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ITT DIVERSIFIED CREDIT CORP. v. KIMMEL

January 12, 1981

ITT DIVERSIFIED CREDIT CORP., A DELAWARE CORPORATION, PLAINTIFF,
v.
RICHARD KIMMEL, JOSEPH ROCKELMANN, AND JOHN ROCKELMANN, DEFENDANTS.



The opinion of the court was delivered by: Aspen, District Judge:

MEMORANDUM OPINION AND ORDER

Plaintiff, ITT Diversified Credit Corp. ("ITT"), a Delaware corporation, filed this diversity action to enforce the personal guarantees executed on August 31, 1976, by defendants, Richard Kimmel ("Kimmel"), Joseph Rockelmann, and John Rockelmann, all Illinois residents, guarantying the payment of certain business loans made by ITT to Medart, Inc. ("Medart"), a Mississippi corporation.*fn1 Presently before the Court is ITT's motion for summary judgment against Kimmel on his guaranty. In addition, ITT has moved to strike Kimmel's affirmative defenses and to strike his counterclaim seeking $4,000,000 in compensatory damages and $10,000,000 in punitive damages as a consequence of ITT's alleged malicious and commercially unreasonable conduct in its course of dealing with Medart regarding the administration of the loan agreements supported by the guaranty involved herein.

SUMMARY JUDGMENT

In support of a motion for summary judgment, the moving party has the burden of showing that there is no dispute as to any genuine issue of fact material to a judgment in its favor as a matter of law. Cedillo v. International Association of Bridge & Structural Iron Workers, Local Union No. 1, 603 F.2d 7, 10 (7th Cir. 1979). While the non-moving party is entitled to all reasonable inferences that can be drawn in its favor from the evidence in the record, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Moutoux v. Gulling Auto Electric, Inc., 295 F.2d 573, 576 (7th Cir. 1961), it may not merely rely upon unsupported allegations in its pleadings, but rather, must affirmatively show by affidavit or otherwise that there are factual issues that must be decided at trial in response to the movant's assertion that no genuine issues of material fact exist. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968); Kirk v. Home Indemnity Co., 431 F.2d 554, 560 (7th Cir. 1970).

In the case at bar, the undisputed facts are relatively straightforward. Medart was incorporated by Kimmel in 1976 and thereafter purchased the assets of the Medart Division of Jackes-Evans Corporation. Kimmel is the president, chief operating officer, and, since 1978, the sole shareholder of Medart. On August 31, 1976, soon after its incorporation, Medart arranged to borrow operating funds from ITT Commercial Finance Corporation ("Commercial"), the corporate predecessor of ITT Diversified Credit Corporation, pursuant to an accounts receivable agreement, an inventory loan agreement, a machinery and equipment security agreement, and a promissory note given by Medart to Commercial. On that same date, Kimmel and the Rockelmanns executed a guaranty providing, in pertinent part, that:

  For valuable consideration, the receipt of which is
  hereby acknowledged, Undersigned jointly and
  severally unconditionally guarantee to [Commercial]
  the full and prompt performance by Medart,
  Inc. . . . of all obligations which [Medart]
  presently or hereafter may have to [Commercial] and
  payment when due of all sums presently or hereafter
  owing by [Medart] to [Commercial].

The guaranty further provides that:

  For the purposes of this guaranty and indemnity, all
  sums owing to [Commercial] by [Medart] shall be
  deemed to have become immediately due and payable if
  (a) [Medart] defaults in any of its obligations to
  [Commercial] . . . (c) . . . a petition [under any
  section of the Bankruptcy Act, as amended,] be filed
  by [Medart] . . .

The guaranty also provides that it is assignable and that the obligations of the guarantors are not to be impaired in any way by "[n]ew agreements or obligations of [Medart] with or to [Commercial]; amendments, extensions, modifications, renewals, or waivers of default as to any existing or future agreements or obligations of [Medart] . . . to [Commercial], or extensions of credit by [Commercial] to [Medart]."

ITT Commercial Finance Corporation was merged into ITT Diversified Credit Corporation on August 11, 1977, thereby becoming a division of ITT rather than continuing its existence as a separate corporate entity. On June 6, 1979, Medart entered into another loan agreement with ITT secured by a deed of trust on certain real property purchased by Medart and subject to the continuing guaranty executed in 1976 by Kimmel and the Rockelmanns. Thereafter, Medart was apparently beset by financial difficulties and ITT imposed ceilings on the amount of funds it would release to Medart under the accounts receivable and inventory loan agreements. In May, 1980, unable to secure alternative financing to satisfy its accumulating debt to ITT, Medart filed a petition for bankruptcy under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq. (1979), in the United States District Court for the Northern District of Mississippi.

In determining the rights of the parties to a guaranty, as in determining the rights and obligations flowing from any contract, we must look first to the language in the document itself. Blackhawk Hotel Associates v. Kaufman, 80 Ill. App.3d 462, 465, 35 Ill.Dec. 875, 878, 400 N.E.2d 12, 14-15 (1st Dist. 1979). "Where a contract of guaranty is unequivocal in its terms, it must be interpreted according to the language used, for it is presumed that the parties meant what their language clearly imports." Jacobson v. Devon Bank, 39 Ill. App.3d 1053, 1055-56, 351 N.E.2d 254, 255-56 (1st Dist. 1976), quoting National Acceptance Co. v. Exchange National Bank, 101 Ill. App.2d 396, 402, 243 N.E.2d 264, 267 (1st Dist. 1968). "Thus, in the absence of an ambiguity, the plain language of the contract controls and no extrinsic evidence need be adduced." Blackhawk Hotel Associates v. Kaufman, supra, 80 Ill.App.3d at 465, 400 N.E.2d at 15.

The contract of guaranty involved in this case contains a very broad assumption of liability on the part of the guarantors. The guaranty is expressly made assignable and specifically provides that modification of the loan agreements supported by the guaranty does not impair the obligations of the guarantors. Accordingly, Kimmel's argument that any assignment of the guaranty from Commercial to ITT as a result of the merger along with some alleged material change in the business dealings between Medart and Commercial-ITT releases him from liability on the guaranty is clearly misguided in light of the unambiguous language in the contract itself.*fn2 Kimmel apparently contends that despite the broad language of the guaranty, ITT's conduct was so commercially outrageous and materially different from that contemplated by the parties that the guarantors must be discharged from liability on their guaranty. However, the record is completely devoid of any evidence tending to show that ITT's conduct in administering the loan agreements with Medart does not easily fit within the enumeration of factors that are deemed to leave the obligations of the guarantors unimpaired "in any manner whatsoever:" e.g., "[n]ew agreements or obligations . . . amendments, extensions, modifications, renewals, waivers of default as to any existing or future agreements . . ." Indeed, the accounts receivable and inventory loan agreements themselves expressly authorize ITT to exercise its sole discretion from time to time in determining the amount of funds to be released and the percentage of receivables to be advanced to Medart under the agreements, which is the most egregious conduct attributed to ITT by Kimmel in calling for the discharge of his guaranty. The evidence in the record also does not support Kimmel's contention that there is inadequate consideration to support the continuing guaranty executed at the same time as the loan agreements. Illinois courts have held that there is adequate consideration for a guaranty when it is executed contemporaneously with the creation of the principal loan. First National Bank of Red Bud v. Chapman, 51 Ill. App.3d 738, 740, 9 Ill.Dec. 426, 429, 366 N.E.2d 937, 940 (5th Dist. 1977).

Accordingly, we hold that Kimmel is bound by his guaranty. Since Medart's petition for bankruptcy, filed in May, 1980, constitutes a default under the individual agreements with ITT as well as under the terms of the guaranty, this Court holds that ITT is entitled to enforce the guaranty against Kimmel as one of the guarantors jointly and severally liable thereunder. Finding that there are no material facts in issue and that summary judgment ...


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