United States District Court, N.D. Illinois, Eastern Division
May 19, 2005.
AMERICAN GENERAL FINANCIAL SERVICES OF ILLINOIS, INC., an Illinois corporation, Plaintiff,
RIVERSIDE MORTGAGE COMPANY, INC., an Arkansas corporation, Defendant.
The opinion of the court was delivered by: MICHAEL MASON, Magistrate Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, American General Financial Services of Illinois,
Inc. ("plaintiff" or "American General Illinois") filed an action
for declaratory relief and breach of contract against defendant
Riverside Mortgage Company, Inc. ("Riverside"). American General
Illinois moved for summary judgment. For the following reasons,
we deny plaintiff's motion for summary judgment.
On February 16, 2001, Riverside entered into a Purchase and
Sale Agreement with American General Finance, Inc., a Delaware
corporation ("American General Delaware"). Pursuant to the
contract, American General Delaware purchased several mortgage
secured loans from Riverside, two of which are the subject of
this litigation. In particular, American General Delaware
purchased a note and mortgage purportedly executed by Kurt Bulawa and a note and mortgage purportedly executed by Amanda
Spendel.*fn2 Riverside assigned all of its rights, title and
interest in the Bulawa and Spendel notes and mortgages to
American General Delaware on February 16, 2001. The Bulawa note
and mortgage are secured by residential property located at 23006
East Drive, Richton Park, Illinois. The Spendel note and mortgage
are secured by residential property located at 586 Saratoga,
Chicago Heights, Illinois.
Both the Bulawa and Spendel notes have been delinquent since
May 2001. The Bulawa and Spendel notes and mortgages are the
subject of this litigation because they were allegedly procured
by fraud. The parties dispute whether these mortgages and notes
On July 11, 2001, Amanda Spendel signed an Affidavit of Forgery
swearing that she did not sign the promissory note associated
with the Chicago Heights property and she did not know who forged
her signature. On July 20, 2001, American General Delaware sent a
formal demand letter to Riverside in which it asked Riverside to
repurchase the Spendel note and mortgage pursuant to the terms of
the contract between the parties. Riverside refused.
Subsequently, on August 6, 2001, American General Delaware sent
another formal demand letter asking Riverside to repurchase the
Bulawa note and mortgage pursuant to the terms of the contract.
Again, Riverside refused.
Both demand letters asked Riverside to repurchase the Bulawa
and Spendel notes and mortgages pursuant to ¶ 11 of the contract. The relevant
portion of ¶ 11 provides:
11. SELLER'S WARRANTIES REGARDING THE RECEIVABLES
a. . . . . Seller represents and warrants to Buyer,
which representations and warranties shall survive
the execution and closing of this Agreement, that as
of the Contract Date and the Closing Date:
(x) All of the Receivables, together with any
instruments securing the same are genuine, valid and
complete, were made for valuable considerations and
are legally enforceable obligations of the respective
persons shown as indebted thereon, in accordance with
c. In the event of any breach or breaches of any of
the foregoing warranties, Seller will, within 30 days
after written demand, pay Buyer [sic] purchase price
listed on Exhibit D of the then Net Outstanding
Balance of the affected Receivable(s).
In a separate criminal action brought by the United States
against defendant Valerie Fortner in the Northern District of
Illinois, Ms. Fortner admitted in a plea agreement that she
fraudulently obtained mortgage loans secured by several
residential properties, including 23006 East Drive, Richton Park,
Illinois and 598 Saratoga, Chicago Heights, Illinois.*fn3
The plea agreement was filed on April 1, 2004. Fortner also
admitted that she fraudulently caused Riverside, among other
mortgage companies, to issue mortgage loans based upon documents
that often contained forged signatures from alleged borrowers and
false and fraudulent information related to the alleged
borrowers' finances, employment and familial situation.
Plaintiff, American General Illinois, filed its complaint in
the district court on May 16, 2002, alleging that Riverside
breached its contractual obligation to repurchase the subject loans upon demand. American General Illinois also asked the Court
to declare the rights and responsibilities of the parties to this
action as they relate to performance of the contract. Riverside
filed an affirmative defense alleging that American General
Illinois has no standing to seek remedies for breach of contract
or request a declaration of its rights under the February 16,
2001 contract because American General Illinois is not a party to
the contract. Riverside further alleged that no contract exists
between Riverside and American General Illinois.
The parties also dispute whether American General Illinois is
the holder of the Bulawa and Spendel notes and mortgages.
Riverside contends that American General Illinois has not
established that it is the holder of these notes and mortgages.
American General Illinois argues that the affidavits of Michael
Walsh, an authorized agent of American General Illinois, show
that the subject notes and mortgages were assigned by American
General Delaware to American General Illinois.*fn4 In the
affidavits submitted in support of plaintiff's motion, Mr. Walsh
states that American General Illinois controls the right, title
and interest of the Bulawa and Spendel notes and mortgages, as it
is the servicing arm of American General Delaware. Mr. Walsh
further states that the servicing rights for these notes and
mortgages were internally transferred between the related
corporate entities to American General Illinois in 2002.
However, under Federal Rule of Civil Procedure 56(e),
supporting and opposing affidavits must "set forth such facts as would be admissible in
evidence. . . ." Fed.R.Civ.P. 56(e). To be admissible in
evidence, the affidavits must be "accompanied by a certificate of
acknowledgment executed in the manner provided by law by a notary
public. . . ." Fed.R. Evid. 902(8). The Walsh affidavits are
unsigned and they are not notarized. Thus, the affidavits are not
admissible as evidence under Rule 56(e) and we will not consider
them. Howard-Ahmad v. Chicago Sch. Reform Bd. of Trustees,
161 F. Supp. 2d 857, 861 (N.D. Ill. 2001). We will also disregard any
factual contentions plaintiff supports by reference to these
affidavits. See Mingo v. Roadway Express, Inc.,
135 F. Supp. 2d 884, 893-94 (N.D. Ill. 2001); Bell Enters. Venture v. Santanna
Natural Gas Corp., 2002 U.S. Dist. LEXIS 19460 (N.D. Ill. 2002)
(recognizing that the Court must disregard factual contentions
which are conclusory or unsupported by the record or admissible
Summary judgment is proper when "the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show 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." Fed.R.Civ.P. 56(c); see also,
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The
moving party has the burden of demonstrating the absence of
genuine issues of material fact. Celotex, 477 U.S. at 323. "A
genuine issue of material fact exists only if there is sufficient
evidence favoring the nonmoving party for a jury to return a
verdict for that party." Alexander v. Dept. of Health and Family
Services, 263 F.3d 673, 680 (7th Cir. 2001). When making this
determination, we review the record in the light most favorable
to the nonmovant, and draw all reasonable inferences in favor of
the nonmovant. Id. Here, American General Illinois moved for summary judgment on
its breach of contract and declaratory relief counts. The breach
of contract counts arise out of Riverside's alleged breach of the
February 16, 2001 contract Riverside entered into with American
General Delaware. Plaintiff's request for declaratory relief asks
the Court to declare the rights and responsibilities of the
parties to this action as they relate to performance of the
February 16, 2001 contract. However, American General Illinois is
not a party to that contract.
"Generally, only parties to a contract or those in privity with
the parties have rights under the contract." OEC-Diasonics v.
Major, 674 N.E.2d 1312, 1315 (Ind. 1996).*fn5 Those not
party to a contract may enforce the contract only if they
demonstrate that they are third-party beneficiaries. Luhnow v.
Horn, 760 N.E.2d 621, 628 (Ind.Ct.App. 2001). American General
Illinois does not claim that it is a party to the February 16,
2001 contact, nor does it argue that it was in privity with the
parties to that contract. Furthermore, American General Illinois
makes no attempt to demonstrate that it is a third-party
beneficiary of the contract.
Instead, American General Illinois contends that it is the true
and lawful owner of the Bulawa and Spendel notes and mortgages
and that American General Delaware assigned those notes and
mortgages to it. Even if these facts were supported by an
admissible affidavit, which they are not, American General
Illinois still has not demonstrated that it has standing to seek
remedies for breach of contract or request a declaration of its
rights under the February 16, 2001 contract. Indeed, American
General Illinois has failed to show that it has any rights under the February 16, 2001 contract because it
is not a party to the contract, it is not in privity with the
parties, nor is it a third-party beneficiary. See Kaplan v.
Shure Bros., 266 F.3d 598 (7th Cir. 2001).
Nevertheless, there are two contractual provisions under which
American General Illinois potentially could demonstrate a right
to seek the relief requested in its complaint. In particular,
pursuant to ¶ 19 of the contract, as a subsidiary or affiliate of
American General Delaware, American General Illinois could obtain
all the benefits and obligations of the contract if it purchased
one of the receivables (i.e., the notes and mortgages).
Paragraph 19 of the February 16, 2001 contract provides:
If a subsidiary or affiliate of Buyer purchases a
Receivable, the subsidiary or affiliate shall have
all the benefits and obligations of this Agreement
including but not limited to the benefits of the
covenants, representations and warranties made by
Seller, and shall have the authorizations, rights and
powers granted by the Seller, with respect to the
American General Illinois has not submitted any evidence
demonstrating that it purchased either the Bulawa note and
mortgage or the Spendel note and mortgage. Accordingly, plaintiff
has not demonstrated a right to seek contractual or declaratory
relief pursuant to ¶ 19 of the contract.
Under ¶ 26 of the contract, American General Illinois could
demonstrate a right to seek contractual or declaratory relief if
it established that it is a transferee, successor or assignee.
Paragraph 26 of the contract provides:
All terms and provisions of this Agreement shall be
binding upon and shall inure to the benefit of the
parties to the Agreement and their respective
transferees, successors, and assigns.
American General Illinois offers no evidence nor does it even
argue that American General Delaware assigned or transferred the February 16, 2001
contract to it.*fn6
Furthermore, there is no evidence that
American General Illinois is a successor of American General
Delaware. See Markham v. Prutsman Mirror Co., 565 N.E.2d 385,
386-387 (Ind.Ct.App. 1991) (recognizing that a successor, with
reference to corporations, generally means another corporation
which, through amalgamation, consolidation, or other legal
succession, becomes invested with rights and assumes burdens of
first corporation). Accordingly, plaintiff has not demonstrated a
right to seek relief pursuant to ¶ 26 of the contract. Id. at
387 (recognizing that the cross-claimant had no standing to
enforce rights under an asset purchase agreement because
cross-claimant was not a successor or assignee under the
agreement) ; see also, Kaplan v. Shure Bros., 266 F.3d 598
2001 U.S. App. LEXIS 19610, *20-25 (7th Cir. 2001) (holding that
the plaintiff lacked standing to enforce rights under a real
estate contract because plaintiff was not a party to that
contract and he failed to produce evidence demonstrating that the
contract was assigned to him).
It is well settled that to recover for breach of contract, a
plaintiff must prove that a valid contract existed between the
parties. Black Agents & Brokers Agency, Inc. v. Near North Ins.
Brokerage, Inc., 2004 U.S. Dist. LEXIS 17945, *12 (N.D. Ind.
2004) (relying on Indiana law). American General Illinois has
failed to establish this most fundamental element of its breach of contract claims. Indeed, plaintiff has
not shown that it is a party to the contract, that it is in
privity with the parties or that it is a third-party beneficiary.
Furthermore, American General Illinois failed to demonstrate that
it has standing to enforce any rights under the February 16, 2001
contract as an assignee, transferee or successor. Markham,
565 N.E.2d at 387. Simply put, American General Illinois has not
established all of the essential elements of its breach of
contract claims or the right to seek declaratory relief under the
contract. Accordingly, American General Illinois is not entitled
to summary judgment.*fn7
For the reasons set forth above, plaintiff's motion for summary
judgment is denied. It is so ordered.