Court of Appeals of Illinois, First District, First Division
Appeal from the Circuit Court of Cook County, No. 10-CH-14025; the Hon. Peter Flynn, Judge, presiding.
Reed Smith, LLP, of Chicago (Stephen T. Bobo, Michael D. Richman, and Peter M. Stasiewicz, of counsel), for appellants.
Ruff, Weidenaar & Reidy, Ltd., of Chicago (Edward P. Freud and Michael B. Bregman, of counsel), for appellee.
JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Presiding Justice Connors and Justice Hoffman concurred in the judgment and opinion.
¶ 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. ...