McGinley Partners, LLC v. Royalty Properties, LLC
117 N.E.3d 1207
Ill. App. Ct.2018Background
- In 2006 Royalty Properties, LLC (formed by Richard and Meryl Cannon) borrowed $1.5M from Horizon Farms, secured by a mortgage; the Cannons personally guaranteed the note. Horizon Farms dissolved and assigned the note to a marital trust, which later assigned it to McGinley Partners, LLC (plaintiff).
- Defendants defaulted; plaintiff sued in 2014 on the note and guaranty after prior foreclosure litigation on the primary mortgage produced a deficiency judgment against defendants.
- Plaintiff obtained summary judgment; at prove-up defendants contested the interest used (20%) as usurious and sought to amend to plead usury/Interest Act defenses.
- Trial court initially allowed amendment but reconsidered, denied leave to amend (finding waiver), held the Interest Act’s mortgage and corporate-loan exceptions applied, and entered judgment for $8,320,669.43.
- Defendants appealed, arguing (1) the claim was barred by the five‑year corporate survival statute, (2) assignment discharged the guaranty, and (3) usury/Interest Act defenses were available.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of corporate survival statute (805 ILCS 5/12.80) to suit enforcing assigned promissory note | McGinley: statute inapplicable because the note was assigned and plaintiff sues as assignee, not as or against dissolved corporation | Cannons: Horizon’s assignment was subject to five‑year survival rule; claim is time‑barred | Held: Survival statute inapplicable to enforcement of fixed, assignable debt; assignee (plaintiff) may enforce the note—summary judgment affirmed |
| Whether assignment of the note/guaranty discharged guarantors | McGinley: guaranty expressly covers successors/assigns and permits enforcement by subsequent holders; no material change in obligations | Cannons: assignment (including to trust) materially altered guaranty and relieved guarantors | Held: Assignment did not materially increase guarantors’ risk; guaranty language and reaffirmation (extension) preserve liability—guarantors not discharged |
| Usury / Interest Act (815 ILCS 205/4) challenge to 20% default rate | McGinley: Interest Act exceptions apply (mortgage and loans to corporations); note unambiguous; plaintiff may sue on note and still rely on exceptions | Cannons: Interest Act caps at 9% (or 5% default); loan was personal/residential and structured to evade statute; usury defense available | Held: Mortgage exception (loans secured by real estate) and corporation exception apply; no ambiguity in rate language; usury defense inapplicable—trial court’s reconsideration affirmed |
Key Cases Cited
- Shute v. Chambers, 142 Ill. App. 3d 948 (Ill. App. 1986) (promissory notes are fixed assets that pass to shareholders/assignees on dissolution and lie outside corporate survival bar)
- Lake County Trust Co. v. Two Bar B, Inc., 182 Ill. App. 3d 186 (Ill. App. 1989) (applies Shute reasoning; enforcement of assigned note not barred by survival statute)
- Dubey v. Abam Building Corp., 266 Ill. App. 3d 44 (Ill. App. 1994) (transferee of fixed debt steps into corporation’s shoes and is not bound by survival statute)
- Pielet v. Pielet, 2012 IL 112064 (Ill. 2012) (clarifies corporate survival statute does not create post‑dissolution causes of action; distinguishes which claims fall under the statute)
- Sharif v. International Development Group, 399 F.3d 857 (7th Cir. 2005) (distinguishes open‑ended breach claims from fixed, ascertainable promissory notes for survival‑statute purposes)