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Private Bank & Trust Co. v. EMS Investors, LLC

Court of Appeals of Illinois, First District, Third Division

May 27, 2015

THE PRIVATE BANK AND TRUST COMPANY, Plaintiff-Appellee,
v.
EMS INVESTORS, LLC, HERBERT P. EMMERMAN, and EQUITY MARKETING SERVICES, INC., Defendant-Appellants

As Corrected.

Appeal from the Circuit Court of Cook County. No. 12 L 9313. The Honorable Raymond Mitchell, Judge, presiding.

Affirmed.

FOR PLAINTIFF-APPELLEE: Jason M. Metnick, Monica J. Paine, Meltzer, Purtill & Stelle, LLC, Chicago, Illinois.

FOR DEFENDANTS-APPELLANTS: William T. Dwyer, Jr., O'Rourke, Hogan, Fowler & Dwyer, Chicago, Illinois.

JUSTICE HYMAN delivered the judgment of the court, with opinion. Presiding Justice Pucinski and Justice Lavin concurred in the judgment and opinion.

OPINION

HYMAN, Judge

Page 893

[¶1] In the absence of a reservation of rights, co-borrowers contend that a lender's release and discharge of a third co-borrower regarding mortgages secured by property of the third co-borrower and others released and discharged them as well.

[¶2] Herbert P. Emmerman and Cheryl Bancroft formed EMS Investors, LLC (Investors), to convert an apartment building in downtown Chicago into condominiums. To finance the project, Emmerman, Bancroft, and Investors borrowed $1.62 million from The Private Bank and Trust Company (Private Bank). Equity Marketing Services, Inc. (EMS), another entity Bancroft and Emmerman owned, guaranteed the loan. Bancroft and her husband also had several mortgages with Private Bank on property they owned individually, together and through Bancroft Group LP (BGLP). When the housing bubble collapsed in late 2008, Bancroft, Emmerman, and Investors slid into financial difficulties. Sales of condominium units stalled, making repayment of the $1.62 million loan difficult. Before the note became due, Bancroft filed for chapter 11 bankruptcy (11 U.S.C. § 101 et seq. (2006)), and she and her husband entered into a settlement agreement with Private Bank. The settlement agreement, which only mentioned the Bancrofts' personal real estate and not the $1.62 million loan, released and discharged them " from any and all claims, demands, actions, causes of action, suits, costs, damages, expenses and liabilities of every kind, character and description, either direct or consequential, at law or in equity." Emmerman was not a party to the release or aware of it at that time.

[¶3] When the note matured, Emmerman asked for an extension or modification. Private Bank refused and filed a breach of contract action against Emmerman and Investors on the loan and EMS on its guaranty. The parties filed cross-motions for summary judgment. Emmerman and Investors contended that Private Bank's release of Bancroft also released them from liability as co-obligors under the note. The trial court disagreed, granting Private Bank's motion for summary judgment and denying defendants' motion. The court also entered judgment in Private Bank's favor for the amount owed on the loan, interest, and attorney fees.

Page 894

[¶4] Emmerman and Investors argue the trial court erred in finding that the Private Bank's settlement agreement with Bancroft did not release all of them from liability on the note in the absence of a reservation of rights. We affirm. The language of the release between the Bancrofts and Private Bank and the circumstances under which it arose pres ent enough evidence to demonstrate that Private Bank did not intend to release defendants from liability on the note. Thus, the trial court did not err in granting Private Bank's motion for summary judgment and entering judgment in the bank's favor.

[¶5] BACKGROUND

[¶6] The facts are not in dispute. EMS Investors, LLC, is an Illinois limited liability company, with two members, Herbert C. Emmerman and Cheryl Bancroft. On January 29, 2008, Private Bank loaned $1.62 million to Investors, Emmerman and Bancroft, which was documented by a promissory note and a first amended promissory note. Emmerman and Bancroft were co-makers on the promissory note and agreed to be " jointly and severally" liable under it. Defendant Equity Marketing Services, Inc., guaranteed repayment of the loan. Defendants defaulted under the terms of the note and amended note by failing to make payment due on the maturity date, January 1, 2012. EMS also defaulted by failing to make payments after defendants defaulted.

[¶7] On November 22, 2011, a few months before the note became due, Private Bank entered into a settlement agreement with Cheryl Bancroft, Stephen Bancroft, and BGLP. The settlement agreement noted that Private Bank had mortgages on several residential properties owned together and separately by Cheryl and Stephen, and that " disputes exist among the Parties with respect to various claims and issues relating to" the residential real estate, and they want to " settle any and all claims and disputes by, among and against each other under this Agreement." The agreement also noted that Cheryl filed for bankruptcy under chapter 11 on January 14, 2011, and that the bank had begun legal action against Stephen on property he owned separately and with BGLP. The settlement agreement then stated, in relevant part:

" 10) Release of Cheryl, Stephen and BGLP. Except as expressly set forth in this Agreement, the Bank, and each of its respective successors, affiliates, assigns, shareholders/members, directors, officers, agents, servants, employees, heirs, executors, administrators and assigns, does hereby forever release and discharge Cheryl, Stephen, and BGLP, and their respective parents, successors, affiliates, assigns, directors, officers, agents, servants, and employees from any and all claims, demands, actions, causes of action, suits, costs, damages, expenses and liabilities of every kind, character and description, either direct or consequential, at law or in equity, which they may now, may have had at any time heretofore, or in any manner ...

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