III. Motion to Strike Jury Demand

Because Count II still remains, the Court must consider Household’s motion to strike
defendants’ jury demand. Plaintiff argues that by the express terms of the Guaranty defendants’
have waived their right to a jury trial. If a document is signed by the party being charged, the
other party’s signature is not necessary if the document is delivered to that party and she indicates
acceptance through performance. Meyer & Meyer Photography, Inc. y. Miglin, Inc., 652 N.E.2d
1233, 1239 (Ill. App. Ct. 1995). Further, Illinois law states that if the contract terms are
unambiguous, the parties’ intent must be ascertained exclusively from the express language of
the contract, as a matter of law. See id. at 1238. Here, defendants signed the Guaranty, and
plaintiff performed by continuing to extend credit to ANHM for nearly three months. Because
defendants’ failure of consideration defense is barred by the ICAA and because the Guaranty is
supported by adequate consideration, this Court follows Illinois law and will enforce the
unambiguous terms of the jury waiver.

Although the right to a jury trial in civil cases is guaranteed by the Seventh Amendment,
like some constitutional rights, it may be waived. Cf’ D.H. Overmyer Co. Inc. v. Frick Co., 405
U.S. 174, 187 (1972) (contractual waiver of pre-judgment notice and hearing not violative of
Fourteenth Amendment). The question whether the right has been waived is governed by federal
rather than state law even in diversity cases. Bonfield vy. AAMCO Transmissions, Inc., 717 F.
Supp. 589, 594-95 (N.D. Ill. 1989) (citing Simler v. Conner, 372 U.S. 221, 222 (1963)).
However, the circuits are split on whether the party asserting the validity of a contractual jury
waiver bears the burden of proof as to whether the waiver was knowingly and voluntarily
executed. See Pierce v. Atchison Topeka & Santa Fe Ry. Co., 110 F.3d 431, 435 n.4 (7th Cir.
1997). Compare Leasing Serv. Corp. v. Crane, 804 F.2d 828, 833 (4th Cir. 1986) (agreeing with
those courts that have held that party seeking enforcement of waiver bears burden of proving
consent), with K.M.C. Co., Inc. v. Irving Trust Co., 757 F.2d 752, 758 (6th Cir. 1985) (placing
burden of proving that consent was secured unknowingly and involuntarily on objecting party).

While the Seventh Circuit has not addressed this issue, it is unnecessary for this Court to

13


Bankruptcy Code. On April 4, 2001, the Honorable George C. Paine II of the United States
Bankruptcy Court for the Middle District of Tennessee granted an order providing in part that in
conducting any sale of its collateral, Household would be entitled to enter a bid and could credit
some or all of the indebtedness against its bid. On April 26, 2001, Household conducted a sale
of the Household collateral pursuant to Section 9-504 of the Uniform Commercial Code. At the
sale, Household entered a bid of $6,500,000 which was accepted. After applying the credit bid to
the Household Indebtedness of $7,741,013.20, Household contends the remaining debt owed on
the loan documents is $1,241,013.20.

When defendants did not make any payment to Household on the remaining debt,
plaintiff commenced this action, on June 6, 2001, claiming breach of the Guaranty (Count I) and
seeking the remaining debt. Plaintiff later amended its complaint to include a conversion claim
(Count Il) alleging that defendants caused ANHM not to transfer company cash collateral to
Household in contravention of Judge Paine’s order and seeking said cash collateral as payment in
satisfaction of ANHM’s indebtedness as well as punitive damages.

Household has moved, and defendants have cross moved, for summary judgment as to
Count I. Defendants assert affirmative defenses arguing that: (1) they were fraudulently induced
by Hammond into signing the Guaranty; (2) the Guaranty fails for want of consideration; (3)
plaintiff breached its duty of good faith and fair dealing; and (4) that plaintiff failed to mitigate
damages and as a result defendants contest plaintiff's debt calculation. Plaintiff suggests that the
Guaranty is subject to the Illinois Credit Agreements Act (“ICAA”) which bars a debtor from
maintaining an action on or in any way related to a credit agreement unless such agreement is in
writing and is signed by both the creditor and debtor. 815 ILL. Comp. STAT. 160/1 et seq.

(1989). Plaintiff further argues that the express terms of the Guaranty defeat defendants’ claim of
failure to mitigate damages. Defendants argue that since the Guaranty was only signed by the
debtors, the agreement does not fall within the bounds of the ICAA. Plaintiff has also moved to
strike defendants’ jury demand. Finally, plaintiff moves to strike defendants’ declaration as

lacking the personal knowledge required by FED. R. Civ. P. 56(e).


parties must sign all documents for debtor to assert credit agreement may be more consistent with
express terms of ICAA); McAloon, 654 N.E.2d at 1094 (holding that debtor could not maintain
breach of contract claim based on written loan proposal that creditor had initialed in absence of
allegation that debtor had also signed proposal). Further, in Finova Capital Corp., where, as
here, a creditor sued a debtor for breach of a personal guaranty, when the debtor offered a trust
agreement that only the debtor had signed as altering the initial credit arrangement, that court
concluded “because the trust and assignment agreement is not signed by the creditor . . . , as well
as the debtors, §§ 2 and 3 of the ICAA bar [debtors] from asserting a defense based on its
content. Thus [debtors] cannot use the terms of the trust and assignment agreement as a basis for
an affirmative defense against [creditor’s] claims.” Finova Capital Corp., 2002 WL 318294, at
*4, The effect of the terms of the ICAA in the instant case is to allow Household to assert the
Guaranty, signed only by the Suddarths offensively. However, Illinois courts have repeatedly
emphasized that the ICAA is a broad statute that will be applied the way it was written, even
though the results of that application may at times seem harsh. Mach. Transps. of Ill. v. Morton
Cmty. Bank, 687 N.E.2d 533, 535-36 (Ill. App. Ct. 1997); McAloon, 654 N.E.2d at 1095-96;
First Nat’l, 642 N.E.2d at 142.

Additionally, while the terms of the Guaranty reference the Credit Agreement and other
documents pertaining to the parties’ credit relationship, neither party has raised the issue of
whether multiple documents may be aggregated to satisfy the ICAA’s signature requirement and
the Court therefore declines to address this question. Cf Help At Home, 260 F.3d at 756
(declining to resolve this question of state law and emphasizing that document at issue had
insufficient connection to rest of parties’ agreements to demonstrate intent to contract).
Therefore, the Court finds that the ICAA, by its plain language, does not bar Household’s claim
against defendants.

Finding that defendants have not satisfied the requirements of Section 2, the Court turns
to the question of whether defendants’ specific affirmative defenses are barred by the ICAA.

Here, the Suddarths assert that they were fraudulently induced into signing the Guaranty by


is with these standards in mind that the Court addresses the instant motions.

I. The ICAA

Household contends that the Suddarths’ affirmative defenses, i.e., fraudulent inducement,
lack of consideration and breach of a duty of good faith and fair dealing, are barred by the ICAA
because they rely on an alleged oral credit agreement between Hammond and defendants to
extend ANHM a new line of credit. Defendants argue that Hammond fraudulently induced them
to sign the Guaranty by promising that Household would extend ANHM a new cline of credit,
forbear from declaring ANHM in default of its prior obligations, and allow ANHM to apply
future profit to its existing debt. In addition, they allege that the Guaranty lacked adequate
consideration because it only reaffirmed pre-existing duties and that Household breached its duty
of good faith and fair dealing by falsely promising that Household would not withhold credit and
then withdrawing credit and declaring ANHM in default.

Section 2 of the ICAA imposes special writing requirements on actions arising from a
“credit agreement.” The ICAA defines “credit agreement” as “an agreement or commitment by a
creditor to lend money or extend credit or delay or forbear repayment of money not primarily for
personal, family or household purposes, and not in connection with the issuance of credit cards.”
815 ILL. Comp. STAT. 160/1. Section 2 of the ICAA provides:

“Credit agreements to be in writing. A debtor may not maintain an action on or in

any way related to a credit agreement unless the credit agreement is in writing,

expresses an agreement or commitment to lend money or extend credit or delay or

forbear repayment of money, sets forth the relevant terms and conditions, and is

signed by the creditor and the debtor.”
815 ILL. Comp. STAT. 160/2. The ICAA’s writing requirement is a strong form of the statute of
frauds. See Resolution Trust Corp. v. Thompson, 989 F.2d 942, 944 (7th Cir. 1993); McAloon y.
Northwest Bancorp, Inc., 654 N.E.2d 1091, 1094 (Ill. App. Ct. 1995). The plain words of the
statute prohibit a debtor from maintaining an action where the agreement is not in writing and
signed by both parties; the ICAA, however, does not by its plain language place any restrictions

on the actions of creditors. See Help At Home Inc., v. Med. Capital, L.L.C., 260 F.3d 748, 756-


DISCUSSION

Summary judgment is proper when the record shows that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law. FED. R.
Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). This standard of
review applies to cross motions for summary judgment. Int’l Bhd. of Elec. Workers v. Balmoral
Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002). The nonmovant must show through
specific evidence that a triable issue of fact remains on the issues on which he bears the burden
of proof at trial. See Celotex, 477 U.S. at 324. “The nonmovant may not rest upon mere
allegations in the pleadings or upon conclusory statements in affidavits; it must go beyond the
pleadings and support its contentions with proper documentary evidence.” Chemsource, Inc. v.
Hub Group, Inc., 106 F.3d 1358, 1361 (7th Cir. 1997). A genuine issue of material fact exists
when the evidence is such that a reasonable jury could return a verdict for the nonmoving party.
Insolia v. Phillip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000).

Where, as here, jurisdiction is based on diversity of citizenship, the substantive rights of
the parties are governed by state law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938);
Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999). Although
defendants dispute the validity of the Guaranty, which includes language stating that the
Guaranty shall be construed in accordance with Illinois law, defendants have failed to suggest
that the law of a state other than the forum state ought to apply and accordingly the forum state’s
law applies by default. See ECHO, Inc. v. Whitson Co. Inc., 52 F.3d 702, 707 (7th Cir. 1995);
see also Kritikos v. Palmer Johnson, Inc., 821 F.2d 418, 421 (7th Cir. 1987) (holding that
parties’ failure to raise choice of law issue on appeal resulted in waiver of that issue). Therefore,
it is the Court’s duty to apply the law that it believes the Supreme Court of Illinois would apply if
the case were brought before that tribunal rather than this Court. See Brunswick Leasing Corp. v.
Wis. Cent., Ltd., 136 F.3d 521, 527 (7th Cir. 1998). When the “state supreme court has not ruled
on an issue, decisions of the state appellate courts control, unless there are persuasive indications

that the state supreme court would decide the issue differently.” Lexington, 165 F.3d at 1090. It


rather in connection with other loan documents, and thus the guaranty agreement constitutes a
credit agreement for purposes of the ICAA. Bank One v. Roscetti, 723 N.E.2d 755, 762-63 (Ill.
App. Ct. 1999) (concluding that Illinois courts’ consideration of whether guarantor’s defenses
based on oral promises was modification of entire loan, rather than merely guaranty, despite fact
that lender had sued on guaranty, indicates recognition that guaranty is one of several documents
constituting credit agreement); see also Finova Capital Corp. v. Slyman, No. 01 C 6244, 2002
WL 318294, at *3 (N.D. Ill. Feb. 25, 2002) (stating that personal guaranty is credit agreement
under terms of ICAA).

Here, the Guaranty makes specific reference to the Credit Agreement as well as
defendants’ obligations thereunder should a default arise. The Guaranty forms an integral part of
Household’s continued extension of credit to ANHM given the execution of the (Second) First
Amendment and the Replacement Revolving Credit Note, signed by Angela Suddarth, expanding
the warehouse line from $14,000,000 to $17,000,000 a month prior. See Bank One, 723 N.E.2d
at 763 (recognizing that documents comprising credit agreement are often conditioned upon each
other such that default under one creates default under all). Therefore, the Court finds that the
Guaranty falls within the scope of Section 1 of the ICAA.

Defendants contend that because the Guaranty is signed only by the Suddarths, it fails the
signature requirement of the ICAA. However, the plain words of Section 2 of the ICAA state
only that a debtor may not maintain an action unless the alleged credit agreement is signed by the

creditor and the debtor.' See Help At Home, 260 F.3d at 756-57 (noting that assertion that both

' The language of the ICAA concerning its signature requirement provides the only guidance as to the framer’s
intent, for, as the Seventh Circuit has noted, the act has no usable legislative history. Resolution Trust Corp., 989
F.2d at 944. Further, a review of similar statutes in other states provides no settled doctrine to guide our inquiry.
For instance, Minnesota’s credit agreements statute, MINN. STAT. § 513.33 (West 1991), defines “signed” as
including any symbol adopted by a party with intent to authenticate a writing cannot be reconciled with Illinois
jurisprudence. Compare Rural Amer. Bank of Greenwald v. Herickhoff, 485 N.W.2d 702, 706 (Minn. 1992)
(indicating that complete signature is not necessary and that authentication may take form of print, stamp, initials or
thumbprint), with McAloon, 654 N.E.2d at 1094 (stating that loan agreement that contained only creditor’s initials
was insufficient to meet requirements of ICAA). Colorado’s statute appears to follow the common law requiring only
that “the credit agreement is in writing and is signed by the party against whom enforcement is sought,” ©LO. REV.
STAT. § 38-10-124 (1989). Washington’s statute provides that a credit agreement is not enforceable against the
creditor unless the agreement is in writing and signed by the creditor. WASH. REV. CODE § 19.36.110 (West 1990).
The terms of Colorado’s and Washington’s statutes diverge from the express language of Section 2 of the ICAA,
which requires the signature of both the creditor and the debtor.

8


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Namcofasine ies | Ronald A, Guzman | Sng Jug f me

CASE NUMBER 01 C 4355 DATE 9/5/2002
CASE HOUSEHOLD COMMERCIAL FINANCIAL SERVICE vs. WILLIAM SUDDARTH,
TITLE etal

[In the following box (a) indicate the party filing the motion, e.g, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented.]

(11)

MOTION:

DOCKET ENTRY:

ql) o Filed motion of [ use listing in “Motion” box above.]

(2) o Brief in support of motion due

(3) o Answer brief to motion due___. Reply to answer briefdue_

(4) (a) Ruling/Hearingon____esetfor_ at.

(5) a Status hearing set for 9/20/02 at 9:30A.M..

(6) oO Pretrial conference[held/continued to] [set for/re-set for]on___—setfor__——s at.

(7) Oo Trial[set for/re-set for]on__at

(8) Q [Bench/Jury trial] [Hearing] held/continuedto_at_

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
CFRCP4(m) ClLocal Rule 41.1 COFRCP41(a)\(1) C1 FRCP41(a)(2).

do) «=o [Other docket entry] ENTER MEMORANDUM OPINION AND ORDER: Plaintiff’s motion for

summary judgment as to Count I [11-1] is granted because the undisputed facts show that defendants
breached the Guaranty and plaintiff suffered damages in the amount of $1,241,013.20. The Suddarths’
cross-motion for summary judgment as to Count I [18-1] is denied. Plaintiffs motion to strike
defendants’ declaration [26-1] is stricken as moot and its motion to strike defendants’ jury demand [24-1]
is granted. Only Plaintiffs claim for conversion, Count II, remains for trial.

[For further detail see order attached to the original minute order.]

No notices required, advised in open court.
No notices required. Qe ~~

Notices mailed by judge’s staff.
Notified counsel by telephone.
Docketing to mail notices.

Mail AO 450 form.

Copy to judge/magistrate judge.

SEP 0 9 2002

ate docketed

TBK

SEP 0 9 2002

date maited notice
courtroom

deputy’s be

initials : M
Date/time received in
central Clerk's Office taling dep jails



breach of covenant of good faith and fair dealing separately from defenses barred by ICAA and
recognizing that agreements signed by parties included implied duty of good faith and fair
dealing); and Bank One, 723 N.E.2d at 763-67 (examining allegation of breach of good faith and
fair dealing under “even if the [ICAA] applies” assumption). Since the Seventh Circuit decisions
in Help at Home and Whirlpool are binding authority on this Court, and in those cases the Courts
held that claims of breach of an implied duty of good faith and fair dealing were barred by the
ICAA, this Court also holds that such a defense is barred by the ICAA.

II. Duty to Mitigate

Defendants further allege that Household failed to mitigate damages by promptly taking
over ANHM defaulted loans or approving loans pending at the time of default. Defendants,
however, failed to brief this issue and plaintiff addressed it in terms of contractual interpretation
rather than under the ICAA. As a result, this Court approaches the issue as one of application of
contractual terms under Illinois law. The Suddarths submit that mitigation of damages would
have substantially reduced the outstanding $1,241,013.20 that Household claims here. The duty
to mitigate damages imposes a duty on the injured party to “exercise reasonable diligence and
ordinary care in attempting to minimize his damages after injury has been inflicted.”
Amalgamated Bank of Chicago v. Kalmus & Assocs., Inc., 741 N.E.2d 1078, 1086 (Il. App. Ct.
2000).

Plaintiff argues that, by the terms of the Guaranty, defendants have waived this defense.
Specifically, plaintiff points to the language of the Guaranty:

Each of the undersigned hereby expressly waives: . . . (d) all diligence in collection

or protection of or realization upon any Liabilities or any security for or guaranty of

any Liabilities . .. . No delay on the part of the Lender in the exercise of any right or

remedy shall operate as a waiver thereof, and no single or partial exercise by the

Lender of any right or remedy shall preclude other or further exercise thereof or the

exercise of any other right or remedy... .
(Pl.’s Ex. B at 1.) Under Illinois law, a guaranty is a contract and should be interpreted according
to the standards that govern the interpretation of contracts in general. Blackhawk Hotel Assocs.

v. Kaufman, 421 N.E.2d 166, 168 (Ill. 1981); 7.C.7. Bldg. P'ship v. Tandy Corp., 751 N.E.2d
1


Hammond’s oral promises to extend ANHM a new line of credit, extinguish the old line of
credit, allow ANHM to apply future profits to past debts, and forbear from declaring ANHM in
default. Unfortunately for defendants, these contentions fit squarely within the language of
Section 3 of the ICAA; they tend to show the agreement by a creditor to enter into a new credit
agreement and to forbear from exercising remedies in connection with an existing agreement and
therefore do not give rise to a defense. See Whirlpool, 96 F.3d at 226 (barring debtor’s six
affirmative defenses including fraudulent inducement). Likewise, defendants’ defense based on
failure of consideration is barred by the ICAA? Jd. (barring debtor’s affirmative defenses
pleading failure and want of consideration).

In connection with Hammond’s alleged oral modifications to the Credit Agreement,
defendants also assert a breach of the implied duty of good faith and fair dealing. Every contract
implies good faith and fair dealing between the parties to it. Martindell v. Lake Shore Nat’l
Bank, 154 N.E.2d 683, 690 (Ill. 1958). Good faith requires the party vested with contractual
discretion to exercise it reasonably, and he may not do so arbitrarily, capriciously, or in a manner
inconsistent with the reasonable expectations of the parties. Carrico v. Delp, 490 N.E.2d 972,
976 (Ill. App. Ct. 1986). Courts are divided on the question of whether the ICAA bars this
particular defense. Compare Help At Home, 260 F.3d at 757 (citing First Nat'l, 642 N.E.2d at
142 and dismissing counterclaim for breach of implied duty of good faith and fair dealing for
failure to comply with ICAA), and Whirlpool, 96 F.3d at 226 (same), and Gen. Elec. Capital
Corp. v. Donogh Homes, Inc., No. 93 C 5614, 1993 WL 524814, at *3-6 (N.D. Ill. Dec. 15,
1993) (holding counterclaims including breach of good faith and fair dealing are barred by
ICAA), with Finova Capital, 2002 WL 318294, at *7-8 (treating debtor’s affirmative defense of

? The Court recognizes that under Illinois law where, as here, a guaranty is executed after the guaranteed debt is
incurred, new consideration is necessary to support the guaranty. City Nat’l Bank of Hoopeston v. Russell, 615
N.E.2d 1308, 1312 (lll. App. Ct. 1993). Forbearance from exercising a right to take legal action against a third party
constitutes adequate consideration for the guaranty of a debt obligation. Town & Country Bank v. E&D.
Bancshares, Inc., 527 N.E.2d 637, 642 (III. App. Ct. 1988). To constitute consideration for a guaranty, an
agreement to forbear need not be in express terms or for an exact period of time. /d. at 642. Therefore, even under
defendants’ characterizations in their affirmative defenses [doc. no. 10-1] where they state that they signed the
Guaranty only on the condition that plaintiff agreed to continue funding ANHM’s business operations and on the
additional condition that plaintiff would not declare ANHM to be in default, the Guaranty was supported by
adequate consideration in the form of Household’s forbearance.

10


57 (7th Cir. 2001); McAloon, 654 N.E.2d at 1094.

Section 3 of the ICAA outlines the set of agreements that must satisfy Section 2’s
requirements in order for a debtor to maintain an action premised on the existence of a new credit
agreement. Section 3 of the ICAA provides in relevant part:

Actions not considered agreements. The following actions do not give rise to aclaim,

counter-claim, or defense by a debtor that a new credit agreement is created, unless

the agreement satisfies the requirements of Section 2:

... (3) the agreement by a creditor to modify or amend an existing credit agreement

or to otherwise take certain actions, such as entering into a new credit agreement,

forbearing from exercising remedies in connection with an existing credit agreement,

or rescheduling or extending installments due under an existing credit agreement.

815 ILL. Comp. STAT. 160/3. The Court notes, at the outset, that the term “Actions”
encompasses the procedural device of affirmative defenses. Teachers Ins. & Annuity Ass'n of
Amer. v. LaSalle Nat’l Bank, 691 N.E.2d 881, 886-88 (Ill. App. Ct. 1998) (finding that debtor’s
affirmative defenses are actions barred by Section 3 when based on alleged oral credit
agreement); see also Whirlpool Fin. Corp. v. Sevaux, 96 F.3d 216, 225 (7th Cir. 1996)
(concluding that debtor’s assertion that counterclaims are not “actions” within meaning of ICAA
is wholly without merit).

The ICAA bars all actions that are in any way related to an alleged credit agreement,
whether those actions sound in contract or tort. See Nordstrom v. Wauconda Nat'l Bank, 668
N.E.2d 586, 588 (Ill. App. Ct. 1996); McAloon, 654 N.E.2d at 1095; First Nat'l Bank v. McBride
Chevrolet, Inc., 642 N.E.2d 138, 142 (Ill. App. Ct. 1994). It also bars traditional exceptions to
the statute of frauds, such as fraud, part performance, and equitable estoppel. See Whirlpool, 96
F.3d at 226. Indeed, “there is no limitation as to the type of actions by a debtor which are barred
by the [ICAA], so long as the action is in any way related to a credit agreement.” First Nat’l, 642
N.E.2d at 142.

A threshold inquiry concerns whether a guaranty is contained within the ICAA’s

definition of a credit agreement. Illinois courts have found that where a guaranty agreement

forms an integral part of a loan, it should not be viewed in isolation from the underlying loan but


application for a new credit line.
Following execution of the (Second) First Amendment, Hammond observed increased aging
in ANHM’s credit line and requested that defendants sign a personal Guaranty Agreement (“the
Guaranty”). Defendants contend that Hammond assured them that (1) the Guaranty was just a
“formality,” “routine paperwork” for the opening of a new credit line; (2) the old credit line would
be closed; and (3) Household would allow ANHM’s future business to repay its old debt. Plaintiff
counters that Hammond never represented that the Guaranty was a mere formality or that execution
would secure anew credit line, waive any terms of the Credit Agreement, or prevent Household from
ever declaring ANHM in default.
Plaintiff asserts that in exchange for agreeing not to declare an immediate default against ANHM
and continuing to extend credit to ANHM, defendants agreed to sign the Guaranty. On July 28, 2000,
defendants signed the Guaranty; although the Guaranty states that the agreement is executed in favor of
plaintiff, no representative signed on behalf of Household. The Guaranty provides in pertinent part:
...for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each of the undersigned hereby jointly and severally,
unconditionally and irrevocably, as primary obligor and not merely as surety,
guarantees the full and prompt payment when due, ... of all obligations (monetary
or otherwise) of [ANHM] to the Lender under or in connection with the Credit
Agreement, the Note, any Loan Document and any other documents or instrument
executed in connection therewith, in each case however created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing, or due
or to become due (all such obligations collectively called the “Liabilities”); ... ifany
Event of Default shall occur under ... the Credit Agreement, ... such undersigned
will pay to [Household] forthwith the full amount which would be payable hereunder
by such undersigned if all Liabilities were then due and payable.
(P1.’s Ex. B at 1.) Household continued to provide credit to ANHM, although no new credit line
was ever created, until September 29, 2000, when ANHM failed to make payments required on
the indebtedness of the Credit Agreement. On October 20, 2000, Household sent defendants a
letter notifying them of the event of default, informing them that Household was terminating its
commitment to make loans to ANHM and requesting that all obligations be immediately due and
payable.

On November 2, 2000, ANHM filed for relief under Chapter 11 of the United States


do so because irrespective of which party carries the burden of proof and whatever the applicable
standard, it is clear that the Suddarths voluntarily waived this right. See Bonfield, 717 F. Supp. at
595. Examination of the Guaranty reveals just how clear the waiver provision was. The waiver
language stands out from the majority of the document in that it appears in all caps and in
boldface type: “EACH OF THE UNDERSIGNED, AND LENDER, HEREBY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY ....” (Pl.’s Ex. B at
5); see In re Reggie Packing Co., 671 F. Supp. 571, 573-74 (N.D. Ill. 1987) (upholding jury
waiver provision where language was located directly above signature). While the Suddarths’
claim that they each signed but did not read the Guaranty, instead relying on the review and
approval of the other, both claim that ANHM’s chief executive officer, an individual with years
of experience in the mortgage industry reviewed the documentation. In any event, the failure to
read an agreement provides defendants no relief from the application of a jury waiver provision.
See ARH Distribs., Inc. v. ITT Commercial Fin. Corp., No. 87 C 511, 1988 WL 17628, at *2
(N.D. Il. Feb. 19, 1988) (enforcing jury waiver provision despite evidence that party seeking to
avoid waiver did not read contract prior to signing); see also Heller Fin., Inc. v. Midwhey
Powder Co., Inc., 883 F.2d 1286, 1292 (7th Cir. 1989) (“basic contract law establishes a duty to
read the contract; it is no defense to say, ‘I did not read what I was signing.””) Further, having
previously owned and operated several companies the Suddarths were not inexperienced business
persons and were not prevented from having counsel review the Guaranty, though they chose not
to exercise this option. See Mellon Bank y. Miglin, No. 92 C 4059, 1993 WL 281111, at *12
(N.D. Ill. Apr. 29, 1993) (enforcing waiver provision and noting that courts should be
circumspect in helping any, but the most unsophisticated parties, where they have not read their
contracts well). Therefore the language of the Guaranty is binding and this Court will enforce the
jury waiver provision. Moreover, as the waiver covers “any financing relationship existing in
connection with any of the foregoing [agreements],” the waiver applies equally to the conversion

count. (PI.’s Ex. B at 5.)

14


connection with the Credit Agreement, the parties also entered int

a Security Agreement both dated November 22, 1999.

As of September 20, 1999, Joseph Cleghorn, Sr. controlled
In late December 1999 and early January 2000, the Suddarths, resi
majority purchase of ANHM. Subsequently, Angela Suddarth a|
operations. On March 8, 2000, Household and ANHM entered iy
Agreement and a Replacement Revolving Credit Note which
commitment to $14,000,000. Defendants contend that plaintiff's
upon them to relinquish ANHM’s other funding sources, assuring q
meet all ongoing capital needs; plaintiff, however, disputes this.

In March 2000, defendants came to suspect that financial in
to their purchase of ANHM stock failed to disclose that ANHM|
position. In June 2000, following a financial review and audit, defy
in default of its obligations to Household and notified Hammoy

informed Angela Suddarth that the Credit Agreement prohibited A]

| a Revolving Credit Note and

nd pwned a majority of ANHM.
len of Tennessee, negotiated a
‘sur jed oversight of day-to-day
to 2|First Amendment to Credit
jncypased the revolving credit
igen} Mike Hammond prevailed
her f at Household would fully
brmption provided to them prior
‘fin a problematic financial
Indabts learned that ANHM was

id of the situation. Hammond

NHM from changing ownership

without notifying Household and that the change in ownership c
requested that defendants provide resumés and an application for 4

Household could conduct due diligence to determine the wisdom

mstituted a default. Hammond

warehpuse line of credit so that

f waiving the event of default.

After defendants submitted the documentation, Household\continued to provide credit to

ANHM. Hammond then sent defendants a (Second) First Am

e\dment to Credit Agreement

(“(Second) First Amendment”) and a Replacement Revolving Credit Nbte increasing the revolving
credit commitment to $17,000,000, which were subsequently executed on June 28, 2000.
Defendants contend that Hammond told them that the amendment would remedy the ongoing default
while Household processed their application for a new credit agreement and new credit line, as the
old line had been extinguished by the change in ownership. Plaintiff counters that Hammond never
discussed a new line of credit with defendants nor did any representative of Plaintiff tell them that

the (Second) First Amendment only applied while the parties awd approval of ANHM’s

2


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

HOUSEHOLD COMMERCIAL
FINANCIAL SERVICES INC.,
a Delaware corporation,

Plaintiff,

Vv.
01 C 4355
WILLIAM SUDDARTH, an individual, and

ANGELA SUDDARTH, an individual, Judge Ronald A. Guzman

Sn

Defendants,

Decne: ‘

MEMORANDUM OPINION AND ORDER SEP 99 20

In this diversity case, plaintiff Household Commercial Financial Services, Inc.,
(“Household”) has sued defendants William Suddarth and Angela Suddarth (‘the Suddarths”) for
breach of a personal guaranty agreement (Count I) and for conversion (Count II). Pending are the
parties’ cross motions for summary judgment as to Count I pursuant to Feb. R. Civ. P. 56 as well
as plaintiff's motions to strike defendants’ declaration and jury demand. For the reasons set forth
below, Household’s motion for summary judgment as to Count I is granted and the Suddarths’
cross motion is denied. Further, the Court strikes Household’s motion to strike defendants’
declaration as moot and grants its motion to strike defendants? jury demand as to the remaining

claim for conversion (Count II).

FACTS
American National Home Mortgage, Inc. (“ANHM”) was a residential mortgage lender
located in Nashville, Tennessee. On November 22, 1999, Household, a Delaware corporation,
whose principal place of business is in Prospect Heights, Illinois entered into a Warehousing
Line Revolving Credit Agreement (“Credit Agreement”) with ANHM pursuant to which
Household agreed to extend revolving credit to ANHM in the amount of $10,000,000. In

1 om)

=


135, 139 (Ill. App. Ct. 2001). Contracts are enforced according to their terms under Illinois law
and therefore guaranties are to be interpreted in accordance with their clear and unambiguous
language. Chrysler Credit Corp. y. Marino, 63 F.3d 574, 577 (7th Cir. 1995). Illinois courts
generally enforce clear and unambiguous waivers of defenses contained in guaranties. Donogh
Homes, 1993 WL 524814, at *5; BA Mortgage & Int’l Realty Corp. v. Am. Nat'l. Bank & Trust
Co., 706 F. Supp. 1364, 1376 (N.D. II. 1989).

The express language of the Guaranty clearly waives all diligence on the part of
Household in the collection of outstanding liabilities. To now claim that defendants may assert
defenses premised on Household’s delay in performance “flies directly in the face of [the]
Guaranty.” BA Mortgage, 706 F. Supp. at 1376. Further, in its response to plaintiff's statement
of undisputed facts paragraphs 23 and 24, defendants fail to cite any portion of the record to
support their contention that Household could have entered a bid in the full amount of the alleged
indebtedness at the sale of Household Collateral or their assertion that Houschold’s calculation of
ANHM’s indebtedness, $1,241,013.20, is inaccurate. The statements of fact in Household’s
paragraphs 23 and 24 are therefore deemed admitted because they were not properly
controverted. Local Rule 56.1(b), which the Court strictly enforces, provides that “[a]ll material
facts set forth in the statement required of the moving party will be deemed to be admitted unless
controverted by the statement of the opposing party.” Am. Nat’l Fire Ins. Co. v. Abrams, No. 99
C 5807, 2002 WL 243455, at *1 n.2 (N.D. Il. Feb. 19, 2002); see also Wienco, Inc. v. Katahn
Assocs., Inc., 965 F.2d 565, 567 (7th Cir. 1992) (noting Circuit’s strict enforcement of LR
12(N), which is now LR 56.1).

As a result of the foregoing discussion, the Suddarths defenses are either barred by the
ICAA or by the express language of the contract and as such no dispute of any material fact
remains with regard to Count I. Further, the undisputed facts before this Court establish that the
Guaranty is a valid contract and that the amount defendants owe to Household is $1,241,013.20.
Therefore, Household’s motion for summary judgment as to Count I is granted, defendants’ cross

motion is denied, and plaintiff's motion to strike defendants’ declaration is stricken as moot.

12


CONCLUSION
For the foregoing reasons, Household’s motion for summary judgment as to Count I [doc.
no. 11-1] is granted because the undisputed facts show that defendants breached the Guaranty
and plaintiff suffered damages in the amount of $1,241,013.20. The Suddarths’ cross-motion for
summary judgment as to Count I [doc. no. 18-1] is denied. Household’s motion to strike
defendants’ declaration [doc. no. 26-1] is stricken as moot and its motion to strike defendants’
jury demand [doc. no. 24-1] is granted. Only Household’s claim for conversion, Count II,

remains for trial.

SO ORDERED ENTERED: 9-5°O2

ION. RONALD A.
United States Judge

15