preserved for the benefit of Metropolitan all of NBD's claims and liens which were avoided due to the settlement. In Re Metropolitan Plant & Flower, Inc., Ch. 11 Case No. 96 B 3816, slip op. at 12 (N.D. Ill. July 2, 1996). Metropolitan now possesses all of the rights and privileges contained in the Subordination Agreement, including the subordination of Mr. Dalen's debt. Mr. Dalen moves for dismissal of this count because he contends that Mr. Clamage and Ms. Clamage are not parties to the Subordination Agreement and that Mr. Clamage's personal debt as a result of the Stock Purchase Agreement is separate from any debt owed by Metropolitan. Therefore, he argues, the Subordination Agreement does not nullify the effect of the Guaranty which relates only to the Stock Purchase Agreement.
Mr. Dalen's arguments are rooted in two assumptions that I cannot make on this motion. First, as explained earlier, Mr. Clamage appears to be a party to the Subordination Agreement. If so, the personal debt that he owed to Mr. Dalen is covered by the terms of the Subordination Agreement. Mr. Dalen signed this agreement, which specifically stated that all indebtedness of the borrower to the creditor, as specified in all of the agreements between these parties, was subordinated. Second, Mr. Clamage's personal debt is linked to Metropolitan by means of another guaranty agreement. Contemporaneous with the execution of the Stock Purchase Agreement, Metropolitan signed a guaranty ensuring performance of the payments due Mr. Dalen from Mr. Clamage. Hence, Mr. Clamage and Metropolitan were involved in both the Subordination Agreement and the Stock Purchase Agreement with respect to the personal debt that Mr. Clamage owed for purchase of the stock.
These facts are important because of the language of the Guaranty. The Guaranty states that Ms. Clamage's obligation to pay Mr. Dalen is "subject to any rights or defenses that [Edward] Clamage, Metropolitan or Silkcorp may have either at the time of the execution of the [Stock Purchase] Agreement dated March 4, 1994, . . . or in the future. . . ." Thus, Mr. Clamage's status as a party to the Subordination Agreement and Metropolitan's ownership of the privileges and rights of that agreement may provide Ms. damage with a defense to Mr. Dalen's enforcement of the Guaranty. Since I cannot say that Ms. Clamage can prove no set of facts to support her claim, Count III will not be dismissed.
Count IV, on the other hand, fails because of Mr. Clamage's role in this transaction. Count IV alleges that the Stock Purchase Agreement constituted a fraudulent conveyance, and therefore, Ms. Clamage's Guaranty is unenforceable. Mr. Dalen seeks to dismiss this count because Ms. Clamage is not a creditor as required under the Illinois Uniform Fraudulent Transfer Act, 740 ILCS 160 et seq. (the "Act"), and therefore cannot pursue a cause of action based on the Act.
The Act provides that a transaction may be fraudulent only "as to a creditor." 740 ILCS 160/5. In addition, Illinois courts have held that parties to a fraudulent transaction are bound by it and cannot use the Act as a shield against the fraudulent bargain. Rozycki v. Gitchoff, 180 Ill. App. 3d 523, 536 N.E.2d 130, 132, 129 Ill. Dec. 446, 448 (5th Dist. 1989); Robertson v. Robertson, 123 Ill. App. 3d 323, 462 N.E.2d 712, 721, 78 Ill. Dec. 593, 602 (5th Dist. 1984); Peric v. Chicago Title & Trust Co., 89 Ill. App. 3d 271, 411 N.E.2d 934, 935, 44 Ill. Dec. 568, 569 (1st Dist. 1980). Therefore, only the creditors of a party to a fraudulent conveyance may maintain an action under the Act.
Ms. Clamage cannot maintain her cause of action against Mr. Dalen in Count IV because she is not a creditor of Metropolitan or Silkcorp. Ms. Clamage does not allege anywhere in her Amended Complaint that she is a creditor, and none of the four agreements grant her creditor status. Metropolitan, Silkcorp, and Mr. Clamage were parties to the transaction. As parties they all are bound to the transaction and cannot use the Act as a defense. If Mr. Clamage, Metropolitan and Silkcorp have no defense, then Ms. Clamage cannot "borrow" any of their defenses pursuant to the Guaranty. Hence, Ms. Clamage may not pursue a fraudulent conveyance action for this transaction.
The motions to dismiss Count IV of the amended complaint and the counterclaim are granted. The motion to dismiss Count III of the amended complaint is denied.
Elaine E. Bucklo
United States District Judge
Dated: March 17, 1997