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Keywords

contracttrialsummary judgmentcorporation

contracttrialsummary judgmentpartnershipcorporation

Related Cases

CCP Ltd. Partnership v. First Source Financial, Inc., 368 Ill.App.3d 476, 856 N.E.2d 492, 305 Ill.Dec. 687

Facts

Catherine, Patrick, Anthony, and Merrill Kirsch owned shares of Capatony, Inc., which owned 45% of Dart Distributing, LLC. In 1997, First Source Financial (FSFP) agreed to loan Dart funds, and in 2000, a Last-Out Participation Agreement (LOPA) was signed, listing the Kirsches as participants in the loans. In January 2003, the Kirsches sent a letter to FSFP revoking the LOPA, stating they would not be liable for any loans after that date. FSFP later claimed the Kirsches owed money after Dart defaulted on loans, leading to the legal dispute.

Catherine, Patrick, Anthony and Merrill Kirsch owned shares of Capatony, Inc. Capatony owned 45% of Dart Distributing, LLC, while CCP Limited Partnership owned the remaining 55%. Anthony and Merrill also served on Dart's board of directors. In November 1997, First Source Financial (FSFP) agreed to loan Dart some funds.

Issue

Did the Kirsches validly revoke the loan participation agreement prior to the corporation's default, and does the agreement constitute a continuing guaranty?

Rule

Under Illinois law, a continuing guaranty can be revoked at any time with proper notice, and unless the contract expressly limits the right to revoke, the guarantor retains that right.

Analysis

The court analyzed the nature of the LOPA and determined it functioned as a continuing guaranty rather than a simple loan participation agreement. The Kirsches provided proper notice of revocation in January 2003, and at that time, there were no loans outstanding to Dart exceeding the Borrowing Base. The court found that FSFP had no right to recover from the Kirsches for loans made after the revocation.

The court analyzed the nature of the LOPA and determined it functioned as a continuing guaranty rather than a simple loan participation agreement.

Conclusion

The Appellate Court affirmed the trial court's summary judgment in favor of the Kirsches, concluding that they validly revoked the LOPA and were not liable for any loans made after the revocation.

Who won?

Catherine, Patrick, Anthony, and Merrill Kirsch prevailed in the case because the court found their revocation of the LOPA was valid and they were not liable for loans made after that revocation.

Catherine, Patrick, Anthony, and Merrill Kirsch prevailed in the case because the court found their revocation of the LOPA was valid and they were not liable for any loans made after that revocation.

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