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Rbs Citizens, N.A., D/B/A Charter One Bank v. Sanyou Import

July 13, 2011


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


This case comes before the Court on the motion of Plaintiff RBS Citizens, N.A. d/b/a Charter One Bank ("Charter One") to dismiss the counterclaims and strike the affirmative defenses of Defendants Sanyou Import, Inc. ("Sanyou Import") and Jian Qiang Yang ("Yang") (collectively, "Defendants"), pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(f). For the reasons stated below, the Court grants Charter One's motion to dismiss Defendants' counterclaims and grants in part and denies in part Charter One's motion to strike Defendants' affirmative defenses.


Two individuals, Gang Bai ("Bai") and Li Ma ("Ma"), own and operate Sanyou Import, a corporation which needed a loan for real estate ventures. For the loan, Bai and Ma contacted Charter One. Although the relationship between Bai, Ma, and Yang is unclear, Yang alleges that Bai and Ma along with Stephanie Li Cheung ("Li Cheung"), a Charter One employee, and Li Cheung's supervisor personally visited Yang on two occasions, so that Yang could obtain a line of credit for Sanyou Import and personally guarantee the loan.

On March 30, 2005, Yang signed several documents as the "President" of Sanyou Import, including a Loan Agreement and a Demand Line of Credit Note (the "Note"). Yang also signed, as an individual, an Unlimited Guaranty. At the time Yang signed the documents, he was, in fact, not the President of Sanyou Import. Charter One allegedly knew that Yang was not the President of Sanyou Import and that Yang had no control over either Sanyou Import or the proceeds from the Note. Further, Charter One knew that Yang was not fluent in English and did not translate the documents into his native language, Chinese. According to the Loan Agreement, Charter One agreed to make loans to Sanyou Import in an aggregate amount of up to $100,000. According to the Note, Charter One loaned Sanyou Import $100,000 and Sanyou Import promised to re-pay Charter One. The Note is a "demand note" and gives Charter One the absolute and unconditional right to demand payment, in whole or in part, at any time. The Note also stated that Sanyou Import would not use the proceeds for personal, family, or household purposes. According to the Unlimited Guaranty, Yang unconditionally and personally guaranteed payment to Charter One of all sums presently due or due in the future. Notwithstanding the explicit terms of the contracts, Li Cheung allegedly assured Yang that he would not assume any risks by either signing the loan documents as Sanyou Import's President or personally guaranteeing the loan.

Defendants also allege that, on March 30, 2005, Li Cheung witnessed Bai and Ma execute an agreement with Yang (the "Unidentified Agreement"), which stated that the $100,000 obtained by Sanyou Import was not meant for corporate use, but for Bai's and Ma's personal use. Pursuant to the Unidentified Agreement, Bai and Ma pledged their Chicago property as collateral for the line of credit. Even though Charter One knew of the pledge made by Bai and Ma, it subsequently lent Bai and Ma additional money in an amount equal to the remaining equity of the Chicago property.

On January 31, 2011, Charter One sent a Notice of Default, Demand for Payment, and Reservation of Rights to Sanyou Import and Yang, demanding $99,930.06 as payment for all the amounts due under the Note.

On March 16, 2011, Charter One filed suit against Sanyou Import and Yang, alleging a claim for breach of contract because the Defendants have failed to make the payments due under the Note. On April 26, 2011, Defendants filed an answer, in which Defendants asserted several affirmative defenses and Yang asserted several counterclaims.


A motion to dismiss tests the legal sufficiency of a pleading. In re HealthCare Compare Corp. Sec. Litig., 75 F.3d 276, 279 (7th Cir. 1996). A court grants a motion to dismiss a counterclaim when the counter-plaintiff alleges no set of facts entitling him or her to relief. Id. In ruling on a motion to dismiss, a court accepts the well-pleaded allegations of the counterclaim as true, construes the allegations in the light most favorable to the counter-plaintiff, and draws all reasonable inferences in favor of the counter-plaintiff. See Hentosh v. Herman M. Finch Univ. Of Health Scis./The Chicago Med. Sch., 167 F.3d 1170, 1173 (7th Cir. 1999).Further, a "court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). The court may strike affirmative defenses which, on the face of the pleading, are insufficient as a matter of law. Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989). DISCUSSION*fn2

I. Motion to Dismiss Defendants' Counterclaims

Yang asserts three counterclaims. First, Yang asserts a counterclaim for fraudulent conveyance, alleging that Charter One induced Yang to sign the loan documents and accepted collateral (i.e., the remaining equity in the Chicago property) already pledged to Yang. While Yang alleges that Charter One's actions constitute a fraudulent conveyance under Illinois common law, a fraudulent conveyance claim is governed by the Uniform Fraudulent Transfer Act ("UFTA"), 740 Ill. Comp. Stat. 160/8(a). To state a claim under the UFTA, "the factual situation must include a debtor who is liable on a claim to a creditor." Apollo Real Estate Inv. Fund, IV, L.P. v. Gelber, 935 N.E.2d 963, 970 (Ill. App. Ct. 2010). The creditor seeking to avoid the conveyance must show that he or she has a right to payment from the debtor. Id. Defendants fail to allege facts demonstrating that Yang can avoid a conveyance because he is a creditor and has a right to payment from Charter One. Indeed, Charter One is the creditor in this case. Accordingly, this Court dismisses Defendants' fraudulent conveyance counterclaim.

Second, Yang asserts a counterclaim under the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 Ill. Comp. Stat. 505/2. Yang broadly alleges that Charter One violated the ICFA's requirements to Yang's detriment. To state a claim under the ICFA, Defendants must allege: (1) a deceptive act or practice by Charter One; (2) intent by Charter One that Defendants rely on the deception; (3) the occurrence of the deception during a course of conduct involving trade or commerce; and (4) that Defendants suffered actual damage proximately caused by the deception. Ramirez v. Smart Corp., 863 N.E.2d 800, 811 (Ill. App. Ct. 2007). As a matter of law, Yang cannot state an ICFA claim based on misrepresentations that conflict with the terms revealed within the very loan documents signed. See, e.g., Bank of Am., N.A. v. Shelbourne Dev. Group, Inc., 732 F. Supp. 2d 809, 826 (N.D. Ill. 2010) (dismissing ICFA counterclaim where defendants alleged that plaintiff misrepresented the terms of the contract). Accordingly, Defendants fail to state a claim under the ICFA.

Finally, Yang asserts a counterclaim for breach of a fiduciary duty. Specifically, Yang alleges that Charter One breached the fiduciary duties it owed to Yang as a bank customer. A fiduciary relationship may exist either because of the relationship of the parties or because the facts reveal that one party placed special trust and confidence in the other party which resulted in the other party's superiority and influence.*fn3 Farmer City State Bank v. Guingrich, 487 N.E.2d 758, 762-64 (Ill. App. Ct. 1985). The relationship between a bank and its customers is a debtor-creditor relationship and, as a matter of law, no fiduciary relationship exists. Id. at 763. Moreover, no fiduciary relationship exists between a guarantor and a creditor. Id. Whether viewed as a debtor and creditor ...

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