Ccp Ltd. Partnership v. First Source Fin.
| Decision Date | 22 September 2006 |
| Docket Number | No. 1-05-3235.,1-05-3235. |
| Citation | 368 Ill. App.3d 476,305 Ill.Dec. 687,856 N.E.2d 492 |
| Parties | CCP LIMITED PARTNERSHIP, the Estate of Merrill Kirsch, Anthony Kirsch, Patrick Kirsch and Catherine Kirsch, Plaintiffs-Appellees, v. FIRST SOURCE FINANCIAL, INC., Defendant-Appellant, First Source Financial, Inc., a Delaware corporation, and Special Situations Opportunity Fund I, LLC, a Delaware limited liability company, Plaintiffs-Appellants, v. CCP Limited Partnership, a Wisconsin limited partnership, and Cedar Creek Partners, LLC, its General Partner, Defendants-Appellees, First Source Financial, Inc., a Delaware corporation, and Special Situations Opportunity Fund I, LLC, a Delaware limited liability company, Plaintiffs-Appellants, v. Estate of Merrill Kirsch, Anthony Kirsch, Patrick Kirsch and Catherine Kirsch, Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
James W. Hutchinson, BeLinda I. Mathie, Katten Muchin Rosenman LLP, Chicago, for Appellants Orchard First Source Capital, Inc., f/k/a First Source Financial, Inc., and OFSI Fund II, LLC, f/k/a Special Situations Opportunity Fund I, LLC.
Michael A. Stiegel, Laurel A. Haskell, Michael Best & Friedrich LLP, Chicago, for Appellees CCP Limited Partnership, The Estate of Merrill Kirsch, Anthony Kirsch, Patrick Kirsch and Catherine Kirsch.
This case involves the proper characterization of a contract between a bank and several individuals who owned a corporation that took a series of loans from the bank. The bank claims that the owners in the contract purchased parts of the loans the bank made to the corporation, effectively using the bank as a vehicle to loan their corporation their money. When the corporation defaulted on some of the loans, the owners, as participating lenders, lost their investments in the loans. The bank sought to recover from the owners the amounts they agreed to lend their corporation.
The trial court held that the contract created a continuing guaranty of the series of loans, and the owners validly revoked the guaranty in 2003. Because the corporation did not default on loans made prior to the revocation date, the owners did not owe the bank anything on the guaranty. The trial court awarded the owners summary judgment against the bank. We agree with the trial court's characterization of the transaction and the finding of a valid revocation. Therefore, we affirm the trial court's judgment.
Catherine, Patrick, Anthony and Merrill Kirsch owned shares of Capatony, Inc. Capatony owned 45% of Dart Distributing, LLC, while CCP Limited Partnership owned the remaining 55%. Anthony and Merrill also served on Dart's board of directors. In November 1997, First Source Financial (FSFP) agreed to loan Dart some funds. The following year, Dart sought additional loans to fund its ongoing operations. Dart agreed to secure the revolving loans by giving FSFP an interest in most of its property. The loan agreement included a formula for computing the total amount of outstanding revolving loans Dart could accumulate. The parties referred to the prescribed maximum loan total as the "Borrowing Base."
Dart's needs soon exceeded the Borrowing Base. FSFP agreed to loan Dart further funds, but it sought to protect itself by spreading the risk from the loans. In September 2000 Dart and FSFP signed a "Second Amendment" to the revolving loan agreement, increasing the amount of revolving loans FSFP would allow Dart to accumulate. The parties agreed that the increased loans depended upon a "Last-Out Participation Agreement" (the LOPA) between CCP, the Kirsches, and FSFP.
The LOPA lists CCP and the Kirsches as "Participants" in the loans to Dart. It provides:
"WHEREAS, each of the Participants acknowledges that (i) the effectiveness of the Second Amendment is expressly conditioned upon, and FSFP has entered into the Second Amendment in reliance upon, each Participant's execution and delivery of this Agreement and (ii) each Participant will derive substantial benefit and advantage from the financial accommodations made available to [Dart] in the Second Amendment; * * *
* * *
NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained herein, FSFP and each of the Participants hereby agree as follows:
* * *
* * * FSFP hereby sells to each Participant, and each Participant hereby purchases from FSFP, * * * a subordinated secured participation interest * * * in the Loans. * * * The Purchase Amount of each Participant shall be due and payable by such Participant within 10 days after the date * * * that such Participant receives written notice from FSFP that (i) an Event of Default under the Credit Agreement has occurred and is continuing and (ii) the Revolving Loans have been accelerated and are due and payable in full (the date of such acceleration being referred to as the `Determination Date').
* * *
* * * [N]one of the Participants shall be entitled to the payment in cash of accrued interest hereunder until the indefeasible payment in full in cash to FSFP of all Liabilities owing to FSFP under the Credit Agreement, in accordance with Section 6 below.
6. Allocation of Payments. All payments received by [FSFP] from time to time on account of the Loans shall be applied in the following order: (a) first, to FSFP, for (i) all costs * * *; (ii) all accrued interest * * *; (iii) all principal * * * and (iv) any other Liabilities owing to FSFP * * *; and (b) after all amounts described in clause (a) above shall have been indefeasibly paid in full in cash to FSFP, then, to Participants * * *. The Participants shall bear all losses up to the amount of their * * * Participations that may be sustained before FSFP shall bear any loss." (Emphasis in original.)
Catherine, Patrick, Anthony and Merrill each owned a brokerage account with Lowry Hill. Each of the Kirsches signed a "Pledge and Security Agreement" in favor of FSFP. In all four agreements FSFP acquired a security interest in the pledgor's brokerage account with Lowry Hill, payable if the pledgor failed to fulfill his duties under the LOPA.
In January 2003 CCP and the Kirsches sent a letter to FSFP in which they said:
The Kirsches also notified Lowry Hill of their revocation of the LOPA and the pledges and security agreements.
Merrill Kirsch died and the administrator of his estate took over the management of his finances. In December 2003, two members of the Kirsch family and Robert Cook, managing director of CCP's general partner, asked FSFP to lend additional funds to Dart. In April 2004 Catherine, Patrick and Anthony sent FSFP a letter reminding FSFP that the Kirsches had revoked the LOPA. Cook and some of the Kirsches returned to FSFP seeking more loans for Dart in June 2004.
On January 26, 2005, FSFP notified the Participants in the LOPA that Dart had defaulted and therefore FSFP declared the "Determination Date" for the LOPA had arrived. According to FSFP, the Participants owed it $1 million apportioned amongst the Participants in the manner set forth in the LOPA. When the Participants refused to pay, FSFP recovered $450,000 directly from Lowry Hill under the pledges the Kirsches signed.
On April 8, 2005, the Kirsches and CCP sued FSFP, seeking a judgment declaring that the Kirsches and CCP validly revoked the LOPA in 2003 and that FSFP had no right to the money it took from the Lowry Hill accounts. Also on April 8, 2005, FSFP sued CCP for its portion of the $1 million FSFP sought to recover under the LOPA. A few days later FSFP sued the Kirsches, seeking a judgment declaring that FSFP had the right to take the $450,000 it had already taken from the Lowry Hill accounts. The circuit court granted the parties' motion to consolidate the three cases.
All parties moved for summary judgment. FSFP admitted that in January 2003, when the Kirsches and CCP sent the revocation letter, the total revolving loans outstanding to Dart did not exceed the Borrowing Base. Under the formula in the LOPA, if FSFP had then declared the Determination Date, the Kirsches and CCP would owe nothing. FSFP could not declare a Determination Date at that time, however, because no default had occurred. After FSFP received the revocation letter, it continued lending Dart funds in excess of the Borrowing Base.
Both CCP and FSFP supported their summary judgment motions with documents purporting to reflect e-mails sent between FSFP and Dart. For FSFP, Robert Palmer swore in an affidavit:
"The e-mails attached * * * have been maintained in the ordinary course of business in [FSFP's] computer system, and I assisted in retrieving them for use in this matter."
Cook similarly swore that the e-mails attached to CCP's motions for summary judgment were "maintained in the ordinary course of business in CCP[']s * * * computer system." Neither affiant said anything about his participation in the correspondence or the occasion for receipt of the e-mail.
The trial court held that the LOPA was, in effect, a continuing guaranty, revocable on due notice. The notice the Kirsches and CCP provided in January 2003 effectively revoked the continuing guaranty. The court entered summary judgment against FSFP and its affiliated parties on all three complaints. FSFP now appeals.
We review de novo the grant of summary judgment. Delaney v. McDonald's Corp., 158 Ill.2d 465, 467, 199 Ill.Dec. 696, 634 N.E.2d 749 (1994).
FSFP contends...
To continue reading
Request your trial
-
Cordeck Sales v. Construction Systems
..."`testimony of a witness who has sufficient personal knowledge'" of the document. CCP Ltd. Partnership v. First Source Financial, Inc., 368 Ill.App.3d 476, 484, 305 Ill.Dec. 687, 856 N.E.2d 492 (2006), quoting Kimble v. Earle M. Jorgenson Co., 358 Ill.App.3d 400, 415, 294 Ill. Dec. 402, 830......
-
Piser v. State Farm Mut. Auto. Ins. Co.
...at 1110. Authentication can be made by either direct or circumstantial evidence. CCP Ltd. Partnership v. First Source Financial, Inc., 368 Ill.App.3d 476, 484, 305 Ill.Dec. 687, 856 N.E.2d 492, 498 (2006), citing People v. Downin, 357 Ill.App.3d 193, 203, 293 Ill.Dec. 371, 828 N.E.2d 341, 3......
-
Mueller Indus. Inc v. Berkman
...Inc., 394 Ill.App.3d 105, 107, 333 Ill.Dec. 567, 915 N.E.2d 88 (2009); see also CCP Ltd. Partnership v. First Source Financial, Inc., 368 Ill.App.3d 476, 484, 305 Ill.Dec. 687, 856 N.E.2d 492 (2006). Although Supreme Court Rule 216(b) (134 Ill.2d R. 216(b)) permits a party to serve requests......
-
In Re Alexis H.
...raised by an appellant in a reply brief should be ignored by this court. CCP Ltd. Partnership v. First Source Financial, Inc., 368 Ill.App.3d 476, 485, 305 Ill.Dec. 687, 856 N.E.2d 492, 499 (2006); 210 Ill.2d R. 341(j). As such, we will not address respondent-mother's request to impose a mi......