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CONTINENTAL ILL. NAT. BANK & TRUST v. STANLEY

April 15, 1985

CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, PLAINTIFF,
v.
JOHN R. STANLEY, DEFENDANT.



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

ORDER

Before the Court is, plaintiff's motion for summary judgment pursuant to Fed.R.Civ.P. 56, and its motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) or in the alternative to transfer the defendant's counterclaim to the United States District Court for the Southern District of New York pursuant to 28 U.S.C. § 1404(a). For the reasons stated herein, plaintiff's motion for summary judgment against defendant is granted. Plaintiff's motion to transfer is granted and therefore defendant's counterclaim is transferred to the United States District Court for the Southern District of New York. The Court leaves a decision on plaintiff's motion for judgment on the pleadings to the transferee court.

I. FACTS

Stanley is the controlling stockholder of GHR. On December 23, 1981, GHR and the Banks entered into a Credit Agreement. As a condition of the Credit Agreement, CINB required Stanley to provide a joint and several personal guaranty. That same day, Stanley executed and delivered to CINB, as loan agent for the Banks, a written, personal guaranty.

The guaranty provides that Stanley "unconditionally . . . guarantee[s] the full and prompt payment and performance when due, whether by acceleration or otherwise, and at all times thereafter, of all obligations of [GHR] to the Banks . . . howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing or due or to become due . . . under and in connection with the . . . Credit Agreement." The guaranty further provides that "[t]he right of recovery against [Stanley] under this guaranty is, however, limited to the amount of SEVEN HUNDRED FIFTY MILLION DOLLARS ($750,000,000) plus interest on such amount . . . plus all expenses of enforcing this guaranty."

On April 13, 1982, GHR and the Banks amended the Credit Agreement to provide for an additional loan of $50 million. In January of 1983, GHR filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code which is an automatic act of default under Section 14.1.11 of the Credit Agreement. Because of these defaults, GHR now owes CINB and the Banks the outstanding principal amount of its loans under the Credit Agreement, $388,444,139.34, plus all accrued interest. As of August 13, 1984, the accrued interest totaled $85,381,264.83 and continues to accrue at a daily rate of $164,847.32. The Banks seek judgment against Stanley on his personal guaranty for unpaid principal and interest in the amount of approximately $474 million as of August 13, 1984. CINB and the Banks also ask for attorneys' fees and costs in this matter.

Stanley filed an eight-count counterclaim against CINB. The counterclaim alleges that CINB overreached in extending credit to GHR, that CINB wrongfully secured and exercised control over GHR's finances and operations, and that CINB intentionally prevented GHR from receiving credit from other sources. The counterclaim further alleges that CINB's activities caused GHR's inability to perform under the Credit Agreement and thus precipitated GHR's voluntary bankruptcy proceeding.

Stanley moved, pursuant to 28 U.S.C. § 1404(a), to transfer this action to the United States District Court for the District of Louisiana. CINB opposed the motion to transfer and, in addition, moved to dismiss all counts of the counterclaim on the grounds that Stanley lacked standing to prosecute these claims. The Court denied the Motion to Transfer by its order dated May 25, 1984. Continental Illinois National Bank & Trust Company of Chicago v. Stanley, 585 F. Supp. 610 (N.D.Ill. 1984). The Court also granted CINB's motion to dismiss as to the causes of action arising under the federal antitrust statutes and common law. The motion was denied as to Count IV of the counterclaim which arises under the Bank Holding Company Act Amendments of 1970, 12 U.S.C. § 1971, et seq. ("BHCA"). Continental Illinois National Bank & Trust Company of Chicago v. Stanley, 585 F. Supp. 1385 (N.D.Ill. 1984). On August 22, 1984, CINB filed an Answer to Count IV of the counterclaim which effectively denied or demanded proof of the factual allegations.

II. DISCUSSION

  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 material fact and that it is entitled to
judgment 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). The nonmoving party is entitled to all reasonable
inferences that can be drawn in its favor from the evidence in
the record. ITT Diversified Credit Corp. v. Kimmel, 508 F. Supp. 140
 (N.D.Ill. 1981). However, to create a question of fact, an
adverse party responding to a properly made and supported
summary judgment motion must set forth specific facts showing
that there is a genuine issue for trial. Rule 56(e),
Fed.R.Civ.P.; Posey v. Skyline Corp., 702 F.2d 102, 105 (7th
Cir. 1983). A party may not rest on mere allegations or denials
of his pleadings; similarly, a bare contention that an issue of
fact exists is insufficient to raise a factual issue. Id. Rule
56 clearly requires that an adverse party set forth specific
facts showing a genuine issue for trial. Id.

Stanley asserts affirmative defenses which allege that there was a failure of consideration for the personal guaranty; that the guaranty was secured by duress; that plaintiff breached certain implicit covenants contained in the Credit Agreement; that the conduct of certain of the Banks rendered it impossible for GHR to perform under the Credit Agreement; and that CINB has failed to mitigate the damages, if any, it has suffered.

A. Failure of Consideration

Defendant's Fourth and Eighth Affirmative Defenses allege that Stanley's personal guaranty is unenforceable for lack of consideration and that CINB failed to provide GHR with sufficient financing in breach of the Credit Agreement. CINB argues that these defenses are meritless because (1) the guaranty recites on its face that it was executed for consideration, ...


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