Opinion
Case No. 98 C 0366
March 23, 1999
MEMORANDUM OPINION AND ORDER
Plaintiff Equitable Life Assurance Society of the United States ("Equitable") filed a claim against Defendant Steve T. Shen ("Shen") seeking rent, attorneys' fees, costs and interest pursuant to a personal guaranty ("Guaranty") that Shen executed on behalf of a corporation's real estate lease. Shen admits that he is the guarantor of a corporation that defaulted on a lease agreement by failing to pay rent due and owing since September 1, 1997. However, Shen argues that Equitable failed to mitigate its damages after December 31, 1997. Equitable now moves the court for a partial summary judgment on its behalf, under Rule 56 of the Federal Rules of Civil Procedure for certain rent payments due and owing for the period of September 1 through December 31, 1997. For the reasons set forth below, the court grants Equitable's motion for partial summary judgment.
Background
Equitable, a New York corporation, is the fee simple owner of real property and improvements known as 1688 Glenn Ellyn Road, Glendale Heights, Illinois ("the Premises"). (Pl.'s 12(M) Stmt. ¶ 1.) Equitable is the successor-in-interest as lessor to the November 4, 1987 lease agreement and Guaranty, both of which Shen, an Illinois resident and citizen, executed on behalf of Ulti-Med International, Inc. ("Ulti-Med"). (Pl.'s 12(M) Stmt ¶¶ 3-5,7.) Pursuant to the terms of the Guaranty, Shen irrevocably and unconditionally guaranteed: (i) the full, timely and complete payment of all rent and other sums payable by Ulti-Med to lessor under the lease and any amendments or modifications thereto, and (ii) performance of all covenants. (Pl.'s 12(M) Stmt. ¶ 6; Compl. Ex. B ¶ 1.)
On September 15, 1993, Equitable and Ulti-Med amended the lease to rent the Premises for an additional five-years, to begin on October 1, 1998 and extending through September 30, 2003. (Pl.'s 12(M) Stmt. ¶ 8.) Ulti-Med, however defaulted under the lease by failing to pay rent due and owing since September 1, 1997. (Pl.'s 12(M) Stmt. ¶ 9.) As a result, Equitable instituted a forcible entry and detainer proceeding against Ulti-Med in state court. During the period of September 1 and December 31, 1997, Ulti-Med was in full possession of the Premises. (Pl.'s Mot. ¶ 2; Def.'s 12(N) Stmt. ¶ 2.) Parties do not dispute that triable issues may exist as to whether Equitable was under a duty to mitigate damages after December 31, 1997, when Ulti-Med was no longer on the Premises. (Pl.'s Mot. ¶ 4.) On January 26, 1998, the Circuit Court of the Eighteenth Judicial Circuit, DuPage County, Illinois, entered a $164,502.40 judgment against Ulti-Med for rent owed from September 1 through December 31, 1997. (Pl.'s 12(M) Stmt. ¶¶ 10, 11, App. 4.)
The lease and Guaranty define Equitable's damages and provide for the payment of base rent and additional rent, including real estate taxes, operating expenses, late charges, and interest. (Pl.'s 12(M) Stmt. ¶¶ 14, 15; Compl. Ex. A, §§ 1.13(a), 3.01, 4.01, 4.02, 4.03, 4.06, 4.07; Compl. Ex. B; Gibbons Aff. ¶ 12.) Equitable calculated total damages for unpaid and additional rent for September 1 through December 31, 1997 at $189,138.40, then subtracted a $25,000 security deposit, and arrived at $164,138.40 as the total amount Shen owes Equitable for Ulti-Med's September through December, 1997 rental delinquency. (Pl.'s 12(M) Stmt. ¶¶ 16, 17.)
Shen does not dispute that Ulti-Med defaulted on its obligations under the lease and occupied the Premises from September through December, 1997 without paying rent. Nor does he dispute that he executed the November 4, 1987 Guaranty.
Shen's fails comply with Local Rule 12(N)(3) because his 12(N) Statement does not contain a concise response to Equitable's 12(M) Statement. Where a non-movant's response fails to comply with the precise requirements of Rule 12(N)(3), the material facts set forth in the 12(M)(3) statement may also be deemed to be admitted. See Valenti v. Qualex, Inc., 970 F.2d 363, 369 (7th Cir. 1992). The Seventh Circuit has consistently required strict compliance with rule 12(N). See Johnson v. Gudmundsson, 35 F.3d 1104, 1108 (7th Cir. 1994). Therefore, because they are uncontroverted by Shen, the court must deem the material facts set forth in Equitable's 12(M) Statement admitted. See Tobey v. Extel/JWP, Inc., 985 F.2d 330, 332 (7th Cir. 1993). However, this court is not relieved of its obligation to determine whether there is a genuine issue of material fact. Johnson, 35 F.3d at 1116.
On August 27, 1998, Equitable filed a motion for partial summary judgment in its favor as to the amount Shen owes for the period between September 1 and December 31, 1997.
Motion for Summary Judgment
Equitable moves the court to enter a partial summary judgment on its behalf under Rule 56 of the Federal Rules of Civil Procedure. The court will render summary judgment only if the factual record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."Bratton v. Roadway Package Sys., Inc., 77 F.3d 168, 173 (7th Cir. 1996) (quoting Fed.R.Civ.P. 56(c)). The court will not render summary judgment if "a reasonable jury could return a verdict for the nonmoving party." Sullivan v. Cox, 78 F.3d 322, 325 (7th Cir. 1996) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). In ruling on a motion for summary judgment, the court views the facts in the light most favorable to the nonmoving party. Bratton, 77 F.3d at 171 (citation omitted); Sullivan, 78 F.3d at 325 (citation omitted).
On a motion for summary judgment, the moving party "bears the initial burden of showing that no genuine issue of material fact exists." Hudson Ins. Co. v. City of Chicago Heights, 48 F.3d 234, 237 (7th Cir. 1995) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Then the burden shifts to the nonmoving party, which "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); accord, NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 234 (7th Cir. 1995) (citation omitted), cert. denied, 155 S. Ct. 2249 (1995). Whether a disputed fact is material depends on the relevant substantive law. Anderson, 477 U.S. at 248; Sullivan, 78 F.3d at 325.
These burdens are reflected in Rule 12 of the Local General Rules for the Northern District of Illinois. Waldridge v. American Hoechst Corp., 24 F.3d 918, 921-22 (7th Cir. 1994). Under Rule 12(M)(3), the moving party must submit a statement of material facts in the form of short numbered paragraphs supported by specific references to the factual record. Under Rule 12(N)(3), the nonmoving party must submit a response to each such paragraph, including (in the case of disagreement) specific references to the factual record. If the nonmoving party fails to disagree with a fact in the moving party's 12(M) statement, the court will deem that fact admitted. See Local Rule 12(N)(3). Similarly, if the nonmoving party disagrees with a fact in the moving party's statement but fails to support its disagreement with a specific reference to the factual record, the court may deem that fact admitted as well. Fed.R.Civ.P. 56(e); Flaherty v. Gas Research Institute, 31 F.3d 451, 453 (7th Cir. 1994) (citations omitted). The Seventh Circuit Court of Appeals has "repeatedly upheld the strict enforcement of these rules." Waldridge, 24 F.3d at 922;e.g., Knoblauch v. DEF Express Corp., 86 F.3d 684, 690 (7th Cir. 1996).
Rule 12(N)(3) further instructs the nonmoving party to submit a statement of any additional facts requiring denial of summary judgment, in the form of short numbered paragraphs supported by specific references to the factual record. In turn, Rule 12(M)(3) instructs the moving party to submit a concise reply to any such additional facts, including (in the case of disagreement) specific references to the factual record.
Analysis
Plaintiff asks the court to enter judgment against Shen, as guarantor under Ulti-Med's lease with Equitable, for rents due from the period of September 1 to December 31, 1997. Summary Judgment is an appropriate means for plaintiffs to obtain a judgment against a guarantor, when a defendant admits executing a guaranty and does not plead an affirmative defense for breach of contract, like duress. See BA Mortg. Intern. Realty Corp. v. LaSalle Nat. Bank, 535 F. Supp. 435, 438-39 (N.D. Ill. 1982).
In support of its motion for partial summary judgment, Equitable submits that, from September 1 through December 31, 1997, Ulti-Med remained in possession of the Premises, but failed to make the monthly rent payments required by the lease. In response to Ulti-Med's default, Equitable commenced a forcible entry and detainer action in state court, and in December 1997 received an immediate order of possession, and later in January 1998 received a $164,502.40 judgment against Ulti-Med for rent due from September 1 through December 31, 1997. (Pl.'s 12(M) Stmt. ¶¶ 10, 11, App. 4.) Therefore, it is undisputed that the Ulti-Med breached its contractual obligations under the terms of the lease. Equitable filed before this court, on January 22, 1998, its complaint against Shen for his breach of the Guaranty of Ulti-Med's lease.
Having reviewed the memoranda, affidavits, and exhibits submitted by the parties, the court concludes that Shen is liable to Equitable for $164,138.40. "A guarantor promises to answer for the payment of a debt or the performance of an obligation to a creditor (or obligee) upon default by the principal of the payment or performance." Matter of L S Industries, Inc., 989 F.2d 929, 934 (7th Cir. 1993). Neither party disputes Shen's role as guarantor or his liability for Ulti-Med's obligations under the lease. (Def.'s 12(N) Stmt. ¶ 3.) Instead, in response to plaintiff's motion for partial summary judgment, Shen takes issue with Equitable's calculation of the damages.
First, Shen notes that in November, 1997, Ulti-Med made an assignment for the benefit of creditors, and the assignee collected thousands of dollars from the sale of Ulti-Med's assets. (Def.'s 12(N) Stmt. ¶¶ 4-6.) The record supports Equitable's argument that it did not receive any additional funds from the assignee other than the January 1998 rent payment. Equitable was not a party to the assignment for the benefit of creditors and had specifically informed Ulti-Med in October 1997 that it would proceed with its then pending forcible entry and detainer action. (Pl.'s Resp. to Def.'s 12(N) Stmt. ¶¶ 4-7, Gibbons Aff. II Ex. A.) In addition, a March 31, 1998 final report to the creditors of Ulti-Med from the assignee states that LaSalle Bank received all the proceeds from the liquidation of Ulti-Med's assets. (Pl.'s Resp. to Def.'s 12(N) Stmt. ¶ 5, Ex. B.)
Next, Shen argues that Equitable received a $50,000 rent or settlement payment in January, 1998 from the assignee but failed to give Ulti-Med any credit for that amount. (Id. ¶¶ 7, 8.) This argument is without merit. The facts in the record support Equitable's assertion that it negotiated an agreement with the assignee for the benefit of Ulti-Med's creditors whereby Equitable would forego placing its December 1997 order of immediate possession in return for a $50,000 payment for January 1998 rent. This agreement allowed the assignee to safely collect and remove Ulti-Med's assets from the Premises for purposes of sale. (Pl.'s Res. to Def.'s 12(N) Stmt. ¶ 7; Graney Aff., Ex. B, C.) Therefore, the $50,000 payment from the assignee is properly credited against any liability for rent owed from January 1998 through September 2003, a time period subject to further litigation after this motion for partial summary judgment is resolved.
Finally, Shen contends that Equitable's damages calculation is erroneous and somehow prevents him from independently verifying whether Equitable failed to give Ulti-Med credit for any additional sums of money Equitable may have received. (Def.'s 12(N) Stmt. ¶¶ 9, 10; Shen Aff. ¶¶ 7-12; Def.'s Resp. ¶¶ 6-9.) Shen "cannot create an issue of material fact through conjecture or speculation as to what evidence might be adduced at trial or what might be turned up by further discovery." BA Mortg. Intern. Realty Corp., 535 F. Supp. at 438. Furthermore, as guarantor, Shen has the duty to find out exactly how much he owes Equitable. He neither suggests that he will attempt to obtain this information, nor explains why he is unable to do so at this time. "In the context of the guarantor-guarantee relationship, there is no duty of care or loyalty requiring disclosure by the guarantee to the guarantor; [the court] assumes they do their own investigation."Chrysler Credit Corp. v. Marino, 63 F.3d 574, 580 (7th Cir. 1995) citing Continental Bank, N.A. v. Everett, 964 F.2d 701, 703 (7th Cir.) (citations omitted) cert. denied, 506 U.S. 1035 (1992);Magna Bank v. Jameson, 604 N.E.2d 541, 544 (1992).
The court will not forego resolution of this matter without at least some evidence to disprove Equitable's claims. Shen has provided no facts sufficient to create a genuine issue as to whether he owes plaintiff the full amount claimed. An Illinois court has already determined that for rent, during the period of September 1 to December 31, 1997, Ulti-Med owes plaintiff $164,138.40. The court will not question the validity and accuracy of this state court final judgment. See Torres v. Rebarchak, 814 F.2d 1219, 1222 (7th Cir. 1987) (barring plaintiff from requesting equitable relief in federal court since her claims were adjudicated on the merits in a forcible entry and detainer action); Reconstruction Finance Corp. v. Central Republic T. Co., 128 F.2d 242, 244 (7th Cir. 1942) (finding that claim against trust company in state court proceeding involving settlement of company's accounts as trustee was conclusive against the company's stockholders as to existence, validity, and amount of claim.) As guarantor, Shen is personally liable for this obligation. He has not shown that he has any affirmative defense to liability and therefore, the court must grant plaintiff's motion for partial summary judgment.
Conclusion
For the reasons set forth above, the court grants plaintiff's motion for partial summary judgment. [11-1] At the conclusion of this action, the court will enter judgment in favor of Equitable against Shen in the amount of $164,138.40. The parties are instructed to discuss settlement before the next date scheduled in this case.