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Van Pelt Constr. Co. v. BMO Harris Bank, N.A.

Court of Appeals of Illinois, First District, Fourth Division

March 27, 2014

VAN PELT CONSTRUCTION COMPANY, INC., Plaintiff and Counterdefendant,
v.
BMO HARRIS BANK, N.A., f/k/a Harris Bank, N.A., as assignee of Amcore Bank, N.A, Defendant, Counterplaintiff, and Third-Party Plaintiff-Appellant, (BWA, INC., Defendant and Counterdefendant-Appellee; Unknown Owners and Non-Record Claimants, Defendants and Counterdefendants; Albert Belmonte, Allen Kutchins, Angelos Mitroussias, Danny Karalis, Dorance Lorenzo Padron, Pedro Cevallos Candau, Rogelio Llamedo, and Rosa Gonzalez, Third-Party Defendants-Appellees; and James Papas and Luis Flocco, Third-Party Defendants). VAN PELT CONSTRUCTION COMPANY, INC., Plaintiff and Counterdefendant,
v.
BMO HARRIS BANK, N.A., f/k/a Harris Bank, N.A., as assignee of Amcore Bank, N.A, Defendant, Counterplaintiff, and Third-Party Plaintiff-Appellant (BWA, INC., Defendant and Counterdefendant-Appellee; Unknown Owners and Non-Record Claimants, Defendants and Counterdefendants; Albert Belmonte, Allen Kutchins, Angelos Mitroussias, Danny Karalis, Dorance Lorenzo Padron, Pedro Cevallos Candau, Rogelio Llamedo, and Rosa Gonzalez, Third-Party Defendants-Appellees; and James Papas and Luis Flocco, Third-Party Defendants)

As Corrected March 28, 2014.

Appeal from the Circuit Court of Cook County. No. 08 CH 45136. The Honorable Robert J. Quinn, Judge Presiding. The Honorable Robert J. Quinn, Judge Presiding.

Reversed and remanded.

SYLLABUS

The trial court's order granting the emergency motion filed by the guarantors of a mortgage seeking the enforcement of a purported settlement by which the guarantors would be released from their obligations under the mortgage upon the tender of a deed in lieu of foreclosure and an amount of cash was reversed on the ground that the settlement was unenforceable under the Credit Agreements Act, since the forebearance required of the mortgagee under the agreement brought it within the scope of the Act, but there was no proof of a meeting of the minds as to the terms of the agreement, especially in the absence of a recitation of the names of all parties to be bound, a statement of the specific property to be transferred in the deed in lieu of foreclosure, a deadline for the parties' performance, or a definition of how a determination was to be made as to whether the guarantors experienced an " upward variance" in their personal financial conditions that would negate the agreement.

For Appellant: Kurt M. Carlson, Martin J. Wasserman, Carlosn Dash, LLC, Chicago, IL.

For Appellee: Thomas Rosenwein, Glickman, Flesch & Rosenwein, Chicago, IL.

JUSTICE LAVIN delivered the judgment of the court, with opinion. Justice Fitzgerald Smith and Justice Epstein concurred in the judgment and opinion.

OPINION

LAVIN, JUSTICE

Page 555

[¶1] This appeal arises from the trial court's order enforcing a settlement agreement purportedly entered into between mortgagee BMO Harris Bank, N.A., f/k/a Harris Bank, N.A. (Harris), as assignee of Amcore Bank, N.A. (Amcore), and mortgagor BWA, Inc. (BWA), as well as several guarantors of related promissory notes executed in Harris/Amcore's favor. Pursuant to the alleged settlement agreement, Harris agreed to accept $350,000 and a deed in lieu of foreclosure in place of the greater amount due. On appeal, Harris asserts that (1) the settlement agreement was unenforceable under the Credit Agreements Act (the Credit Act) (815 ILCS 160/0.01 et seq . (West 2010)) and the Frauds Act (740 ILCS 80/0.01 et seq . (West 2010)); (2) no evidence showed that Harris's attorney had the authority to enter into the agreement; (3) no settlement agreement was reached; and (4) the condition precedent to Harris's duty under the agreement was not satisfied. We agree with Harris's assertion that the alleged settlement agreement failed to satisfy the Credit Act. Accordingly, we reverse and remand for further proceedings.

[¶2] I. BACKGROUND

[¶3] We recite only those facts necessary to resolve the issues raised on appeal. The record indicates that in 2008, BWA borrowed money from Amcore in order to purchase real estate located at 43 West Dundee Road in Wheeling, Illinois (the Property), and build a bank thereon. Specifically, BWA granted Amcore a mortgage on the Property, secured by two promissory notes. In addition, the 10 organizers of BWA (Albert Belmonte, Allen Kutchins, Angelos Mitroussias, Danny Karalis, Dorance Lorenzo Padron, Pedro Cevallos Candau, Rogelio Llamedo, Rosa Gonzalez, James Papas and Luis Flocco) signed commercial guaranties promising to pay any and all of BWA's indebtedness. Afterward, however, BWA failed to raise the necessary capital and the planned bank never materialized.

Page 556

[¶4] In December 2008, plaintiff Van Pelt Construction Company, Inc. (Van Pelt), commenced this action by filing a complaint against BWA and Amcore, seeking foreclosure of Van Pelt's mechanic's lien on the Property. [1] In September 2009, Amcore filed a counterclaim against BWA and a third-party complaint against the 10 guarantors, the pleading that ultimately led to the dispute before us. Count I of Amcore's pleading sought to foreclose BWA's mortgage on the Property while counts II and III asserted that BWA breached the promissory notes. At that time, the total amount due under the two promissory notes was approximately $1.5 million. In addition, counts IV through XIII individually asserted that each guarantor had breached his or her respective guaranty to pay BWA's indebtedness. Subsequently, in July 2010, the trial court granted Harris's motion to substitute itself for Amcore, as the loan documents at issue were acquired by Harris after Amcore was taken over by the Federal Deposit Insurance Corporation. [2]

[¶5] Throughout these proceedings, attorney Kent Maynard represented BWA and all guarantors with the exception of Papas, who was represented by other counsel, and Flocco, who was discharged in bankruptcy proceedings (the Maynard guarantors). In August 2010, BWA and the Maynard guarantors filed an answer denying that they had failed to pay amounts due. Meanwhile, Maynard and counsel for Harris/Amcore had begun settlement negotiations. These negotiations occurred mostly in the form of more than a year's worth of emails between Maynard and Harris's counsel, originally Tzivia Masliansky of Much Shelist Denenberg Ament and Rubenstein, P.C. Throughout these negotiations, the parties attempted to resolve their differences regarding the guarantors' ability to pay, the mechanism for determining whether they had experienced an increase in that ability, Papas's role in any settlement, and the settlement amount. Harris apparently believed the guarantors may have understated the strength of their financial circumstances.

[¶6] A. Communications with Masliansky

[¶7] In March and April 2010, the two attorneys communicated regarding the guarantors' personal financial statements and 2008 tax returns, which Maynard was to provide to Masliansky. On August 19, 2010, Maynard told Masliansky that he had been authorized to offer a deed in lieu of foreclosure and $200,000 to settle all claims. That offer was not accepted. On November 15, 2010, Masliansky emailed Maynard that she had spoken with her client, who demanded $475,000 as well as a deed in lieu of foreclosure to settle all claims. The next day, Maynard inquired whether Masliansky's client would consider settlement with fewer than all of the guarantors or was willing to negotiate release prices with individual guarantors. She responded that Harris was not willing to do so. The record indicates that following a phone conversation on December 13, 2010, she told Maynard that she had conveyed an offer he had made to Harris, who countered at $450,000 with a deed in lieu of foreclosure. After further dickering, Maynard responded with an offer of $350,000.

[¶8] According to Maynard's clients, the emails written a week later on December

Page 557

20 and 21 of 2010 culminated in the settlement agreement at issue. On the former date, Masliansky confirmed that she had received the counteroffer of $350,000 and asked how soon Maynard's clients could provide updated personal financial statements in order for Harris to consider the offer. Maynard then reminded Masliansky of the " lengthy and cumbersome ordeal" in gathering that information and expressed his belief that requiring updated financial information would " be more trouble than it is worth - - and would, if anything, show that the various guarantors have continued ...


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