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Westwacker K-Parcel LLC v. Pacific Mutual Life Insurance Co.

January 20, 2006


The opinion of the court was delivered by: Charles P. Kocoras, Chief District Judge


The following matter is before the court on Defendant's, Pacific Mutual Life Insurance Co. now known as Pacific Life Insurance Company ("Pacific"), Motion to Dismiss counts I and II of Plaintiffs', Westwacker K-Parcel LLC ("WKLLC") and Westwacker Holdings LLC ("WHLLC"), first amended complaint pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons set forth below, the Motion is denied.


Both WHLLC and WKLLC are limited liability companies, incorporated in Delaware, and authorized to do business in the State of Illinois. Pacific is a California corporation. We assume the truth of the following facts for purposes of this Motion.

In May 1987, Pacific loaned $6.3 million to Chicago Dock and Canal Trust, which was secured by real property in Chicago, Illinois.*fn1 The Loan was evidenced by a Note and Mortgage (collectively the "Loan Documents") as well as a Specific Assignment which collaterally assigned the existing lease on the property to Pacific.

Paragraph 17 of the Mortgage restricts the transfer of the loan to a third party by allowing a one-time only right of transfer to a third party after the 10th year of the loan to a creditworthy transferee for a fee of 1% of the outstanding principal. In 2003, WHLLC requested Pacific's consent to transfer the existing loan to WKLLC, an indirect subsidiary, who would shortly thereafter sell the property and reassign the loan to a third party. On March 25, 2005, Pacific agreed to the transfer and signed a Consent Agreement evidencing such. Paragraph 8 of said agreement provides that "the provisions of Paragraph 17 of the Mortgage . . . shall remain in full force and effect following this Consent." Plaintiffs allege said language preserved the 1% transfer right provided under Paragraph 17 of the Mortgage despite the transfer to WKLLC. Consequently, Plaintiffs allege Pacific was still under an obligation to not unreasonably withhold its consent from WKLLC's future sale or transfer of the Mortgage.

Plaintiffs then invested $5 million in the existing property, as well as an adjacent property, to make improvements and bring the properties into compliance with various statutory and regulatory requirements. Subsequently, Plaintiffs negotiated with a Developer to sell the property and reached an agreement contingent upon Pacific's consent. Both the Developer and the Plaintiffs requested Pacific's permission to transfer the Loan, but Pacific denied both requests.

Plaintiffs allege that Pacific's denial caused the Developer to lower his purchase price from $9.5 million to $9 million, which they were consequently forced to accept. Pacific then refused to permit the transfer of the loan to the Developer unless WKLLC (1) paid a $2,551,767.19 premium and (2) fully released all claims against Pacific in writing. In addition, Pacific required that Plaintiffs pay (1) $36,583.10 in interest and (2) $19,995.50 in legal fees.

WKLLC objected to Pacific's demands and insisted that Pacific had no contractual right to any unearned interest, release from claims, or legal fees, and therefore the premium qualified as an illegal and unenforceable prepayment penalty. On February 26, 2004, despite disputing said fees, WKLLC agreed to pay the charges but withheld the right to bring an action to contest them and the property was transferred to the Developer.

On August 25, 2005, Plaintiffs filed a four count complaint initiating this suit against Pacific. On October 31, 2005, Plaintiffs filed their first amended complaint consisting of two counts: 1) breach of contract by Pacific and 2) a request for a declaratory judgment that the prepayment premium was unreasonable. Pacific now brings the instant Motion to Dismiss Plaintiffs' first amended complaint in its entirety.


When considering a 12(b)(6) motion to dismiss, a court evaluates the legal sufficiency of a plaintiff's complaint, not the merits. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). We must accept all well-pleaded allegations as true and will not dismiss a case for failure to state a claim unless the plaintiff cannot prove any facts sufficient to support his claim. Conley, 355 U.S. at 45-46. All inferences are to be drawn in a light most favorable to the plaintiff. Jackson v. E.J. Branch Corp., 176 F.3d 971, 978 (7th Cir. 1999). To survive a motion to dismiss, a plaintiff need only provide a "short and plain statement" under Rule 8(a)(2); the particulars of the claim are not required. Midwest Gas Servs. v. Ind. Gas. Co., 317 F.3d 703, 710 (7th Cir. 2002). Nonetheless, to withstand a motion to dismiss, a complaint must allege facts setting forth the essential elements of the cause of action. Doherty v. City of Chi., 75 F.3d 318, 326 (7th Cir. 1996).


For the most part, Defendant's arguments in support of its Fed. R. Civ. Proc. 12(b)(6) motion ask that we make factual determinations which are inappropriate for us to make. As previously stated, the depth of our review under such a motion is confined to assessing whether plaintiffs have posited adequate facts to place defendants on notice of ...

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