Northern Trust Co. v. Peters

• Decision Date: 20 October 1995
• Docket Number: No. 94-2657,94-2657
• Parties: The NORTHERN TRUST COMPANY, Plaintiff-Counterdefendant-Appellee, v. Frank E. PETERS and Marta Chaikovska, Defendants-Counterplaintiffs-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 123

69 F.3d 123

The NORTHERN TRUST COMPANY, Plaintiff-Counterdefendant-Appellee, v. Frank E. PETERS and Marta Chaikovska,

Defendants-Counterplaintiffs-Appellants.

No. 94-2657.

United States Court of Appeals, Seventh Circuit.

Argued March 27, 1995.

Decided Oct. 20, 1995.

Gary E. Dyal (argued), James G. Bonebrake, Wildman, Harrold, Allen & Dixon, Chicago, IL, for Plaintiff-Appellee.

Lawrence C. Rubin (argued), Cary E. Donham, Shefsky, Froelich & Devine, Chicago, IL, Alexander D. Kerr, Jr., Bruce L. Wald, Richard W. Hillsberg, Jeffrey B. Rose, Tishler & Wald, Chicago, IL, for Defendants-Appellants.

Before EASTERBROOK and KANNE, Circuit Judges, and STIEHL, ^* District Judge.

KANNE, Circuit Judge.

Defendants-appellants Frank E. Peters and Marta Chaikovska filed a lengthy and excessively detailed amended counterclaim against plaintiff-appellee The Northern Trust Company alleging various injuries stemming from eight counts of wrongful conduct. This appeal requires us to review the decision of the district court that dismissed the amended counterclaim under FED.R.CIV.P. 12(b)(6) as barred by the applicable statutes of limitation. For the purpose of deciding this appeal, we summarize Peters's ¹ recitation of the facts as set forth in the amended counterclaim and exhibits. We take the factual allegations as true and adopt in our analysis all reasonable inferences in favor of Peters. ²

Several counts incorporate the same factual allegations to assert different theories of recovery. Different limitations periods are applicable to the specific theories of recovery, however, and so we address Peters's claims count by count. We affirm the dismissal of counts seven and eight and affirm in part the dismissal of counts one through six. We reverse and remand only with regard to certain allegations (and their consequent injuries) contained in counts one through six.

I

In early 1983, the Welsh Development Agency ("WDA") solicited Frank Peters to build a computer diskette manufacturing plant in Wales, United Kingdom. A start-up venture, Parrot Corporation, Ltd., would own and operate the plant. Peters's role was to provide expertise in building and operating the plant. He also became an investor. WDA stated it was willing to invest pounds sterling1,000,000 and would secure additional financing through outside investors.

WDA prepared an Investment Memorandum on July 18, 1983, which outlined the plans for the Parrot venture and asked the Development Capital Group ("DCG") to solicit additional investors. The outside investors eventually provided an additional pounds sterling1,500,000 for the venture. WDA alone managed all contact with the investors. In the fall of 1983, Parrot also applied for a loan of approximately pounds sterling2,500,000 from the European Coal and Steel Community ("ECSC").

The Memorandum stated that the ECSC loan would be made through a clearing bank and that all funds raised from the investors and the ECSC would be available to Parrot for working capital and purchases of equipment. Peters suggested, based on past business and personal dealings, that WDA approach the Northern Trust Company to obtain a loan guarantee. A contact in Northern Trust's Chicago office referred Peters to John Iwanicki, a loan officer assigned to Northern Trust's London office. WDA provided Northern Trust with the Memorandum in Peters's presence, but it informed Northern Trust and Peters that WDA would not provide Peters with the Memorandum. WDA negotiated a loan guarantee from Northern Trust in the form of letters of credit on behalf of Parrot. At no time did Peters learn the contents of the Memorandum.

The investors agreed to enter into an Investment Agreement upon receipt of a satisfactory comfort letter from Northern Trust. On December 23, 1983, Northern Trust submitted a comfort letter to WDA. The comfort letter did not reference a 100% cash collateral requirement as a prerequisite to the letters of credit. On that same day, the investors, including Peters and his management team, entered into the Investment Agreement. Prior to this day, Peters had in his personal capacity borrowed pounds sterling250,000 from Northern Trust's Chicago office to finance his purchase of Parrot stock. As of December 23, 1983, none of the investors knew that Northern Trust was prepared to issue the letters of credit only upon the condition that Parrot provide 100% cash collateral for the entire eight-year term of the ECSC loan.

Following the execution of the Investment Agreement, all of the investors placed their funds with Northern Trust's Chicago office, which then wired these funds to its London office on January 4, 1984. Northern Trust then disbursed the funds to Parrot to commence the venture.

On January 12, 1984, Iwanicki delivered a three-page letter to Peters and WDA dated December 22, 1983 (the "misdated letter"). This letter, unlike the comfort letter, detailed Northern Trust's 100% cash collateral requirement. (Prior to issuing the comfort letter and the misdated letter, Northern Trust had received the Memorandum, which stated that all funds raised for the Parrot venture would be available for use.) Peters did not know the contents of the Memorandum and thus was not aware of the discrepancy between the representations made in the Memorandum and the cash collateral requirement described in the misdated letter.

The collateral requirement prevented the Parrot venture from using approximately pounds sterling2,000,000 of the funds it had raised from the investors and the ECSC. Inexplicably, neither WDA nor Peters, both of whom knew of the different terms stated in the comfort letter and the misdated letter, took any action to investigate and/or rectify this inconsistency. Northern Trust began the process of documenting and issuing the letters of credit.

In the summer of 1984, Peters informed Iwanicki that he would rely on Northern Trust's counsel to prepare documentation for the loan guarantees because Peters was unfamiliar with U.K. law and had previously relied on Northern Trust's counsel in the United States on other business matters. In order to issue the letters of credit, Northern Trust required, among other things, extracts of the minutes of Parrot's board of directors meetings, which would demonstrate that Parrot's board agreed to the terms of the loan guarantees. Northern Trust's counsel informed Northern Trust, but not Peters, that these extracts had to be presented in writing to the board for its approval.

On August 16, 1984, the Parrot directors met and authorized Peters to proceed with the letters of credit and ECSC loan transactions. The next day, Peters and WDA informed Northern Trust of the Parrot directors meeting. On August 21, 1984, Northern Trust submitted to Peters several documents concerning the loan guarantees, which they instructed him to sign and return to Northern Trust. Peters did so, and Northern Trust returned the documents to its counsel. Included in the documentation sent by Northern Trust to its counsel was an extract of the August 16 directors meeting prepared by Northern Trust's counsel and requiring two of Peters's signatures (the "two-signature extract"). Though the two-signature extract purported to bear Peters's signatures, he had not received this extract on August 21. The signatures were forgeries.

A week later, Peters received from Northern Trust an extract of the August 16 Parrot directors meeting (the "August extract") with instructions to sign and return it. Peters signed the August extract on August 28, 1984--twelve days after the Parrot directors meeting--and returned it to Northern Trust. Northern Trust retained this extract and did not send it to counsel. Northern Trust delivered a second extract to Peters for his signature on February 28, 1985, (the "February extract") again after the relevant directors meeting had taken place. Peters's amended counterclaim does not state whether he signed the February extract, but the photocopy attached as an exhibit to the amended counterclaim appears to bear Peters's signature. We infer, then, that he signed the February extract and returned it to Northern Trust.

The Parrot venture began to experience cash flow problems in August 1985, and WDA approached the original investors for additional funds. The investors claimed no knowledge of Northern Trust's cash collateral requirement. The investors launched a fact-finding expedition and discovered the misdated letter in WDA's files. Upon inquiry, Peters explained that he did not receive the misdated letter until mid-January 1984. The investors demanded that WDA contribute additional funds to make good on the representations made in the Memorandum. WDA then began its own investigation of Parrot and Northern Trust.

WDA authorized Parrot's chairman, Donald Butterwick, to meet with Northern Trust and try to resolve the inconsistency between the comfort letter and the misdated letter. Northern Trust gave Butterwick the misdated letter, the August extract, and the February extract. Northern Trust did not give Butterwick the two-signature extract, nor did it inform Butterwick of the erroneous date on the misdated letter. Northern Trust led Butterwick to believe that the December 22 date was correct and that Peters had withheld the document.

Parrot fired Peters, and WDA subsequently referred the matter to British law enforcement authorities. On September 10, 1985, Peters was detained and questioned by police in Wales regarding pounds sterling2,000,000 allegedly missing from Parrot. (These funds were on deposit with Northern Trust as collateral for the loan guarantees.) The police released Peters without arresting him, and he returned to the United States.

Peters contacted Iwanicki in October 1985 seeking written confirmation of the actual delivery date of the misdated letter. Iwanicki orally confirmed Peters's recollection of the delivery date, and Peters assumed that Northern Trust would make...