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Phoenix REO, LLC v. Shashtriji, Inc.

United States District Court, N.D. Illinois, Eastern Division

July 29, 2019

Phoenix REO, LLC, Plaintiff,
Shashtriji, Inc.; Ghanshyam K. Patel; Pradyuman Shah; Pramod Patel; Sunita Patel; Hiralkumar Patel and Priyanka Patel, Defendants.


          Honorable Thomas M. Durkin, United States District Judge.

         Plaintiff Phoenix REO brings this action to recover on a loan made to Shashtriji Inc. and guaranteed by individual defendants Ghanshyam Patel, Pradyuman Shah, Pramod Patel, Sunita Patel, Hiralkumar Patel, and Priyanka Patel. Phoenix REO filed a motion for summary judgment against the individual defendants for breach of their guaranties. For the following reasons, Phoenix REO's motion is granted.

         Legal Standard

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The Court considers the entire evidentiary record and must view all of the evidence and draw all reasonable inferences from that evidence in the light most favorable to the nonmovant. Horton v. Pobjecky, 883 F.3d 941, 948 (7th Cir. 2018). To defeat summary judgment, a nonmovant must produce more than a “mere scintilla of evidence” and come forward with “specific facts showing that there is a genuine issue for trial.” Johnson v. Advocate Health and Hosps. Corp., 892 F.3d 887, 894, 896 (7th Cir. 2018). Ultimately, summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).


         This suit arises from guaranties executed by the individual defendants to secure a commercial loan for a hotel. The facts are largely undisputed. In March 1998, Shashtriji Inc. issued a promissory note to The National Republic Bank of Chicago (NRBC) for $1, 200, 000. R. 129 ¶ 11.[1] The note was secured by a mortgage on the hotel property and a loan agreement. Id. ¶ 14; R. 124 ¶¶ 7-8. The note and loan were modified and ratified several times between 1998 and 2012. R. 129 ¶¶ 12-13. In connection with the note, the individual defendants each entered into guaranty agreements with NRBC for the debt owed by Shashtriji. Id. ¶¶ 15-18.

         Shashtriji is in default under the promissory note for, among other reasons, failing to make timely and complete mortgage payments, failing to pay property taxes, further encumbering the property, and failing to send regular financial statements. Id. ¶ 19. As of February 5, 2019, the principal due and owed under the promissory note was $751, 104.17, with accrued interest of $35, 171.72, real estate taxes of $43, 021.95, receiver property expenses of $66, 000, default interest of $114, 927.18, appraisal and environmental fees of $7, 200, and late fees of $6, 747.55. Id. ¶ 20. Interest continues to accrue at a rate of $271.22 per day. Id. Further, Phoenix REO has paid or become obligated to pay attorneys' fees and costs of $204, 351.37. Id. ¶ 23.

         Despite demands from Phoenix REO, the defendants have failed to make the payments specified in the promissory note and guaranties. Id. ¶ 21. Phoenix REO now moves for summary judgment on Count II of its complaint for the individual defendants' breach of their guaranties.[2] The defendants raised six affirmative defenses that they contend excuse their non-performance including: (1) fraudulent inducement; (2) impairment of collateral against NRBC; (3) impairment of collateral against Phoenix; (4) breach of contract against NRBC; (5) breach of contract against Phoenix; and (6) release and discharge of guarantors.[3]


         The elements of a breach of contract claim are “(1) the existence of a valid and enforceable contract; (2) substantial performance by plaintiff; (3) breach of contract by the defendant; and (4) resultant injury to the plaintiff.” Avila v. Citi Mortgage, Inc., 801 F.3d 777, 786 (7th Cir. 2015).

         The defendants do not dispute in their response to Phoenix REO's motion or in the declaration of Ghanshyam Patel that they executed valid guaranties, that Shishtriji defaulted on the promissory note, that they have failed to make payments as required by the guaranties, or that Phoenix REO has suffered damages. See R. 129 ¶¶ 15-21; Ex. 6. It is thus clear defendants breached their contracts as a matter of law.

         However, defendants contend they are discharged from paying the debt because of the additional facts alleged in their six affirmative defenses. See Myers v. Harold, 279 F.Supp.3d 778, 798 (N.D. Ill. 2017) (“[T]he basic concept of an affirmative defense is an admission of the facts alleged in the complaint, coupled with the assertion of some other reason defendant is not liable.”) (alteration in original) (quoting Instituto Nacional De Comercializacion Agricola (Indeca) v. Cont'l Illinois Nat. Bank & Trust Co., 576 F.Supp. 985, 988 (N.D. Ill. 1983)). To survive summary judgment, the defendants bear the burden of putting forth evidence to create a genuine issue of material fact on their affirmative defenses. Bethine W. Alberding Estate Admin. Tr. ex rel. Moore v. Vinoy Park Hotel Co., 2005 WL 730960, at *3 (N.D. Ill. Mar. 24, 2005); Dunkin' Donuts Inc. v. N.A.S.T., Inc., 428 F.Supp.2d 761, 773 (N.D. Ill. 2005). They fail to meet that burden here.

         I. Impairment of Collateral (Defendants' Affirmative ...

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