Appeal from Circuit Court of Sangamon County No. 96L256 Honorable Sue E. Myerscough and Robert J. Eggers, Judges Presiding.
The opinion of the court was delivered by: Justice Garman
Plaintiff, Bank One, Springfield (Bank One), filed a complaint against William Roscetti (Roscetti) seeking to enforce a guaranty (guaranty) Roscetti executed to secure Bank One's extension of credit to Illini Motorama (Illini). Roscetti responded with five affirmative defenses and one counterclaim. Bank One filed a motion seeking summary judgment in its favor on Roscetti's counterclaim and dismissal of Roscetti's affirmative defenses, arguing they were barred by the Credit Agreements Act (Act) (815 ILCS 160/1 et seq. (West 1998)). Roscetti responded with a cross-motion for summary judgment, alleging that the Act did not bar his defenses and counterclaim and arguing that Bank One had breached the implied covenant of good faith and fair dealing. The trial court found that (1) guaranties are not credit agreements for purposes of the Act; (2) even if the Act applied, good faith and fair dealing are implied in all contracts; and (3) Bank One breached its duty of good faith and fair dealing. The trial court entered judgment for Roscetti. On appeal, Bank One argues that the trial court erred in (1) ruling that guaranties are not credit agreements and that the Act did not apply, (2) ruling that Bank One breached the duty of good faith, (3) granting summary judgment because unresolved issues of material fact exist, and (4) granting Roscetti leave to file a fifth affirmative defense and ruling on the defense on the same day. We reverse and remand with instructions.
In 1987, Bank One extended a revolving floor-plan line of credit of $300,000 (loan) to Illini, evidenced by a promissory note (note) and floor plan (floor plan) executed by Illini in favor of Bank One. Under the floor-plan line of credit, Illini was to purchase vehicles with funds loaned by Bank One, pay interest on the line of credit, and upon the sale of a vehicle repay Bank One for the portion of the loan allocated to such vehicle. Ellis "Mike" Robinson (Robinson), an account manager at Bank One, informed Larry Dellomo (Dellomo), the principal of Illini, that Bank One required a personal guaranty as a condition to the loan. To satisfy this requirement, Roscetti, a long-time friend of Dellomo's, executed and delivered a guaranty to Bank One unconditionally guaranteeing payment of the loan. The guaranty was renewed on a yearly basis.
In 1991, Illini became out-of-trust under the floor plan by about $60,000. Shortly thereafter, Robinson, Roscetti, and Dellomo met to discuss the default. The parties agreed that Bank One would loan Roscetti $60,000, Roscetti would loan the $60,000 to Illini, and Illini would pay Bank One and bring itself back into trust. In exchange, Robinson agreed to allow Illini to continue the existing floor-plan line of credit. Roscetti alleges that Robinson encouraged him to agree to this scheme by promising that he would watch Illini and Dellomo "like a hawk" and would inform Roscetti immediately of any problems. Roscetti further alleges that, over the next few years, he periodically inquired of Robinson about the status of Illini and was told that everything was "A-OK."
In the summer of 1995, Bank One requested that Illini and Roscetti execute new financing documents. On October 2, 1995, Illini executed a new floor plan and note in the principal amount of $300,000, set to expire on December 31, 1995. On October 2, 1995, Roscetti executed a new guaranty, unconditionally guaranteeing the loan. Although the guaranty was unlimited in nature, Roscetti alleges that this was the result of a mutual mistake of fact and that he and Bank One intended the guaranty to be limited to $300,000.
Illini maintained a checking account at Elliot State Bank (Elliot). John Wilcox (Wilcox), an employee of Elliot, became aware of a pattern of overdrafts in Illini's account in September 1995. Wilcox allegedly discussed the pattern of overdrafts with Robinson. Roscetti alleges that the pattern of overdrafts was evidence that Illini was operating a check-kiting scheme and that Wilcox may have used the term "check-kiting" in his discussions with Robinson.
The floor plan and note matured on December 31, 1995, but Bank One did not call the note or renew the floor plan or note. However, it continued to advance funds to Illini from January 1, 1996, to April 16, 1996. Roscetti alleges that Bank One advanced over $6 million to Illini during this four-month period. In April 1996, Dellomo presented checks to Bank One in the amount of $389,930 and received additional funds. At this point, Illini's principal balance was $263,250. The deposited checks bounced, however, leaving a principal balance of $653,180. As a result, Illini was in default and Dellomo disappeared.
Bank One filed a complaint against Roscetti on September 25, 1996, seeking to enforce the guaranty in the amount of Illini's principal balance, which had by then been reduced to $547,659.08 due to additional vehicles on Illini's lot being sold. As of March 26, 1997, the principal balance was further reduced to $408,285.80 due to additional vehicles being sold.
On February 13, 1997, Roscetti filed an answer, four affirmative defenses, a counterclaim, and a third-party complaint alleging various counts against Bank One, Elliot, Illini, and Dellomo. The third-party complaint was ultimately dismissed. Roscetti's four affirmative defenses alleged that Bank One (1) failed to properly inspect and monitor the floor plan and falsely advised Roscetti the floor plan was in order; (2) failed to inform Roscetti it had extended the floor plan and promissory note, and thereby increased Roscetti's risk; (3) failed to inform Roscetti it had discussed the alleged check-kiting scheme with Elliot, and thereby increased Roscetti's risk; and (4) breached the implied covenant of good faith and fair dealing by failing to vigilantly monitor Illini and by not requiring full performance by Illini under the floor plan. Roscetti's counterclaim alleged that Bank One breached its contract with Roscetti that it would keep Roscetti informed of Illini's operations and would watch Illini and Dellomo "like a hawk."
On March 12, 1998, Bank One filed a motion seeking summary judgment on Roscetti's counterclaim and dismissal of his defenses. Bank One argued that the Act barred "any action on an oral agreement related to the extension of credit." Because Roscetti's counterclaim and defenses rested on Robinson's alleged agreement to monitor vigilantly Illini's operation, which agreement was not reduced to writing, the counterclaim and defenses were barred.
On April 9, 1998, Roscetti filed a cross-motion for summary judgment, responding that his counterclaim and defenses were based on Bank One's failure to perform obligations imposed on it by the express terms of the guaranty, floor plan, and note, and were not predicated upon Robinson's statement. Roscetti also argued that Bank One had breached the implied covenant of good faith and fair dealing by acting inconsistently with Roscetti's rights and failing to disclose circumstances that materially increased Roscetti's risks.
Roscetti also filed a motion seeking leave to file a fifth affirmative defense on the same day. Before actually obtaining leave, Roscetti filed his fifth affirmative defense on April 14, 1998, alleging that Bank One had failed to diligently pursue timely compliance by Illini with the terms of the floor plan and note, failed to diligently notify Roscetti that Illini was in default, and materially modified Roscetti's obligations.
On December 2, 1998, Judge Myerscough issued a memorandum opinion granting Roscetti's motion for leave to file his fifth affirmative defense, denying Bank One's motion for summary judgment on Roscetti's counterclaim and motion to strike his defenses, and entering judgment in favor of Roscetti and against Bank One's complaint and Roscetti's counterclaim. Judge Eggers denied the motion for reconsideration. This appeal followed.
Summary judgment is appropriate where the pleadings, affidavits, depositions, admissions, and exhibits on file, when viewed in the light most favorable to the non-movant, reveal that no genuine issue as to any material fact exists and that the movant is entitled to judgment as a matter of law. This court reviews the entry of summary judgment de novo. Busch v. Graphic Color Corp., 169 Ill. 2d 325, 333, 662 N.E.2d 397, 402 (1996). It considers anew the facts and law related to the case to determine whether the trial court was correct. Shull v. Harristown Township, 223 Ill. App. 3d 819, 824, 585 N.E.2d 1164, 1167 (1992). A. Roscetti's Affirmative Defenses and Counterclaims
The trial court's memorandum opinion states that "a guaranty is not a credit agreement under the [Act]" and, accordingly, holds the Act inapplicable. Bank One contends that the trial court's holding defies controlling case law. We agree that the trial court incorrectly held that the Act is inapplicable to Roscetti's defenses and counterclaim.
The Act defines a "credit agreement" as:
"an agreement or commitment by a creditor to lend money or extend credit or delay or forbear repayment of money not primarily for personal, family[,] or household purposes, and not in connection with the ...