Reger Development, LLC v. National City Bank

• Decision Date: 20 January 2010
• Docket Number: No. 09-2821.,09-2821.
• Citation: 592 F.3d 759
• Parties: REGER DEVELOPMENT, LLC, Plaintiff-Appellant, v. NATIONAL CITY BANK, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

592 F.3d 759

REGER DEVELOPMENT, LLC, Plaintiff-Appellant, v. NATIONAL CITY BANK, Defendant-Appellee.

No. 09-2821.

United States Court of Appeals, Seventh Circuit.

Argued December 9, 2009.

Decided January 20, 2010.

Peter Graham Hallam (argued), Law Offices of Peter G. Hallam, Flossmoor, IL, for Plaintiff-Appellant.

Chad A. Schiefelbein (argued), Vedder Price Kaufman & Kammholz, Chicago, IL, for Defendant-Appellee.

Before FLAUM, WILLIAMS, and SYKES, Circuit Judges.

FLAUM, Circuit Judge.

Reger Development borrowed money from National City through a revolving line of credit supported by a promissory note. Then, when National City discussed the possibility of calling the note, Reger Development sued the bank for breach of contract and fraud. After reviewing the terms of the governing contract, the district court dismissed the complaint. We now affirm.

I. Background

This is a diversity case governed by Illinois law. For the purposes of this appeal, defendants-appellees accept as true the allegations contained in appellant's complaint. Plaintiff-appellant Reger Development, LLC ("Reger Development") is an Illinois limited liability company involved in real estate development. Kevin Reger is Reger Development's principal and sole member. Defendant-appellee National City Bank ("National City"), was headquartered in Cleveland, Ohio, at the time this lawsuit commenced and had lent money to Reger Development for several previous projects. In June 2007, National City offered the company a line of credit to fund potential development opportunities. On June 25, 2007, Kevin Reger met with Erica Duncan, a National City representative, to discuss the loan. At some point, when Reger asked about changing the terms of the arrangement, Duncan responded that the documents National City provided were nonnegotiable. Reger Development then executed the form contract, which was structured as a promissory note ("Note") coupled with a commercial guaranty by Kevin Reger in his individual capacity for the debt of his business entity. Reger Development attached both contracts to its initial complaint.

The main question in this case is whether the Note entitles National City to demand payment from Reger Development at will. To this end, several excerpts from the two-page contract are particularly important. The first clause in the Note reads:

PROMISE TO PAY: Reger Development, LLC ("Borrower") promises to pay to National City Bank ("Lender"), or order, in lawful money of the United States of America, on demand, the principal amount of Seven Hundred Fifty Thousand & 00/100 Dollars ($750,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.

PAYMENT: Borrower will pay this loan in full immediately upon Lender's demand. Borrower will pay regular monthly payments of all accrued unpaid Interest due as of each payment date, beginning July 25, 2007, with all subsequent Interest payments to be due on the same day of each month after that.

. . .

FAILURE TO PAY ON DEMAND. Notwithstanding any other provision set forth in this Note, if (a) any principal owing under this Note remains unpaid after Lender shall have given Borrower notice of demand for payment thereof or after the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower or (b) any accrued Interest under this Note remains unpaid after the due date of that Interest, then, and in each such case, all unpaid principal of this Note shall bear Interest at a rate equal to three percent (3%) per annum above the rate that would otherwise be applicable. Interest, whether prior to or after judgment by a court of competent jurisdiction, shall continue upon the outstanding balance until paid in full, at the higher of the rate provided in this Note or the rate otherwise permitted by law.

The Note proceeds to reference payment on lender's demand several times in other provisions. It also features a "NO COMMITMENT" clause that states: "NOTWITHSTANDING ANY PROVISION OR INFERENCE TO THE CONTRARY, LENDER SHALL HAVE NO OBLIGATION TO EXTEND ANY CREDIT TO OR FOR THE ACCOUNT OF BORROWER BY REASON OF THIS NOTE." The contract then includes integration language defining it as the final and complete agreement between parties. The Note is governed by federal and Illinois law, to the extent the former does not preempt the latter. Language above the signature line specifies in capital letters that the borrower has read and understood the terms of the document. Reger Development paid a $5000 closing fee for the line of credit.

About a year after Reger Development executed the contract, National City requested updated personal financial statements and tax returns pursuant to a clause in the Note entitling the bank to do so. The borrower complied. Through that point, Reger Development had made timely interest payments on the loan. On August 19, 2008, National City asked the company to pay down $125,000 towards the principal of the line of credit, which appellant did the next business day. Then, on September 9, 2008, National City asked that Reger Development "term out" $300,000 of the Note by having one of Kevin Reger's other businesses agree to take out a three-year loan in that amount secured by a second mortgage on some real estate. National City also notified appellant that it would be reducing the amount of cash available through the line of credit from $750,000 to between $400,000 and $500,000.

Kevin Reger "expressed surprise" about these developments and asked if National City would call the line of credit if Reger Development did not agree to the requests. The bank acknowledged that Reger Development was not in default but stated that "there is a possibility that we may demand payment of the line."

Reger Development then filed a complaint in Illinois state court accusing National City of breaching the terms of the Note. The company also alleged that National City used the form promissory note contracts to perpetuate a fraudulent scheme in which the bank fooled people into taking out loans by concealing the fact that the principal could be called on demand. Appellee removed the case to the Northern District of Illinois under diversity jurisdiction and then successfully moved to dismiss the complaint for failure to state a cause of action under which relief could be granted. The district court rejected Reger Development's Motion for Reconsideration under Fed.R.Civ.P. 59(e). Reger Development now appeals from both the substantive judgment and denial of the motion to reconsider.

II. Discussion

We review the district court's grant of a motion to dismiss under Fed. R.Civ.P. 12(b)(6) de novo. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). When evaluating the sufficiency of the complaint, we construe it in the light most favorable to the nonmoving party, accept well-pleaded facts as true, and draw all inferences in her favor. Id. We review the district court's denial of Reger Development's motion for reconsideration for abuse of discretion and reverse "only if no reasonable person could agree with that decision." Schor v. City of Chi., 576 F.3d 775, 780 (7th Cir.2009). In his jurisdictional statement, Reger Development announces that it is appealing both the district court's decision to dismiss its original complaint and the district court's subsequent denial of Reger Development's motion for reconsideration. However, as the appellee points out, the remainder of Reger Development's brief never identifies the standard of review for a district court's 59(e) ruling, mentions the denial, or makes any substantive arguments that would require us to examine that decision. We treat this silence as a waiver of Reger Development's right to contest the 59(e) ruling, though we note that the switch in posture changes nothing about the outcome of this appeal.

The Supreme Court has described the bar that a complaint must clear for purposes of Rule 12(b)(6) as follows: "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A "formulaic recitation of the elements of a cause of action will not do." Id. Nonetheless, a plaintiff must provide "only `enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief.'" Tamayo, 526 F.3d at 1083. Furthermore, plaintiffs must plead their accusations of fraud with particularity. Fed.R.Civ.P. 9(b); Arazie v. Mullane, 2 F.3d 1456, 1465 (7th Cir.1993) (stating that particularity requires the party to specify the "who, what, when, where, and how" of the alleged fraudulent act). We consider documents attached to the complaint as part of the complaint itself. Int'l Mktg., Ltd. v. Archer-Daniels-Midland Co., 192 F.3d 724, 729 (7th Cir.1999). Such documents may permit the court to determine that the plaintiff is not entitled to judgment. Hecker v. Deere & Co., 556 F.3d 575, 588 (7th Cir.2009).

A. Reger Development's Breach of Contract Claim

Under Illinois law, a plaintiff looking to state a colorable breach of contract claim must allege four elements: "(1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages." W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill.App.3d 752, 286 Ill.Dec. 734, 814 N.E.2d 960, 967 (2004). We construe contracts by giving their unambiguous terms clear and ordinary meaning, Reynolds v. Coleman, 173...