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Ringgold Capital IV, LLC v. Finley

Court of Appeals of Illinois, First District, Third Division

June 19, 2013


Held [*]

The trial court properly dismissed with prejudice plaintiff’s claims against defendant for the breach of his guaranty of a construction loan, reformation of the guaranty, enforcement of the reformed guaranty and fraudulent misrepresentation, since the guaranty unambiguously stated that defendant guaranteed a loan dated July 27, 2007, but the actual loan was dated August 24, 2007, resort to parol evidence was unnecessary, the binding judicial admission that defendant would guarantee the July 27 loan precluded reformation or enforcement of a reformed guaranty, and no scheme or device by defendant to defraud the lender was alleged.

Appeal from the Circuit Court of Cook County, No. 10-CH-41352; the Hon. Laura C. Liu, Judge, presiding.

Barack Ferrazzano Kirschbaum & Nagelberg LLP, of Chicago (James R. Vogler, Brandon C. Prosansky, and John C. deMoulpied, of counsel), for appellant.

Greenberg Traurig, LLP, of Chicago (Paul T. Fox and James P. Madigan, of counsel), for appellee.

Panel JUSTICE PIERCE delivered the judgment of the court, with opinion, Justices Sterba and Hyman concurred in the judgment and opinion.



¶ 1 Old Second National Bank (the Bank) agreed to finance the construction of an $8.1 million athletic training facility to be developed by ATTACK Properties, LLC (Attack Properties or Borrower), Timothy Grover (Grover), and A.T.T.A.C.K. Athletics, Inc. (Attack Athletics), Attack Properties' parent company. The loan was secured by a mortgage and note along with unlimited guaranties executed by Attack Athletics and Grover and a limited personal guaranty executed by defendant Michael Finley (Finley) not to exceed $2 million. The mortgage went into default, causing the Bank to file a foreclosure action against the property and civil actions against Grover and Attack Athletics on their unlimited guaranties and, separately, against Finley on his limited guaranty. The trial court dismissed the claims against Finley for failure to state a cause of action pursuant to section 2-615 of the Code of Civil Procedure (Code). 735 ILCS 5/2-615 (West 2008).

¶ 2 The circuit court entered an agreed order pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010), allowing an immediate appeal. The Bank timely filed a notice of appeal. Subsequently, on June 29, 2012, the Bank assigned its interest in the Finley guaranty to Ringgold Capital IV, LLC (Ringgold). On August 7, 2012, Ringgold's motion to substitute as real party in interest on appeal was granted.

¶ 3 On appeal, Ringgold contends the circuit court erred in dismissing with prejudice its claims against Finley alleging breach of guaranty (count V), reformation of the guaranty (count VI), enforcement of the reformed guaranty (count VII) and fraudulent misrepresentation (count VIII). Ringgold argues that because the Finley guaranty is ambiguous, the court was required to look outside the four corners of the guaranty to examine the context of the complete agreement and that the court erred in finding the Bank failed to adequately plead facts sufficient to warrant reformation of the guaranty; Ringgold also argues the Bank sufficiently pled the existence of a mistake to warrant reformation and whether fraudulent misrepresentation was adequately pled against Finley.


¶ 5 Relevant to its claims against Finley, the Bank alleged the following prefatory facts in its second amended verified complaint: In May 2007, Attack Properties and Grover sought a loan, characterized in its complaint as the "Facility Loan, " to purchase and develop a training facility described as the "Attack Training Facility." In support of the loan proposal, Attack Athletics and Timothy Grover, a personal trainer and owner of Attack, executed unlimited guaranties with the Bank. The Bank rejected the initial proposal citing inadequate guaranties. Plaintiff alleged that Grover arranged for Finley, a client of Attack, to serve as an additional limited guarantor of the note. Plaintiff alleged that in June 2007, Finley, through his "sophisticated" counsel, and the Bank negotiated the terms of his limited personal guaranty. The Bank drafted the limited guaranty for review by Finley's attorneys. Grover and Attack Athletics guaranteed "any indebtedness [Attack Properties] might incur at any time to [the Bank]." Finley's guaranty, unlike the guaranties of Grover or Attack, would be limited in amount and would "guarantee only the indebtedness incurred under the Facility Loan." Plaintiff alleged, on information and belief, that Finley made representations that he was "guarantying the Facility Loan and its payment" and he provided personal financial statements to the Bank as evidence of his ability to honor his guaranty. Thereafter, with the additional proposed guaranty of Finley, the Bank's loan committee approved the loan. On July 5, 2007, the Bank sent Grover a confirmation letter which specifically stated the loan was conditioned on the Finley guaranty. The Bank alleged, on information and belief, that Finley was aware of the terms of the confirmation letter sent to Grover; he intended to execute the limited guaranty of the indebtedness created under the Facility Loan and he intended to induce the Bank to make the loan in reliance thereon. The Bank further alleged there were no other proposed loans pending between the Bank and Attack.

¶ 6 In mid-June, 2007, after negotiation and modifications were made, the Bank sent Finley's attorneys the agreed-upon guaranty that, as alleged, "guarantees to [Bank] the prompt and full payment and performance of the 'Indebtedness' described." Because of Finley's travel schedule, on July 18, 2007, the Bank provided Finley with the final guaranty and requested that it be executed before the scheduled July 27, 2007 loan closing date. Finley returned the executed guaranty on August 3, 2007. Due to certain environmental issues, the loan was not made on July 27. There is no allegation the Bank communicated with Finley about the failed closing or that there were any further discussions between them from July 27 and August 3.

¶ 7 The Facility Loan was made on August 24, 2007 and memorialized in a note and mortgage bearing the same date. However, the Finley guaranty was never changed to reflect the date of the loan: August 24. As a result, the complaint alleged the guaranty set forth the indebtedness to be guaranteed as: "the debt, liability, and obligation under [sic] incurred under that certain loan agreement between [Bank] and Attack Properties, LLC dated July 27, 2007." The "loan agreement" was not otherwise described or defined in the Finley guaranty or elsewhere. Finley is alleged to have understood he guaranteed the "Facility Loan"; the Bank intended the guaranty to apply to the debt created under the "Facility Loan"; Finley knew the Bank relied on the guaranty to induce it to make the loan; and Finley knew the closing did not take place on July 27.

ΒΆ 8 Finley provided the Bank with updated financial information after the loan was made. From August 3 to the date of default, it was alleged, Finley never advised the Bank that he did not intend ...

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