Sullivan asked for copies of the documents he had signed. Z.andstra copied the corporate

note and two riders, gave them to Sulliva

and promised Lo send the remaining documents “after

Bill [Nazh.

zncd the at |plaintiff’s] office and the deal was complete.

It is undisputed that Nazha never signed the loan documents or any guaranty of the loan.
‘There is no evidence that plaintiff had ever even prepared a personal guaranty for Nazha to sign
Plaintiff opened the floor plan despite Nazha’s refusal to lend his credit to the transaction.

DISCUSSTON

To recover on a promissory note, plaintiff must show that: (1) North Chicago executed
the security agreement and promissory note; (2) plaintiff is the holder of the note; and (3) North
Chicago has no viable defense. Soc Basu v. Stelle, 237 Ml. App.3d 113, 115-16 (2d Dist 1992).
To prevail on its breach of contract claim, plaintiff must establish: (1) the existence of a valid and
enforceable contract; (2) performance by plaintiff; (3) breach of the contract by North Chicago;
and (4) resulting injury to plainuiff. Gallagher Corp, v. Russ, 309 []LApp.3d 192, 199 (1* Dist.
1999)

In the instant case, it is undisputed that Sullivan, acting on behalf of North Chicago,
executed the security agrecrnent and promissory note, thal plaintiff is the holder of the note and
performed its obligations, that North Chicago has failed to pay on the note, and plaintiff has been
injured. North Chicago argues that it was fraudulently induced to exccute the documents,

however, challenging plaintiff's ability to establish the third element of the promissory note

count (no viable defense) and the first element of the breach of contract count (a valid and

enforceable contract),



that induced the making of one kind of an instrument under the belief that the maker was giving
one of a different character. Id.
This court has already rejected any fraud in the execution theory in this case

Daimlerchrysler Services North America, LLC v. North Chicago Marketing, Inc,, No, 02 C 5633

(N.D. IIL Feb. 7, 2003), The documents are clearly labeled to be exactly what they are. Any
allempt to enforce an alleged statement by Zandstra (hat the corporate contract would not be
valid and enforceable unli] Nazha personally guarantecd is nothing but a disguised attempt to

enfore

an oral promise to forehear enforcement until Nazha signed, Such a claim is precisely

what the ICAA was enacted to foreclose. Sec Bank One, Springfield v. Roscetti, 309 IILApp.3d

1048, 1036-58 (4"" Dist. 1999) (personal guaranty of floor plan financing agreement is a credit

vreement under the ICAA, and any alleged oral promise to not enforec or to modify the terms is
barred by the CAA).
No doubt North Chicago and its principals will find this resull to be harsh and distressing
in light of their insistence that North Chicago was fraudulently induced to sign the documents by
a promise that Nazha would be personally liable “if anything went wrong with the “Floor Plan

Financing.” To quote Judge Coar in Westinghouse, 993 F. Supp. at 489, however, “Illinois

courts have concluded that they must apply the [CAA] even in the face of harsh consequences.”
Plainu{?s motion for summary judgment for liability on Counts I through IH] against North
Chicago is granted,

CONCLUSION

For the reasons set forth above plaintiffs motion for summary judgment on Counts 1

through HI against North Chicago is granted. Plaintiff is directed to present a draft judgment



intent lo answer, raise affirmative defenses and file counterclaims based on an affidavit filed by
Sullivan in response to plaintiffs motion for summary judgment against North Chicayo.!

According to that affidavit, Sullivan formed a joint venture (North Chicago) with William
Nazha to ercate and operate a used car dealership, Nazha arranged for financing, and Sullivan
was Lo manage the day-to-day operations, Sullivan was the president, Nazha was not a corporate
officer,

After North Chicago was incorporated, Nazha told Sullivan that plaintiff would provide
“Floor Plan Financing.” On April 7, 2000, Brian Zandstra, a representative of plaintiff, arrived
unannounced at North Chicago with a stack of documents for Sullivan to sign. Sullivan initially
told Zandstra that he did not want lo sign and tried to reach Nazha by telephone. Zandstra then
told Sullivan that Sullivan (and not Nazha) needed to sign because Sullivan was the President of
North Chicago and Nazha could not sign on behalf of the corporation. He then told Sullivan that
the documents “were part of a corporate promissory note,” that ““Nazha had already approved the
papers and agreed to sign them and his personal guaranty, and that Zandstra was meeting with
Nazha in plaintiff's office that aflernoon.” Zandstra assured Sullivan that “Nazha would be
personally liable if anything went wrong with the Floor Plan Financing” and that the Floor Plan
Financing would open as soon as Nazha “completed the transaction” with plaintil!. Based on

these representations Sullivan signed the documents without reading them.

‘Because of lack of aascts, North Chicago has not answered the second amended
complaint. Sullivan, Laura, and R.S. Associates have filed a brief and 1..R. 56.1 Statement. in
opposition to plaintiffs motion for summary judgment against North Chicago, North Chicago
has adopted those pleadings as its own. ‘I'he court rejects plaintiff's argument that there is
anything improper in North Chicago’s adoption of the other defendants’ pleading.

3



In response, plaintiff argues that even if all of Sullivan’s factual assertions are acecpled as
true, North Chicago's (raudulent induecment defense is barred by the Illinois Credit Agreement
Act (ICAA”), 815 ILCS 60/2, 3, which bars all actions by a debtor based on or related to an

oral credit agreement.? First National Bank in Staunton v. McBride Cheyrolet, Inc., 267 II.

App.3d at 367 (4 Dist. 1994).
The ICAA has been described by the Scventh Circuit as a “strong form” of the Statute of
Frauds because, unlike the usual Statute of Frauds, it requires that the agreement be signed by

both partics. Sec Resolution Trust Corp, v. Thompson, 989 1'.2d 942, 944 (7" Cir. 1995).

Sections 2 and 3 of the ICAA, 815 ILCS 160/2 provide:

§ 2. Credit Agreements to be in writing, A debtor may not maintain an action
on or in any way related to a credit agrecment unless the agreement or
commitment to lend money or extend credit or delay or forebear repayment of
monicy sets forth the relevant terms and conditions, and assigned by the creditor
and the debtor.

§ 3. Actions not considered agreements. he following actions do not give rise lo a
claim, counterclaim, or defense by a debtor that a new credit agrcement is created, unless
the agreement satisfies the requirements of Scetion 2:

ho OK

(3) the agreement by a creditor to modify or amend an existing credit agreement
or w otherwise take certain actions, such as entering to a new credit agreement,
forebcuring from exercising remedies in connection with an cxisting credit agreement, or
rescheduling or extending installments duc under an existing credit agreement.

A credil agreement is defined as “an agreement or commitment by a creditor Lo lend

nioney or extend credit or delay or forebear repayment of money. . ..” As noted by Judge Coar

*Plaintiff did not raise the ICAA as an issue in its previously filed motion to dismiss
North Chicago's and Sullivan’s counterclaims.



order for presentation to the court on April 8, 2004, at 9:30 a.m., computing interest through that
date

ENTER: April 2, 2004

“eh. (ara

Robert W. Gettleman
United States District Judge

oo



,
Minute Order Form (06:91)

United States District Court, Northern District of Ilinois

Name of Assigned Judge
or Magistrate Judge

Robert W. Gettleman

Sitting Judge if Other
than Assigned Judge

CASE NUMBER 02 C 5633 DATE April 2, 2004
CASE DaimlerChrysler Services v___North Chicago Marketing
TITLE
[In the following box {a) indicate the party filing (te motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) stute briefly the nature
MOTION: of the motion being presented. ]

DOCKET ENTRY:

qd) Oo Filed motion of [ use listing in “Motion” box ubove.]

(2) Q Brief in support of motion due

(3) Oo Answer brief1o motion due___. Reply to answer brief due.

4 Hearing

(5) ia] Status hearing

(6) Q Pretrial conference(held/continued to] |set for/re-set for] on _ sot for _ at

(7) ia) Trial[sct for/re-sct for] on at

(8) t [Bench/Jury trial] [Hearing] held/continued t to at.

(9) a This cas¢ is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) Ci General Rule 21 OFRCP41(a\(1) OO FRCP41(a\(2).

(0) [Other docket entry]

Memorandum opinion and order entered. Plaintifi’s motion for summary
judgment on counts I through TIL against North Chicago is granted. Presentation of
plaintiffs proposed judgment order is set for 4/8/04, at 9:30 a.m.

dal) @ (Hor further detail sce order attached to the original minute ordcr.]

No notices required, advised in open court,

No notives required. number uf nntions

Notices mailed by judge's stail.

Notified counsel by telephone,

X  [ Docketing to mail notices,

Mail AO 450 form.

dothotlnys deuty initials

Copy to judge/magistrate judge. Matis Stes:

courtroom
Gps deputy’s
initials

Date/time received in
ventral Clerk's Office

rity deputy initials



in Westinghouse Electric Corp, v. McLean, 938 F. Supp. 487, 492 (N.D. TIL, 1996), the

legislature concluded that “justice was best served by putting all parties to covered transactions

on notice that the agrcement will be enforced as written. Winks and nods and whispered
promises to deviate therefrom would not be enforced.”

A wink and a nod promise is precisely whal North Chicago attempts to argue, allhough
cast in fraudulent inducement terms. ‘That characterization aside, however, North Chicago is
altempting to enforce an oral promise by Zandstra thal despite the exccution of the corporate
agreement, no enforecable contract would exist until Nazha signed the personal guaranty. The
documents executed by Sullivan do not so indicate, and the personal guaranty that he signed is

plainly marked as such.

North Chicago argues that such an interpretation would prevent any claim of fraudulent
inducement, and would be in direct conflict with the Promissory Note and Bank Holiday Act.
815 ILCS 105/10, which provides that “if any fraud or circumvention be used in obtaining the
making or execution of a [promissory note] such fraud or circumvention may be pleaded in bar to
any action lo be brought on any such instrument so obtained, whether such action be brought by
the party committing such fraud or circumvention, or any assignee of such instrument.” As noted

arl, 230 I, App. 393, 1923 WI. 3324 at *3 (2" Dist. 1923), “the fraud referred to

in this section, which will avoid a note in the hands of an assignee, must relate to the exccution
of the note, and not to the consideration of the note.” Fraud in the execution of the note cannot

be used to avoid the obligation unless the maker was induced to sign a note prejudicially

different {rom the instrument he was willing to sign, and which he thought he w

gning. Thus,

for purposes of this section, the fraud and circumvention must consisi of some trick or device

6


IN THE UNITEI) STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
FASTERN DIVISION

DAIMLERCHRYSLER SERVICES NORTH
AMERICA, LLC,

Plaintiff/Counter Defendant,
No 02 C 5633

Judge Robert W, Gettlerman
NORTH CHICAGO MARKETING, INC., and
RICHARD J, SULLIVAN,

Defendants/Counter Plaintiffs.

RICILARD J, SULLIVAN,

Third Party Plaintiff,

WILLIAM CALLAS NAZHA,

we SSS SS eS SS SS SS SS SSS SS

Third Party Defendant.
MEMORANDUM OPINION AND ORDER

Plaintiff Daimlerchrysler Services North America LLC has brought a seven count second
amended complaint against defendants North Chicago Marketing Inc. (“North Chicago”),
Richard J, Sullivan, Laura Sullivan, R.S. Auto Brokers, Inc., and R.S. Auto Associates, Inc.,
alleging breach of contract, action on account, and breach ol a promissory note (Counts J through
111); breach of a personal guaranty against Sullivan (Count lV); conversion against North Chicago
and Sullivan (Count V), and fraudulent transfer against North Chicago, Sullivan, Laura Sullivan,

R.S. Auto Brokers and R.5. Auto Associates (Count VI and VT1), all arising out of North

Chicago's breach of a security agreement (“Lloor Plan linancing Agreement”). Plaintiff has



moved lor summary judgment on Counts | through MI against North Chicago. For the reasons set

forth below the motion is granted.

PROCEDURAL HISTORY/FACTS

‘This action began as a simple suit by plaintiff to collect a loan it made to North Chicago
and a personal guaranty of that Joan by Richard Sullivan, the President of North Chicago, Both
North Chicago and Sullivan answered and counterclaimed. North Chicago claimed that the loan
documents were sccured through fraudulent inducement, and Sullivan claimed fraud in the
execution or in the altemative negligent misrcpresentation. On February 7, 2003, plaintiff's
motion to dismiss the counterclaims was denied as to North Chicago but granted as to Sullivan

Daimlerchrysler Services North America, LLC v. North Chicago Marketing, Inc,, No. 02 C 5633

(N.D. fll. Feb. 7, 2003). On February 18, 2003, both North Chicago and Sullivan filed separate
Chapter 7 Bankruptcy Petitions. North Chicago's bankruptcy trustee reported no assets and the
North Chicago bankruptey was dismissed,

Plaintiff filed an adversary proceeding in Sullivan’s bankruptcy seeking a moncy
judgment from Sullivan on his guaranty, a determination that the judgment is non-dischargable
under 11 U.S.C. § 523, and a denial of discharge of Sullivan’s debts, Sullivan counterelaimed
raising fraudulent inducement.

Defendants Laura Sullivan (“laura”) and R.S. Auto Associates, Inc, ("R.S, Associates”)
were added as defendants in plaintiffs second amended complaint. Sullivan, Laura, and R.S.
Associates moved to dismiss or for abstention, To resolve that motion the court withdrew the

reference of the adversary proceeding. Sullivan, Laura and R.S. Associates have indicated an