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Guterman Partners Energy, LLC v. Bridgeview Bank Group

Court of Appeals of Illinois, First District, Fourth Division

March 29, 2018

BRIDGEVIEW BANK GROUP, Defendant-Appellee.

          Appeal from the Circuit Court of Cook County. No. 15 L 11747 The Honorable Diane M. Shelley, Judge Presiding.

          JUSTICE GORDON delivered the judgment of the court, with opinion. Justices McBride and Ellis concurred in the judgment and opinion.



         ¶ 1 The instant appeal arises from an uncompleted purchase between plaintiff Guterman Partners Energy, LLC, and defendant Bridgeview Bank Group, in which plaintiff sought to purchase certain loan documents from defendant. During the time in which the parties intended to close on the purchase, plaintiff paid $400, 000 to defendant as a deposit. The closing never occurred, and defendant retained the deposit. Plaintiff filed suit for the return of the deposit, claiming that the closing never occurred because plaintiff had discovered that defendant did not actually "own" the loan documents it was attempting to sell. Both parties filed motions for summary judgment, and the trial court denied plaintiffs motion for summary judgment and granted defendant's motion for summary judgment. Plaintiff appeals and, for the reasons that follow, we affirm.

         ¶ 2 BACKGROUND

         ¶ 3 I. Complaint

         ¶ 4 On November 17, 2015, plaintiff filed a complaint against defendant; the complaint was amended on June 14, 2016, and it is the amended complaint that is at issue on appeal. In the complaint, plaintiff sought to recover $400, 000 in deposits that it had made in connection with its agreement to purchase certain loan documents from defendant. Defendant allegedly appropriated the funds from plaintiff's account at defendant bank, claiming that plaintiff had forfeited the funds because plaintiff had failed to close on the purchase of the loan documents. The complaint alleged that this action was wrongful because (1) plaintiff had no obligation to close on the purchase and therefore did not forfeit its deposits because defendant did not own the loan documents that it was purporting to sell (a breach of contract count); and (2) defendant had no right or authority to reach into plaintiff's account and remove the funds (a conversion count).[1]

         ¶ 5 The agreement at issue was dated June 17, 2015, and was entitled the "Non-Recourse Loan Sale Agreement" (LSA). Under the LSA, which is described in further detail below, plaintiff was to purchase defendant's position as secured lender with respect to two loan transactions.

         ¶ 6 The first transaction concerned a 2009 loan made by plaintiff to 401 Properties Limited Partnership (401 Partnership). The 401 Partnership loan was secured by an office building located at 401 South LaSalle Street in Chicago, and defendant held a mortgage on this property as security for the loan.

         ¶ 7 The second transaction was a 2010 loan made by defendant to 401 LaSalle Lenders LLC (LaSalle Lenders), which was done in order to facilitate LaSalle Lenders' purchase of defendant's interest in the 401 Partnership loan. According to the complaint, "[p]ursuant to the LaSalle Lenders Loan, [defendant] assigned to LaSalle Lenders all of its right, title, and interest in the 401 Partnership Loan, including the underlying promissory notes."

         ¶ 8 According to the complaint, in 2013, defendant "took the position" that LaSalle Lenders was in default on the LaSalle Lenders loan and, "[i]n connection with the resolution of that purported default, [defendant] contends that LaSalle Lenders re-assigned its interest in the 401 Partnership Loan back to [defendant]."

         ¶ 9 The complaint alleges that, pursuant to the LSA, plaintiff sought to purchase from defendant both the 401 Partnership loan and the LaSalle Lenders loan for a total purchase price of $10.1 million, for which plaintiff "would acquire loans with outstanding balances exceeding $15 million (for the 401 Partnership Loan) and $9 million (for the LaSalle Lenders Loan)." Additionally, "[plaintiff] would also acquire security interests in the underlying collateral-including a senior mortgage on the commercial office building at 401 South LaSalle Street."

         ¶ 10 The complaint further alleges:

"12. In light of the foregoing, [plaintiff] bargained for [defendant's] representation and warranty that it actually owned and had the authority to sell the documents that it was purporting to sell to [plaintiff] including, significantly, the promissory notes that evidenced the 401 Partnership Loan.
13. Accordingly, as a condition precedent to [plaintiffs] obligation to close the transaction and purchase these positions, the LSA required [defendant] to make several representations and warranties. Key among them, [defendant] was required to represent and warrant that it owned the documents comprising both loans, and accordingly, had the power and authority to sell both loan positions to [plaintiff].
14. *** [Defendant] was unable, and remains unable, to honor this representation and warranty." (Emphasis in original.)

         ¶ 11 According to the complaint, upon LaSalle Lenders' default under the LaSalle Lenders loan in 2013, defendant "did not take the steps required to enforce any alleged security interest [defendant] had in the collateral for that loan, " namely, the 401 Partnership loan promissory notes "that [defendant] had sold to LaSalle Lenders in 2010 and no longer owned." Due to defendant's failure, "multiple parties involved in bankruptcy proceedings related to 401 Partnership (initiated in December 2014) have since challenged whether [defendant] owns the loan documents that [defendant] agreed to sell to [plaintiff] in 2015 pursuant to the LSA." The complaint alleges that even LaSalle Lenders claimed in the bankruptcy proceeding that it never assigned the promissory notes back to defendant.

         ¶ 12 The complaint alleges that plaintiff "raised these issues" with defendant prior to the LSA's closing date and "suggested steps that might be taken to put [defendant] in a position to represent and warrant its ownership of all the loan documents." However, defendant did not take any of these steps "and by the time of that scheduled closing date, it was clear that [defendant] could not represent and warrant that it owned the notes and had the authority to sell them to [plaintiff]." The complaint also alleges that in the months leading up to the closing date, defendant failed to provide plaintiff a complete and accurate set of documents underlying the two loans during the LSA's "due diligence" period.[2] Consequently, "[a]s a result of this course of conduct, defendant was unable to fulfill the conditions precedent to [plaintiff's] obligation to close pursuant to the LSA."

         ¶ 13 According to the complaint, despite defendant's failure to honor its obligations, defendant unilaterally appropriated the $400, 000 that plaintiff had deposited in plaintiff's savings account at defendant bank.

         ¶ 14 II. LSA

         ¶ 15 Attached to the complaint was a copy of the LSA, which was dated June 17, 2015. Since the precise language of the LSA is at issue on appeal, we quote from the relevant provisions extensively. The LSA's recitals provided, in relevant part:

"WHEREAS, Purchaser has expressed to Seller its intent to purchase certain loan documents possessed by Seller and represented by certain mortgages, loan documents and other documents described more fully in Exhibit A to this Agreement (the 'Loan Documents'),
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, all of Seller's right, title and interest in, and to the Loan Documents on the terms and conditions as set forth below[.]"

         ¶ 16 Article II was entitled "Purchase and Sale of the Loan Documents." Section 2.1 provided:

"Section 2.1 Purchase and Sale; Release of Servicing Rights. Subject to the terms and provisions set forth in this Agreement, on the Closing Date, [3] Purchaser shall purchase all of Seller's right, title and interest in the Loan Documents from Seller and Seller shall sell, transfer, assign and convey such Loan Documents to Purchaser. The Loan Documents shall be sold to Purchaser with all servicing rights being assigned to Purchaser."

         ¶ 17 Section 2.2 concerned one of the deposits at issue on appeal:

"2.2 Deposit against Purchase Price. Purchaser shall contemporaneously with the execution of this Agreement deposit $100, 000.00 ('Refundable Deposit') with Seller. Purchaser may terminate this Agreement for any reason or no reason whatsoever in Purchaser's sole discretion, by delivering written notice of such termination to Seller before the expiration of the Due Diligence Period (as defined below). In the event that the Purchaser terminates this Agreement prior to the expiration period of the Due Diligence Period, Seller shall return the Refundable Deposit within three (3) business days of written notification. Should Purchaser elect to proceed to closing or otherwise fail to deliver written notice to Seller of its intent to terminate this Agreement, Seller may retain the Refundable Deposit as liquidated damages as its sole remedy. The Refundable Deposit shall become non-refundable after the expiration of the Due Diligence Period (as defined below). If Purchaser requests an extension of the Due Diligence Period, Seller may grant it at its sole discretion. Upon closing, the Refundable Deposit shall be credited to the Purchase Price."

         The "Purchase Price" was set at $10.1 million. The "Due Diligence Period" terminated on June 30, 2015; under section 6.1(a) of the LSA, during this period, "Purchaser is entitled to inspect and review Seller's information in its possession and control as it relates to: (i) legal documents, e.g., notes, amendments, deeds, mortgages and title; (ii) loan payment histories; and (iii) payoff schedules."

         ¶ 18 Article III of the LSA was entitled "Conditions to Execution and Closing." Section 3.2 concerned conditions precedent to plaintiffs obligations as the purchaser and provided:

"Section 3.2: Conditions Precedent to Obligations of Purchaser. The obligation of Purchaser to consummate the transactions contemplated by this Agreement is subject to fulfillment of each of the following conditions (any or all of which may be waived by Purchaser in writing in whole or in part to the extent permitted by applicable Law):
(a) All representations and warranties of Seller set forth in this Agreement shall be true and correct on the Closing Date, except to the extent that such representations and warranties relate to an earlier date or specifically reference another date (in which case such representations and warranties shall be true on and as of such date);
(b) Seller shall have performed and complied in all material respects with all obligations and agreements required in this Agreement to be performed or complied ...

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