United Federal Sav. Bank v. McLean

• Decision Date: 01 September 1988
• Docket Number: No. 87-1261.,87-1261.
• Parties: UNITED FEDERAL SAVINGS BANK, a corporation, and Fidelity Federal Savings and Loan Association, a corporation, Plaintiffs, v. Lee McLEAN, Jr., Defendant.
• Court: U.S. District Court — Central District of Illinois

694 F. Supp. 529

UNITED FEDERAL SAVINGS BANK, a corporation, and Fidelity Federal Savings and Loan Association, a corporation, Plaintiffs, v. Lee McLEAN, Jr., Defendant.

No. 87-1261.

United States District Court, C.D. Illinois, Peoria Division.

September 1, 1988.

COPYRIGHT MATERIAL OMITTED

Jack Ball, Blake & Ball, Roger L. Williamson, West Neagle & Williamson, Galesburg, Ill., for plaintiffs.

Tim Swain, Swain, Hartshorn & Scott, Peoria, Ill., for defendant.

ORDER

MIHM, District Judge.

Presently before the Court is the Defendant's Motion to Dismiss the Complaint on the basis that this Court does not have in personam jurisdiction over the Defendant. The Defendant asserts that he is a citizen of the State of Missouri and was not and is not subject to service of process for the relief set forth in the Complaint. The Defendant argues that suit on the guarantee is not the type of action which would provide a basis for in personam jurisdiction as to this Defendant under the Long Arm Statute of the State of Illinois, Ill.Rev.Stat., ch. 110, § 2-209 or the Due Process clause of the United States Constitution.

FACTS

This case arises out of a document denoted as a personal guarantee purportedly signed by the Defendant. The date of execution is shown to be May 12, 1978, three months subsequent to the execution of two real estate mortgages by a corporation, McLean Enterprises, Inc., on February 14, 1978.

The Complaint recites a mortgage foreclosure proceeding in Knox County, Illinois, against the corporate signatory of the mortgages, McLean Enterprises, Inc. (Case No. 87-CH-7). This proceeding resulted in the sale of the real estate in question for $1,100,000 on June 30, 1987.

The Plaintiffs, savings and loan associations, seek to recover in this lawsuit the deficiency between the real estate sale price and the sum allegedly personally guaranteed by the Defendant, in the amount of $862,498.32. The basis of the claim is a document entitled "Agreement as to Conveyance by Mortgagor, Continued Guarantee by Mortgagor and Guarantee by Mortgagor's Grantee." By its own terms, the document was conditioned upon "the actual conveyance" of real estate to the individual Defendant. While the Complaint alleges that the Plaintiffs duly performed all their conditions of the guarantee, there is no separate allegation that the property was, in fact, actually conveyed by the corporation to the individual Defendant.

A complaint was filed by the Plaintiff and against the Defendant in Knox County, Illinois as 87-L-62 on September 4, 1987. Summons was served on the Defendant on September 14, 1987, in Greene County, Missouri. On October 14, 1987, a Petition to Remove this action was filed with the United States District Court for the Central District of Illinois on the basis of diversity of citizenship. On October 14, 1987, the Defendant filed his Motion to Dismiss under Rule 12(b) for lack of personal jurisdiction over the Defendant.

DISCUSSION

Under 28 U.S.C. § 1441 et seq., removal jurisdiction is based upon the federal court's original jurisdiction over diversity suits. As a general rule, a cause is not removeable unless it is properly before the state court. If a state court lacks jurisdiction over one of the parties, the federal court cannot acquire jurisdiction. People of the State of Illinois v. Kerr-McGee Chemical Corp., 677 F.2d 571 (7th Cir. 1982).

To determine the existence of personal jurisdiction, the federal court must first look to state law long arm statutes, and second, determine whether the exercise of such jurisdiction is consistent with the Due Process clause of the Fourteenth Amendment. As noted in O'Hare International Bank v. Hampton, 437 F.2d 1173 (7th Cir. 1971):

"In situations where federal jurisdiction is based upon diversity of citizenship, in personam jurisdiction `is determined in accordance with the law of the state where the court sits, with federal law entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee.' (Citation omitted)."

The Illinois Long Arm Statute (Ill.Rev. Stat., ch. 110, § 2-209) provides in relevant part:

"Acts submitting to jurisdiction — Process. (a) Any person, whether or not a citizen or resident of this state, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of such acts:

(1) The transaction of any business within this state;

(2) * * *

(3) The ownership, use, or possession of any real estate situated in the state;

(4) * * *

(b) Service of process upon any person who is subject to the jurisdiction of the courts of this state, as provided in this section, may be made by personally serving the summons upon the defendant outside the state, as provided in this Act, with the same force and effect as if those summons had been personally served within the state.

(c) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jurisdiction over him or her is based upon this section.

(d) * * *

Cook Associates, Inc. v. Lexington United Corp., 87 Ill.2d 190, 197-198, 57 Ill.Dec. 730, 429 N.E.2d 847 (1981)-long long arm two elements § 2-209 and due process."

The Defendant's Motion to Dismiss asserts that this Court has no in personam jurisdiction over the Defendant pursuant to the Illinois Long Arm Statute. However, the Plaintiff asserts jurisdiction pursuant to two prongs of the statute: (1) transaction of business, and (2) ownership, use or possession of any real estate situated in Illinois.

The issue of in personam jurisdiction over a defendant is a very fact specific analysis, regardless of the prong of the Illinois Long Arm Statute being applied. To further complicate the analysis, and as was noted by the Seventh Circuit in the case of Small v. Sheba Investors, Inc., 811 F.2d 1163 (7th Cir.1987), there is a lack of consistent tests used in Illinois to determine in personam jurisdiction.

A. TRANSACTION OF BUSINESS

As to the transaction of business prong, a long laundry list of factors have been looked to by varying courts in making the determination of whether in personam jurisdiction exists. Keeping in mind that the purpose of the Long Arm Statute is to insure that there is a close relationship between a cause of action against a nonresident defendant and his jurisdictional activity, Carlson v. Carlson, 147 Ill.App.3d 610, 101 Ill.Dec. 384, 498 N.E.2d 708 (2nd Dist.1986), the factors which have been consistently addressed by the courts in this analysis have included:

(1) Choice of law provision in the agreement. Ohare International Bank v. Hampton, 437 F.2d 1173 (7th Cir.1971). Ronco, Inc. v. Plastics, Inc., 539 F.Supp. 391 (N.D.Ill.1982). First National Bank of Chicago v. Boelcskevy, 126 Ill.App.3d 271, 81 Ill.Dec. 380, 466 N.E.2d 1182 (1st Dist.1984).

(2) Contacts between the Defendant and Illinois, e.g.:

(a) Numerous contacts with Plaintiff's Illinois office. Tatham-Laird and Kudner, Inc. v. Johnny's American Inn, Inc., 383 F.Supp. 28 (N.D.Ill.1974). Capital Associates v. Roberts-Ohbayashi Corp., 138 Ill. App.3d 1031, 93 Ill.Dec. 563, 487 N.E.2d 7 (1985).

(b) Execution of contract while defendant a resident of Illinois. United Services Auto Association v. Cregor, 617 F.Supp. 1053 (D.C.Ill.1985).

(c) Numerous telephone calls to Illinois office. Tabor & Co. v. McNall, 30 Ill.App. 3d 593, 333 N.E.2d 562 (1975). Capital Associates, supra.

(d) "Regularity of activities in Illinois." Cook Associates v. Lexington, 87 Ill.2d 190, 57 Ill.Dec. 730, 429 N.E.2d 847 (1981).

(e) Negotiation of contract in Illinois. Ronco, supra. Boelcskevy, supra. Aetna Casualty and Surety Co. v. Looney, 98 Ill.App.3d 1057, 54 Ill.Dec. 444, 424 N.E.2d 1347 (1981).

(f) Seeking the benefits and protections of Illinois law. Ronco, supra. Boelcskevy, supra. Morton v. Environmental Land Systems, Ltd., 55 Ill.App.3d 369, 13 Ill.Dec. 79, 370 N.E.2d 1106 (1977).

(g) Shipping of products into Illinois in substantial numbers. Ronco, supra.

(h) Substantial performance of duties in Illinois. Boelcskevy, supra.

In First National Bank of Chicago v. Boelcskevy, 126 Ill.App.3d 271, 81 Ill.Dec. 380, 466 N.E.2d 1182 (1984), the action arose from a guarantee made by the plaintiff to an in-state business, which was signed by the defendant guarantor outside of the State of Illinois. The appellate court found that the defendant guarantor was subject to personal jurisdiction pursuant to the Illinois Long Arm Statute and considered the following factors in arriving at this conclusion: who initiated the transaction; where the transaction was entered into; where the performance of the contract was to take place; and, whether the contract expressly provided for the invocation of Illinois law. First National Bank of Chicago v. Boelcskevy, 81 Ill.Dec. at 383, 466 N.E.2d at 1185.

Similarly, in Aetna Casualty and Surety Co. v. Looney, 98 Ill.App.3d 1057, 54 Ill. Dec. 444, 424 N.E.2d 1347 (1981), the Illinois court found personal jurisdiction over an Oklahoma defendant in a suit based on an indemnity agreement. The court noted that the nexus of the defendant's connection to Illinois was a construction contract, which was to be performed in Illinois; that the defendant had come to Illinois to negotiate the contract; and that while the physical act of signing the indemnity agreement took place in Oklahoma, it was for the purpose of securing and guaranteeing performance of a contract to be performed in Illinois. Aetna Casualty & Surety Co. v. Looney, 54 Ill.Dec. at 447, 424 N.E.2d at 1350.

In Morton v. Environmental Land Systems, Ltd., 55 Ill.App.3d 369,13 Ill.Dec. 79, 370 N.E.2d 106 (1977), the court found that solicitation of a contract in Illinois was activity sufficient...