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Bank of America, N.A v. Ebro Foods

April 26, 2011

BANK OF AMERICA, N.A.,
PLAINTIFF-APPELLANT,
v.
EBRO FOODS, INC., DANIEL P. DUFFY, VICTOR REYES, RSD HOLDINGS, LLC, AND ZENAIDA ABREU,
DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 2009 L 003301 The Honorable Bill Taylor, Judge Presiding.

The opinion of the court was delivered by: Justice Harris

JUSTICE HARRIS delivered the judgment of the court, with opinion. Justices Karnezis and Connors concurred in the judgment and opinion.

OPINION

In this appeal, plaintiff Bank of America, N.A. (Bank of America) challenges the circuit court's dismissal of its complaint to enforce a defaulted loan and various guaranty agreements pursuant to section 2-615 and section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615; 5/2-619 (West 2008)). At the hearing on the motions to dismiss, defendant Daniel P. Duffy (Duffy) argued that Bank of America did not possess a certificate of authority required by the state of Illinois to maintain a civil action in the state. On appeal, Bank of America contends the circuit court should have granted its motion for reconsideration because as a national bank, it is not subject to state laws "that obstruct, impair, or condition [its] ability to fully exercise its powers to conduct activities authorized under Federal law." 12 C.F.R. §7.4009(b) (2010). For the reasons that follow, we reverse the dismissal of Bank of America's complaint and remand for further proceedings.

JURISDICTION

The trial court dismissed the complaint without prejudice on December 9, 2009. On April 7, 2010, the trial court denied a timely motion to reconsider the December 9, 2009, dismissal. The dismissal order included a Rule 304(a) finding that there was no just reason to delay enforcement or appeal. Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010). Bank of America filed this timely appeal on May 6, 2010.*fn1 Accordingly, this court has jurisdiction pursuant to Illinois Supreme Court Rules 303 and 304 governing appeals from final judgments entered below. Ill. S. Ct. R. 303 (eff. May 30, 2008); R. 304(a).

BACKGROUND

On August 31, 2005, defendant Ebro Foods, Inc. (Ebro), executed and delivered to LsSalle Bank a loan and security agreement and revolving note for a revolving loan in the amount of $250,000. The note was to mature and expire on August 1, 2006. That same day, Duffy, Victor Reyes (Reyes), and RSD Holdings, LLC (RSD), executed and delivered to LaSalle Bank separate continuing unconditional guaranties wherein each guaranteed the full and punctual payment of Ebro's indebtedness, limited to the amount of $75,000 plus interest, costs, fees and expenses. Zenaida Abreu (Abreu), the registered agent of Ebro, executed and delivered to LaSalle Bank a continuing unconditional guaranty extending to any and all indebtedness, obligations and liabilities of Ebro, plus interest, costs, fees and expenses. Subsequent amendments to the note increased the sum of the loan to $600,000 and changed the maturity date of the note to December 30, 2007. Ebro and LaSalle Bank entered into forbearance agreements with the most recent agreement granting Ebro a short-term forbearance ending on October 28, 2008.

The date of maturity and both forbearance periods passed without any payment made by Ebro to LaSalle Bank. On February 5, 2008, LaSalle Bank sent a written notice of default to Ebro. On February 27, 2009, it accelerated the entire debt and sent a demand for payment. Bank of America filed a two-count complaint on March 18, 2009, with count I directed against Ebro and count II against Duffy, Reyes, RSD and Abreu based on their unconditional guaranties. Prompted by Ebro's bankruptcy filing, Bank of America voluntarily dismissed it as a party on May 14, 2009.

On May 18, 2009, RSD filed a combined motion to dismiss the complaint, arguing that dismissal was proper under section 2-615 because Bank of America failed to establish its successor rights to LaSalle Bank. RSD argued that dismissal under section 2-619 was proper because the suit against the guarantors was premature when no judgment had been entered against Ebro. Duffy filed a combined motion to dismiss on June 4, 2009, amended June 10, 2009, alleging that Bank of America failed to establish standing to sue and that the complaint did not name all necessary parties and otherwise abrogated the terms of the guaranty. Abreu and Reyes joined the RSD and Duffy motions. Abreu also had filed a counterclaim against Bank of America and alleged affirmative defenses. Bank of America responded to the motions on July 15, 2009, and filed an amended motion to strike Abreu's affirmative defenses and dismiss her counterclaims.

On October 29, 2009, Duffy filed a motion to supplement the record in support of his motions to dismiss. In his motion, Duffy argued that section 13.70 of the Illinois Business Corporation Act of 1983 (the Act) requires a foreign corporation to obtain a certificate of authority in order to maintain a civil action in any court of the state. 805 ILCS 5/13.70 (West 2006). At the time Duffy filed the motions to dismiss, the Illinois Secretary of State's Web site indicated that the successor to LaSalle Bank, "BANA Holding Corporation," was not in good standing. Since the filing, the Web site had been updated to reflect the status of BANA Holding Corporation as "revoked."

On November 3, 2009, the trial court denied RSD's and Duffy's motions to dismiss, finding that Bank of America pled sufficient facts to allege standing to pursue the claim as successor by merger to LaSalle Bank. In his motion to supplement the record, Duffy argued that Bank of America failed to obtain the certificate of authority required for it to maintain a suit in the state of Illinois. He contended that the absence of such a certificate provided an independent basis for dismissal. In response, Bank of America argued that the BANA Holding Corporation listed on the Web site was not the same as Bank of America and that Bank of America was the plaintiff in this suit. The trial court granted Duffy's motion to supplement the record and RSD's motion to join Duffy's motion to dismiss. It also granted Bank of America's motion to strike Abreu's affirmative defenses and counterclaims without prejudice.

On November 30, 2009, Duffy filed a motion to reconsider and, alternatively, a motion to stay the case pending Ebro's bankruptcy proceedings. In his motion, Duffy asked the trial court to address his argument that Bank of America could not bring suit in Illinois because it lacked a certificate of authority pursuant to section 13.70 of the Act. Duffy sought a section 2-619 dismissal of the claim based on this argument.

At the December 9, 2009, hearing on his motion to reconsider, Duffy argued again that the explicit language of section 13.70 of the Act requires a foreign corporation transacting business in Illinois to obtain a certificate of authority in order to maintain a civil action in the state. Bank of America once again responded that it was not the same as BANA Holding Corporation. Also at the hearing, counsel for Abreu requested to join Duffy's motion. The trial court granted Duffy's motion to reconsider and dismissed Bank of America's complaint as to Duffy and Abreu. On December 23, 2009, Bank of America filed a motion to reconsider, arguing that dismissal was improper because it is a national banking association authorized to do business in all 50 states, which includes the ability to sue and be sued. Duffy and Abreu responded to the motion, contending Bank of America waived the issue by failing to raise it ...


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