The opinion of the court was delivered by: Judge Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
Plaintiff Lincoln National Life Insurance Co. ("Lincoln National") sued Defendant TCF National Bank ("TCF") for failing to fully honor a letter of credit. TCF asserted a counterclaim against Lincoln National for declaratory judgment and attorneys fees and costs because it paid the full amount available to Lincoln National under the letter of credit. Lincoln National moves for judgment on the pleadings, or Rule 12(b)(6) dismissal, on TCF's affirmative defenses and counterclaim. Lincoln National also moves for judgment on the pleadings on its Complaint. Finally, Lincoln National seeks to dismiss TCF's third-party complaint for improper joinder under Federal Rule of Civil Procedure 20. For these reasons, the Court denies Lincoln National's motions.
This case is about related two agreements. The main agreement at issue is the Irrevocable Standby Letter of Credit ("Letter of Credit") between Lincoln National and TCF. The second agreement is the Loan Agreement between Lincoln National and a third party, Sunset Village Limited Partnership ("Sunset"). The Loan Agreement is the contract underlying the Letter of Credit and it contained the material terms for amending the Letter of Credit.
Sunset, a party not directly involved in this litigation, needed funds for the construction and maintenance of its mobile home community. (Affirm. Defense ¶¶ 4-5.) Lincoln National agreed to provide Sunset funds for this purpose, and secured its loan with a Letter of Credit issued by TCF. (Answer ¶¶ 6-7.) When TCF issued the Letter of Credit on June 20, 2006, it was in the amount of $7,075,000. (Id. ¶ 6.) The terms of the Letter of Credit were straightforward. Upon Lincoln National's presentation to TCF of two documents-a sight draft and original Letter of Credit-TCF was contractually obligated to pay Lincoln National the outstanding balance of the Letter of Credit. (Compl. Ex. A.)
The Loan Agreement between Lincoln National and Sunset was the contract underlying the Letter of Credit. (Answer ¶ 12.) The Loan Agreement defined the terms of Lincoln National's loan to Sunset. (Answer Ex. 1.) Critically, it also set forth the procedure for reducing the outstanding balance of the Letter of Credit:
[T[he Letter of Credit shall be reviewed by [Lincoln National] and appropriate reductions made every six (6) months after capital improvements are made to the property upon written notice of the amount of the reduction to [Sunset] and [TCF], such written notice of reduction shall not be later than thirty (30) days after [Sunset's] request for the reduction. (Answer ¶ 12.)
After the June 2006 issuance of the Letter of Credit in the amount of $7,075,000, Sunset and Lincoln National amended the Letter of Credit a number of times to reduce the outstanding balance. Specifically, TCF issued amended Letters of Credit on May 2, 2007; May 8, 2008; January 16, 2009; August 13, 2009; and January 18, 2010. (Id. ¶ 13.) Lincoln National asserts that, in accordance with the terms of the Loan Agreement, for each reduction Sunset made a written request to Lincoln National to reduce the outstanding balance, and upon Lincoln National's assent, TCF would issue an amended Letter of Credit. (Id. ¶ 13;Compl. Ex. H.) While TCF does not admit that exact process was followed for each of the reductions, both TCF and Lincoln National agree that by January 18, 2010, the Letter of Credit had been reduced to $3,189,693.69. (Id.)
The dispute here hinges on whether any additional reductions were validly made to the Letter of Credit. From January 26, 2010 until April 28, 2010, TCF made four construction disbursements, in the cumulative amount of $1,281,832.54, to Sunset for improvements on its property. (Compl. Ex. H.; Countercl. ¶ 17.) On April 28, 2010, Lincoln National refused to approve Sunset's request for reduction of the Letter of Credit by $1,281,832.54 because the Loan Agreement allowed only one reduction every six months, and the most recent reduction was in January 2010. (Answer ¶ 15.) When Sunset defaulted on the loan in July 2010, Lincoln National was relieved of its obligation to reduce the Letter of Credit. (Id. ¶ 17-20.)
TCF read the situation differently. TCF believed that Sunset had provided Lincoln National with the appropriate documentation to reduce the Letter of Credit. (Countercl. ¶¶ 18-20.) Based on previous interactions, TCF deemed the transfer of documentation sufficient to reduce the amount of the Letter of Credit because Lincoln National "implicitly consented" to the reduction. (Id. ¶ 21.)
As a result, TCF reduced the Letter of Credit by $1,281,832.54. (Id. ¶¶ 17-20.) According to its calculation, the outstanding balance was $1,907,861.15. (Id. ¶ 21.)
On August 30, 2010, Lincoln National presented TCF its Letter of Credit in the amount of $3,189,693.69, and a sight draft dated August 30, 2010. (Id. ¶ 23.) TCF, having reduced the Letter of Credit, wire transferred to Lincoln National $1,907,861.15. (Id. ¶ 24.) Lincoln National seeks to recover the shortfall of $1,281,832.54, alleging that TCF failed to fully honor the Letter of Credit. (Answer ¶1.)
A party can move for judgment on the pleadings after the filing of the complaint and answer. Fed. R. Civ. P. 12(c). The standard for a Rule 12(c) motion is the same as a motion to dismiss under Rule 12(b)(6); the Court views all facts in a light most favorable to the nonmoving party, which is TCF. See Finch v. Peterson, 622 F.3d 725, 728 (7th Cir. 2010). By examining the pleadings, the Court must determine if the undisputed material facts entitle the moving party to judgment on the merits. See. e.g., Continental X-Ray Corp. v. Home Indem. Co., No. 96 C 5250, 1997 WL 102537, at *2 (N.D. Ill. March 5, 1997) (Andersen, J.). Where, as here, the plaintiff is moving for judgment on the pleadings, the Court will grant the motion only if "it appears ...