Bank of America, N.A. v. Freed
2012 IL App (1st) 110749
| Ill. App. Ct. | 2012Background
- Bank foreclosed a $205 million loan on Block 37; Freed and DDL LLC guaranteed the loan.
- Guaranty contained section 1(c) carve-outs making guarantors liable for the full loan if borrowers contested action to appoint a receiver or foreclose.
- Bank sought and obtained summary judgment; judgment entered for full loan amount plus costs and interest.
- Citations to discover assets were served; defendants moved for substitution of judge; motion denied.
- Bank later sought charging orders on 72 LLCs/LPs in which Freed and DDL had interests; receiver appointed; several orders on charging and sale of interests.
- These appeals were consolidated to review (summary judgment, substitution of judge, charging orders).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Substitution of judge as of right | Bank argues issue forfeited; substitution not allowed after related orders. | Freed/DDL insist the citation proceedings created a new proceeding requiring substitution of judge as of right. | Affirmed denial of substitution; issue forfeited. |
| Enforceability of carve-out provision 1(c) | Section 1(c) enforces full recourse when defendants contest actions involving receiver/foreclosure. | 1(c) is vague/penalty, unenforceable, and improperly used to restrict due process. | Carve-out is enforceable; not a penalty; triggers full liability when action taken. |
| Full amount judgment against guarantors | Carve-out converts guarantors to full recourse liability for the loan. | 1(c) is overbroad and damages do not reflect actual harm; violates policy against penalties. | Judgment for full amount affirmed. |
| Charging orders against nonparty LLCs/LPs | Courts may charge distributional interests without joining every entity. | Entities must be joined; serving only on judgment debtor is insufficient. | Charging orders proper; court jurisdiction over debtor suffices; nonparties need not be joined. |
Key Cases Cited
- Chicago Title & Trust Co. v. Telco Capital Corp., 292 Ill. App. 3d 553 (Ill. App. 1st Dist. (1997)) (de novo review for summary judgments; charging orders context)
- D’Agostino v. Lynch, 382 Ill. App. 3d 639 (Ill. App. 2d Dist. (2008)) (postjudgment motions; tolling of appeal period)
- Kingbrook, Inc. v. Pupurs, 202 Ill. 2d 24 (Ill. 2002) (sufficiency of postjudgment motion to toll appeal period)
- Vanderplow v. Krych, 332 Ill. App. 3d 51 (Ill. App. 1st Dist. (2002)) (postjudgment motions and tolling principles)
- Monat v. County of Cook, 322 Ill. App. 3d 499 (Ill. App. 1st Dist. (2001)) (standards for postjudgment relief)
- Roselle Police Pension Bd. v. Village of Roselle, 232 Ill. 2d 546 (Ill. 2009) (statutory interpretation and absurd results avoidance)
- Schak v. Blom, 334 Ill. App. 3d 129 (Ill. App. 2d Dist. (2002)) (service of citations in land-trust-like interests)
- First Mid-Illinois Bank & Trust, N.A. v. Parker, 403 Ill. App. 3d 784 (Ill. App. 4th Dist. (2010)) (charging orders and party participation)
- CSFB 2001-CP-4 Princeton Park Corporate Center, LLC v. SB Rental I, LLC, 980 A.2d 1 (N.J. Super. Ct. App. Div. (2009)) (nonrecourse carve-out clause enforcement; actual damages)
- ING Real Estate Finance (USA) LLC v. Park Avenue Hotel Acquisitions LLC, 907 N.Y.S.2d 437 (N.Y. Sup. Ct. (2010)) (distinguishes cases involving tax-related carve-outs)