Contract Law - Personal Guarantee Enforced Because of Admissions By Defendant

NISSAN MOTOR ACCEPTANCE CORPORATION v. ABBAS HOLDING I, INC., Ill: Appellate Court, 1st Dist., 2nd Div. 2012 - Google Scholar:


The main issue in this case was whether the trial court properly ruled that an individual defendant, Joseph Abbas, was liable on a personal guaranty. The original document with Mr. Abbas' signature was lost. The court initially ruled in his favor. Upon reconsideration, the court ruled that the personal guaranty was binding on Abbas because he admitted in a verified answer that he signed it.

The admission in a verified answer was a binding judicial admission and was fatal to the defense of the personal guaranty claim. The analysis is worthy of quotation:

"¶ 19 Section 2-610 of the Code provides that every answer and subsequent pleading "shall contain an explicit admission or denial of each allegation of the pleading to which it relates," and that "[e]very allegation, except allegations of damages, not explicitly denied is admitted, unless the party states in his or her pleading that he or she has no knowledge thereof sufficient to form a belief, and attaches an affidavit of the truth of the statement of want of knowledge." (Emphasis added.) 735 ILCS 5/2-610(a), (b) (West 2010). "Any admission contained in the original verified pleading, which is not the product of mistake or inadvertence, is a binding judicial admission." Arpac Corp. v. Murray, 226 Ill. App. 3d 65, 80, 589 N.E.2d 640, 652 (1992). Such an admission "has the effect of withdrawing a fact from issue and dispensing wholly with the need for proof of the fact." Id. at 80-81, 589 N.E.2d at 652; Beverly Bank v. Coleman Air Transport, 134 Ill. App. 3d 699, 703, 481 N.E.2d 54, 57 (1985). A judicial admission in a verified pleading "makes it unnecessary for the opposing party to introduce evidence in support thereof." L.D.S., LLC v. Southern Cross Food, Ltd., 2011 IL App (1st) 102379, ¶ 35.

¶ 20 Paragraphs 22 and 23 of Nissan's first amended complaint pertained to its claim that Joseph breached the guaranty agreement (count III). As discussed, paragraph 22 alleged that "[o]n or about February 26, 2007, [Joseph] made, signed, and delivered to [Nissan] a certain Continuing Guaranty Agreement (`Guaranty') in writing, whereby he promised and agreed promptly to pay any and all liabilities of [Abbas Holding] to [Nissan] then existing or due or to be incurred or become due." In Abbas Holding and Joseph's verified answer, Joseph "denies the allegations contained within [p]aragraph 22 of [Nissan's] First Amended Complaint, except the allegation that on or about February 26, 2007, he made, signed, and delivered to [Nissan] a certain Continuing GuarantyAgreement (`Guaranty') in writing, subject to the production and examination of the original document." (Emphasis added.) Paragraph 23 of Nissan's first amended complaint alleged that the guaranty agreement "was continuing, absolute, and unconditional, including all costs and expenses in enforcing the Guaranty. (A copy of the Guaranty is attached hereto as Exhibit D.)" In Abbas Holding and Joseph's verified answer, Joseph "denies the allegations contained within [p]aragraph 23 of [Nissan's] First Amended Complaint, except the allegation that [Nissan] has attached a copy of theGuaranty as Exhibit D." (Emphasis added.)

¶ 21 We find that the italicized and "excepted" portions of Joseph's answers were not explicit denials of the allegations under section 2-610 of the Code and, thus, constituted admissions that Joseph had signed and delivered the guaranty agreement to Nissan and that a copy of the guaranty agreement was attached to Nissan's first amended complaint as an exhibit. Because Abbas Holding and Joseph do not argue that these admissions in the verified answer were the product of mistake or inadvertence, we find them to be binding judicial admissions which had "the effect of discharging the need for any further proof" to prove the existence of the guaranty agreement, as the trial court correctly noted in its April 12, 2011 ruling which granted Nissan's motion to reconsider. Accordingly, Nissan was not required to produce the original guaranty agreement at trial under the best evidence rule, and Joseph's answer to the allegations under paragraph 22 that his admission was made "subject to the production and examination of the original document" had absolutely no legal effect upon Nissan. See Beverly Bank,134 Ill. App. 3d at 704, 481 N.E.2d at 57 (holding that personal guarantor's verified answer admitting plaintiff's allegations that a guaranty had been signed and delivered constituted a binding admission against personal guarantor); see generally In re Estate of Weiland, 338 Ill. App. 3d 585, 604, 788 N.E.2d 811, 827 (2003) (best evidence rule requires the existence of a contract or other writing to be proven by the original writing unless it is shown that the original was lost, destroyed, or otherwise unavailable)."


Comment: it is important to carefully consider any answer to any pleading. An answer that admits a paragraph of a verified complaint should usually be binding on the person making the admission, especially here where sophisticated people borrowed money from a finance company. This is a good decision.


Edward X. Clinton, Jr.

www.clintonlaw.net

'via Blog this'

Read More

For What It's Worth: Two articles in today's Law Bulletin suggest struc...

For What It's Worth: Two articles in today's Law Bulletin suggest struc...: Today's Chicago Daily Law Bulletin carries two articles that expose what may be a structural flaw in the legal profession itself. Too big...

Jack Leyhane points out today that (a) more lawyers are being created every year and (b) the demand for legal services is shrinking.  Worse still, lots of people who could pay for lawyers are now opting to litigate pro se.

He is, of course, correct about these long-term trends in the profession.  I graduated in 1991 and joined Mayer Brown in 1992.  From the first day I was there, it became obvious that there were extra people at the firm, people who were billing time to clients but who were not doing any real work.  The recession in 2008  obviously caused the corporations to notice that they were paying for extra people - lots of extra people.  The corporations became smart - they learned how to cut outside lawyers and bring the work in house or to handle the work very efficiently.  Lawyers who were used to attending team meetings were laid off never to return to the corridors of the large law firms.

The new problem is outsourcing - lots of work can be done competently by outsourcing firms in India and elsewhere.  The routine legal work that employed lots of people is slowly drying up - at least at the corporate level.

This all spells trouble for the law students who have graduated in the past 10 years.  While we produced too many lawyers in 1991, we now produce 2X as many lawyers as there are jobs to fill.  This means misery and unpaid debt for lots of young people.

It also suggests that the law schools have been graduating students who were not qualified to practice law and that this process (social promotion) has caused great harm to the profession.  It is difficult to quantify the number of people who graduate each year and do not have the skills necessary to practice.  What is beyond dispute is that this number is growing, even with an increase in law school tuition and more and more clinical programs.

Edward X. Clinton, Jr.

www.Clintonlaw.net

Read More

Insurance Coverage - State Farm Prevails Because Policyholders No Longer Live In Residence

SCHUCHMAN v. STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY, Dist. Court, SD Illinois 2012 - Google Scholar:

State Farm has won summary judgment in a coverage case.  The plaintiffs purchased homeowners insurance and then made the mistake of moving out to a mobile home.  The residence sustained fire damage and they submitted a claim to State Farm, which denied coverage.

The District Court agreed with State Farm and granted summary judgment.  Because the insurance contract limited State Farm's obligation to insure a "residence," plaintiff's had no claim.

This type of result occurs all the time in the world of insurance coverage - plaintiff buys insurance only to realize that when there is a claim, he has no insurance.

Edward X. Clinton, Jr.


'via Blog this'

Read More

Insured Prevails In Coverage Fight With Progressive Insurance

PROGRESSIVE DIRECT INSURANCE COMPANY v. JUNGKANS, Ill: Appellate Court, 2nd Dist. 2012 - Google Scholar:

This case was recently decided by the Illinois Appellate Court, Second District.

The defendant, Kyle Jungkans, was seriously injured in a motor vehicle accident, while he was riding in a car driven by Billy Watts.

Jungkans settled with State Farm, Watts' insurer, for the policy limits, then sought underinsured motorist coverage under his policy with Progressive Direct.  Progressive denied coverage on the basis that Jungkans' failure to give notice to Progressive before the settlement violated the cooperation clause.  The trial court granted Progressive summary judgment, but the Appellate Court reversed.

Jungkans conceded that he violated the Progressive policy by failing to give notice to Progressive.  However, Progressive was not prejudiced by the settlement because Watts was judgment proof at the time of the accident.  Moreover, Progressive was aware of its subrogation rights before Jungkans entered into the settlement with State Farm.

The Court explains:

As to the knowledge issue:

"¶ 19 We agree with defendant that there is no genuine dispute that State Farm knew in advance of the settlement that plaintiff had a subrogation right against Watts and that this was sufficient to defeat the invocation of the cooperation clause. Bell said plainly that she knew in advance of plaintiff's subrogation right. Although this statement was a conclusion, it hardly required elaboration; Bell would have known whether she had been aware of plaintiff's subrogation right, a routine fact of insurance litigation. Under the case law, that was sufficient. Thus, there is no genuine issue of fact as to whether plaintiff retained its subrogation right, especially as, per Richter, it was ultimately plaintiff's burden to prove that defendant's settlement cut off that right."


As to the prejudice issue, there was no prejudice because the defendant in the underlying case was judgment proof.


"¶ 25 Numerous jurisdictions have held that an insurer may not rely on a technical violation of a cooperation clause to deny coverage if the tortfeasor with whom the insured settled was judgment-proof."


The opinion cites the many cases siding with the insured.


Edward X. Clinton, Jr.


www.clintonlaw.net



'via Blog this'

Read More

Contract Law - Personal Guaranty Enforced in Illinois

The case is a routine collection case for $5,000.  The legal issue is important: the enforceability of a personal guaranty.

TH Davidson and Company v. Eidola Concrete, LLC and Thomas E. Kilbride, 2012 Il App (3d) 110641.

The case originated in small claims court.  Plaintiff sought to recover on a line of credit for $5,600.80.  The trial court entered judgement in that amount against Plaintiff, and against Kilbride, who signed a personal guaranty.

Kilbride appealed on the ground that his guaranty was limited to $1,000.  He based this argument on the original credit application, which he signed as a personal guarantor.  The original credit application was for $1,000.  Later, the parties, through a course of dealing, increased the credit limit to $5,600.

The trial court and the appellate court found that the guaranty was a continuing guaranty.  The opinion at Paragraph 11 quotes the Restatement (Third) of Suretyship and Guaranty § 16: "A continuing guaranty is a contract pursuant to which a person agrees to be a secondary obligor for all future obligations fo the principal obligor to the obligee."  Because the parties contemplated a "future course of dealing" the guaranty was for the maximum amount of credit extended.

Kilbride could have also limited the guaranty by inserting express language into the credit application.  He did not.  Therefore, the guaranty was unlimited.

Comment: clients should never sign a continuing guaranty.  Limiting language should always be inserted.  That being said, my experience is that clients sign these documents all the time and do not consider the consequences until it is too late.

Edward X. Clinton, Jr.

www.clintonlaw.net

Read More

Illinois Court Rejects Challenge To Written Settlement Agreement

Schrager v. Bailey, Ill: Appellate Court, 1st Dist., 1st Div. 2012 - Google Scholar:

This is an odd case in which the plaintiff settled with the defendant, signed a written settlement agreement and release, and then sued again.

The court dismissed the claims in the second case.

The court described the settlement in case No. 1 as follows:

"¶ 5 In 2002, plaintiff Schrager filed a legal malpractice suit against the defendants and attorney James T. Hynes.^[1] The suit alleged that the defendants committed legalmalpractice when they took a voluntary dismissal of a federal suit they had filed on plaintiff Schrager's behalf. The suit was refiled in the circuit court of Cook County only to be dismissed with prejudice based on the single-refiling rule.

¶ 6 In June 2006, plaintiff Schrager agreed to dismiss the malpractice suit and settle his claim against the defendants based on their representation that they had relied on advice from attorney Hynes in deciding to dismiss the federal suit. As part of the settlement negotiations, plaintiff Schrager requested affidavits from the defendants to support their representation. The Agreement provided in pertinent part as follows:

"13. NO CONDITIONS PRECEDENT: Each of the parties to this Agreement acknowledges that no conditions precedent and no promise, inducement, or agreement not stated herein has been made to them in connection with this Agreement except that it is expressly agreed and understood that this Agreement is contingent upon the entry of an order granting Defendants' motion for Good Faith Finding in the Lawsuit.

14. INTEGRATION AND NO RELIANCE CLAUSE//AMENDMENT: This Agreement and the exhibits attached hereto constitute the entire understanding and agreement of the parties hereto and supercede any and all other written or oral agreements, representations or understandings. No representations, inducements, promises or agreements, oral or written have been made by SCHRAGER or Releasees or anyone acting on behalf of Releasees which are not contained herein, and any prior letters of intent, agreement, promises, negotiations, statements or representations not expressly set forth in this Agreement have not been relied upon in any respect and shall be of no force or effect. SCHRAGER agrees and warrants that in entering into this Agreement, SCHRAGER is solely relying upon the information contained in this Agreement and not in reliance upon any other information. No modification, amendment or alteration to this Agreement shall be effective unless in a writing signed by the Parties hereto."

The Agreement also contained an acknowledgment by the parties that they received independent legal advice as to the "effect and import" of its provisions. By June 30, 2006, the Agreement had been signed by all parties.

¶ 7 On July 6, 2006, the circuit court found the Agreement had been made in good faith and dismissed plaintiff Schrager's claims against the defendants."

...

The court holds: "¶ 34 We conclude that the integration/nonreliance clause in the Agreement precluded plaintiff Schrager from proving justifiable reliance, which was fatal to his cause of action for fraud."

I have printed the clauses in the well-drafted settlement agreement to show how good lawyers can draft such clauses to avoid future claims.

Edward X. Clinton, Jr.

www.clintonlaw.net

'via Blog this'

Read More

Insurance Company Has No Duty To Defend Stranger Operating Insured's Car

MERCURY INSURANCE COMPANY OF ILLINOIS v. SMOROVSKY, Dist. Court, ND Illinois 2012 - Google Scholar:

The court granted summary judgment to the insurance company on the ground that the driver of the car, Smorovsky, did not have permission to use the vehicle.  The opinion does not explain how Smorovsky managed to get the car started, whether he had a key or whether the car had been stolen.  There is a hint that Smorovsky was a garage attendant where the car was garaged.

In any event, because he was not an insured under the policy, Smorovsky had no coverage and the insurance company had no duty to defend.

Edward X. Clinton, Jr.

'via Blog this'

Read More