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CROWN LIFE INS. CO. v. AMERICAN NATL. BANK & TRUST

July 30, 1993

CROWN LIFE INSURANCE COMPANY, Plaintiff,
v.
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not personally or individually, but as Trustee under a Trust Agreement dated January 24, 1986, and known as Trust No. 66542; TRI-CENTER PROPERTIES, LTD., an Illinois limited partnership, and EARLE W. ARONSON, Defendants. TRI-CENTERS PROPERTIES, LTD., etc., Cross-plaintiff, v. EARLE W. ARONSON, Cross-defendant.


MORAN


The opinion of the court was delivered by: JAMES B. MORAN

Three motions are now before the court. First, defendant and cross-plaintiff Tri-Centers Properties, Ltd. (Tri-Centers) moves to strike defendant and cross-defendant Earle Aronson's second and third affirmative defenses to Tri-Centers' cross-claim. Second, plaintiff Crown Life Insurance Company (Crown Life) moves to substitute itself as the real party in interest in Tri-Centers' cross-claim. Finally, Tri-Centers moves to prove up damages and for final judgment against Aronson.

 BACKGROUND

 Most of the relevant facts are laid out in our memorandum and order of May 11, 1993, in which this court granted Tri-Centers' motion for summary judgment and established Aronson's liability with respect to the cross-claim. For the sake of clarity, several facts are repeated here.

 This case concerns the financing of three shopping plazas (the properties), two located in Bolingbrook, Illinois and a third in Romeoville, Illinois. In 1986 the properties were held in trust by the American National Bank and Trust Company of Chicago (the trust). Tri-Centers possessed full power of direction over the trust and was its sole beneficiary. In May 1986 Crown Life issued a loan to the trust in the amount of $ 2,812,500 and secured the loan with a mortgage on the properties. The loan was secured with four other documents as well, including a collateral assignment of Tri-Centers' beneficial interest in the trust. Until recently this court was unaware of the collateral assignment because it was mentioned for the first time only in the latest round of pleadings, but it has proved to be one of the most significant documents in the case. In the collateral assignment Tri-Centers agreed to the following terms:

 
Debtor [Tri-Centers] assigns, grants, sells, transfers and sets over unto Secured Party [Crown Life] all of its rights, titles, powers, privileges, property and beneficial interest (including the rents, issues and profits of said property and the avails and proceeds thereof and the power of direction thereto) in and to [the entire beneficial interest of the trust].

 Tri-Centers also agreed not to sell or transfer the properties without the prior written consent of Crown Life.

 Five years later the trust sold the properties to Aronson for $ 4,300,000, payable in installments. Before completing the sale, Tri-Centers received Crown Life's written consent, for which Crown Life charged a $ 25,000 fee.

 In May 1992, Aronson ceased making the installment payments he owed the trust pursuant to the purchase contract. The trust sent Aronson a notice of default in late June 1992. That notice was followed in early July 1992 by a warning that Aronson's rights under the contract would be forfeited if he did not pay the amount owed by August 20, 1992.

 Meanwhile, in June 1992, the trust failed to pay the amounts it owed to Crown Life pursuant to their loan agreement. Crown Life accelerated the entire unpaid principal balance on the loan and in July 1992 filed suit against the trust, Tri-Centers and Aronson demanding foreclosure on the properties and other relief.

 On September 17, 1992, Tri-Centers filed both an answer to Crown Life's complaint and a cross-claim against Aronson. As that cross-claim is now formulated Tri-Centers seeks to recover damages from Aronson under the terms of the purchase contract. On December 22, 1992, this court entered a judgment for foreclosure and sale of the properties, thereby awarding to Crown Life the primary relief that it sought. The sale was held on May 6, 1993, and the successful bidder -- Crown Life -- obtained the properties for $ 2.2 million. Although a deficiency in the amount of $ 1,126,000 remained against the trust, this court believed that the only major issue left, for all practical purposes, was whether Tri-Centers would receive anything more from Aronson. On May 11, 1993, this court granted Tri-Centers' motion for summary judgment, finding Aronson liable under the contract.

 This court's expectation that the case could be brought to a rapid end proved to be premature. Aronson has submitted two additional affirmative defenses. According to Aronson, both the terms of the contract and applicable Illinois law precluded Tri-Centers from seeking relief against him once the properties had been sold pursuant to this court's foreclosure order. The case is complicated further by Crown Life's motion to substitute itself as the real party in interest in the cross-claim. If its motion were successful, then Crown Life would be able to cure the remaining deficiency against the trust by availing itself of the proceeds that Tri-Centers hopes to obtain from Aronson.

 DISCUSSION

 The court turns first to Tri-Centers' motion to strike Aronson's second and third defenses. (The first affirmative defense already has been rejected.) The court assumes, for the sake of ...


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