Opinion
No. 07 CV 0262.
July 24, 2007
Jonathan H. Claydon, One of Its Attorneys. Frederic R. Klein, Steven A. Levy, Jonathan H. Claydon, GOLDBERG, KOHN, BELL, BLACK, ROSENBLOOM MORITZ, LTD., Chicago, Illinois.
PLAINTIFF'S MOTION FOR ENTRY OF JUDGMENT PURSUANT TO SETTLEMENT TERMS
Plaintiff Fitraco, N.V. ("Fitraco"), by its undersigned counsel, hereby moves this Court for the entry of a judgment against Defendant E. Thomas Wold ("Wold") pursuant to the Settlement Terms ("Settlement") reached by the parties on July 12, 2007 following a settlement conference with this Court. In support thereof, Fitraco states as follows:
1. On July 12, 2007, Fitraco and Wold entered into the Settlement which resolved the dispute underlying this cause of action. A true and correct copy of the Settlement is attached hereto as Exhibit A. In the Settlement, the parties agreed that this action would be terminated by entry of a consent judgment against Wold. Paragraph 2(a) of the Settlement provides that:
(a) Wold will execute a consent judgment in the Federal Lawsuit in the amount of $732,000 which will not be enforced unless Wold fails to make a payment when due pursuant to ¶ 1. If Wold fails to make any payment when, due, Fitraco will be entitled to collect the judgment in the amount of $732,000 less any payments that Wold has made prior to the default. The Federal Lawsuit will be terminated by the entry of the consent judgment against Wold. If and when Wold has made all the payments required by ¶ 1, Fitraco will execute a release and satisfaction of the consent judgment.
2. Alternatively, to protect Wold against the possibility that the entry of the contemplated consent judgment would constitute an event of default on Wold's other current financial obligations, Paragraph 2(b) of the Settlement provides that:
(b) Provided, however that if by July 16, 2007, Wold produces to Fitraco's counsel a loan agreement demonstrating that such a consent judgment would be an event of default under a current loan, the parties agree to the following alternative to ¶ 2(a): In the event that Wold fails to make any payment when due as set out in ¶ 1, Fitraco shall be entitled to bring an action for breach of this settlement agreement for damages in the amount of $732,000 less any payments Wold has made, plus Fitraco's attorneys' fees and costs to bring the action, and Wold agrees that he will not contest or raise any defense to such an action except: (i) that he actually made a payment that Fitraco claims was not made, or (ii) that Fitraco miscalculated the amount due. If this alternative is implemented, the Federal Lawsuit will be dismissed with prejudice. If and when Wold has made all payments required by ¶ 1, Fitraco will execute a release and satisfaction of Wold's obligations under this agreement and the guarantee that is that subject of the Federal Action.
3. On July 16, 2007, Wold sent to Fitraco's counsel a letter attaching two loan agreements, and marking provisions thereof, purporting to satisfy the condition set forth in Paragraph 2(b), and stating simply that it would be necessary to proceed "according to the alternative provision in the settlement agreement and dismiss the lawsuit with prejudice." A true and correct copy of the July 16, 2007 letter is attached hereto asExhibit B. The letter contained no analysis or explanation of Wold's belief that the condition necessary to invoke Paragraph 2(b) was satisfied.
4. Fitraco disagreed with Wold's analysis, and sent a letter to Wold's counsel explaining the basis for that disagreement on July 17, 2007. A true and correct copy of the July 17, 2007 letter is attached hereto as Exhibit C. As set forth in Fitraco's July 17, 2007 letter, Fitraco does not believe that Wold has presented any documentation that demonstrates, as required by the Settlement, that the entry of "a consent judgment would be an event of default under a current loan."
5. One of the promissory notes presented by Wold is executed by Wold himself, and one is executed by Time Escape, LLC ("Time Escape"). There is no evidence, however, that either loan is current. Moreover, with respect to the Time Escape note, Fitraco assumes that Wold is taking the position that he is a guarantor of the loan, and that pursuant to the provision of the Time Escape note entitled "Events Affecting Guarantor", an Event of Default as to Mr. Wold personally would constitute an Event of Default as to Time Escape.
6. Assuming arguendo, however, that (1) a default in a Time Escape loan, as opposed to a loan owed by Wold, is sufficient to trigger the contingency in the Settlement, (2) that both loans are current, and (3) that Wold is a guarantor of the Time Escape loan, the provisions relied upon by Wold do not demonstrate that the entry of a consent judgment as contemplated by the Settlement would constitute an Event of Default under either of these loans.
7. First, Wold relies on a provision of the two loans stating that an Event of Default committed by the borrower (or presumably, by any guarantor) of any other loan of any other creditor that materially affects the borrower's (or any guarantor's) property or ability to repay the debt (or pay the guaranty) is an event of default. Wold's default to Fitraco, however, occurred in October, 2004, when he failed to make a payment on his guaranty to Fitraco as demanded. The consent judgment itself is not a default; it is the result of negotiations following the default. Moreover, there is no indication that the entry of a consent judgment as contemplated by the Settlement would materially affect Wold's ability to repay either his own note, or to repay any Time Escape obligation he has guaranteed. In fact, Fitraco assumes that the reason that Wold asserted that he could pay Fitraco no more than $5,000 per month was to ensure that his remaining cash flow would be sufficient to service his other financial obligations.
8. Second, Wold relies on a provision of the two loans stating that the commencement of foreclosure or forfeiture provisions or other actions relating to any collateral securing the current loan (or, presumably, securing any guaranty by Wold of Time Escape's loan) shall constitute an Event of Default. Fitraco's guaranty lawsuit against Wold, and the resulting consent judgment, however, do not in any way seek to foreclose upon or seek the forfeiture of any collateral that might be securing Wold's other loans, or that possibly secures Wold's guaranty of Time Escape's loan. Accordingly, this provision does not apply.
9. On July 18, 2007, Wold's counsel responded to Fitraco's July 17, 2007 letter. A true and correct copy of the July 18, 2007 letter is attached hereto as Exhibit D. Therein, Wold claims that notwithstanding his failure to pay under the guaranty since Fitraco's demand in October, 2004, he is not in default under the terms of the guaranty without a judicial finding that he is, in fact, in default, so that he would not actually default under the Fitraco guaranty until the consent judgment is entered. There is no basis for this contention; no judicial finding is necessary to demonstrate to Wold's other lenders that Wold's failure to pay the amounts demanded by Fitraco since 2004 constitutes an event of default. Moreover, unless Wold has hidden those facts from his other lenders, they are undoubtedly already aware of his failure to pay Fitraco.
10. Additionally, Wold asserts in his July 18, 2007 letter that a consent judgment as contemplated by the Settlement would interfere with his ability to repay his other debts. Wold, however, does not produce any evidence to support this assertion, nor does he produce any evidence that such an interference would rise to the level of materially affecting his ability to repay his obligations.
11. Wold does not in any way in his July 18, 2007 letter try to defend his previous argument that a consent judgment would constitute a default pursuant to the provision of the two loans providing that a foreclosure or forfeiture action with respect to collateral securing his other loans had been commenced. Fitraco therefore presumes that Wold has dropped this contention.
12. Fitraco agreed that if Wold could demonstrate that the entry of a consent judgment as contemplated by the Settlement would constitute a default under Wold's other current loans, the consent judgment would not be entered. Obviously preferring that a consent judgment not be entered, however, Wold has simply fabricated purported reasons why the contemplated consent judgment would constitute a default under other loans. Because Fitraco disagrees with Wold's position, and the parties have not been able to come to agreement on this issue, Fitraco is now asking this Court to enter the contemplated judgment (which presumably would no longer be a consent judgment) in the form attached hereto as Exhibit E.
13. The parties consented to proceed before this Court for all purposes in connection with the Settlement, so this Court has jurisdiction to enter a final order in this case.
WHEREFORE, Fitraco, N.V. respectfully requests that this Court enter a consent judgment against Defendant Thomas E. Wold in the amount of $732,000, pursuant to the Settlement Terms, in the form attached hereto as Exhibit E.
EXHIBIT A Settlement Terms
1. As full settlement of this lawsuit (the "Federal Lawsuit") Defendant Thomas Wold ("Wold") will pay plaintiff Fitraco N.V ("Fitraco") the total of $603,500, in the following installments:
On August 15, 2007, a payment of $29,000;
On the 15th of each month from September 2007 through June 2008, a payment of $4,000 each month;
On July 15, 2008, a payment of $100,000;
On the 15th of each month from August 2008 through June 2009, a payment of $4,000 each month;
On July 15, 2009, a payment of $125,000;
On the 15th of each month from August 2009 through June 2010, a payment of $4,000 each month;
On July 15, 2010, a payment of $221,500.
Wold must make payment by wire transfer to Fitraco's New York account no later than 4:00 p.m. New York time on the 15th of the month when due, unless the 15th is not a business day, in which event the payment must be made by 4:00 p.m. the following business day. Failure to make any payment at the time it is due is an event of default under this agreement without any notice by Fitraco to Wold.
2 (a). Wold will execute a consent judgment in the Federal Lawsuit in the amount of $732,000 which will not be enforced unless Wold fails to make a payment when due pursuant to ¶ 1. If Wold fails to make any payment when due, Fitraco will be entitled to collect the judgment in the amount of $732,000 less any payments that Wold has made prior to the default. The Federal Lawsuit will be terminated by the entry of the consent judgment against Wold. If and when Wold has made all payments required by ¶ 1, Fitraco will execute a release and satisfaction of the consent judgment.
(b). Provided, however, that if by July 16, 2007, Wold produces to Fitraco's counsel a loan agreement demonstrating that such a consent judgment would be an event of default under a current loan, the parties agree to the following alternative to ¶ 2(a): In the event that Wold fails to make any payment when due as set out in ¶ 1, Fitraco shall be entitled to bring an action for breach of this settlement agreement for damages in the amount of $732,000 less any payments Wold has made, plus Fitraco's attorneys' fees and costs to bring the action, and Wold agrees that he will not contest or raise any defense to such an action except: (i) that he actually made a payment that Fitraco claims was not made; or (ii) that Fitraco miscalculated the amount due. If this alternative is implemented, the Federal Lawsuit will be dismissed with prejudice. If and when Wold has made all payments required by ¶ 1, Fitraco will execute a release and satisfaction of Wold's obligations under this agreement and the guarantee that is the subject of the Federal Action.
3. Wold hereby releases Fitraco from any and all claims he has against Fitraco. Wold represents that he has not assigned to any third party any claim that he might have against Fitraco.
4. The parties consent to the jurisdiction of the Magistrate Judge to enter any dismissal or judgment in the Federal Lawsuit.
EXHIBIT B
FACSIMILE TRANSMITTAL SHEET TO: FROM: Steven A. Levy Kristi L. Browne COMPANY: DATE: Goldberg Kohn Bell Black 7/16/2007 Rosenbloom Moritz, Ltd. FAX NUMBER: TOTAL NO. OF PAGES INCLUDING COVER: 312-863-7850 7 SENDER'S DIRECT DIAL: SENDER'S REFERENCE NUMBER: 312-223-1699 ext 211 RE: YOUR REFERENCE NUMBER: Fitraco v. Wold URGENT FOR REVIEW PLEASE REPLY PLEASE RECYCLE NOTES/COMMENTS: The information contained in this communication is confidential, may be attorney-client privileged, and is intended only for the use of the addressee Unauthorized use disclosure of copying is strictly prohibited and may be unlawful IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE NOTIFY SENDER IMMEDIATELY.July 16, 2007
By Facsimile Transmission (312) 863-7850
Steven A. Levy
Goldberg Kohn Bell Black Rosenbloom Moritz, Ltd.
55 E. Monroe St., Suite 3300
Chicago, IL 60603-5792
Re: Fitraco v. Wold
Dear Mr. Levy:
Following are two of Mr. Wold's loan agreements which we believe would be in default if we enter a consent judgment pursuant to the settlement in this action. There are others, but the relevant language is identical. I have marked the relevant paragraphs. We will therefore need to proceed according to the alternative provision in the settlement agreement and dismiss the lawsuit with prejudice.
Sincerely,
Kristi L. Browne
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
EXHIBIT C
July 17, 2007 steven.levy@goldbergkohn.com direct phone: 312.201.3965 direct fax: 312.863.7465 BY EMAILKristi L. Browne, Esq.
The Patterson Law Firm, P.C.
33 North LaSalle Street
Suite 3350
Chicago, IL 60602
Re: Fitraco v. Wold
Dear Kristi:
We have received your letter dated July 16, 2007. Given the brevity of and lack of analysis in your letter, we were forced to make some educated guesses as to what positions Mr. Wold is taking. To the extent we understand those positions, however, we disagree that Mr. Wold has presented any loan documents that demonstrate, as required by the Settlement Terms, that the entry of "a consent judgment would be an event of default under a current loan."
You have presented two promissory notes, one executed by Time Escape, LLC, and one executed by Mr. Wold. You have produced no evidence, however, that the loan documents you provided relate to a loan that is current. With respect to the Time Escape note, we presume you are taking the position that Mr. Wold is a guarantor, and that an Event of Default as to Mr. Wold therefore constitutes an Event of Default as to Time Escape under the "Events Affecting Guarantor" provisions of the Time Escape note.
We note that Mr. Wold signed the Time Escape note as "Manager of Time Escape, LLC," which is inconsistent with his deposition testimony.
Even if we assume that (1) a default in a Time Escape loan, as opposed to a loan taken by Mr. Wold, is sufficient to trigger the contingency in the Settlement Terms, (2) that both loans are current, and (3) that Mr. Wold is a guarantor of the Time Escape loan, the provisions you rely upon do not demonstrate that the entry of a consent judgment in our case would constitute an Event of Default under either of these loans.
First, you rely upon a provision that states that an Event of Default committed by the borrower (or, presumably, by any guarantor) of any other loan in favor of any other creditor that materially affects the borrower's (or any guarantor's) property or ability to repay the debt (or pay the guaranty) is an event of default. Mr. Wold's default to Fitraco, however, occurred in October, 2004, when he failed to make payment on his guaranty to Fitraco as demanded. The consent judgment itself is not a default; it is the result of negotiations following the default. In addition, you provide no evidence that the entry of a consent judgment as contemplated by the Settlement Terms would materially affect Mr. Wold's ability to repay either his own note or to pay any Time Escape debt he has guaranteed. Indeed, we presume that the reason that Mr. Wold told us that he could pay no more than $5,000 a month is because he was making sure that his remaining cash flow was sufficient to service his other financial obligations.
Second, you rely upon a provision that states that the commencement of foreclosure or forfeiture provisions or other actions relating to any collateral securing the current loan (or, presumably, securing any guaranty by Mr. Wold of Time Escape's obligations) shall constitute an Event of Default. Fitraco's guaranty lawsuit, and the resulting consent judgment, however, do not in any way seek to foreclose upon or seek the forfeiture of any collateral that might be securing Mr. Wold's other loans, or that might be securing Mr. Wold's guaranty of Time Escape's loan. Accordingly, this provision does not apply.
We are prepared to evaluate any response you may have to this letter, and to re-evaluate our position if appropriate. If you do not respond to this letter, or if we cannot reach agreement after reviewing your response, however, we will ask Magistrate Judge Soat Brown to enter an order that, under the Settlement Terms and the documentation you have provided, Mr. Wold has not demonstrated that the entry of the consent judgment as contemplated by the Settlement Terms "would be an event of default under a current loan," and that a judgment should be entered as contemplated by the Settlement Terms.
Please let us know your position as soon as possible. Thank you.
Sincerely,
Steven A. Levy
SAL/bsm
cc: Frederic R. Klein, Esq. Jonathan H. Claydon, Esq.
EXHIBIT D
July 18, 2007
Via U.S. Mail and Facsimile (312) 863-7850
Steven A. Levy
Goldberg Kohn Bell Black Rosenbloom Moritz, Ltd.
55 E. Monroe St., Suite 3300
Chicago, IL 60603-5792
Re: Fitraco v. Wold
Dear Steve:
I am in receipt of your letter sent at 6:16 last night. As indicated, the promissory notes sent are two examples of loans which would be impacted by a consent judgment in this action. Mr. Wold has other such loans and I can send you those documents if you desire, but the language at issue is identical.
I disagree with your analysis of the language of the notes. The notes indicate that a default under any loan which impacts Mr. Wold's ability to repay the loans evidenced by the notes is an event of default under the notes. Prior to the entry of a judgment in this action, there has been no finding or determination that Mr. Wold is in default, nor would there be any such finding or determination if we adhere to the alternative provision of the settlement agreement. Although I understand that it is your client's position that Mr. Wold is currently in default on the guaranty, without a finding or determination of default, we do not believe he is currently in default under the relevant provisions of the notes.
I also disagree with your analysis that a consent judgment which would be an event of default does not interfere with Mr. Wold's ability to repay the debts evidenced by the notes. Although it is the case that Mr. Wold presently anticipates being able to pay all of these obligations in a timely manner, a judgment obviously presents the risk that assets will be attached, significantly impacting his ability to pay the obligations evidence by the notes.
My concern is simply that the lenders will consider a judgment to trigger the default provisions under these notes and call the loans. Please let me know what additional documentation you require to demonstrate that a consent judgment would be an event of default under Mr. Wold's other loans.
Sincerely,
Kristi L. Browne
EXHIBIT E
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
FITRACO, N.V., a Belgium corporation, ) ) No. 07 CV 0262 Plaintiff, ) ) Judge James F. Holderman ) v. ) ) E. THOMAS WOLD, ) Magistrate Judge Soat Brown ) Defendant. )FINAL JUDGMENT
This cause coming on to be heard pursuant to the parties' Settlement Terms, attached hereto as Exhibit 1, and the Court being fully advised in the premises; IT IS HEREBY ORDERED THAT:1. Judgment is entered in favor of Plaintiff Fitraco, Inc. ("Fitraco") and against Defendant E. Thomas Wold ("Wold") in the amount of $732,000.
2. This Judgment may not be enforced unless Wold fails to make a payment required pursuant to paragraph 1 of the Settlement Terms. In that event, Fitraco will be entitled to collect, pursuant to this Judgment, the amount of $732,000, less any payments actually made by Wold pursuant to the Settlement Terms.
3. This Final Judgment terminates this action in the entirety.
ENTER: ________________________________ Magistrate Judge Soat BrownEXHIBIT 1 Settlement Terms
1. As full settlement of this lawsuit (the "Federal Lawsuit") Defendant Thomas Wold ("Wold") will pay plaintiff Fitraco N.V ("Fitraco") the total of $603,500, in the following installments:
On August 15, 2007, a payment of $29,000;
On the 15th of each month from September 2007 through June 2008, a payment of $4,000 each month;
On July 15, 2008, a payment of $100,000;
On the 15th of each month from August 2008 through June 2009, a payment of $4,000 each month;
On July 15, 2009, a payment of $125,000;
On the 15th of each month from August 2009 through June 2010, a payment of $4,000 each month;
On July 15, 2010, a payment of $221,500.
Wold must make payment by wire transfer to Fitraco's New York account no later than 4:00 p.m. New York time on the 15th of the month when due, unless the 15th is not a business day, in which event the payment must be made by 4:00 p.m. the following business day. Failure to make any payment at the time it is due is an event of default under this agreement without any notice by Fitraco to Wold.
2 (a). Wold will execute a consent judgment in the Federal Lawsuit in the amount of $732,000 which will not be enforced unless Wold fails to make a payment when due pursuant to ¶ 1. If Wold fails to make any payment when due, Fitraco will be entitled to collect the judgment in the amount of $732,000 less any payments that Wold has made prior to the default The Federal Lawsuit will be terminated by the entry of the consent judgment against Wold. If and when Wold has made all payments required by ¶ 1, Fitraco will execute a release and satisfaction of the consent judgment.
(b). Provided, however, that if by July 16, 2007, Wold produces to Fitraco's counsel a loan agreement demonstrating that such a consent judgment would be an event of default under a current loan, the parties agree to the following alternative to ¶ 2(a): In the event that Wold fails to make any payment when due as set out in ¶ 1, Fitraco shall be entitled to bring an action for breach of this settlement agreement for damages in the amount of $732,000 less any payments Wold has made, plus Fitraco's attorneys' fees and costs to bring the action, and Wold agrees that he will not contest or raise any defense to such an action except: (i) that he actually made a payment that Fitraco claims was not made; or (ii) that Fitraco miscalculated the amount due. If this alternative is implemented, the Federal Lawsuit will be dismissed with prejudice. If and when Wold has made all payments required by ¶ 1, Fitraco will execute a release and satisfaction of Wold's obligations under this agreement and the guarantee that is the subject of the Federal Action.
3. Wold hereby releases Fitraco from any and all claims he has against Fitraco. Wold represents that he has not assigned to any third party any claim that he might have against Fitraco.
4. The parties consent to the jurisdiction of the Magistrate Judge to enter any dismissal or judgment in the Federal Lawsuit.