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JPMorgan Chase Bank, N.A. v. East-West Logistics, L.L.C.

Court of Appeals of Illinois, First District, Sixth Division

March 31, 2014

JPMORGAN CHASE BANK, N.A., Successor by Merger to Bank One, NA, Plaintiff and Counterdefendant-Appellee,
EAST-WEST LOGISTICS, L.L.C., a Nevada Limited Liability Company, MICHAEL STRUCK, Not Individually But in His Capacity as Personal Representative of the Estate of James Wesley Taylor, Deceased, and EAST WEST LOGISTICS SUPPLY, LLC, an Arizona Limited Liability Company, Defendants (Arthur Wondrasek, Defendant and Counterplaintiff-Appellant)

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As Corrected.

Appeal from the Circuit Court of Cook County. No. 2008 L 051299. Honorable Allen S. Goldberg and John C. Griffin, Judges Presiding.



In an action to recover on a continuing guaranty executed by defendant in support of a line of credit furnished to defendant limited liability company, the trial court properly entered orders dismissing defendant's affirmative defenses of extinguishment of the guaranty, equitable estoppel, breach of the duty of good faith, and termination of the credit agreement by the integration clause, and it also properly dismissed defendant's counterclaims for common law fraud, consumer fraud and a setoff; further, summary judgment was properly granted to plaintiff, and the trial court did not abuse its discretion in ordering defendant to pay a portion of plaintiff's electronic discovery costs.

For appellant: P. Andrew Fleming, Richard G. Douglas, Christopher N. Stanton, Novack & Macey LLP, Chicago, IL.

For appellee: Robert F. Rabin, Booker T. Shaw, of counsel, Thompson Coburn LLP, Chicago, IL.

JUSTICE HALL delivered the judgment of the court, with opinion. Presiding Justice Rochford and Justice Lampkin concurred in the judgment and opinion.



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[¶1] On December 4, 2008, the plaintiff, JPMorgan Chase Bank, N.A. (Chase Bank), filed a verified multicount complaint against Arthur Wondrasek[1] and other named parties. Following Mr. Wondrask's death in 2010, his estate (hereinafter the Estate) was substituted as a party-defendant. In 2012, the circuit court of Cook County entered orders dismissing the Estate's affirmative defenses and counterclaims and granted partial summary judgment to the plaintiff, Chase Bank.

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[¶2] On appeal, the Estate contends as follows: the dismissal of its affirmative defenses and counterclaims was error; the award of summary judgment to Chase Bank was error; and the circuit court erred in ordering the Estate to pay discovery costs to Chase Bank. On review, we find no error and affirm the orders of the circuit court.


[¶4] The pertinent facts are taken from the record on appeal. In 2003, Bank One, NA, entered into a lending relationship with defendant East-West Logistics, L.L.C. (East-West), and furnished a line of credit to East-West in the amount of $1 million. On December 10, 2003, Mr. Wondrasek executed a continuing guaranty of East-West's obligation under the line of credit loan (the guaranty).

[¶5] The continuing guaranty provided in pertinent part as follows:

" Guaranty. To induce Bank One, NA *** (the 'Bank'), and its successors and assigns, at its option, to make loans, extend or continue credit or some other benefit *** present or future, direct or indirect, *** to [East-West] *** and because [Mr. Wondrasek] has determined that executing this Guaranty is in [his] interest and to [his] financial benefit, [Mr. Wondrasek] unconditionally guarantees to the Bank, as primary obligor and not merely as surety, the full and prompt payment of the Liabilities when due, whether at stated maturity, by acceleration or otherwise.
* * *
Limitation. [Mr. Wondrasek's] obligation under this Guaranty is unlimited.
Continued Reliance. The Bank may continue to make loans or extend credit to [East-West] based on this Guaranty until it receives written notice of termination from [Mr. Wondrasek], regardless of whether at any time or from time to time there are no existing Liabilities or commitment by the Bank to make advances or other financial accommodations for [East-West].
* * *
Permissible Actions. [Mr. Wondrasek] authorizes the Bank, without notice or demand and without affecting [Mr. Wondrasek's] obligations hereunder, from time to time to[] (a) renew, modify, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Liabilities or any part thereof, including increasing or decreasing the rate of interest thereon. *** [Mr. Wondrasek's] obligations under this Guaranty shall not be released, diminished or affected by (i) any act or omission of the Bank ***.
Nature of Guaranty. This Guaranty is a guaranty of payment and not of collection. Therefore, the Bank may insist that [Mr. Wondrasek] pay immediately, and the Bank is not required to attempt to collect first from [East-West] ***.
* * *
Waivers. [Mr. Wondrasek] waives (a) to the extent permitted by law, all rights and benefits under any laws or statutes regarding sureties, as may be amended, and (b) any right [Mr. Wondrasek] may have to receive notice of the following matters before the Bank enforces any of its rights (i) the Bank's acceptance of this Guaranty, (ii) any credit that the Bank extends to [East-West], (iii) [East-West's] default, (iv) any demand, diligence, presentment, dishonor and protest, or any action that the Bank takes regarding [East-West] *** or any of the Liabilities, which it might be entitled to by law or under any other

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agreement *** (d) any defense based on any claim that [Mr. Wondrasek's] obligations exceed or are more burdensome than those of [East-West],
* * *
Information. [Mr. Wondrasek] assumes all responsibility for being and keeping [himself] informed of [East-West's] financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Liabilities and the nature, scope and extent of the risks that [Mr. Wondrasek] assumes and incurs under this Guaranty and agrees that the Bank does not have any duty to advise [Mr. Wondrasek] of information known to it regarding those circumstances or risks ***." (Emphasis omitted.)

[¶6] In its complaint, Chase Bank, the successor to Bank One since 2004, alleged that the loan to East-West had matured on February 24, 2008, and as of November 17, 2008, East-West owed a balance of $1,627,339.46 on the loan. In addition, East-West was obligated to pay attorney fees, costs and expenses incurred by Chase Bank in collecting the amounts due under the credit agreement. In count III of the complaint, Chase Bank sought to enforce the guaranty against Mr. Wondrasek to recover the outstanding loan balance as well as the attorney fees, costs and expenses of collection.

[¶7] On November 12, 2009, Mr. Wondrasek filed a verified answer and seven affirmative defenses. Mr. Wondrasek admitted he had executed the guaranty as alleged in the complaint and evidenced by an exhibit to the complaint but denied the remaining allegations for lack of knowledge. On December 2, 2009, Chase Bank filed a motion pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2008)) (the Code) to dismiss the affirmative defenses. On October 22, 2010, following Mr. Wondrasek's death and the substitution of the Estate, Circuit Court Judge Allen S. Goldberg dismissed six of the seven affirmative defenses, and the Estate withdrew the remaining affirmative defense. The Estate was given 28 days to replead the affirmative defenses.

[¶8] On November 23, 2010, Chase Bank filed a motion seeking reimbursement of electronic discovery costs from the Estate. In support of its motion, Chase Bank argued that the Estate opposed Chase Bank's request to stay all discovery until the parties were at issue on the pleadings, and insisted that discovery go forward.

[¶9] On December 15, 2010, the Estate filed counterclaims and amended affirmative defenses. The counterclaims sought recovery for common law fraud and under the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq . (West 2010)) (the Consumer Fraud Act). The Estate set forth the following amended affirmative defenses: (1) extinguishment of the guaranty; (2) doctrine of equitable estoppel; (3) breach of the duty of good faith; and (4) setoff. As the factual basis for the counterclaims and amended affirmative defenses, the Estate alleged that Chase Bank created phony " SOFA" accounts (secured out of formula advance) to which the loan balance was transferred in order to hide the existence of East-West's defaults from Mr. Wondrasek

[¶10] On April 27, 2011, Judge Goldberg entered an order granting Chase Bank's section 2-615 motion to dismiss the Estate's counterclaims and amended affirmative defenses. Judge Goldberg granted in part and denied in part Chase Bank's motion to assess discovery costs and assessed the Estate $3,025.80 in costs. On June 21, 2011, Judge Goldberg entered judgment

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against the Estate in the amount of $3,025.80.

[¶11] On June 28, 2011, Chase Bank filed a motion for summary judgment on count III of the complaint. According to Chase Bank, it was undisputed that Mr. Wondrasek executed the guaranty and then defaulted on it, that Chase Bank was the lawful holder of the note and that the indebtedness on the line of credit loan matured on February 28, 2008, and remained unpaid. Since there was no genuine issue of material fact, Chase Bank maintained it was entitled to summary judgment as a matter of law.

[¶12] On August 16, 2011, the Estate filed a motion to strike two affidavits filed by Chase Bank in support of its motion for summary judgment, and filed its response to Chase Bank's summary judgment motion. The Estate argued that the affidavits were inadmissible and therefore could not provide the necessary foundation for the admission of the documents evidencing the loan to and the balance owed on the loan by East-West. In its response to the summary judgment motion, the Estate argued that the motion should be denied in the absence of any admissible evidence of the original note, any of the replacement notes or the 2007 note modification. The Estate asserted that Chase Bank failed to establish that East-West defaulted on the loan, that East-West owed any amount to Chase Bank and that Chase Bank failed to provide sufficient evidence of how it calculated the loan indebtedness.

[¶13] On September 13, 2011, the Estate filed a motion for leave to file its amended counterclaims and second amended affirmative defenses. The Estate explained that the amended counterclaims and second amended affirmative defenses were reasserted for appeal purposes only. The Estate also corrected the allegations regarding the creation of the SOFA accounts. It now alleged that the SOFA accounts were never created, but nonetheless, " when the Bank was hypothetically shifting money around in these various fake accounts, it was doing so in order to conceal East West's defaults, and prevent Wondrasek from cancelling his Guaranty." The Estate also added a fifth affirmative defense. The Estate alleged that Mr. Wondrasek was not a party to the 2007 modification agreement and, therefore, no longer a guarantor of Chase Bank's loan to East-West. On October 12, 2011, Chase Bank filed a motion requesting that the Estate be denied leave to file its amended counterclaim and second amended affirmative defenses, and in the alternative, moved to dismiss. On January 5, 2012, the Estate filed a motion for reconsideration of the order of April 27, 2011, dismissing the counterclaims and amended affirmative defenses.

[¶14] On January 9, 2012, Circuit Court Judge John C. Griffin granted the Estate leave to file its amended counterclaims and second amended affirmative defenses. Judge Griffin then granted Chase Bank's motion to dismiss the Estate's counterclaims and second amended affirmative defenses. The remaining matters were set for hearing on March 14, 2012.

[¶15] On March 14, 2012, Judge Griffin entered an order denying the Estate's motion for reconsideration of the April 27, 2011, order dismissing its counterclaims and amended affirmative defenses. The judge also denied the Estate's motion to strike the summary judgment affidavits. Judge Griffin granted Chase Bank's motion for partial summary judgment as to count III of the complaint and entered judgment against the Estate in the amount of $2,044,411.97. Since the case was continued for status on the remaining counts, Judge Griffin made a finding pursuant to Illinois Supreme Court Rule 304(a) (Ill. S.Ct. R. 304(a)

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(eff. Feb. 26, 2010)) that there was no just reason to delay the enforcement or appeal of the March 14, 2012, order. The Estate filed its notice of appeal on April 12, 2012.

[¶16] On May 11, 2012, Judge Griffin granted Chase Bank's motion for voluntary dismissal of counts II (breach of guaranty -- estate of James Wesley Taylor) and count IV (breach of guaranty -- East West Logistics Supply, LLC) without prejudice. The order further stated that all pending claims had been resolved.[2]


[¶18] I. Appellate Jurisdiction

[¶19] Initially, we must address the Estate's challenge to our jurisdiction of this appeal. The Estate contends that this court has jurisdiction of the March 14, 2012, order but not the orders entered prior to the entry of that order. Chase Bank maintains that after the circuit court disposed of all the pending claims in its order of May 11, 2012, the Estate was required to file a second notice of appeal in order to appeal those prior nonfinal orders. In the absence of the second notice of appeal, Chase Bank maintains this court has no jurisdiction to review any of the nonfinal orders entered prior to the March 14, 2012, order.

[¶20] A. Standard of Review

[¶21] A challenge to our jurisdiction is a question of law. In re Marriage of Demaret, 2012 IL App (1st) 111916 ¶ 25, 964 N.E.2d 756, 358 Ill.Dec. 87. Questions of law are subject to de novo review. Jones v. DHR Cambridge Homes, Inc., 381 ...

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