Lasalle Bank Nat'L Assoc v. Paramont Properties

588 F.Supp.2d 840

LaSALLE BANK NAT'L ASSOC v. PARAMONT PROPERTIES et al.

No. 08 C 2081.

United States District Court, N.D. Illinois.

November 24, 2008.

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Mike W. Bartolacci, Thompson Coburn LLP, St. Louis, MO, Scott P. Clair, Todd A. Rowden, Thompson Coburn LLP, Chicago, IL, for LaSalle Bank Nat'l Assoc.

Michael A. Wax, Peter E. Kanaris, Fisher Kanaris, Chicago, IL, Paul J. Puricelli, Stone, Leyton & Gershman PC, St. Louis, MO, for Paramont Properties et al.

AMY J. ST. EVE, District Judge.

STATEMENT

Plaintiff LaSalle Bank National Association ("LaSalle") sued Paramont Properties, L.L.C. ("Paramont") and Keith Barket (collectively, "Defendants") pursuant to the Court's diversity jurisdiction for repayment under a Promissory Note and Guaranty. Before the Court is Plaintiffs Motion to Dismiss Defendants' Counterclaims and Plaintiff's Motion to Strike Defendants' Affirmative Defenses. Defendants' counterclaims allege the following state law claims against LaSalle: negligence (Count I), breach of the implied covenant of good faith and fair dealing (Count II), negligent misrepresentation (Count III), and breach of contract (Count IV). (R. 15-1, Countercls.) Defendants also seek declaratory judgment regarding the enforceability of Barket's Guaranty (Count V). (Id. at 14.) In addition, Defendants asserted a number of affirmative defenses. LaSalle moved to dismiss the counterclaims under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim for which relief can be granted, and to strike each of the affirmative defenses. (R. 22-1, Mot. to Dismiss Defs.' Countercls. & Strike Affirmative Defenses at 2.)

Because Defendants' Counterclaims fail to allege diversity jurisdiction (R. 15-1, Countercls. ¶¶ 1-2), the Court relies on supplemental jurisdiction to decide these Motions regarding Defendants' Counterclaims. See Leipzig v. AIG Life Ins. Co., 362 F.3d 406, 410 (7th Cir.2004) ("[A] compulsory counterclaim does not require an independent grant of jurisdiction. Even a permissive counterclaim, if part of the same case or controversy (a condition met here), may be brought under the supplemental-jurisdiction statute, 28 U.S.C. § 1367(a), without an independent basis of jurisdiction." (citation omitted)). Defendants must file an amended Answer and Counterclaims, consistent with this opinion, which properly alleges diversity jurisdiction on or before December 15, 2008.

As explained below, Plaintiffs Motion to Dismiss is granted in part and denied in part. The Court grants in part and denies in part Plaintiffs Motion to Strike Defendants' Affirmative Defenses.

BACKGROUND

Keith Barket is the sole member of Paramont, a real estate development company. (R. 1-1, Compl. ¶¶ 2-3; R. 15-1, Defs.' Answer & Countercls. at 1.) Both Defendants are citizens of Missouri. (R. 1-1 ¶¶ 12-3; R. 15-1 at 1.) LaSalle is a citizen of Illinois because its main office was in Chicago, Illinois.

For purposes of deciding the Motion to Dismiss, the Court accepts Defendants' allegations as true and construes the facts alleged in the parties' pleadings in the light most favorable to Defendants.

In September 2005, LaSalle agreed to establish a line of credit in favor of Paramont with a maximum commitment of $6,500,000 to fund the acquisition of real estate in Jefferson County, Missouri known as Amberleigh Woods (the "Property") and its development into a 224-lot residential subdivision. (R. 15-1, Countercls. ¶¶ 3, 5.) Barket, as Paramont's representative, signed a Promissory Note in favor of LaSalle, whereby LaSalle agreed to loan and Paramont agreed to repay LaSalle the amount of the loan. (R. 1-1, Ex. A.) In his personal capacity, Barket executed a Guaranty in favor of LaSalle promising to repay LaSalle for Paramont's debt evidenced by the Promissory Note. (Id., Ex. D.) In February 2006 and December 2006, the maximum commitment under the Note was increased to $7,000,000 and $8,500,000, respectively. (Id., Exs. B & C; R. 15-1, Answer ¶ 10.) Paramont and LaSalle intended for the development of the Property to be completed in two phases: Phase I involved the development of 119 lots, and Phase II involved the development of 114 lots. (R. 15-1, Countercls. ¶ 3.) The Note provides that "Notwithstanding anything in this Note to the contrary, no Advance shall be made hereunder for the purpose of improvements to the part of the Land within Phase II until 60 percent (60%) of the lots in Phase I are sold." (R. 1-1, Ex. A ¶ 2.3.) In December 2005, Paramont contracted with Arch Land Development, L.L.C. ("Arch") for Arch to perform the construction work necessary to ready the Property for sale to third-party homebuilders. (R. 15-1, Countercls. ¶ 4.) Arch is managed by Larry Labrier, who is not a party to this suit. (Id.)

In relevant part, the Note states:

2.2. Advances

(a) ... Each Advance shall be made available to the Borrower by the Lender upon any written, electronic, telecopy or verbal loan request (provided that any verbal loan request is promptly confirmed in writing), which the Lender in good faith believes to emanate from a properly authorized representative of the Borrower, whether or not that is the case.

. . .

(e) At least ten (10) Business Days prior to, and as a condition of, each Advance, Borrower shall furnish to Lender the following documents covering such Advance:

(i) Borrower's disbursement request (a "Request For Advance") in the form of Exhibit "A" attached hereto, which shall, among other things ... certify to Lender, as of the date of the applicable request for disbursement, that:

(A) the total amount of each request for disbursement (exclusive of interest) represents the actual amount payable for development work on the Land ...

. . .

(iii) Such other schedules, certificates, documents and other materials as Lender may reasonably request.

(R. 1-1, Ex. A ¶ 2.2.) The Request for Advance form ("Request form") (referred to as "Exhibit A" in the Note) provides that:

The Borrower acknowledges that the approval of this Construction Disbursement by the Lender is subject to all of the terms and conditions precedent for the disbursement of Loan Proceeds, including, without limitation, inspection of the Project, verification of the matters set forth in this Request for Advance and the available [sic] of Loan Proceeds.

(Id. at 27.)

According to Defendants, LaSalle engaged U.S. Title to act as LaSalle's escrow agent for purposes of processing Advances under the Note. (R. 15-1, Countercls. ¶ 8.) In January 2006, LaSalle, Paramont, Arch, and U.S. Title executed a Construction Loan Escrow Agreement ("Escrow Agreement"). (R. 15-2, Ex. A to Answer & Countercls.) The Escrow Agreement set out budgets for Phase I and Phase II costs and provided a schedule for disbursing loan proceeds between Phase I and Phase II. The Escrow Agreement also states that "Contractor [Arch] is agent for Owner [Paramont]." (Id. ¶ 22.)

LaSalle eventually disbursed the entire amount of the loan proceeds. The loan was issued with a 92% loan-to-value ratio, in violation of the bank's "internal lending guidelines." (R. 15-1, Countercls. ¶ 11(a).) Defendants assert that LaSalle disbursed loan proceeds to Arch/Labrier without requiring Request forms. (Id. ¶ 11(e).) Defendants further allege that LaSalle knew about cost overruns, but never alerted Defendants about the problems with the budget. (Id. ¶ 11(g), 20.) LaSalle never performed any inspections, even though the Request form and Escrow Agreement granted it authority to inspect the progress of construction. (Id. ¶ 11(g); R. 15-2 ¶ 20.) LaSalle made advancements for Phase I costs that exceeded the Phase I budget set out in the Escrow Agreement. (R. 15-1, Countercls. ¶ 11(k).) Finally, La-Salle promised to modify the loan a third time to extend additional financing, but later refused to increase the amount of the loan. (Id. ¶ 13, 16.) According to Defendants, LaSalle administered the loan as it did because it was actively marketing itself for merger and wanted to increase the amount of its loans in order to improve its loan portfolio and its "salability" for prospective merger or acquisition suitors. (Id. ¶ 12.)

Paramont defaulted on its payments, and Barket has refused LaSalle's demand for repayment. (R. 1-1 ¶¶ 20-26, 31.) La-Salle is suing Paramont and Barket for repayment of the loan and costs. (R. 1-1.) Defendants' counterclaims allege additional contract claims and tort claims of negligence and negligent misrepresentation against LaSalle. (R. 15-1 at 11, 12-13.)

MOTION TO DISMISS COUNTERCLAIMS

I. Legal Standard

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of a complaint, not its factual sufficiency. Szabo v. Bridgeport Mach., Inc., 249 F.3d 672, 675-76 (7th Cir.2001). The Court will only grant a motion to dismiss if "it appears beyond doubt that the [complainant] can prove no set of facts in support of his claim which would entitle him to relief." Center's v. Centennial Mortg., Inc., 398 F.3d 930, 933 (7th Cir.2005) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In making its determination, the Court must assume the truth of the facts alleged in the counterclaim, construe allegations liberally, and view them in the light most favorable to the counterclaim plaintiff. See Centers, 398 F.3d at 933; Cozzi Iron & Metal v. U.S. Office Equip., Inc., 250 F.3d 570, 574 (7th Cir.2001). At the 12(b)(6) stage, the Court considers the exhibits attached to the complaint, but where an exhibit conflicts with the allegations of the complaint, the exhibit typically controls. Centers, 398 F.3d at 933. "A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes." Fed.R.Civ.P. 10(c). Here, the relevant "complaint" is Defendants' Counterclaims. The Court does not typically...