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Inland Mortgage Capital Corporation v. Chivas Retail Partners

January 25, 2012


The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge


Even in the time before Noah's flood when this Court was still in the private practice of law, it regularly urged the other partners and associates in its small law firm (whether engaged in the transaction practice or in litigation) to place the question of choice of law at the very top of their mental checklists. That principle is no less true today, and this case provides a graphic demonstration of its potency.

Here Inland Mortgage Capital Corporation ("Inland") has sued Arizona limited liability company Chivas Retail Partners, LLC, Tim Dollander (both as an individual and as Trustee of the TJD Separate Property Trust) and Walter Brown, Jr. (both as an individual and as Trustee of Walter J. Brown, Jr. Revocable Trust)(collectively "Guarantors") through what it has labeled as its Complaint for Breach of Guaranty Agreement, invoking federal subject matter jurisdiction on diversity of citizenship grounds. That clear message as to the nature of this action is reinforced by the attachment of the parties' June 6, 2007 Loan Guaranty Agreement ("Guaranty"), Paragraph 26 of which begins:

This Guaranty Agreement has been made and delivered by the undersigned in the State of Illinois and shall be construed for all purposes and enforced in accordance with the laws of the State of Illinois....

Yet Guarantors seek dismissal of the action on claim preclusion grounds and issue preclusion grounds under Georgia law in attempted reliance on a mortgage foreclosure action pursued in that state against the real estate that secured the $59.670 million loan that is the subject of the Guaranty. This opinion will first address why Inland is right (and Guarantors are thus dead wrong) by reason of Guarantors' detailed and unequivocal undertakings in the Guaranty, and it will then turn to the bogus nature of Guarantors' efforts to extricate themselves from the toils of those voluntary and deliberate contractual commitments.

As to the Guaranty itself, in light of the multimillion dollar amount of the underlying loan it is hardly surprising that the Guaranty document contains all of the provisions typical of unconditional guaranties in major commercial transactions--provisions that unambiguously sew up the express personal liability of Guarantors for the indebtedness that is the subject of the guaranty. Lest there be any doubt in that respect, the Guaranty itself is attached to and made a part of this opinion, just as it has been made an integral part of Inland's Complaint. And without seeking to be exhaustive, the following sampling demonstrates why Guarantors' effort to squirm out from under their deliberately undertaken personal obligations is totally unpersuasive:

1. At the outset, two of the Guaranty's recitals confirm the intent of the parties:

WHEREAS, Lender is willing to extend the Loan only on the condition that Guarantor,*fn1 irrevocably and unconditionally, fully guarantees to Lender the full and prompt payment and performance of the Obligations (defined below) as herein provided; and

WHEREAS, Guarantor is willing to irrevocably and unconditionally, fully guarantee the Obligations, pursuant to the terms of this Guaranty Agreement.

2. Guaranty §2 sets out the particulars of the obligations under the Loan Documents of the "Borrower" (Harbins Crossing TC, LLC ["Harbins"]), whose "full, complete and punctual observance, payment and performance and satisfaction" of those obligations is "absolutely, unconditionally, and irrevocably guarantee[d] by Guarantors."

3. To scotch precisely the kind of evasive tactics now essayed by Guarantors, Guaranty §2 at page 3 contains a paragraph that begins "All of the remedies set forth herein and/or provided for in any of the other Loan Documents or at law or equity" and that then expressly negates any contention based on election-of-remedies principles.

4. Guaranty §9 includes express waivers by Guarantors, among other things, (1) of the pursuit or exhaustion of remedies against the Borrower as a condition precedent to proceeding against Guarantors under the Guaranty (subsection (a)) and (2) of "any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Guaranty Agreement" (subsection (g)). Those waivers are undertaken "[t]o the extent permitted by law," and on that score such cases as Chrysler Credit Corp. v. Marino, 63 F.3d 574, 577 (7th Cir. 1995) confirm that Illinois law--specifically controlling under the Guaranty--gives full play to freedom-of-contract principles in enforcing such express waivers.*fn2

5. Guaranty §9's broad expanse of waivers also includes another provision that might well have been written for the present case, under which Guarantor:

(c) waives all rights and defenses that Guarantor may have because the Borrower's debt is secured by real property, ...

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