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Nilsson v. NBD Bank of Illinois

December 14, 1999

LARS NILSSON, AN INDIVIDUAL, AND HALSTEAD PROPERTIES I LIMITED PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP,
PLAINTIFFS-APPELLANTS AND CROSS-APPELLEES,
V.
NBD BANK OF ILLINOIS, NOW KNOWN AS FIRST CHICAGO NBD CORPORATION; LISA CALLAHAN, INDIVIDUALLY AND AS VICE PRESIDENT; WILLIAM MCKINLEY, INDIVIDUALLY AND AS VICE PRESIDENT; WILLIAM LYNCH, INDIVIDUALLY AND AS VICE PRESIDENT; AND NATIONAL BANK OF DETROIT, DEFENDANTS-APPELLEES AND CROSS-APPELLANTS.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY No. 93-L-10560 THE HONORABLE RICHARD E. NEVILLE JUDGE PRESIDING.

The opinion of the court was delivered by: Presiding Justice Cousins

Plaintiffs, Lars Nilsson and Halstead Properties I Limited Partnership (Halstead Properties), appeal from a judgment of the circuit court of Cook County awarding Nilsson $15,000 in damages as a result of a breach of contract by defendant NBD Bank of Illinois and three of its employees, Lisa Callahan, William McKinley, and William Lynch. All counts brought by or on behalf of Halstead Properties were dismissed by the circuit court prior to trial. Thus, on appeal, Nilsson contends that the lower court erred: (1) in denying his motion for a new trial on damages only as to count II of his complaint or, in the alternative, a new trial on all issues as to both breach of contract counts; (2) in directing a verdict in favor of defendants on Nilsson's common law fraud claim; (3) in finding that defendants did not violate the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1996)); and (4) in dismissing Nilsson's contention that defendants violated the Illinois Fairness in Lending Act (815 ILCS 120/1 et seq. (West 1996)). Defendants cross-appeal, claiming that the promissory note, signed by Nilsson to secure the loan from which the breach of contract suit arose, was a demand note as a matter of law.

For the reasons articulated below, we affirm.

BACKGROUND

The following represents information relevant to the determination of the case at bar. Beginning in December 1987, Nilsson and his partners obtained several loans from NBD Bank of Chicago (NBD Chicago) using their commercial properties as collateral. In June 1989, due to his previously established banking relationship with NBD Chicago, Nilsson wrote a letter to the bank to request a $500,000 five-year personal line of credit that would allow him to borrow, repay, and borrow again up to the maximum amount of the line. As collateral for the line of credit, Nilsson offered an assignment of the beneficial interest in a land trust for commercial property located at 1215 S. Washington, Wilmette, Illinois, as well as an assignment of the beneficial interest in the land trust that owned his own residence. Additionally, at the time of his request, Nilsson gave NBD Chicago a personal financial statement that listed his real estate holdings, declared his personal net worth to be more than $7 million, and disclosed his ownership of art, automobiles and certain stock in DNIC Brokerage Company, which was then a small, closely held corporation doing business as Telular, Inc.

Nilsson's loan request was handled by Paul Slade, a commercial real estate loan officer at NBD Chicago. As the amount Nilsson requested exceeded Slade's spending limit, the line of credit had to be approved by the bank's loan committee, which subsequently authorized Slade to extend to Nilsson a one-year, rather than five-year, $500,000 personal line of credit with no restrictions on Nilsson's use of the money. The collateral offered by Nilsson was to be used as the security for the loan and the authorization was to expire on July 1, 1990. The authorization further provided that, if the loan was renewed, Nilsson would be required to pay down 25% of the outstanding balance annually.

On July 5, 1989, Nilsson signed a "Demand Revolving Note" as a promissory note to support the line of credit, without first reading the contents of the document. The promissory note included a description of events that would give rise to default under the terms of the note, as well as an acceleration clause describing the bank's right to accelerate payments due in the event of default. It was not until after signing the promissory note, but before drawing down funds, that Nilsson noticed that the note stated the loan could be called "on demand." Upon questioning the demand feature, Nilsson was allegedly assured by Slade that the loan was for five years and that the demand feature applied only in the event of default.

In June 1990, Nilsson refinanced his home and repaid $250,000 of the line of credit, thereby reducing the maximum spending limit on the line of credit from $500,000 to $250,000. In return, NBD Chicago released its security interest in Nilsson's residence. Immediately thereafter, Nilsson executed a loan modification agreement that stated the "Revolving Note" was "due upon demand." Upon questioning the demand feature, Nilsson was again allegedly assured by Slade that the loan was for five years and that the demand feature applied only in the event of default.

During the summer of 1992, it was announced that NBD Chicago would merge with other subsidiaries of NBD Bancorp throughout the State of Illinois to form NBD Bank of Illinois *fn1 (the bank). Early that same summer, Mr. Slade left NBD Chicago. Prior to his departure, the authorization for Nilsson's personal line of credit had been renewed each year through 1992. Following Slade's departure, the authorization for Nilsson's personal line of credit was extended until July 1, 1993. Thereafter, some of NBD Chicago's commercial real estate loans, including Nilsson's personal line of credit, were transferred to NBD Bank of Evanston (NBD Evanston), as NBD Evanston was more experienced in commercial real estate loans. Mary Pat Kerrigan was overseeing commercial real estate lending at both banks, while defendant William Lynch was the senior lender for both banks. Responsibility for Slade's customers, including Nilsson, was transferred to defendant Lisa Callahan.

On September 28, 1992, Callahan wrote Nilsson a letter asking Nilsson to replace the "Demand Revolving Note" with a term note maturing on April 1, 1993, as neither Callahan nor Kerrigan liked demand notes. The letter further indicated that, if the term note was not paid when due, the loan would be amortized over the next three years ending on April 1, 1996. Nilsson refused, stating at trial that Callahan's September 28, 1992, letter included a promissory note with a December 31, 1992, date for repayment rather than the April 1, 1993, date implied by her letter. However, December 31, 1992, was actually the maturity date for a $750,000 loan (Halstead loan) issued to Nilsson as a general partner of Halstead Properties by NBD Chicago on December 24, 1987. The Halstead loan was secured by commercial property located at 2201 S. Halstead, Chicago, Illinois, and was supported by a five-year term note.

On October 27, 1992, Callahan proposed to Nilsson that the Halstead loan be extended for an additional five years to December 31, 1997, rather than terminate on December 31, 1992. As to Nilsson's personal line of credit, Callahan again proposed that Nilsson replace the promissory note for his personal line of credit with a term note that would be due on May 31, 1993, instead of April 1, 1993. However, she further indicated that, if the term note was not paid when due, the loan would be amortized over the next three years to May 31, 1996.

In a letter dated November 4, 1992, Nilsson refused to sign a note that made his personal line of credit due on May 31, 1993. Therein, he stated that: (1) his personal line of credit was approved to be used for any purpose he saw fit; (2) the funds were used as a part of his million dollar investment into Telular, Inc.; (3) the note had a five-year term; and (4) he had paid the loan balance down to $250,000 in order to meet the requirement of a 25% reduction per year. Callahan answered Nilsson by letter on November 16, 1992, stating that the promissory note for Nilsson's personal line of credit was a "demand note with bank approval required on an annual basis." Nilsson, however, again refused to sign a new note. Instead, he requested a fixed date of repayment for July of 1993, with an option for an additional three months.

On February 1, 1993, the bank notified Nilsson that the maturity dates for both the Halstead loan and his personal line of credit had been extended to April 1, 1993, rather than July 4, 1993, as requested. As Halstead Properties signed a new note with the April 1, 1993, maturity date, the bank requested that Nilsson also sign a new note for his personal line of credit with the same April 1, 1993, maturity date. Nilsson again refused.

On March 2, 1993, Lynch, Kerrigan and Callahan met with Nilsson and one of his lawyers to ask Nilsson to move his loans elsewhere. In the interim, they offered to extend the loans coming due either to June 30, 1993, without any fees or new appraisals, or for one year if new appraisals were conducted and fees paid. Nilsson refused. As such, on April 16, 1993, the bank demanded repayment of the both the $750,000 Halstead loan and all sums advanced for Nilsson's personal line of credit.

On June 20, 1993, Nilsson refinanced the Halstead loan through Michigan Avenue Bank. Following the refinancing of the Halstead loan, the bank issued Nilsson a payoff letter on July 29, 1993, for the monies due under his personal line of credit. Thereafter, on August 30, 1993, Nilsson and Halstead Properties filed 16-count complaint in the circuit court of Cook County against the bank and three of its employees based upon the bank's untimely demand for repayment of his personal line of credit.

On March 13, 1996, the trial court dismissed eight of the counts alleged in plaintiffs' 14-count second amended complaint, filed on June 20, 1995, including a count that alleged a violation of the Illinois Fairness in Lending Act (815 ILCS 120/1 et seq. (West 1996)). The court further denied defendants' motion for summary judgment and motion in limine, both of which claimed that the promissory note Nilsson signed was a demand note as a matter of law. As all counts brought by or on behalf of Halstead Properties were dismissed by the trial court, Nilsson proceeded to trial on the six remaining counts of Nilsson's third amended complaint: two breach of contract counts, a common law fraud claim, two claims under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act or Act) (815 ILCS 505/1 et seq. (West 1996)), and a charge of civil conspiracy to violate the Consumer Fraud Act.

Trial commenced on March 23, 1998, and ended on April 15, 1998. During trial, Nilsson presented evidence that, on February 5, 1993, he was obliged to sell 8.93% of his stock in Telular, Inc., for $893,000 in order to retire debt secured by the stock and repay the $250,000 personal line of credit he believed was coming due on April 1, 1993. Further, Nilsson asserted that the funds used to repay the personal line of credit in July 1993 were generated by the sale of an additional 2.02% of his stock in Telular, Inc., for $587,486, which was finalized on August 4, 1993. But for these transactions, Nilsson argued that he would have been entitled to either $15,861,978.22 in cash distributions from the sale of Telular, Inc., stock when the stock was at its highest value, on the date of the stock's initial public offering, or $2,331,000 in cash distributions from the sale of the stock had Nilsson been able to hold the stock until the date of trial.

On April 13, 1998, the trial court directed a verdict against Nilsson on the common law fraud and conspiracy contentions following the close of Nilsson's case. As such, only the two breach of contract claims were submitted to the jury; ...


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