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Republic Bank of Chicago v. 1st Advantage Bank

Court of Appeals of Illinois, First District, First Division

September 16, 2013

REPUBLIC BANK OF CHICAGO, Plaintiff-Appellee,
v.
1ST ADVANTAGE BANK; ABCO LEASING, INC.; ACADEMIC CAPITAL GROUP, INC.; ADVANCE FINANCIAL SOLUTIONS, INC.; ALERUS FINANCIAL, N.A.; ALFA FINANCIAL, N.A.; ALFA FINANCIAL CORPORATION DBA OFC CAPITAL; ALL POINTS CAPITAL CORPORATION.; ALLIANCE COMMERCIAL CAPITAL, INC.; ALLIANCE LEASING, INC.; ALTEC CAPITAL (QUAIL CAPITAL); ALTEC CAPITAL SERVICES, LLC; AMERICAN BANK, FSB; AMERICAN BANK LEASING CORPORATION; AMERICAN CHARTERED BANK; ASSOCIATED BANK, NATIONAL ASSOCIATION; AUTO CAPITAL GROUP; BMT LEASING, INC.; BALBOA LEASING; BANK MIDWEST, N.A.; BANK OF DIXON COUNTY; BANK OF THE WEST; BARRETT TRADE AND FINANCE GROUP, LLC; BRYN MAWR; BUTLER CAPITAL CORPORATION; CFC INVESTMENT COMPANY; CM FINANCIAL; CENTER CAPITAL CORPORATION; CENTER NATIONAL BANK; CHARTER NATIONAL BANK AND TRUST; CHERRY CREEK ASSET-BACKED INCOME FUND, L.P.; CITIZENS BANK AND TRUST COMPANY OF CHICAGO; COACTIV CAPITAL PARTNERS, LLC; COMERICA LEASING, a Division of Comerica Bank; COURT SQUARE LEASING CORPORATION; CROSSROADS BANK; CUPERTINO NATIONAL BANK, c/o Greater Bay Equipment Finance; DEERBART FINANCIAL SERVICES COMPANY; DIAMOND LEASE U.S.A., INC.; ENTERPRISE FUNDING GROUP LLC; EQUILEASE FINANCIAL SERVICES, INC.; EQUIPMENT ACQUISITION RESOURCES, INC.; EVANS NATIONAL LEASING, INC.; EVERGREEN LEASING, INC.; FARMERS AND MERCHANTS BANK; FIFTH THIRD BANK (CHICAGO); FIRST BANK; FIRST BANK AND TRUST; FIRST COMMUNITY BANK; FIRST CREDIT FUNDING, LLC; FIRST DUPAGE BANK; FIRST FEDERAL SAVINGS BANK; FIRST MIDWEST BANK; FIRST MUTUAL BANK; FIRST NATIONAL BANK OF MCHENRY; FIRST NATIONAL EQUIPMENT FINANCING, INC.; FIRST PREMIER CAPITAL, LLC; FIRSTLEASE INC.; GIS ROLLING, L.L.C.; GIS VENTURE; HEWLETT-PACKARD FINANCIAL SERVICES COMPANY; HIGHLAND BANK; HOME FEDERAL SAVINGS BANK; HORIZON BANK; IBM CREDIT LLC; IRWIN BUSINESS FINANCE CORPORATION; KCL, LLC; KLC FINANCIAL, INC.; KSP ACQUISITION CORPORATION; KEY GOVERNMENT FINANCE, INC.; LFC CAPITAL, INC.; LAKELAND BANK EQUIPMENT LEASING DIVISION; LEAF FUNDING, INC.; LEASECORP, INC.; LEASING INNOVATIONS, INC.; LEASING ONE CORPORATION; LIBERTYVILLE BANK AND TRUST; LOYALTY FINANCE, INC.; LYON FINANCIAL SERVICES, INC.; MB FINANCIAL BANK N.A.; MANUFACTURERS ACCEPTANCE CORPORATION DBA HERITAGE PACIFIC LEASING; MARLIN LEASING CORPORATION; MICHIGAN HERITAGE BANK; MILLENNIUM BANK; MINWEST BANK; NATIONAL CITY COMMERCIAL CAPITAL COMPANY, LLC; NATIONAL CITY COMMERCIAL CAPITAL CORPORATION; NORSTATES BANK; NORTHWAY STATE BANK; OFC CAPITAL CORPORATION; PNB CAPITAL LEASING, LP; PENTECH FINANCIAL SERVICES, INC.; PEOPLE'S CAPITAL AND LEASING CORPORATION; PEOPLE'S NATIONAL BANK OF KEWANEE; PLAINS CAPITAL LEASING, LP; PULLMAN BANK AND TRUST COMPANY; RED OAK CAPITAL; ROCKFORD CAPITAL LEASING, INC.; SG EQUIPMENT FINANCE USA CORPORATION; SHERMAN AND COMPANY; SKY BANK LEASING; SOVEREIGN BANK; STAR FINANCIAL BANK; STATE FINANCIAL BANK; STEFAN SYDOR OPTICS; STERLING NATIONAL BANK; SUNTRUST LEASING CORPORATION; SUSQUEHANNA COMMERCIAL; TD BANKNORTH LEASING CORPORATION; THE COMMUNITY BANK; THE NORTH SIDE BANK AND TRUST COMPANY; TOWN AND COUNTRY LEASING LLC; TRINITY, a Division of Bank of the West; UC BANCORP; U.S. FINANCIAL, LLC; VARILEASE TECHNOLOGY FINANCE GROUP, INC.; VELOCITY LEASE FUNDING, LLC; WAUKEGAN SAVINGS BANK; and UNKNOWN CLAIMANTS, Defendants (Icon Ear, LLC, and Icon Ear II., LLC, Defendants-Appellants).

Appeal from the Circuit Court of Cook County. No. 10 CH 14025, Honorable Peter Flynn, Judge Presiding.

Presiding Justice Connors and Justice Hoffman concurred in the judgment and opinion.

OPINION

CUNNINGHAM, JUSTICE

¶ 1 This appeal arises from a March 6, 2012 order entered by the circuit court of Cook County which granted summary judgment in favor of plaintiff-appellee Republic Bank of Chicago (Republic Bank). On appeal, defendants-appellants Icon Ear, LLC, and Icon Ear II, LLC (collectively, Icon), argue that: (1) the trial court erred in granting summary judgment in favor of Republic Bank because the law of guaranties governs in this case; and (2) the trial court erred in granting summary judgment in favor of Republic Bank because the "full credit bid rule" does not apply in this case. For the following reasons, we affirm the judgment of the circuit court of Cook County.

¶ 2 BACKGROUND

¶ 3 Icon is a specialty finance company and manager of publicly registered funds that invest in business-essential equipment and corporate infrastructures. Equipment Acquisition Resources, Inc. (EAR), was an Illinois corporation that developed processes for manufacturing wafer chips for the semiconductor industry, as well as refurbished and resold related semiconductor manufacturing equipment. On December 24, 2007, Icon entered into a lease agreement with EAR which stated that Icon would lease equipment to EAR pursuant to various leasing schedules. On lease schedule number one, the equipment that EAR received was listed at a price of $6, 935, 000.

¶ 4 According to Icon, in January 2008, Icon learned that Sheldon Player (Sheldon), one of EAR's principals, had previously been convicted and sentenced for participating in a fraudulent scheme involving equipment financing. Consequently, EAR offered Icon additional collateral in the form of mortgages encumbering Wyoming real estate, in exchange for Icon agreeing to finance additional lease schedules. The Wyoming real estate consisted of six parcels of land owned by Sheldon and his family. On March 18, 2008, Sheldon, his son, Dale Player (Dale), and his daughter, Dana Malone (Dana) (collectively, the Players), executed guaranty agreements as consideration for Icon's agreement to execute lease schedule number two and future lease schedules. In addition to the guaranties, the Players mortgaged the Wyoming real estate to Icon. The terms of the guaranties stated, in pertinent part: "[Icon's] sole and exclusive remedy against [the Players] shall be limited to [the Players'] interest in the Mortgage Premises." (Emphasis in original.)

¶ 5 On April 24, 2008, Icon leased equipment that was listed at a price of $6, 347, 500.02 to EAR, pursuant to lease schedule number two. On June 6, 2008, Icon leased equipment that was listed at a price of $6, 325, 500 to EAR, pursuant to lease schedule number three. On June 30, 2008, Icon leased equipment that was listed at a price of $2, 469, 000 to EAR, pursuant to lease schedule number four. As of June 30, 2008, Icon had leased equipment worth a total of $22, 077, 000.02 to EAR.

¶ 6 During the summer of 2009, EAR defaulted on its lease payments to Icon. On October 23, 2009, EAR filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division. On November 19, 2009, the bankruptcy court entered an order which granted Icon's emergency motion to modify the automatic stay. The court's order lifted the automatic stay with respect to the Wyoming real estate that was subject to Icon's mortgages. Icon then began the process of foreclosing its mortgages on the Wyoming real estate. On December 1, 2009, the sheriff of Teton County, Wyoming, sold the Wyoming real estate through foreclosure proceedings. Icon successfully purchased the Wyoming real estate with a credit bid of $22, 743, 564.44, which represented the full amount of the debt owed to Icon under the lease agreement with EAR.

¶ 7 On March 22, 2010, Icon filed a complaint for replevin against EAR in the circuit court of Cook County. In its complaint, Icon sought immediate possession of the equipment that was leased to EAR. Additionally, numerous other lessors and lenders filed similar complaints against EAR. On April 2, 2010, Republic Bank filed a complaint against EAR for judicial foreclosure and declaratory judgment under case number 10 CH 14025. On April 5, 2010, the court consolidated the multiple complaints into a single action under case number 10 CH 14025. On June 30, 2010, Icon filed an answer and affirmative defenses which contested Republic Bank's right to the equipment that was leased to EAR and sought return of the equipment. Additionally, Icon filed counterclaims which sought a declaratory judgment that Icon was the owner of all of the equipment and that its interests in the equipment were senior to the rights of all other parties.

¶ 8 From June 2010 through July 2011, Icon sold five of the six parcels of the Wyoming real estate to unrelated third parties. Icon realized total net proceeds of $2, 159, 777.05 from the sales of the real estate. The sixth parcel of the Wyoming real estate remains unsold. On August 26, 2010, the trial court entered an order which authorized the hiring of an auctioneer to sell the equipment that had been leased to EAR. The trial court's order stated that all parties with claims to the equipment "retain all heretofore existing rights and claims to the Auction Proceeds." On September 23, 2011, Icon filed a proof of claim to the proceeds of the sale of the equipment that was leased to EAR. Icon's proof of claim alleged that after accounting for the proceeds from the sales of the Wyoming real estate, the net amount owed to Icon by EAR was $17, 487, 520.30.

¶ 9 On January 3, 2012, Republic Bank filed a motion for summary judgment against Icon. The motion alleged that EAR's debt to Icon was extinguished because at the foreclosure sale of the Wyoming real estate, Icon made a "credit bid" for the full amount of the debt owed by Ear to Icon. On January 31, 2012, Icon filed a response to Republic Bank's motion for summary judgment. On March 6, 2012, the trial court held a hearing on Republic Bank's motion for summary judgment. The court found that Icon's credit bid at the foreclosure sale of the Wyoming real estate satisfied both the obligations under the guaranty agreements and Icon's claim against EAR. The trial court reasoned that the effect of a full credit bid under Wyoming law is to extinguish the debt and that the individuals who executed the guaranty agreements did not have an independent debt to Icon. Thus, the trial court granted Republic Bank's motion for summary judgment. The trial court found that the judgment was final and appealable pursuant to Illinois Supreme Court Rule 304(b) (eff. Feb. 26, 2010).

ΒΆ 10 On March 23, 2012, Icon filed a timely notice of appeal. Therefore, this court has jurisdiction to consider Icon's arguments on appeal pursuant to Illinois Supreme ...


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