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Bank of America, N.A v. Mary Ann Kenny Smith

October 24, 2012

BANK OF AMERICA, N.A., PLAINTIFF,
v.
MARY ANN KENNY SMITH, DEFENDANT.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Plaintiff Bank of America, N.A.'s (BOA) motion for summary judgment. For the reasons stated below, the motion for summary judgment is granted.

BACKGROUND

BOA contends that in August 2005, LaSalle Bank, National Association (LaSalle) loaned Defendant Mary Ann Kenny Smith (Smith) $3.5 million (Smith Loan) in connection with a development of a hotel in Chicago. Smith allegedly signed a promissory note (Smith Note) in connection with the Smith Loan. After several extensions of the maturity date on the Smith Note, the maturity date was allegedly set for February 28, 2011. After that deadline passed, Smith allegedly failed to pay the amounts owed on the Smith Note. BOA claims that it is the successor in interest of LaSalle and has included in its complaint a breach of contract claim seeking to recover the amounts owed by Smith on the Smith Note, which BOA contends totals $3,630,973.77. BOA now moves for summary judgment on its claim.

LEGAL STANDARD

Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Smith v. Hope School, 560 F.3d 694, 699 (7th Cir. 2009). A "genuine issue" of material fact in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000). In ruling on a motion for summary judgment, the court must consider the record as a whole, in the light most favorable to the non-moving party, and draw all reasonable inferences in favor of the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000).

DISCUSSION

BOA argues that it is not disputed by Smith that she defaulted on the Smith Loan and owes money to BOA under the Smith Note. BOA also contends that there are no genuinely disputed facts that could provide Smith with a meritorious defense in this case or that show that Smith owes less money than asserted by BOA in this case.

I. Liability of Smith Under the Smith Note

BOA argues that there are no genuinely disputed facts regarding whether Smith defaulted on the Smith Loan or whether Smith owes BOA monies under the Smith Note. Smith admits that BOA executed a loan for $3.5 million in coordination with the Smith Note. (R SF Par. 5). Smith claims that she never personally received or used the funds herself. (R SF Par. 6). However, Smith concedes that she personally signed the signature page on the Smith Note, and the language in the Smith Note indicates that the Smith Loan was being made to Smith. (R SF Par. 6).

Smith contends that it is somehow unfair to hold her liable because the funds from the Smith Loan were used by her brother, Gerard Kenny (Kenny). (Ans. SJ 1). However, such facts, even if true, do not alter the undisputed fact that the Smith Loan was made to Smith, not Kenny. What Smith chose to do with the funds from the Smith Loan after she affixed her signature to the Smith Note does not alter the parties to the Smith Note or Smith's contractual obligation under the Smith Note. It is undisputed that BOA executed a separate note and a separate loan with Kenny (Kenny Note) and separately loaned $3.5 million to Kenny. (R SF Par. 8). Thus, BOA loaned a total of $7 million to Smith and Kenny for the hotel project under two separate loans and two separate notes. Smith has not produced any evidence showing that Kenny affixed any signature to the Smith Note or evidence showing that Kenny has any obligation under the Smith Note. Finally, it is undisputed that upon the maturity date of the Smith Note, Smith failed to make the payment owed by her personally under the terms of the Smith Note. (R SF Par. 29). Therefore, based on the undisputed facts, Smith is liable as a matter of law for breaching her obligations to BOA under the Smith Note.

II. Defenses to Liability Asserted by Smith

BOA contends that Smith has not pointed to sufficient evidence relating to her defenses to liability to defeat BOA's motion for summary judgment. In her answer to the complaint, Smith asserts as affirmative defenses: (1) setoff, (2) failure to mitigate, and (3) unclean hands. As to the failure to mitigate and set-off defenses, they relate to the amount of damages owed rather than to underlying liability on the part of Smith. See Leonel & Noel Corp. v. Cerveceria Centro Americana, S.A., 758 F.Supp.2d 596, 602-03 (N.D. Ill. 2010)(explaining that "'failure to mitigate is not a defense to liability; it concerns only the amount of recoverable damages, not the right to recover damages'")(quoting Ner Tamid Congregation of North Town v. Krivoruchko, 638 F.Supp.2d 913 (N.D. Ill. 2009)). In regard to the unclean hands defense, the defense is an equitable defense under which "equitable relief will be refused if it would give the plaintiff a wrongful gain." Scheiber v. Dolby Laboratories, Inc., 293 F.3d 1014, 1021 (7th Cir. 2002). In the instant action, BOA is not seeking to obtain equitable relief in its complaint or in its motion for summary judgment. Thus, the defense of unclean hands is not applicable in this instance. Finally, it is undisputed that in connection with an agreement between Smith and BOA to extend the maturity date of the Smith Note, Smith signed a release (Release). (R SF Par. 15-16, 20, 24-25). The Release provided that she released BOA from any defenses or claims relating to the prior versions of the Smith Note that existed prior to February 28, 2010. (SF Par. 15-16, 20, 24-25); (P Ex. 9). The release further expansively covers ...


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