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Kirschenbaum v. Gillman

United States District Court, N.D. Illinois, Eastern Division

February 7, 2014

BARRY KIRSCHENBAUM, Plaintiff,
v.
MICHAEL GILLMAN, DARRYLE GILLMAN, and ASTA HEALTHCARE COMPANY, Inc., Defendants, Counter-Defendant, Counter-Plaintiffs, MICHAEL GILLMAN, DARRYLE GILLMAN, and ASTA HEALTHCARE COMPANY, Inc., Third Party Plaintiffs,
v.
DIANE KIRSCHENBAUM and ALBANY BANK & TRUST COMPANY, N.A., Third Party Defendants.

OPINION AND ORDER

JOAN H. LEFKOW, District Judge.

Third party defendant Albany Bank & Trust, N.A. moves to dismiss count II of the complaint filed by third party plaintiffs Michael Gillman ("Gillman"), Darryle Gillman, and Asta Healthcare Company, Inc. (collectively, "the Gillman plaintiffs") for failure to state a claim on which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). (Dkt. 44.) For the following reasons, the motion will be granted.[1]

BACKGROUND[2]

Albany Bank is trustee for an Illinois land trust (the "Land Trust") that holds the commercial property commonly known as 300 West Lowell Avenue, Pontiac, Illinois ("the Lowell Avenue property"). The Land Trust is owned by Asta Pontiac Properties ("Asta Properties"), an Illinois limited liability company. Asta Properties has four members: Barry Kirschenbaum ("Kirschenbaum"); Diane Kirschenbaum; Gillman; and Darryle Gillman. Each member owns a 25% interest in the company. Gillman is the manager of Asta Properties.

In 2002, Albany Bank (in its own capacity) loaned $1, 880, 000 to Albany Bank (in its capacity as trustee for the Land Trust). The loan was documented by an installment note ("the First Note") and was secured by a mortgage on the Lowell Avenue property. In addition, Albany Bank required that the members of Asta Properties guarantee the loan. The First Note provided for monthly payments, with final payment due January 1, 2012. The final payment date was later extended to March 1, 2012.

In 2009, Albany Bank (in its own capacity) loaned an additional $900, 000 to Albany Bank (in its capacity as trustee) to pay for improvements to the Lowell Avenue property. This loan was documented by a loan agreement and another installment note ("the Second Note"). The Second Note also was secured by a mortgage on the Lowell Avenue property and guaranteed by the members of Asta Properties. The Second Note provided for monthly payments, with final payment due on January 1, 2019.

On May 10, 2011, Albany Bank emailed a package of loan documents to Gillman, including (1) an installment note in the amount of $900, 000 to replace the Second Note, which provided for monthly payments with final payment due on January 1, 2019 (the same maturity date as the Second Note), (2) a mortgage loan request, (3) a modification of mortgage, (4) a letter of direction directing Albany Bank (as trustee for the Land Trust) to execute the new note, and (5) guaranties to be signed by Kirschenbaum and Gillman. Gillman reviewed and executed the documents. Gillman understood that Albany Bank would communicate separately with Kirschenbaum to obtain his approval.

After Gillman returned the signed documents, Kirschenbaum and Albany Bank communicated directly with one another regarding the re-documentation of the Second Note. On June 10, 2011, Kirschenbaum signed and returned the letter of direction instructing Albany Bank (as trustee to the Land Trust) to sign the "Promissory Note dated April 30, 2011." The same day, Albany Bank (as trustee) executed an installment note dated April 30, 2011 ("the Replacement Note"). But it was not the same note that had been provided to Gillman; instead of maturing on January 1, 2019, the Replacement Note matured on March 1, 2012 (the same maturity date as the First Note). Gillman never reviewed or authorized the Replacement Note and Albany Bank did not deliver a mortgage loan request to Gillman for the Replacement Note. Furthermore, although Gillman had signed guaranties individually and on behalf of Asta Properties and Asta Healthcare with respect to the re-documentation of the Second Note, Albany Bank did not require that Kirschenbaum execute a guaranty. Neither Albany Bank nor Kirschenbaum informed Gillman that the Replacement Note had a different maturity date than the one reviewed by Gillman or that Kirschenbaum had not been required to sign a guaranty.

About a year later and after the maturity of the First Note and the Replacement Note, Albany Bank assigned all of its rights under the First Note, Second Note, Replacement Note (collectively, "the Notes"), and related mortgages on the Lowell Avenue property to Kirschenbaum. Albany Bank continued to act as agent to service the loans.

On October 30, 2012, Kirschenbaum filed this action against Gillman, Gillman's wife, and Asta Healthcare, alleging that the obligations under the Notes had matured and that the Gillmans and Asta Healthcare were liable for the aggregate amount outstanding of $2, 170, 219.33 under the terms of their guaranty agreements. From March 2012, when the debts at issue allegedly matured, until at least June 2013, Albany Bank continued to send a monthly invoice to Asta Properties for the principal and interest due on the First Note and the Replacement Note. Albany Bank did not provide any statement that indicated either of the notes was in default.[3]

On June 27, 2013, the Gillman plaintiffs filed counterclaims against Kirschenbaum and a third party claim against Albany Bank for fraud, alleging that Albany Bank reneged on its promise to refinance the First and Second Notes and executed the Replacement Note without Gillman's approval or authorization. The complaint asserts that by taking these actions, Albany Bank was able to receive full payment of the First Note and Replacement Note seven years ahead of schedule and extricate itself from a simmering dispute between Kirschenbaum and Gillman. In addition, Kirschenbaum was able to put pressure on the Gillman plaintiffs by purchasing the Notes, declaring default, and initiating this action to collect on the guaranties.

Albany Bank has now moved to dismiss the fraud claim under Rule 12(b)(6), arguing that its actions were permitted under the terms of the loan documents and that the complaint fails to state a claim upon which relief may be granted.

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a 12(b)(6) motion to dismiss, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). To survive a 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis, but must also establish that the requested relief is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference ...


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