Inland Mortg. Capital Corp. v. Chivas Retail Partners, LLC

901 F.Supp.2d 1066

INLAND MORTGAGE CAPITAL CORPORATION, Plaintiff,

v.CHIVAS RETAIL PARTNERS, LLC, et al., Defendants.

Case No. 11 C 6482.

United States District Court,

N.D. Illinois,

Eastern Division.

Nov. 1, 2012.

William J. McKenna, Jr., Thomas Charles Hardy, Foley & Lardner, Chicago, IL, for Plaintiff.

James Kenneth Borcia, Tressler LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

MILTON I. SHADUR, Senior District Judge.

In September 2011 Inland Mortgage Capital Corp. (“Inland”) filed this action against Chivas Retail Partners, LLC, the TJD Separate Property Trust and its Trustee Tim Dollander and the Walter L. Brown Jr. Revocable Trust and its trustee Walter Brown Jr. (collectively “Guarantors”), alleging their nonpayment under a loan guaranty agreement (“Guaranty Agreement”). After this Court denied a motion to dismiss filed by Guarantors (841 F.Supp.2d 1029 (N.D.Ill.2012)), Inland moved for summary judgment under Fed.R.Civ.P. (“Rule”) 56. This Court's August 3, 2012 memorandum opinion and order (“Liability Opinion,” 884 F.Supp.2d 702) granted summary judgment in favor of Inland as to liability but reserved the question of damages pending the submission of Guarantors' surreply on that issue.

That submission has now been made, and upon this Court's review of the parties' memoranda it is clear that Inland has carried its burden of showing the absence of any genuine issues of material fact as to the damages owed by Guarantors. Accordingly Inland's Rule 56 motion will also be granted in full as to damages.

Summary Judgment Standard

Because the Liability Opinion has already spelled out the operative Rule 56 standards, they will not be repeated here. And for the same reason, this opinion will not echo the detailed version of the underlying facts as laid out in the Liability Opinion—instead it will simply summarize facts that are relevant to the issue of damages. Those facts will be viewed, of course, in the light most favorable to nonmovant Guarantors—a requirement applied within any limitations created by the extent of their compliance (or noncompliance) with the strictures of this District Court's LR 56.1, adopted to implement Rule 56.

Background

In June 2007 Harbins Crossing TC, LLC (“Borrower”) took out a loan of $15,590,199.57 (the “Loan”) from Inland to build a retail shopping center (the “Property”) in Georgia—a loan secured by the Property itself (G. R. St. ¶¶ 8–11).¹ Guarantors guaranteed payment of the Loan under the terms of the Guaranty Agreement ( id. ¶¶ 11–12). Borrower eventually defaulted, causing the Loan to be accelerated and the Property to be foreclosed upon ( id. ¶¶ 13–15).

In Georgia foreclosure sales are non judicial, so a sheriff's sale of the Property was held without judicial oversight, and Inland purchased the property with a credit bid of $7 million ( id. ¶¶ 15–16). Inland has shown that far more than $7 million was due on the Loan at the time of the foreclosure sale, so that a deficiency existed after the sale (I. Mem. 4). In Georgia such a deficiency cannot be collected upon against a borrower unless and until a court rules that the sale price of a loan's collateral at a foreclosure sale represents the “fair market value” of that collateral, a ruling that must be made at a confirmation hearing (Liability Opinion, 884 F.Supp.2d at 703–04). Inland brought an action for such confirmation in Georgia and lost, thus failing to get confirmation that its $7 million credit bid on the Property represented its fair market value for purposes of any deficiency against the Borrower ( id.).

With a multimillion dollar portion of the Loan remaining unpaid after its credit bid on the Property, Inland brought this action against Guarantors to recover the amount owed on the Loan at the time of foreclosure, plus interest and less the $7 million credit bid (I. Mem. 4). Guarantors have repeatedly argued that this action is nothing more than a suit to obtain the deficiency that, according to Guarantors, is not recoverable because of Inland's lack of success in the confirmation action. But this Court has rejected that argument in the Liability Opinion at 707–08, reasoning that the Guaranty Agreement includes a waiver of Guarantors' right to make that deficiency argument ( id. at 705–06), as well as including an explicit anticipation of the possibility that the present situation might arise, as stated id. at 706–07, quoting (I. Mem. Ex. B ¶ 9(c)):

The amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.

All that remains, then, is to determine the amount owed to Inland under the Guaranty Agreement. More immediately, this Court must determine whether the issue of damages can be resolved on this current motion Rule 56 or requires a trial.

Damages Calculation

In its LR 56.1 statement Inland provided the following calculations, said to represent the amount still owed by Guarantors as of March 1, 2012 under (1) the Installment Note (that memorialized the Loan) and (2) the Guaranty Agreement (I. St. ¶ 24):

+-----------------------------------------------------------------------------+
¦Principal Balance at Maturity Date of 8/11/2008               ¦$15,000,000.00¦
+--------------------------------------------------------------+--------------¦
¦Default Interest—9/1/2008 through 8/31/2009                   ¦$2,737,500.00 ¦
+--------------------------------------------------------------+--------------¦
¦Default Rate = 18% 2                                          ¦              ¦
+--------------------------------------------------------------+--------------¦
¦Per Diem Interest on 360–day basis = 7,500.00                 ¦              ¦
+--------------------------------------------------------------+--------------¦
¦Total Amount Due as of 8/31/2009                              ¦$17,737,500.00¦
+--------------------------------------------------------------+--------------¦
¦Less: Credit Bid at Sale on 9/1/2009                          ¦$7,000,000.00)¦
+--------------------------------------------------------------+--------------¦
¦Total Due After Sale                                          ¦$10,737,500.00¦
+--------------------------------------------------------------+--------------¦
¦                                                              ¦              ¦
+--------------------------------------------------------------+--------------¦
¦Default Interest from 9/1/2009 through 3/1/2012               ¦$5,528,653.24 ¦
+--------------------------------------------------------------+--------------¦
¦Default Rate = 18%                                            ¦              ¦
+--------------------------------------------------------------+--------------¦
¦Per Diem Interest on 360–day basis = $6,055.48                ¦              ¦
+--------------------------------------------------------------+--------------¦
¦Balance Due for 2008 Real Estate Taxes plus penalties         ¦$250,890.54   ¦
+--------------------------------------------------------------+--------------¦
¦                                                              ¦              ¦
+--------------------------------------------------------------+--------------¦
¦Total Amount Due                                              ¦$16,517,043.78¦
+-----------------------------------------------------------------------------+

Inland's Rule 56 motion sought that total amount plus any prejudgment and post judgment interest that would accrue before Guarantors' payment was made (I. Mem. 7). Inland's President Art Rendak (“Rendak”) swore to an affidavit that served as the source for those calculations (I. St. ¶ 24).

In their responsive memorandum and LR 56.1 statement Guarantors have taken issue with Rendak's damages calculations for two reasons (G. Mem. 17; G. St. ¶ 24). First, they maintain that Rendak did not calculate the amount due under the Guaranty Agreement himself and lacks the underlying knowledge necessary to state the amount of damages accurately in this action (G. Mem. 17). Guarantors also contend that, contrary to Inland's assertions, they had made payments on the Loan and those payments were not reflected in the damages calculation provided by Inland ( id.). In support of the latter contention Guarantors have submitted the affidavit of Tim Dollander, in which he swore that Guarantors had in fact made payments on the Loan, as well as tendering a document that is purportedly a record of Guarantors' payments on the Loan from its inception (G. Mem. Ex. 1). Although Guarantors did not point to any particular part of Rendak's calculations that they believe to be false or that failed to take prior payments into account, they urged that summary judgment on the issue of damages is inappropriate.

In its reply Inland acknowledged that some of Guarantors' assertions were valid. Accordingly Inland submitted another affidavit—that of Marie Svehla (“Svehla”), Inland's Vice President and the person who was responsible for computing the calculations embodied in Rendak's affidavit (I. R. Mem. Ex. 1). Svehla affirmed that there were two payments totaling $180,875 that had been received after October 8, 2008 and that had not been accounted for in Rendak's original affidavit (I. R. Mem. Ex. 1 ¶ 11). Those payments were now credited in the “Default Interest—9/1/2008 through 8/31/2009” section of a new set of calculations performed by Svehla ( id. at ¶ 10):

+------------------------------------------------------------------------------+
¦Principal Balance at Maturity Date of 8/11/2008               ¦$15,000,000.00 ¦
+--------------------------------------------------------------+---------------¦
¦Default Interest—9/1/2008 through 8/31/2009                   ¦$2,556,625.00  ¦
+--------------------------------------------------------------+---------------¦
¦Default Rate = 18%                                            ¦

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