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UNITED STATES v. SCHOENHARD

April 27, 1993

UNITED STATES OF AMERICA, Plaintiff,
v.
CARL B. SCHOENHARD, JR., Defendant.



The opinion of the court was delivered by: PHILIP G. REINHARD

 INTRODUCTION

 Plaintiff, the United States of America, has filed a complaint on behalf of the Small Business Administration (SBA) against defendant, Carl B. Schoenhard, Jr., seeking to recover the principal sum of $ 360,000 plus interest pursuant to a written guaranty executed by defendant. *fn1" Defendant has filed a motion for summary judgment.

 FACTS

 Defendant, as the party seeking summary judgment, has filed a "Rule 12(l)" statement in support thereof. *fn2" Plaintiff has filed a Rule 12(n) response. The following facts are based on these two statements. *fn3"

 On or about April 1, 1986, Canton State Bank of Canton, Illinois (Bank), loaned International Plastics Recycling, Inc. (International Plastics) the principal sum of $ 360,000. International Plastics made, executed and delivered to the bank a written promissory note, dated April 1, 1986, *fn4" in the amount of $ 360,000. This note, a copy of which is attached to plaintiff's complaint, provides, in relevant part, that the rate of interest is 12.25%.

 Defendant signed a written guaranty dated March 27, 1986. *fn5" That guaranty provided, in pertinent part, that it is made "to induce" the bank to loan money to International Plastics. The guaranty further states that defendant guarantees the debt evidenced by the note of International Plastics "dated 3/27/86" and "in the principal amount of $ 360,000.00 with interest at the rate of 12 1/4% per cent." (Underline in original.)

 On January 27, 1989, the bank assigned both the note and the guaranty to the SBA. The SBA presently holds both the note and the guaranty. International Plastics defaulted on the note, and the balance of the note ($ 360,000.00) plus interest ($ 219,654.25 as of March 12, 1992, plus $ 120.82 per day until paid) is due and payable.

 CONTENTIONS

 Defendant contends that he is entitled to summary judgment because the guaranty signed by him does not apply to the note given by International Plastics. Specifically, defendant maintains that plaintiff has not alleged that a note dated March 27, 1986, ever existed or that the April 1, 1986, note is a renewal of a note dated March 27, 1986. Plaintiff responds that defendant is not excused from his obligation under the guaranty simply because of a discrepancy between the date on the note and the date on the guaranty. Furthermore, plaintiff argues that such a guaranty is enforceable notwithstanding that the note was executed on a different date. Lastly, plaintiff asserts that under Illinois law the guaranty is enforceable because it accurately reflects the intent of the parties that it apply to the note dated April 1, 1986.

 DISCUSSION

 Summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. Anderson, 477 U.S. at 249. In that regard, the evidence of the non-movant is to be believed, and all reasonable inferences are to be drawn in its favor. Anderson, 477 U.S. at 255. The question to be determined is whether, if the record of the summary judgment proceeding were the record at trial, a reasonable factfinder could find in favor of the non-moving party. Tobey v. Extel/JWP, Inc., 985 F.2d 330, 332 (7th Cir. 1993).

 The court's initial determination in this case is what law to apply. *fn6" Section 1345 jurisdiction does not itself mandate the application of federal law in all circumstances. United States v. Little Lake Misere Land Co., 412 U.S. 580, 591, 37 L. Ed. 2d 187, 93 S. Ct. 2389 (1973). However, dealings that are ordinary or local if between private citizens raise serious questions of national sovereignty when they arise in the context of a specific federal statutory provision. Little Lake, 412 U.S. at 592. This is especially true when transactions involve the federal government. Little Lake, 412 U.S. at 592. Even if there is no specific federal legislation governing a particular transaction to which the United States is a party, a federal court is competent to declare the governing law in an area embracing issues substantially related to an established program of government operation. Little Lake, 412 U.S. at 593. In the absence of an applicable Congressional act, it is for the federal courts to fashion the governing rule of law according to their own standards. Little Lake, 412 U.S. at 594.

 Federal courts may, however, borrow from state law under the appropriate circumstances. Little Lake, 412 U.S. at 594 (citing Clearfield Trust Co. v. United States, 318 U.S. 363, 367, 87 L. Ed. 838, 63 S. Ct. 573 (1943)). Whether state law is to be applied is a question of federal policy, affecting not only the federal judicial establishment but also the federal government's legal interests and relations. Little Lake, 412 U.S. at 595. Such a decision depends upon a variety of considerations related to the nature of the specific governmental interests and to the effects upon them of applying state law. Little Lake, 412 U.S. at 595. Thus, it becomes necessary for a federal court, in ...


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