185 F.3d 817 (7th Cir. 1999), 98-4221, Consol. Serv. v. KeyBank Nat'l. Assoc.& KeyCorp
|Citation:||185 F.3d 817|
|Party Name:||Consolidation Services, Inc., Plaintiff-Appellant, v. KeyBank National Association and KeyCorp, Defendants-Appellees.|
|Case Date:||July 22, 1999|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued May 20, 1999
Rehearing and Suggestion for Rehearing En Banc Denied August 26, 1999*.
Appeals from the United States District Court for the Northern District of Indiana. No. 3:98cv0014AS--Allen Sharp, Judge.
[Copyrighted Material Omitted]
Before Posner, Chief Judge, and Easterbrook and Rovner, Circuit Judges.
Posner, Chief Judge.
This is a diversity suit for breach of contract brought by Consolidation Services, Inc. (CSI) against a bank. Applying Indiana law, which the parties agree governs the substantive issues in this case, the district judge granted summary judgment for the bank on the basis of the Indiana Credit Agreement Statute of Frauds, Ind. Code sec. 32-2-1.5. 29 F.Supp.2d 942 (N.D. Ind. 1998). CSI argues that the requirements of the statute of frauds were satisfied, but alternatively seeks to avoid it by invoking doctrines of partial performance, fraud, and estoppel, both equitable and promissory.
CSI, a freight forwarder, had several outstanding real estate loans from the defendant bank plus a bank account and line of credit. Deciding to expand its business it made a number of new contracts with railroads, discovered that it was overextended, and sought an $8 million loan from the bank, which was refused. The bank did, however, agree to lend it $2.7 million for six weeks to give it time to seek longer-term financing. Repayment was due on September 30, 1994, but, with CSI strapped, the bank agreed to extend the loan, first to November 30, then to December 31, and finally to February 15, 1995. The parties met that day but have conflicting versions of what occurred at the meeting. They agree, though, that the bank, through its representative Joseph McGraw, made an oral offer to forbear collection efforts for another 45 days if CSI would allow the bank to take $500,000 from CSI's bank account and apply it to the repayment of the loan; would execute two mortgages to the bank; would establish a lockbox at the bank for the deposit of CSI's revenues; and would cross- collateralize the loan, that is, make the collateral for the bank's real estate loans to CSI also collateral for the $2.7 million loan. CSI claims that it accepted McGraw's offer (also orally) and that the bank promised to reduce their agreement to writing but never did so. The bank claims that CSI rejected the offer and that the bank then offered a 7-day forbearance in exchange for just the mortgages and the $500,000 and that CSI agreed to this substitute offer.
CSI executed the mortgages and authorized the bank to take $500,000 from its bank account. At the end of 7 days the bank began collection efforts by taking an additional $1.2 million from the account. This action precipitated CSI into insolvency because, in reliance on the 45-day agreement (it claims), it had not yet lined up substitute financing. Eventually it brought this suit for breach of the alleged contract to delay collection by 45, not 7, days in exchange for the four concessions that the bank had demanded.
An ordinary statute of frauds merely requires that the party sought to be charged, in this case the bank, sign a memorandum of the parties' agreement. The memorandum needn't be the contract itself; it need only be evidence of the contract and the contract's essential terms, Newman v. Huff, 632 N.E.2d 799, 803 (Ind. App. 1994); Block v. Sherman, 34 N.E.2d 951 (Ind. App. 1941); Bower v. Jones, 978 F.2d 1004, 1009 (7th Cir. 1992); Vess Beverages, Inc. v. Paddington Corp., 941 F.2d 651, 654 (8th Cir. 1991); Restatement (Second) of Contracts sec. 131, comment d (1981), and the other party to the alleged contract need not have signed anything. Consolidated Bearings Co. v.
Ehret-Krohn Corp., 913 F.2d 1224, 1231 (7th Cir. 1990); St. Francis Medical Center v. Vernon, 576 N.E.2d 1230 (Ill. App. 1991). But like most other states in recent years, see, e.g., Whirlpool Financial Corp. v. Sevaux, 96 F.3d 216, 225 (7th Cir. 1996) (Illinois); Todd C. Pearson, Note, "Limiting Lender Liability: The Trend Toward Written Credit Agreement Statutes," 76 Minn. L. Rev. 295, 296-97 (1991); Jeffrey A. Tochner, Note, "Limiting Lender Liability in Florida: The Application of a Statute of Frauds to Credit Agreements," 44 Fla. L. Rev. 807, 808 (1992), Indiana has added to its statute of frauds special provisions relating to credit agreements. The term includes agreements to "forbear from exercising rights under a prior credit agreement," Ind. Code sec. 32-2-1.5-5, which the agreement to forbear collecting the bank's loan to CSI is rightly conceded to have been. Rural...
To continue readingFREE SIGN UP