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Federal Deposit Insurance Corp. v. Rayman

June 26, 1997




Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 92 C 3688 John A. Nordberg, Judge.

Before BAUER, HARLINGTON WOOD, JR. and COFFEY, Circuit Judges.

HARLINGTON WOOD, JR., Circuit Judge.

Argued February 20, 1997

Decided June 26, 1997

When he signed the guaranty for his $525,000 land purchase loan back in 1969, promising to pay the holder of the note if the loan went into default, Defendant-Appellant Steven Rayman surely had no idea that nearly thirty years later the loan would still be unpaid and that he would owe nearly twice its amount. In this case, Rayman appeals the district court's grant of summary judgment in favor of Plaintiff-Appellee Federal Deposit Insurance Corporation (FDIC) *fn1 in its suit to collect on the loan. He claims that genuine issues of material fact exist as to whether the FDIC increased his risk by allowing a portion of the land, which was serving as collateral for the loan, to be sold without informing him. Rayman also asserts the district court erred in holding that when he signed the guaranty to secure the loan the FDIC is enforcing, he waived the implied covenant of good faith and fair dealing; he claims the FDIC's actions regarding the collection of this debt violated that covenant. While we can do no more for Rayman than sympathize with him and agree that the FDIC has acted most unfairly, we also agree with the district court that back in 1969, Rayman waived the defenses he raises; thus, he has not raised genuine issues of material fact. We therefore must affirm the district court's grant of summary judgment for the FDIC.


The facts of this case should serve as a warning to anyone preparing to sign an unconditional guaranty to pay a loan. In 1969 Rayman purchased Kenilworth Oaks, a 14-building, 96-unit residential complex in Elgin, Illinois, from the Federal Savings and Loan Insurance Corporation (FSLIC) through Hoyne Savings and Loan Association (Hoyne). The Merchants National Bank of Aurora, Illinois acted as land trustee and executed a promissory note for $525,000 payable to Hoyne at eight percent interest. The property itself served as collateral to secure the loan. At this time, Rayman also signed the personal guaranty that causes the problem here. The guaranty provides:

1. The undersigned unconditionally and absolutely guarantees the due and punctual payment of the full amount of the Note executed concurrently herewith by the aforesaid Trustee in the amount of FIVE HUNDRED TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($525,000.00) and any interest thereon, and any other monies due or which may become due pursuant to the terms thereof.

2. In the event of the failure of the Trustee aforesaid to comply with the terms of the aforementioned Note, the undersigned waives notice of acceptance of this guaranty, diligence, presentment, protests, Notice of Dishonor, demand for payment, and any and all notices of whatever kind or nature and the exhaustion of legal remedies available to the Holder of said Note.

Rayman also negotiated for a provision in the note which stated that the holder of the note could not foreclose on the property unless the monthly payments were at least 45 days past due and Rayman was notified of the foreclosure. Once all the papers were signed and in order, Hoyne assigned the note, mortgage and guaranty to FSLIC. FSLIC then assigned the promissory note to Unity Savings in 1971.

In 1976, seven years after he purchased the complex, Rayman sold Kenilworth Oaks to Gary Lemkau and Paul Stansell via an Assumption and Indemnification Agreement, acknowledging, however, that Rayman's duties as guarantor were not changed. When Lemkau and Stansell defaulted on the note in 1977, Unity Savings gave them a chance to bring their obligation up to date by allowing them to sell part of the complex. They sold Lot 39, also known as 809 Sharon Court, the "gateway parcel" and prime real estate of the project, for $29,510. Of the proceeds $20,000 was credited to the partial release and the remaining $9,510 was applied to other debt. No one notified Rayman of the sale and release of this part of the collateral.

Stansell and Lemkau sold the remainder of the property to Richard Wanland in 1978. With the sale, Wanland assumed the obligation to pay the outstanding debt but Rayman was not released from his obligation as guarantor. In 1980 Wanland was two months delinquent with his mortgage payments and Rayman received a letter informing him of the amount and the length of time of the delinquency. When he heard nothing more, he assumed, correctly as it turned out, that Wanland had corrected the delinquency. In September 1982, however, Wanland caused more trouble when he allowed the mortgage to go into default, and he made no payments until 1986.

Meanwhile, Unity Savings merged with Talman Federal Savings and Talman became the owner of the loan documents. When Wanland defaulted on his debt, Talman decided not to foreclose or collect the debt in any other way; instead, it waited and let the arrearage and interest accrue. In 1983, a year after Wanland first defaulted on the mortgage, Talman submitted the defaulted loan to FSLIC for repurchase under an agreement by which FSLIC would repurchase loans that became more than 90 days delinquent. Negotiations began regarding the repurchase, and during this time all collection activity on the loan stopped.

In 1985, Wanland received a notice from the tax assessor's office informing him that the Kenilworth Oaks property had been sold to pay delinquent taxes and instructing him that he had until October 1987 to redeem it. In April 1986 Wanland asked FSLIC to redeem the property, but it refused. In December of that year FSLIC resolved a three-year-long bureaucratic dispute over whether its Washington or Chicago office would ...

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