Elec. Mfg. Co., 313 U.S. 487 (1941) and Birchler v. Gehl Co., 88 F.3d 518 (7th Cir.
1996)).

The Guaranties are contracts. “Generally, in contract actions, the determination
of which state has the closest relationship requires the consideration of several factors,
including: the place of contracting; the place of negotiation of the contract; the place
of performance; the location of the subject matter of the contract; and the domicile,
residence, nationality, place of incorporation, and place of business of the parties.”
Employers Ins. of Wausau v. Ehlco Liquidating Trust, 723 N.E.2d 687, 694 (Ill. App.
Ct. 1999) (citing Restatement (Second) Conflicts of Law § 188(2) (1971)). The
Guaranties on their face appear to have been executed in Hackensack, New Jersey.
Complaint Exs. 3 and 4. Any monetary obligations arising under the Guaranties were
originally’ payable in the state of New Jersey. Jd. Furthermore, the Guaranties
explicitly purport to be “CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW JERSEY.” Jd. We will apply New Jersey contract law with
respect to the Guaranties.

Unicapital’s rights in the Collateral are governed by the two Security

Agreements which ACR and Litho executed. See Complaint Exs. 1-2. The Security

' They were originally payable to ACR (located in Hackensack, New Jersey). Upon
assignment of the Guaranties, they became payable to Unicapital.

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Ill. Fraudulent Inducement

Mr. Foxley contends that the Guaranties are void because he was fraudulently
induced into executing them. In order to prevail on such a defense, Mr. Foxley must
show that he justifiably relied on the alleged oral misrepresentations. See Minasian v.
Standard Chartered Bank, PLC, 109 F.3d 1212, 1215 (7th Cir. 1997) (“In New Jersey,
as in most other states, a person claiming to be the victim of commercial fraud must
show that he justifiably relied on the other party's false statement.”).

Mr. Foxley bases his fraudulent inducement defense on three alleged oral
misrepresentations that KBA would co-guarantee the Loans. Complaint {J 12-14.
Two of these three alleged misrepresentations are irrelevant here because they were
made by KBA, anon-party to the Guaranties. Complaint Jf 13-14. The third and only
relevant misrepresentation allegedly was made sometime in “late 1996”. Complaint
412. On July 15, 1997, after the passing of at least six and a half months in which no
further misrepresentations of KBA being a co-guarantor are alleged to have been made,
Mr. Foxley signed the first Guaranty. Complaint Ex. 5. The July 15, 1997, Guaranty
refers only to Mr. Foxley as a guarantor and makes no mention of a co-guarantor.
Then, on September 12, 1997, after the passing of at least seven months in which no
further mi srepresentations of KBA being a co-guarantor are alleged to have been made,

Mr. Foxley executed a second Guaranty. Complaint Ex. 6. The September 12, 1997,

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LEGAL STANDARD

After the close of pleadings, a party may move for judgment on the pleadings.
Fed. R. Civ. P. 12(c). The appropriate standard for a judgment on the pleadings is that
applicable to summary judgment, except that the court may consider only the contents
of the pleadings. See Alexander, 994 F.2d at 336. Thus, judgment on the pleadings is
appropriate when there is no genuine issue as to any material fact and the moving party
is entitled to judgment as a matter of law. Jd.

DISCUSSION

Unicapital moves for partial judgment on the pleadings that Mr. Foxley is liable
under the Guaranties. It is undisputed that the Loans were made and are now in default
and that Mr. Foxley guaranteed the Loans. Nevertheless, Mr. Foxley opposes the
motion, citing two grounds for relief: (1) Unicapital breached its duty to dispose of the
Collateral in a commercially reasonable manner and (2) Mr. Foxley was fraudulently
induced into guaranteeing the Loans.
I. Choice of Law

This is a diversity action governed by state law. “A federal court sitting in
diversity applies the choice of law rules of the state in which it sits.” Fredrick v.

Simmons Airlines, Inc., 144 F.3d 500, 503 (7th Cir. 1998) (citing Klaxon Co. v. Stentor


Agreements are contracts. We will apply Illinois’ choice of law rules for contracts to
determine the governing law with respect to the Security Agreements. One party to the
Security Agreements, ACR, had its principal place of business in Hackensack, New
Jersey. Complaint Exs. 1 and 2. The Security Agreements explicitly purport to be
“governed by and construed in accordance with the laws of the State New Jersey.” Id.
Furthermore, the Security Agreements are part of the same loan transactions giving rise
to the Guaranties, which we have already declared to be governed by New Jersey law.
Thus, we will apply New Jersey law with respect to the Security Agreements and with
respect to the Collateral secured thereunder.

Mr. Foxley’s “fraudulent inducement” defense sounds in tort. Hlinois applies
“the ‘most significant relationship’ test for choosing the appropriate law in tort cases.”
Fredrick v. Simmons Airlines, Inc., 144 F.3d 500, 503-04 (7th Cir. 1998) (quoting
Esser v. McIntyre, 661 N.E.2d 1138, 1141 (Ill. 1996)). Generally, "the law of the place
of injury controls unless Illinois has a more significant relationship with the occurrence
and with the parties." Fredrick, 144 F.3d at 504 (quoting Esser, 661 N.E.2d at 1141).
The injuries that Mr. Foxley complains of are his obligations under the Guaranties. At
the time he executed the Guaranties, Mr. Foxley became contractually obligated under
the laws of New Jersey. Specifically, he became obligated to guarantee payment of

Litho’s loans to ACR in Hackensack, New Jersey.

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Guaranty also refers only to Mr. Foxley as a guarantor and also makes no mention of
a co-guarantor. Based on this record, no reasonable jury could find that Mr. Foxley
justifiably relied on the alleged misrepresentation. Unicapital is entitled to judgment
as a matter of law that Mr. Foxley is liable under the Guaranties. The extent of liability
is yet to be determined.
CONCLUSION
Based on the foregoing analysis, we grant Unicapital’s motion for partial

judgment on the pleadings.

Charles P. Kocoras
Chief Judge _
United States District Court

Dated: _october 30, 2002


‘Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Charles P. Kocoras than Assigned Judge
CASE NUMBER 02 C 2685 DATE 10/30/2002
CASE UniCapital Funding vs. Foxley
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]

DOCKET ENTRY:

qd) a Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

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

(4) oO Ruling/Hearing on set for at

(5) im} Status hearing[held/continued to] [set for/re-set for} on set for at

(6) oO Pretrial conference[held/continued to] [set for/re-set for]on___set for at

(7) o Trial[set for/re-set for] on at

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

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) (CiLocal Rule 41.1 CHFRCP41(a\(1) COFRCP41(a)(2).

(0) MM [Otherdocketentry] Ruling held. ENTER MEMORANDUM OPINION: We grant Unicapital’s
motion (Doc 15-1) for partial judgment on the pleadings. Answer to all other pending motions due
November 13, 2002. Reply due November 20, 2002. Ruling set for December 11, 2002 at 9:30 a.m.

ai) ff {For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required. number of notices
Notices mailed by judge's staff. g 3 1 2002
Notified counsel by telephone. date dockted

wv | Docketing to mail notices.

Mail AO 450 form. Ge LOE TEE dekCing uy initials
Copy to apimagistate judge. \s
\ nant

courtroom | date mailed notice

deputy's - :
initials

Date/time teceived in
central Clerk's Office

naling deputy initials



Accordingly, we will apply New Jersey tort law to Mr. Foxley’s fraudulent inducement
defense.
Il. _ Disposition of the Collateral

Mr. Foxley contends that Unicapital had a statutory duty to dispose of the
Collateral in a commercially reasonable manner pursuant to section 9-607 of the
Uniform Commercial Code (“UCC”) as codified in N.J. Stat. Ann. § 12A:9-607. Mr.
Foxley further contends that questions of fact regarding Unicapital’s alleged breach of
this duty preclude us from granting the motion for judgment on the pleadings. Whether
or not Unicapital reasonably disposed of the Collateral, however, is only relevant to
damages. This issue will not prevent us from determining whether or not Mr. Foxley
is liable under the Guaranties. Although not controlling, we find the reasoning of
General Trading Co., Inc. v. A & D Food Corp. instructive:

Defendants' argument, that summary judgment as to liability should be

denied because there are triable issues as to whether the sale of the

collateral given as security for the loan guaranteed by them was

conducted in a commercially reasonable manner, is unavailing. Whether

defendants are liable upon their guarantee is an issue which may be

resolved apart from and in advance of any determination as to whether the

sale of the collateral was conducted in commercially reasonable fashion,

the latter being relevant in the present litigation only to the determination

of damages.

738 N.Y.S.2d 845 (N.Y. App. Div. 2002) (citation omitted).


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
UNICAPITAL FUNDING CORPORATION, )
Plaintiff,
vs. 02 C 2685

JOHN C. FOXLEY, }
Defendant.

DOCKE Ten

MEMORANDUM OPINION ocr 31 2002

CHARLES P. KOCORAS, Chief District Judge:

This matter comes before the court on Plaintiff Unicapital Funding Corporation’s
(“Unicapital”) Rule 12(c) motion for partial judgment on the pleadings. For the
reasons set forth below we grant the motion.

BACKGROUND

For the purposes of this motion, Defendant John Foxley’s well-pleaded
allegations are taken as true, and the facts and inferences to be drawn from those
allegations are viewed in a light most favorable to him. See Alexander v. City of
Chicago, 994 F.2d 333, 336 (7th Cir.1993). At all relevant times Mr. Foxley was the
president and owner of Litho Color Printing Corporation (“Litho”). On July 15, 1997,

and September 12, 1997, Litho borrowed money from American Capital Resources,

Cm


Inc. (“ACR”) to finance the acquisition of new printing presses from KBA Planeta
North America, Inc. (“KBA”). Complaint Exs. 3 and 4. To protect its loans (the
“Loans”), ACR took a security interest in various pieces of Litho’s equipment (the
“Collateral”) and required Mr. Foxley to personally guarantee the Loans. ACR
allegedly told Mr. Foxley that “KBA also had agreed to guarantee ACR’s loans to
Litho.” Foxley’s Counterclaim (the “Counterclaim”) ¢ 12. Additionally, KBA’s
president allegedly “told Foxley that KBA was guaranteeing ACR’s loans to Litho,”
and KBA’s CFO allegedly “advised Foxley ‘because we like little guys like you, we
are guaranteeing the loan.”” Counterclaim {J 13-14. Mr. Foxley executed guaranties
(the “Guaranties”) personally guaranteeing payment “absolutely and unconditionally”
to ACR on July 15, 1997, and September 12, 1997, the same days the Loans were
made. Complaint Exs. 5 and 6. Neither KBA, nor anyone else, ever co-guaranteed the
Loans.

ACR assigned its rights under the Loans and Guaranties to Unicapital. When
Litho defaulted on the Loans, Unicapital looked to Mr. Foxley for satisfaction of the
debt. When Mr. Foxley declined to pay, Unicapital brought this action. The
Complaint contains a single count, alleging that Mr. Foxley breached the Guaranties.
Unicapital now moves for partial judgment on the pleadings establishing Mr. Foxley’s

liability (but not the amount of liability) under the Guaranties.

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