defendants rely on a “course of conduct” to argue that Celtic
Bank agreed to modify the loan repayment schedule, the undisputed facts show that
a key ingredient to the course of conduct defense is missing: Celtic Bank’s
acquiescence. As explained above, a contract is only validly modified through a
course of conduct where the “party which did not propose the changes is shown to
acquiesce in the modification through a course of conduct consistent with
acceptance.” Int’l Bus. Lists, 147 F.3d at 641. Here, the undisputed evidence shows
that Celtic Bank rejected the reduced payment Defendants submitted in November
2014.

It also formally rejected Defendants’ request for a third forbearance

agreement in November 2014.

Defendants have pointed to no facts that would

support a finding that Celtic Bank engaged in a course of conduct consistent with
acceptance of reduced payments after October 2014. See Leavitt, 2007 WL 625636,
at *8. Accordingly, to the extent Defendants rely on Celtic Bank’s post-October
2014 course of conduct, no reasonable jury could conclude that through its conduct
Celtic Bank acquiesced in a modification of the payment schedule set forth in the
Loan Documents.

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That leaves Defendants’ argument that the payment schedule was modified
by an oral agreement reached between McClure and Carranza on November 3,
2014. The only response Celtic Bank raises to this argument is its assertion that
even accepting as true that Carranza and McClure entered into an oral agreement,
such an oral modification is prohibited by the terms of the Promissory Note, which
states that Executive Title may not use an oral statement from Celtic Bank to alter
the written terms of the Promissory Note.1 (R. 60, Pl.’s Reply at 6.) But under
Illinois law a written contract may be modified by a subsequent oral agreement
even when the contract precludes oral modifications.” Household Fin. Servs., 152 F.
Supp. 2d at 1022. Moreover, whether an oral modification exists and the extent of
the modification are questions of fact for the trier of fact.” Id. at 1023; see also
Carnes Co. v. Stone Creek Mech., Inc., 412 F.3d 845, 852 (7th Cir. 2005). Here the
parties’ fact statements reveal dueling affidavits, with McClure averring that he
never reached an agreement with Carranza regarding modified payments and with
Celtic Bank has not argued that the Loan Documents are subject to the Illinois
Credit Agreement Act, 815 ILCS 160/1, et seq., which bars a debtor from asserting
“that a new credit agreement is created, based on the agreement by a creditor to
modify or amend an existing credit agreement,” unless that credit agreement is in
writing and signed by both the creditor and the debtor. Comerica Bank v. Nali, Inc.,
No. 14 CV 4884, 2015 WL 5920787, at *4 (N.D. Ill. Oct. 8, 2015); MB Fin. Bank,
N.A. v. Patel, No. 10 CV 6566, 2012 WL 346456, at *3 (N.D. Ill Feb. 1, 2012); In re:
Plenipotentiary Ltd. v. Am. Nat’l Bank & Tr. Co. of Chi., Nos. 92 B 12342, 92 C 2717
& 93 A 00259, 1993 WL 135970, at *8-*9 (N.D. Ill. Br. Apr. 15, 1993). “Courts have
routinely held . . . that counterclaims or affirmative defenses relying on oral (or nonmemorialized) agreements to modify existing credit agreements are barred by the
ICAA.” FirstMerit Bank, N.A. v. Emerald Props., LLC, No. 13 CV 5961, 2014 WL
1292865, at *3 (N.D. Ill. Mar. 28, 2014). Nor has it argued that McClure lacked the
authority to bind Celtic Bank via an oral argument to modify the Loan Documents,
despite McClure’s affidavit asserting that he lacks such authority. (R. 63-1,
McClure Aff. ¶ 8.)
1

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Carranza averring that he did. Typically, that fact dispute would be one that a trier
of fact would have to resolve. But here, even accepting as true Carranza’s version of
events, Defendants have not shown that they complied with what they describe as
the agreement to modify the payment schedule. The only evidence Defendants put
forth in support of the oral modification is Carranza’s affidavit, in which he states
that on November 6, 2014, he informed McClure that Executive Title “was prepared
to make the fully amortizable payments of $2,888.73 from this point forward—so to
cover the October and November 2014 payments, and all subsequent payments.”
(R. 58-1, Carranza Aff. ¶ 32.) Carranza states that McClure verbally accepted this
offer. (Id.) He further states that on November 7, 2014, he sent one check for
$2,888.73 to cover the October 2014 payment.

(Id. ¶¶ 33-34.)

But there is no

evidence that he ever sent a check for the November 2014 payment, as Executive
Title was required to do under Carranza’s own description of the oral agreement.
Nor is there any evidence that Executive Title made any payment with respect to
overdue late fees.2 The Loan Documents allow Celtic Bank to issue a Notice of
Default after a single default event, so even assuming that Defendants cured their
default of the October 2014 payment under the terms of what they say is an oral
agreement, they have submitted no evidence that they paid the November 2014
payment in accordance with that agreement, and by the time Celtic Bank issued the
Notice of Default on November 14, 2014, the November 2014 payment was past due.
Although Carranza’s affidavit states that McClure waived the late fees on
January 21, 2014, (R. 58-1, Carranza Aff. ¶ 16), there is no evidence that he waived
late fees that accrued between that date and the date Celtic Bank issued the Notice
of Default.
2

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There is no evidence that Defendants attempted to cure their default by paying the
November 2014 payment and late fees within the 10-day cure period set forth in the
Notice of Default. Thus even under Defendants’ version of events, Celtic Bank has
shown that Defendants defaulted on their payment obligations.
Celtic Bank has also shown that it is entitled to summary judgment with
respect to the second relevant default event: Defendants’ failure to timely pay the
2013 and 2014 real estate taxes.

Defendants do not dispute that the Loan

Documents require them to pay real estate taxes on the Property in a timely
manner, and that their failure to do so constitutes a default of their obligations.
Nor do Defendants dispute that they failed to pay the 2013 and 2014 real estate
taxes until after they were due and after this suit was filed. They argue, however,
that Carranza and McClure reached an agreement via email on November 3, 2014,
which “cured any default under the Promissory Note related to payment of the real
estate taxes” by allowing them to pay the outstanding taxes “within the next
subsequent months.” (R. 58, Defs.’ Resp. at 7.) As an initial matter, the court notes
that the only evidence Defendants present in support of this “agreement” is
Carranza’s affidavit, where he merely asserts that he reached the agreement by
email with McClure. (Id. Carranza Aff. ¶ 30.) But Defendants did not attach the
email Carranza references as an exhibit to his affidavit or anywhere else in the
record. As the Seventh Circuit has made clear, summary judgment is the “put up or
shut up” moment in a lawsuit, meaning that the non-moving party “is required to
marshal and present the court with the evidence she contends will prove her case.”

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See Goodman v. Nat’l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010). In the
context of loan modifications, conclusory allegations in an affidavit that are
unsupported by corroborating documentation are insufficient to meet the Rule 56
standard requiring concrete facts establishing a genuine fact dispute. See Fast Tek
Grp., LLC v. Plastech Engineered Prods., Inc., No. 1:05-CV-01868-DFH-TA, 2006
WL 2228960, at *6-*7 (S.D. Ind. Aug. 3, 2006); see also United Cent. Bank v. Maple
Court, LLC, No. 10-CV-00464, 2013 WL 4517243, at *4 (E.D. Wis. 2013) (rejecting
defendants’ argument that late tax payments were subject to an escrow agreement
where “they do not offer any proof of such an agreement”). In addition, the advisory
committee notes to Rule 56(c) make clear that “materials referred to in an affidavit
or declaration—must be placed in the record.”

Fed. R. Civ. P. 56(c) advisory

committee notes 2010. If there is an email evidencing an agreement to forgive
Defendants’ default with respect to the tax payments, this was the time for
Defendants to present that email.3
Even if the court were to overlook the missing evidence, Defendants do not
dispute that they failed to pay any real estate taxes in the two month interim
between that agreement and the filing of this lawsuit. And importantly, the only
Prior to the 2010 amendments to the Federal Rules of Civil Procedure, Rule
56(e)(1) explicitly required that a sworn or certified copy of any paper referenced in
an affidavit be attached to the affidavit. The advisory committee’s 2010 notes state
that this requirement was omitted from the amendments “as unnecessary given the
requirement in subdivision (c)(1)(A) that a statement or dispute of fact be supported
by materials in the record.” See Fed. R. Civ. P. 56(c) advisory committee notes 2010.
That note has been interpreted to mean that “the requirement to support
statements in affidavits with admissible evidence on the record remains.” See Fratz
v. Goldman & Warshaw, P.C., No. 11-cv-02577, 2012 WL 4931469, at *7 n.8 (E.D.
Pa. Oct. 16, 2012).
3

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evidence supporting Defendants’ argument with respect to taxes is Carranza’s
statement that the agreement was for Executive Title to pay the overdue taxes “as
soon as possible.” (R. 58-1, Carranza Aff. ¶ 30.) Even taking Carranza’s testimony
and the existence of the agreement at face value, Executive Title failed to pay the
2013 real estate taxes until after this lawsuit was filed and more than eight months
after the agreement to which Defendants now point as the “cure” to their admitted
default. It is also undisputed that Executive Title did not pay the 2014 real estate
taxes until October 28, 2015, the day after it was ordered to do so by the bankruptcy
court. (R. 61, Pl.’s Resp. to Defs.’ Add’l Facts ¶ 30.) Given that Executive Title was
able to bring the property taxes current within a day of the court’s order, even
assuming Carranza and McClure entered into an agreement, no reasonable jury
could conclude that Executive Title paid the taxes “as soon as possible.” Based on
the limited evidence Defendants have submitted in support of their argument that
their default with respect to the payment of property taxes was cured, no
reasonable jury could find that the parties entered into an agreement to forgive
Defendants’ late payment of the real estate taxes or that they complied with that
supposed agreement. Thus even taking the facts in the light most favorable to
Defendants, there is no genuine dispute of material fact regarding Defendants’
default of the Loan Documents. Accordingly, Celtic Bank is entitled to summary
judgment with respect to all three of its claims.
Turning to the question of damages, typically in the face of disputed facts the
calculation of damages would be a question for a fact-finder. See Hillman v. City of

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Chicago, 66 F. Supp. 3d 1109, 1115 (N.D. Ill. 2014). But here, all of the facts that
Celtic Bank submitted regarding its damages have been deemed admitted. (See
R. 54, Pl.’s Facts ¶¶ 37-42.) Because Defendants failed to submit any facts to refute
Celtic Bank’s fact statements on this issue, Celtic Bank is entitled to damages in
the amount of $553,633.97 that was due and owing under the Promissory Note as of
February 29, 2016, the day Celtic Bank filed its motion for summary judgment, plus
interest that has accrued since then at the rate of $56.29 per diem. (Id. ¶ 42); see
FirstMerit Bank, N.A. v. Grear, No. 13 CV 3627, 2013 WL 5835641, at *3 (N.D. Ill.
Oct. 28, 2013) (deeming admitted evidence as to amount of damages where
defendant failed to marshal evidence contradicting plaintiff’s damages calculation).
Conclusion
For the foregoing reasons, Celtic Bank’s motion for summary judgment is
granted.
ENTER:

____________________________________
Young B. Kim
United States Magistrate Judge

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