2014 IL App (2d) 140401
Ill. App. Ct.2015Background
- Kenneth Barrick formed Avanti Medical Group to run in-store clinics and sought a bank loan in 2011; Barrick negotiated with BMO VP Matthew Gable.
- Plaintiffs allege a July 12, 2011 "Original Terms and Conditions" (signed by both Gable and Barrick) committing up to $25M; plaintiffs allege a July 28, 2011 "Amended Terms" (signed only by Gable) reduced the facility to $10M and kept the same closing date.
- BMO prepared several contemporaneous "Terms Documents" (commercial/account/secured-account agreements, certificate, forms) some of which bear signatures by both parties but are generic preprinted forms that do not reference the loan terms.
- Plaintiffs claim the Amended Terms (together with the other documents) created a binding credit agreement; BMO refused to close on August 26, 2011, and plaintiffs sued for declaratory relief, breach of contract, tortious interference, and breach of fiduciary duty.
- BMO moved to dismiss under section 2-619(a)(9), arguing the Credit Agreements Act bars the suit because the alleged credit agreement was not a signed writing by both creditor and debtor; the trial court dismissed with prejudice.
- On appeal the Second District affirmed, holding plaintiffs failed to plead a credit agreement that met the Credit Agreements Act signature and term-requirements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Amended Terms (and related documents) satisfy the Credit Agreements Act requirement that a credit agreement be in writing, set forth relevant terms, and be signed by creditor and debtor | Amended Terms and the contemporaneous Terms Documents should be read together so that signatures scattered among documents satisfy the Act; plaintiffs contend Amended Terms is part of an integrated agreement | Amended Terms is signed only by BMO (Gable); section 2 requires a written agreement signed by both creditor and debtor; the only document with the loan terms lacks the debtor’s signature | Court held plaintiffs failed to plead a credit agreement meeting section 2 because the document that set forth the loan terms (Amended Terms) was signed only by the creditor and the signed documents that included both parties were generic and did not set forth the loan terms |
| Whether multiple documents executed in the same transaction may be aggregated to satisfy the Act’s signature requirement | Plaintiffs urged aggregation: some Terms Documents bear signatures of both parties, so combined the writing requirement is met | BMO argued aggregation cannot cure that the document containing the loan terms lacks the debtor’s signature; the generic signed forms don’t evidence the loan terms | Court declined to establish a broad rule for aggregation but required that the relevant loan terms be discernible in documents signed by both parties; here they were not, so aggregation failed |
| Whether the complaint adequately alleged the loan’s essential terms and conditions required by the Act | Plaintiffs relied on Amended Terms for terms (amount, closing date) plus other forms allegedly completing the arrangement | BMO argued the Amended Terms lacked sufficiently definite interest/maturity terms and conditions precedent (e.g., acceptable collateral) and plaintiffs didn’t plead satisfaction of those conditions | Court agreed that the only document stating loan terms (Amended Terms) was signed only by BMO and the signed ancillary documents were generic and did not establish the required terms or satisfaction of conditions |
| Whether dismissal should be with prejudice under section 2-619(a)(9) based on affirmative matter (the Act) defeating the claim | Plaintiffs argued their pleadings sufficiently alleged an enforceable agreement and facts to survive dismissal | BMO argued the Credit Agreements Act is affirmative matter barring any action based on an unsigned-by-both credit agreement | Court affirmed dismissal (with prejudice) because the Act barred the action; signature defect was a sufficient ground to affirm |
Key Cases Cited
- McAloon v. Northwest Bancorp, Inc., 274 Ill. App. 3d 758 (Illinois Appellate Court) (Credit Agreements Act requires a credit agreement signed by both creditor and debtor)
- R&B Kapital Development, LLC v. North Shore Community Bank & Trust Co., 358 Ill. App. 3d 912 (Illinois Appellate Court) (an escrow or ancillary document can be integral to a comprehensive credit agreement)
- Bank One, Springfield v. Roscetti, 309 Ill. App. 3d 1048 (Illinois Appellate Court) (multiple documents can together form a comprehensive credit agreement)
- Help At Home, Inc. v. Medical Capital, L.L.C., 260 F.3d 748 (7th Cir.) (federal court applying Illinois law declined to decide whether signatures on multiple documents may be aggregated and found the signed documents did not encompass entire loan terms)