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Bank of Montreal v. SK Foods

August 19, 2010

BANK OF MONTREAL, AS ADMINISTRATIVE AGENT, PLAINTIFF,
v.
SK FOODS, LLC, A NEVADA LIMITED LIABILITY COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION & ORDER

Bank of Montreal (the "Bank") brought this action as agent for several lenders (the "Lenders"), seeking to collect from SK Foods, LLC (the "Guarantor") over $190 million that the Bank loaned to SK Foods, L.P. and RHM Industrial/Specialty Foods, Inc. (collectively, the "Borrowers"). Presently before the court is the Bank's Motion for Summary Judgment. (Doc. 35.)

I. BACKGROUND

The Bank filed its Motion for Summary Judgment on May 7, 2010. (Id.) The court set a briefing schedule in which it allowed the Guarantor until June 9, 2010 to file its response. (Doc. 41.) On the day before its response was due, the Guarantor moved for an extension of time, which the court granted, giving the Guarantor until July 16, 2010 to file its response, and indicating that no further extensions would be given. (Doc. 48.) On July 6, 2010, the Guarantor again moved for an extension of time, which the court granted, giving the Guarantor until July 26, 2010 to file its response. (Doc. 60.) On July 26, 2010, the Guarantor's lead counsel moved to withdraw, citing a conflict of interest. (Doc. 68) The court granted the motion (Doc. 71), but noted that it would not extend the then-expired briefing schedule for the Guarantor to obtain new counsel.

Since then, the Guarantor has not appeared through new counsel, and has not made any attempt to file a response to the instant motion. In compliance with Local Rule 56.1, the Bank filed with its motion a statement of material facts for which there is no genuine issue. (Doc. 37.) When the non-movant fails to respond to such a statement of fact, it is within the court's discretion to deem the facts admitted. Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 922-23 (7th Cir. 1994). In light of the Guarantor's repeated failure to respond timely to the Bank's motion, the court deems the Bank's facts admitted.

On September 28, 2007, the Borrowers, the Bank, and the Guarantor all signed a Credit Agreement. On the same day, the Borrowers and the Guarantor separately executed a Security Agreement, pledging substantially all of their assets to the Bank to secure their obligations under the Credit Agreement. The parties entered into several amendments of the Credit Agreement, as well as several notes, pursuant to which the Borrowers borrowed over $190 million. In March 2009, the Borrowers defaulted on the Credit Agreement but, the Guarantor, the Borrowers, and the Bank entered into a series of three forbearance agreements to give the Borrowers some time to pay back their debt. On April 16, 2009, after the periods of forbearance expired without the Borrowers' satisfaction of their debt, the Bank terminated its obligation to extend credit to the Borrowers, accelerated all of the Borrowers' obligations, and demanded from the Borrowers and the Guarantor payments of all amounts due and owing under the Credit Agreement. Both the Borrowers and the Guarantor refused payment and performance of the obligations. The Bank then brought this suit.

II. LEGAL STANDARD

Summary judgment is warranted where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2); Turner v. Saloon, Ltd., 595 F.3d 679, 683 (7th Cir. 2010). All facts, and any inferences to be drawn from them, must be viewed in the light most favorable to the non-moving party. Singer v. Raemisch, 593 F.3d 529, 533 (7th Cir. 2010); Teal v. Potter, 559 F.3d 687, 691 (7th Cir. 2009). In evaluating a motion for summary judgment, the court must first determine whether the movant has demonstrated the absence of a genuine issue of material fact and so is entitled to judgment as a matter of law. See Beard v. Banks, 548 U.S. 521, 529 (2006). If the movant has done so, the court next inquires whether the non-movant has established a genuine issue of material fact precluding summary judgment. Id.; Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795, 805-06 (1999). If not, then the court should enter judgment as a matter of law. Beard, 548 U.S. at 529. The defendant bears the burden of establishing its affirmative defense. Zenith Elecs. Corp. v. Panalpina, Inc., 68 F.3d 197, 201 (7th Cir. 1995).

III. ANALYSIS

The Bank brought claims for breach of contract and foreclosure of security interest, and seeks summary judgment on each claim.

A. Breach of Guaranty

The Bank argues that it is entitled to a judgment for breach of the guaranty. In analyzing the Bank's assertions, the court considers: (1) whether a contract existed; (2) whether the contract was breached; and (3) whether the guaranty also was breached. As in other diversity cases, the court applies the law of the forum state, Illinois. Trask-Morton v. Motel 6 Operating L.P., 534 F.3d 672, 677 (7th Cir. 2008).

1. Existence of a Contract

An enforceable contract requires: "(1) offer and acceptance; (2) definite and certain terms; (3) consideration; and (4) performance of all required conditions." Tower Investors, LLC v. 111 E. Chestnut Consultants, Inc., 864 N.E.2d 927, 937 (Ill. App. Ct. 2007). In this case, the parties agree that the Borrowers and the Guarantor executed the Credit Agreement (Stmt.*fn1 ¶ 6; Ex. B-1), which was subsequently amended and restated by later agreements (Stmt. ¶¶ 13-14), and the Security Agreement (Ex. B-5). Each agreement sets forth definite terms. The Borrowers then borrowed over $190 million from the Agent pursuant to the Credit Agreement. (Id. ¶ 5.) The evidence produced by the Bank also establishes that it completed all required conditions, and more, including agreeing to ...


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