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INSTITUTO NACIONAL v. CONTINENTAL ILL. NAT. BANK

December 2, 1983

INSTITUTO NACIONAL DE COMERCIALIZACION AGRICOLA (INDECA), PLAINTIFF,
v.
CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, ET AL., DEFENDANTS.



The opinion of the court was delivered by:  Shadur, District Judge. [fn*] This is one of two opinions issuing concurrently in this action (the other deals with affirmative defenses asserted by the Continental Bank). In each instance the most valuable analytical input for this Court's consideration came from its law clerk, Linda Rusch, rather than the parties' submissions (extensive though they were).
  MEMORANDUM OPINION AND ORDER *fn*

Indeca has now moved for summary judgment under Fed.R.Civ.P. ("Rule") 56 against Deborah Bell ("Bell") and Rumex International ("Rumex") on Count I (breach of contract) and against Bell, Rumex, Robert Tucker ("Tucker") and Michael Ball ("Ball") on Count II (fraud). Shirley Nagel ("Nagel") and Quosando Corporation ("Quosando")*fn2 have moved for summary judgment against Indeca on Counts I, II and VI (asserting a RICO*fn3 violation). For the reasons stated in this memorandum opinion and order, Indeca's motion is granted and the Nagel-Quosando motion is denied.

Facts

In July 1980 Indeca sought to purchase a large quantity of black beans. Thomas J. Lipani ("Lipani") learned of Indeca's need and wanted to submit a bid, but he needed a black bean supplier. Lipani spoke with Juan Jose Caceres ("Caceres"), a friend and sometime business associate, who (1) happened to have some connection to Indeca head Carlos Ramirez ("Ramirez") and (2) knew Nagel, who Caceres thought might know where Lipani could purchase the beans. On Caceres' recommendation Lipani communicated with Nagel, who in turn spoke with Bell, a commodities broker doing business as Rumex.

Between July 28 and August 19 numerous telexes were sent, either bearing Nagel-Quosando's name (authorship of those is disputed by Nagel) or directed to Nagel-Quosando, regarding the sale of black beans.*fn4 Nagel concededly wrote an August 19 letter appointing Lipani as Quosando's representative in Guatemala (that letter was later rejected by the Guatemalan government for its informality). Bell too sent a letter, this one appointing Lipani as Rumex' representative.

Thereafter Bell negotiated a contract dated September 4 with Irving Pheterson ("Pheterson") doing business as International Association of Grocers, Inc. ("IAG"), under which Pheterson agreed to supply the beans for sale to Indeca. Rumex had represented in the Indeca-Rumex contract it already owned the beans. Pheterson testified in his deposition he had never heard of Nagel or Quosando.

Another provision of the Indeca-Rumex contract required Indeca to open a letter of credit ("Letter") at Continental Illinois National Bank and Trust Company of Chicago ("Continental"),*fn5 with delivery of the beans to occur within 30 days of such opening. Though the Letter was paid the beans were not delivered. There was a flurry of telexes through the end of 1980 among Rumex, Bell, Lipani, Caceres and Ramirez, with repeated promises of delivery by Rumex and Bell — never carried out. Then Tucker's January 15, 1981 letter told Indeca the beans would not be delivered, as Rumex had been defrauded by its supplier.

Part of Indeca's Count II fraud claim asserts Tucker's, Bell's and Ball's participation in presenting false documents to Continental to obtain payment of the Letter. Those three defendants have been convicted on nine counts of wire fraud under 18 U.S.C. § 1343, based upon their participation in such presentation and misrepresentations to Indeca regarding the bean shipments. All of them have appealed their convictions.

Indeca's Motion

1. Count I: Breach of Contract

To prevail on its breach of contract claim against Bell and Rumex, Indeca must prove the existence of the contract, Bell's and Rumex' breach, Indeca's damages as a result of that breach and Indeca's performance of all its conditions precedent. Thilman & Co. v. Esposito, 87 Ill.App.3d 289, 296, 42 Ill.Dec. 305, 311, 408 N.E.2d 1014, 1020 (1st Dist. 1980). To meet that burden Indeca has submitted:

    1. the affidavit of Ana Imelda Garavito Castellanos
  ("Garavito Affidavit"), custodian of all Indeca
  records regarding the transaction, which identifies
  the following documents;

2. a translated copy of the Indeca contract;

    3.  Tucker's January 15, 1981 letter admitting
  Rumex cannot deliver;
4.  Indeca's application for the Letter;
    5. issuance by Banco de Guatemala ("Banco") of the
  Letter, later confirmed by Continental; and

6. Banco's liquidation of the Letter to Rumex.

Tucker has moved to strike the Garavito Affidavit, claiming (1) her identification of its attached documents is not based on her personal knowledge and (2) the affidavit does not show her competence to testify. Essentially Tucker is objecting to Indeca's effort to authenticate the documents.*fn6 Even assuming arguendo the validity of Tucker's objections to the Garavito Affidavit, the documents essential to Indeca's breach of contract claim have been authenticated in other permissible ways. Under Fed.R.Evid. 902(8) the Indeca-Rumex contract is self-authenticated as a notarized document. By his own May 25, 1983 submission Tucker (1) authenticated his January 15, 1981 letter to Indeca (Tucker Aff. ¶ 21) and (2) submitted Banco's liquidation of the Letter in Rumex' favor to support Tucker's own statement of operative facts (Tucker May 23 Exs. 9, 12). All those documents are thus effectively established, and they in turn establish the existence of the Indeca-Rumex contract, Indeca's fulfillment of its conditions precedent, Rumex' breach and Indeca's resultant damages. Indeca has clearly satisfied its burden on Count I.

Moreover Bell and Rumex have elected not to submit any evidence in opposition to those matters, but simply to rest on their pleadings. Without more, summary judgment could properly be entered against Bell and Rumex on Count I. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir. 1983), cert. denied, ___ U.S. ___, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983).

However, Tucker's submission in opposition to Indeca's Count II summary judgment motion has asserted an in pari delicto defense relevant to both Counts I and II.*fn7 Because of the identity of issues, further discussion of that defense will be deferred to the more logical place for its treatment: the next section of this opinion.

2. Count II: Fraud

Indeca moves for summary judgment on Count II, asserting the collateral estoppel effects of the criminal convictions of Bell,*fn8 Tucker and Ball for wire fraud under 18 U.S.C. § 1343. That motion compels consideration both of the elements of a civil fraud claim and of collateral estoppel principles.

First, to prevail on its fraud claim Indeca must show (Almgren v. Engelland, 94 Ill.App.3d 475, 477, 50 Ill.Dec. 66, 68, 418 N.E.2d 1060, 1062 (1st Dist. 1981)):

1. misrepresentation of a material fact

    2. made for the purpose of influencing the other
  party to act,
    3. by a person who knew or believed the statement
  to be untrue,

4. as it was in fact,

    5. to a person who believes and relies on the
  statement.

Indeca asserts the criminal convictions establish all those elements except for its reliance, as to which it submits additional proof.

Again Bell and Rumex offer no evidence in rebuttal, and Ball has made no submission at all. Tucker however raises five points in opposition to the motion:

    1. Under Illinois rules of collateral estoppel a
  criminal conviction is only prima facie evidence, not
  conclusive evidence, of matters established in the
  criminal case.
    2. Under federal collateral estoppel principles the
  doctrine is inapplicable here because Tucker, as a
  criminal defendant, lacked procedural advantages
  afforded civil litigants.
    3. Because the convictions have been appealed, this
  Court cannot give them preclusive effect.
    4. Indeca cannot show it relied on any of Tucker's
  statements because he made no direct representations
  to Indeca and he was not involved in presenting false
  documents to Continental.
    5. In pari delicto, an issue not litigated in the
  criminal case, bars summary judgment.

Brief analysis confirms Tucker's only possibly viable point is the last one:

1. Though Illinois does provide the substantive rules of decision in this diversity case, Illinois collateral estoppel doctrine is irrelevant. This is so because as to a federal criminal conviction Illinois choice-of-law rules look to the effect given by federal law. Nathan v. Tenna Corp., 560 F.2d 761, 763 (7th Cir. 1977). Under that law such a conviction conclusively (not just presumptively) establishes issues actually litigated for purposes of later federal civil litigation — like this case. Id.

2. Any procedural differences that may exist between criminal and civil cases are not such as to evoke any different collateral estoppel result. Criminal defendants, like civil litigants, plainly have every incentive to litigate their cases fully and vigorously. County of Cook v. Lynch, 560 F. Supp. 136, 139 (N.D.Ill. 1982).

3. Pendency of an appeal does not alter the preclusive effect of a criminal conviction. Kurek v. Pleasure Driveway & Park District of Peoria, 557 F.2d 580, 595 (7th Cir. 1977).

4. Tucker need not have made representations directly to Indeca to sustain a fraud ...


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