McGinley Partners, LLC v. Royalty Properties, LLC
117 N.E.3d 1207
Ill. App. Ct.2019Background
- In 2006 Royalty Properties, LLC (formed by Richard and Meryl Cannon) borrowed $1.5 million from Horizon Farms, secured by a mortgage; the Cannons signed a personal guaranty. The note matured in 2007 and provided a contract/default rate up to 20%.
- Horizon Farms dissolved and assigned the note to the William J. McGinley Marital Trust (then to McGinley Partners, LLC). Plaintiff McGinley Partners sued in 2014 to enforce the note and guaranty after default.
- Defendants raised defenses including (a) that Horizon Farms’ dissolution and the five-year corporate survival statute barred the claim, (b) that assignments discharged the guaranty, and (c) that the interest claimed (20%) was usurious under the Illinois Interest Act.
- Trial court granted summary judgment for plaintiff, later allowed defendants to amend to plead Interest Act/usury defenses but then reconsidered, holding the usury defense waived and, in any event, inapplicable because the note was mortgage‑secured (and/or made to a corporation). Judgment entered for $8,320,669.43.
- On appeal the First District affirmed: the corporate survival statute did not bar the claim (note was a fixed, assignable asset); the guaranty was not discharged by assignment; and the Interest Act’s 9% cap did not apply because of statutory exceptions (mortgage and loans to corporations).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Applicability of corporate survival statute (805 ILCS 5/12.80) | McGinley: statute inapplicable because plaintiff is an assignee enforcing a fixed, assigned promissory note (not suing as/against dissolved corp). | Cannons: Horizon Farms had dissolved and the five‑year survival window expired, so the assigned claim is time‑barred. | Affirmed for plaintiff — survival statute does not bar enforcement of a fixed promissory note assigned pre‑default; assignee steps into corporation’s rights. |
| 2) Whether assignments discharged guaranty | McGinley: guaranty expressly permits enforcement by successors/assigns and was reaffirmed; no material change in risk. | Cannons: assignments (including to the trust) materially altered terms/notice and discharged guaranty. | Affirmed for plaintiff — guaranty language and subsequent reaffirmation show no material change/discharge. |
| 3) Availability of usury defense and amendment | McGinley: usury was waived by defendants’ pleading failure; amendment after summary judgment improper. | Cannons: trial court initially allowed amendment; usury challenge applies to 20% interest. | Trial court’s reconsideration affirmed in part — waiver found, but disposition also rests on merits (Interest Act exceptions). |
| 4) Whether the Interest Act’s 9% cap applies (usury) | McGinley: Interest Act exceptions apply (mortgage; loans to corporations) so 20% valid. | Cannons: loan was personal/residential in purpose; suing on note should not allow reliance on mortgage exception; language ambiguous. | Affirmed for plaintiff — mortgage exception and the “loan to a corporation” exception make the Interest Act cap inapplicable; note language not ambiguous. |
Key Cases Cited
- Shute v. Chambers, 142 Ill. App. 3d 948 (Ill. App. 1986) (fixed, ascertainable debts of a dissolved corporation may be enforced by transferees/shareholders and are not barred by the corporate survival statute)
- Lake County Trust Co. v. Two Bar B, Inc., 182 Ill. App. 3d 186 (Ill. App. 1989) (applies Shute to enforcement of assigned note/assignment of rents against a dissolved corporation’s assignee)
- 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 corporate survival statute)
- Pielet v. Pielet, 2012 IL 112064 (Ill. 2012) (clarifies limits of corporate survival statute—postdissolution claims that did not exist at dissolution are not created by the statute)
- Sharif v. International Development Group, 399 F.3d 857 (7th Cir. 2005) (distinguishes open‑ended breach claims from fixed promissory notes for purposes of the corporate survival rule)