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Koenig & Strey GMAC Real Estate v. Renaissant 1000 South Michigan I, LP

Court of Appeals of Illinois, First District, Sixth Division

November 23, 2016

KOENIG & STREY GMAC REAL ESTATE, a limited liability company, Plaintiff,
v.
RENAISSANT 1000 SOUTH MICHIGAN I, LP, an Illinois limited partnership; RENAISSANT 1000 SOUTH MICHIGAN, LLC, an Illinois limited liability company; FIRST AMERICAN BANK; DESTEFANO AND PARTNERS, LTD., an Illinois corporation; TRAINOR GLASS COMPANY, an Illinois corporation; CURTAIN WALL AND DESIGN CONSULTING INCORPORATED, a Texas corporation; and UNKNOWN OWNERS, HEIRS, LEGATEES and NON-RECORD CLAIMANTS, Defendants. FIRST AMERICAN BANK, an Illinois banking corporation, Plaintiff and Defendant-Appellee,
v.
RENAISSANT 1000 SOUTH MICHIGAN LLC, an Illinois limited liability company; RENAISSANT 1000 SOUTH MICHIGAN I, L.P., an Illinois limited partnership; WARREN BARR; JAMES CARROLL; JOHN BORKOWSKI; EDWARD BORKOWSKI; RICHARD BORKOWSKI; CONTRACTORS LIEN SERVICES, INC.; DESTAFANO AND PARTNERS LTD.; TRAINOR GLASS COMPANY; CURTAIN WALL & DESIGN CONSULTING INCORPORATED; KOENIG AND STREY GMAC REAL ESTATE; TISHMAN CONSTRUCTION CORPORATION OF ILLINOIS; CHICAGO TITLE LAND AND TRUST COMPANY, as trustee under trust number 1106328; 1000 SOUTH MICHIGAN AVENUE, LLC; UNKNOWN OWNERS; and NON-RECORD CLAIMANTS, Defendants, John Borkowski; Edward Borkowski; and Richard Borkowski, Defendants-Appellants.

         Appeal from the Circuit Court of Cook County Nos. 07 CH 27475, 08 CH 16304 Honorable Robert J. Quinn and Anthony Kyriakopoulos, Judges, Presiding.

          PRESIDING JUSTICE HOFFMAN delivered the judgment of the court, with opinion. Justices Rochford and Delort concurred in the judgment and opinion.

          OPINION

          HOFFMAN PRESIDING JUSTICE

         ¶ 1 The defendants, John Borkowski, Edward Borkowski and Richard Borkowski (collectively referred to as the Borkowskis), appeal from a $18, 421, 241.04 judgment entered against them on a guaranty agreement which they executed in favor of the plaintiff, the First American Bank (Bank). They argue that the circuit court erred in: (1) including post-judgment interest on the judgment entered against the underlying borrowers in the computation of the sums owed on their guaranty; (2) failing to require the Bank to apply the amount of its credit bid on the foreclosure sale of the borrowers' property to expenses and accrued interest before crediting principal; and (3) failing to grant a credit against their liability for the proceeds of a $4 million letter of credit drawn upon by the Bank on April 3, 2008. For the reasons which follow, we vacate the circuit court's judgment and remand this matter back to the circuit court with directions to recalculate the amounts due by the Borkowskis on their guaranty agreement consistent with the opinions expressed herein and enter judgment in favor of the Bank in that sum.

         ¶ 2 The Bank made two loans to Renaissant 1000 South Michigan LLC (Renaissant) totaling $22, 450, 000 which were memorialized by a $16 million Term Land Note and a $6, 450, 000 Term Mezzanine Note (collectively, the Notes). The Notes were secured by a mortgage on the property commonly known as 1000 South Michigan Avenue in Chicago (Mortgage), an Assignment of Rents and Leases, and a Security Agreement and Financing Statement. The Borkowskis, along with Warren Barr and John Carroll (collectively, the guarantors), jointly and severally, guaranteed the payment of certain specified sums owed to the Bank by Renaissant. The Guaranty Agreement provides, in relevant part, as follows:

"Notwithstanding anything to the contrary contained in the foregoing, or in this Guaranty, the joint and several liability of Guarantors under this Agreement shall not exceed (a) for the principal portion of the Guaranteed Liabilities the sum of Seven Million and No/100 Dollars ($7, 000, 000.00) (The 'Guaranteed Principal Amount'), one hundred percent (100%) of the accrued and unpaid interest under the Notes, as well as one hundred percent (100%) of the late fees due under the Notes, (c) [sic] all Enforcement Costs, and (d) [sic] any Extraordinary Claim. The Guaranteed Principal Amount, all accrued and unpaid interest under the Note, all late fees, the Enforcement Costs, any Extraordinary Claim and any and all costs, losses, damages and reasonable attorney's fees incurred by the Lender in connection with or arising out of any Extraordinary Claim are collectively referred to as the 'Guaranteed Obligations'."

         The Notes were renewed from time to time. With the third extension of the Notes, the Bank required Renaissant to post, as additional collateral, a $4 million irrevocable letter of credit naming the Bank as the beneficiary. With the sixth extension, the Renaissant 1000 South Michigan I, L.P. was added as a borrower (Renaissant and Renaissant 1000 South Michigan I, L.P. are collectively referred to as the Borrowers). The guarantors reaffirmed the Guaranty Agreement in writing with each extension of the Notes.

         ¶ 3 Pursuant to the final extensions, the maturity date of the Notes was March 31, 2008. When the Borrowers defaulted, the Bank filed the instant action. In count I of its complaint, the Bank sought to foreclose upon the Mortgage. In count II, the Bank sought a judgment against the guarantors.

         ¶ 4 On the Bank's motion for summary judgment on count I of its complaint, the circuit court entered a Judgment Order of Foreclosure and Sale on January 26, 2009. In that order, the circuit court found that, as of April 21, 2008, there was due and owing to the bank:

"• $22, 443, 427.61, representing the principal amount due on the Notes; plus
• $285, 371.84, representing interest accrued on the Notes from March 31, 2008, to April 21, 2008;
• Less $4, 000, 000.00 representing the proceeds of a letter of credit drawn by [the Bank], which will be applied as of the date of entry of [the] order;
• for a total of $18, 728, 799.45."

         The court also found that per diem interest under the Notes would accrue after April ...


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