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U.S. v. GOLDEN ELEVATOR

November 30, 1994

UNITED STATES OF AMERICA, PLAINTIFF,
v.
GOLDEN ELEVATOR, INC., DEFENDANT.



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

OPINION

The Government sues to collect a debt.

This is a cause of action to collect on a promissory note held by the Small Business Administration (SBA). On August 14, 1980, Golden Elevator, Inc., through its President, Robert H. Leenerts, executed a promissory note and security agreement with Farmers State Bank. On that same day, Robert H. Leenerts and Debra J. Leenerts agreed to personally guarantee the loan. Over five years later, on October 11, 1985, Farmers State Bank executed an assignment with the SBA.

Sometime prior to the assignment, Golden Elevator began having difficulty making payments on the loan. As a result, in July of 1992, the Government filed suit to collect on the guaranties and to foreclose on the mortgage. Case No. 92-3172. The Government, however, failed to timely prosecute the case and it was dismissed with prejudice. See United States v. Golden Elevator, Inc., 27 F.3d 301 (7th Cir. 1994).

Thereafter, on August 3, 1993, the SBA, pursuant to the terms of the note, sent notice to Robert Leenerts that it was accelerating the loan. Fifteen days later, on August 17, 1993, the Government filed a second suit to foreclose on the mortgage. Defendants Golden Elevator and Robert and Debra Leenerts then filed a motion to dismiss. In response, the Government filed a motion to amend the Complaint. The motion was allowed and the Complaint was amended to assert a cause of action against only Golden Elevator to collect on the promissory note with all other claims and defendants being dropped. After the Complaint was amended, Golden Elevator filed a new motion to dismiss asserting that the Government had failed to plead a cause of action upon which relief could be granted.

Golden Elevator's motion to dismiss was denied. This Court held that under Illinois law the contract action on the note was separate and distinct from the claims that were dismissed for failure to prosecute and that the dismissal for failure to prosecute did not preclude bringing the contract action. After the motion to dismiss was denied, Golden Elevator answered the Amended Complaint raising six affirmative defenses.

On October 20, 1994, the Government moved for summary judgment contending that Defendant had admitted most of the allegations in the Amended Complaint and that no genuine issues of material fact remain. Additionally, the Government asserts that Golden Elevator's affirmative defenses are deficient as a matter of law.

In response, Golden Elevator contends that three asserted affirmative defenses preclude summary judgment. Specifically, Defendant contends that because the Government failed to provide notice and grant administrative rights, failed to plead the Federal Debt Collection Procedures Act, and failed to plead a cause of action upon which relief can be granted, summary judgment should be denied.

I. Summary Judgment

Summary judgment shall be granted if the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Black v. Henry Pratt Co., 778 F.2d 1278, 1281 (7th Cir. 1985). The moving party has the burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). In determining whether a genuine issue of a material fact exists, the evidence is to be taken in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). Once the moving party has met its burden, the opposing party must come forward with specific evidence, not mere allegations or denials of the pleadings, which demonstrates that there is a genuine issue for trial. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir. 1983).

II. Analysis

The Government has put forth uncontroverted evidence that the Defendant made, executed and delivered a written promissory note on August 14, 1980, for $315,000.00, to Farmers State Bank of Camp Point. It is also not in dispute that the SBA is the present owner and holder of said note with assignment occurring on October 11, 1985. Additionally, Defendant's agents have admitted that Defendant defaulted on payments due under the note and that the note matured with a balance due and owing. Finally, the evidence shows that the Government made a written demand for payment on the note on August 3, 1993. Thus, the Government has demonstrated the elements necessary for relief. See Fed.R.Civ.P. Official Form 3.

A. Administrative Remedies

Defendant claims Plaintiff is not entitled to summary judgment because three affirmative defenses preclude relief. First, Defendant argues that summary judgment is not warranted because the Government failed to provide "notice of, or the opportunity to apply for administrative remedies prior to the initiation of the foreclosure." (Def.'s ...


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