United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY United States District Judge.
City Bank (the Bank) made three loans to various borrowers,
all of which were personally guarantied by Allison Davis. The
borrowers stopped making payments, and the loans were
eventually assigned to SMS Financial XXVII, LLC (SMS
Financial). SMS Financial filed suit against Davis to recover
on the guaranties. SMS Financial has moved for summary
judgment. For the reasons stated below, the Court grants SMS
Financial's motion for summary judgment on the issue of
Davis's liability and reserves the determination of
damages pending a further submission.
2004, the Bank extended a loan to Davis Associates Managers,
LLC and Davis for $250, 000. Davis also personally guarantied
payment of the loan. In July 2006, the Bank extended another
loan to Evans Improvement Association, LLC for $300, 000.
Davis again personally guarantied payment of the loan. In
January 2007, the Bank extended a loan to Davis Associates
Managers, LLC; Victory 2005, LLC; and 86th Ashland, LLC for
$1, 100, 000. Davis personally guarantied payment of the
March 2012, the Illinois Department of Financial and
Professional Regulation closed the Bank, and the FDIC was
named as receiver. In July 2012, the borrowers for each loan
stopped making payments. In October 2012, the FDIC arranged
to sell the loans and their accompanying guaranties to SMS
Financial. That same month, the FDIC granted power of
attorney to two employees of SMS Financial, Jonathan Hoffer
and Jonathan Harris, for the purpose of assigning these three
loans to SMS Financial. In December 2012, Hoffer executed
three allonges, which assigned the loans to SMS Financial.
receiving the loans, SMS Financial filed suit in the Circuit
Court of Cook County against the borrowers for breach of the
loan agreements. In those suits, SMS Financial submitted
affidavits of Benjamin Myers, an affiliate of SMS Financial
who managed the loans. The state court ultimately found in
favor of SMS Financial and entered three judgments against
the borrowers, in the amounts of $347, 474.00; $361, 828.90;
and $1, 184, 446.06.
Financial then filed this suit to recover these same amounts
from Davis based on her personal guaranty of each loan. SMS
Financial has moved for summary judgment, arguing that there
is no genuine dispute on whether Davis is obligated to pay
for these defaulted loans. In its motion, SMS Financial seeks
in damages the value of the judgments awarded in state court,
interest as provided under 725 ILCS 5/2-1303, and reasonable
attorneys' fees and costs. In response, Davis argues that
there is a genuine dispute on whether SMS Financial is the
lawful holder of the loans and thus has standing to recover
reviewing a motion for summary judgment, the Court views all
evidence in the light most favorable to the nonmoving party
and draws all reasonable inferences in that party's
favor. AAR Aircraft & Engine Grp., Inc. v.
Edwards, 272 F.3d 468, 469 (7th Cir. 2001). Summary
judgment is appropriate when there is no genuine issue as to
any material fact and the movant is entitled to judgment as a
matter of law. United Cent. Bank v. KMWC 845, LLC,
800 F.3d 307, 310 (7th Cir. 2015). "Once the moving
party puts forth evidence showing the absence of a genuine
dispute of material fact, the burden shifts to the non-moving
party to provide evidence of specific facts creating a
genuine dispute." Carroll v. Lynch, 698 F.3d
561, 564 (7th Cir. 2012).
enforce a guaranty under Illinois law, the court must find
"proof of the original indebtedness, the debtor's
default and the guarantee." Mid-City Indus. Supply
Co. v. Horowitz, 132 Ill.App.3d 476, 483, 476 N.E.2d
1271, 1277 (1985). The evidence provided by SMS Financial
shows there is no genuine dispute on any of these issues. SMS
Financial has provided documentation of the loans from the
Bank to the various borrowers, and Davis admits that the
loans are valid. See Pl.'s Stat. of Undisputed
Material Facts (SUDF), Exh. 1 (Myers Affid.) at Exhs. A, E,
H; Def.'s Resp. to Pl.'s SUDF ¶ 5, 12, 19. Davis
further admits that the loans are in default. Def.'s
Resp. to Pl.'s SUDF ¶ 31, 37, 43. Finally, SMS
Financial has provided documentation that shows Davis is
personally liable on each of the loans: Davis is a named
borrower on one of the loans and personally guarantied all
three loans. See Myers Afffid. at Exhs. D, E, J;
Compl. at Exh. 3. Further, Davis admits that she is
personally liable on each loan. Def.'s Resp. to Pl.'s
SUDF ¶ 9-10, 16-17, 21-22. Thus there is no dispute on
whether the personal guaranties can be enforced against
argues primarily that SMS Financial does not have standing to
enforce the guaranties because the assignment of the
guaranties was invalid. In Illinois, guaranties are generally
non-assignable. See Harris Tr. and Sav. Bank v.
Stephans, 97 Ill.App.3d 683, 686, 422 N.E.2d 1136, 1139
(1981). This, however, is not a rigid rule; it is applied
only where "the essentials of the original contract have
been changed and the performance required of the principal is
materially different from that first contemplated."
Id. at 687-87, 422 N.E.2d at 1139. Illinois courts
have held that the sale of a loan to another bank does not
discharge a guaranty where the guaranty of repayment of the
loan expressly contemplated assignment. See, e.g.,
FDIC v. O'Malley, 249 Ill.App.3d 340, 356, 618
N.E.2d 818, 830 (1993). The guaranties at issue in this case
expressly contemplated assignment. Specifically, the
guaranties authorized the Bank to "sell, transfer,
assign or grant participations in all or any part of the
Indebtedness; and . . . to assign or transfer this Guaranty
in whole or in part." See, e.g., Myers Affid.,
Exh. D. The FDIC's sale of the loan and the guaranties
did not materially alter Davis's obligations under the
guaranties and therefore did not discharge the guaranties.
argues, however, that the underlying assignment was invalid,
making SMS unable to enforce the guaranty obligations. Davis
offers two reasons: 1) one set of power of attorney forms
executed by the FDIC authorized Hoffer and Harris to assign
the loans only to a different entity and not to SMS
Financial; and 2) the power of attorney forms indicate that
the power terminates if the designee's employment with
SMS Financial terminates, and Myers testified that SMS
Financial has never had any employees. See
Def.'s Mem. in Opp'n to Pl.'s Mot. for Summ. J.
¶¶ 6-13. The evidence shows, however, that these
facts are insufficient to give rise to a genuine dispute over
whether SMS Financial is the holder of the loans and the
true that, in his affidavit to the state court, Myers
submitted a document in which the FDIC authorized the
designated attorneys-in-fact to sign the loans over to SMS
Financial JDC, LP, a different entity than the plaintiff in
this case. See Def.'s Statement of Additional
Facts (SAF), Davis Affid. at 15, 29, 43. But Myers later
filed a supplemental affidavit stating that he submitted
those documents in error. See Pl.'s Resp. to
Def.'s SAF, Exh. A. Myers also submitted a second set of
similar power of attorney forms, by which the FDIC authorized
the same Attorneys-in-Fact to sign the loans over to SMS
Financial. See Id. The FDIC executed the first set
of documents in July 2012; it executed the second set in
October 2012. Hoffer executed the allonges in December 2012.
Therefore by the time that Hoffer assigned the loans to SMS
Financial in December, he clearly had the authority to do so.
There is no genuine dispute as to whether, at that time,
Hoffer was authorized to assign the loans to SMS Financial.
argument based on the language of the power of attorney
itself is likewise insufficient to defeat summary judgment.
The October 2012 power of attorney forms designate two
"Employee(s) of SMS Financial, " Hoffer and Harris,
as the attorneys-in-fact. Myers Affid., Exh. P. The forms
also indicate that the limited power of attorney shall be
immediately revoked "upon the termination of employment
from SMS Financial." Id. Myers testified in a
deposition for the related state court cases that SMS
Financial "has never had any employees." Def.'s
Mem. in Opp'n to Pl.'s Mot. for Summ. J., Myers Dep.
at 89:25. Davis argues, therefore, that Hoffer never had the
authority to execute the allonges that assigned the loans to
SMS Financial, as he was never an employee of SMS Financial.
Def.'s Mem. in Opp'n to Pl.'s Mot. for Summ. J.
at ¶ 13. Hoffer did, however, maintain a relationship
with SMS Financial. SMS Financial is a manager-managed LLC
with a single manager, SMS Management, LLC (SMS Management).
Myers Affid. ¶ 2. SMS Management is also a
manager-managed LLC. Id. Hoffer is a current member
and manager of SMS Management. Id. ¶ 23. Hoffer
therefore has a relationship with SMS Financial as
contemplated by the power of attorney forms. Further, the
evidence provided by SMS ...