Harris N.A. v. Loren W. Hershey
711 F.3d 794
| 7th Cir. | 2013Background
- Harris N.A. loaned Acadia Investments L.C. up to $12.5 million (later $15.5 million) with Hershey guaranteeing the debt.
- Forbearance was granted in June 2009 after Acadia defaulted in February 2009, with a $3 million principal payment due by August 6, 2009.
- Acadia failed to make the August 2009 payment, Harris declared default, and filed suit to collect and enforce Hershey’s guaranty.
- District court granted summary judgment to Harris on all issues except prejudgment interest, which was resolved by stipulation; final judgment issued February 4, 2011.
- Hershey appealed, challenging the forbearance, alleged misrepresentations, duress, and the prejudgment interest calculation; Acadia’s appeal was stayed in bankruptcy.
- The Seventh Circuit affirmed the district court and imposed Rule 38 sanctions for a frivolous appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of forbearance under Illinois Act | Harris argues no oral modifications; Act requires written modification signed by both parties. | Hershey contends promises during negotiations affected validity; forbearance should be invalidated. | Defenses fail; Act’s writing requirement applies; no valid modification. |
| Fraudulent inducement, duress, and related defenses | Forbearance induced by Harris’s alleged promises; misrepresentations taint the agreement. | Hershey asserts Harris’s promises induced the forbearance and breached duties of good faith. | Defenses fail; no evidence of enforceable inducement; forbearance remains valid. |
| Commercial reasonableness of acceleration | Acceleration was permitted under the forbearance terms after default; timely due. | Hershey contends rejection of certain interest payments and collateral concerns show unreasonableness. | Acceleration was proper; interest payments did not alter default or remedy. |
| Prejudgment interest calculation | Disputed LIBOR-based portion; settlement resolved the amount. | Dispute over calculation and whether certain periods bear LIBOR rate. | Final judgment affirmed; prejudgment interest amount upheld per stipulation. |
Key Cases Cited
- Whirlpool Financial Corp. v. Sevaux, 874 F. Supp. 181 (N.D. Ill. 1994) (strong form of statute of frauds—writing requirement for modifications)
- Ruderer v. Fines, 614 F.2d 1128 (7th Cir. 1980) (Rule 38 sanctions and appellate damages considerations)
- Spiegel v. Continental Illinois Nat’l Bank, 790 F.2d 638 (7th Cir. 1986) (frivolous appeal standards and sanctions guidance)
- Smeigh v. Johns Manville, Inc., 643 F.3d 554 (7th Cir. 2011) (addressing appellate sanctions and coherence of arguments)
- Williams v. U.S. Postal Service, 873 F.2d 1069 (7th Cir. 1989) (frivolous appeal standards and dismissals)
- Rosenburg v. Lincoln American Life Ins. Co., 883 F.2d 1328 (7th Cir. 1989) (considerations for evaluating arguments and record evidence)
- Greviskes v. Universities Research Ass’n, Inc., 417 F.3d 752 (7th Cir. 2005) (sanctions and evidence-based argument requirements)
- Spiegel v. Continental Illinois Nat’l Bank, 790 F.2d 638 (7th Cir. 1986) (reiterated standards for frivolous appeals)
- Indianapolis Colts v. Mayor and City Council of Baltimore, 775 F.2d 177 (4th Cir. 1985) (frivolous appeal standard and evidentiary considerations)
- Whirlpool Financial Corp. v. Sevaux, 874 F. Supp. 181 (N.D. Ill. 1994) (statute of frauds in credit agreements)