In addition to affirming the trial court’s striking the Estate’s affirmative defenses, the First District in JPMorgan Chase Bank, N.A. v. East-West Logistics, LLC, 2014 IL App (1st) 121111 also upheld the Section 2-615 dismissal of the Estate’s fraud-based counterclaims and the summary judgment awarded the plaintiff bank on its breach of guaranty claim against the Estate.
Fraud and Consumer Fraud
To state a common law fraud claim in Illinois, a plaintiff must allege (1) a false statement of material fact; (2) by one who knows or believes it to be false; (3) made with the intent to induce action by another in reliance on the statement; (4) action by the other in reliance on the truthfulness of the statement; and (5) injury to the other resulting from that reliance. Intentional concealment of a material fact is the same as an express false statement under the law. Where a person has a duty to speak, his failure to disclose material information constitutes fraudulent concealment. (¶¶ 65-68).
A colorable consumer fraud claim requires allegations of (1) a deceptive act or practice by defendant, (2) an intent on the defendant’s part that plaintiff rely on the deception, and (3) deception that occurs in the course of conduct involving trade or business. The plaintiff must also show that the consumer fraud proximately caused his injury.
The Court rejected the Estate’s argument that the plaintiff committed fraud by not telling the deceased guarantor that the bank was increasing his risk by continuing to loan monies to a financially distressed corporate borrower. The Estate argued that this amounted to deceptive conduct. The Court disagreed. Under the plain text of the guaranty, the plaintiff bank had no duty to give information to the guarantor that could increase his risk of liability under the guaranty. In fact, it was just the opposite: the guaranty required the guarantor to actively monitor the borrower’s economic condition and loan status. The guaranty didn’t saddle the plaintiff bank with a duty to continually update the guarantor on the loan or borrower. (¶¶ 69-70).
The Estate also failed to adequately plead reliance – another common law fraud element. A fraud claimant must show he justifiably reliance on a material false statement. To determine whether reliance is justified, the court considers the facts the party knew and those facts it could have learned through ordinary prudence.
Since the Estate didn’t allege that the guarantor made any effort to obtain information about the loan he guaranteed, the Estate wasn’t able to plead that the bank deceived the guarantor. The Court found the Estate also pled insufficient facts to back up its consumer fraud claims that the plaintiff planned to deceive the guarantor by hiding the corporate borrower’s precarious monetary condition from the guarantor. Absent more factual specifics, the Estate’s fraud counterclaims failed. (¶¶ 73-78).
Summary Judgment Affidavits and Computerized Business Records – Supreme Court Rule 191, IRE 803(6)
Affirming summary judgment for the plaintiff on its breach of guaranty count, the Court sustained the plaintiff’s two supporting affidavits: one from a bank vice president, the other from a bank analyst. Both agents testified that they reviewed the loan documents, payment history and pay-off documents. They also swore that the supporting documents were prepared and kept in the regular course of plaintiff’s business. (¶¶ 86-93).
Supreme Court Rule 191 governs summary judgment affidavits. It requires that affidavits be made on personal knowledge, to be based on admissible facts and to attach sworn or certified copies referenced in the affidavit. See Ill. S.Ct. R. 191(a). In the context of business records, the author or creator of the record doesn’t have to testify. Instead, the custodian or other person familiar with the business and its mode of operation can provide the foundational testimony. A record author’s failure to testify affects only weight, not admissibility of the record. (¶¶94-98).
Evidence Rule 803(6) – the business records rule – allows the introduction of computerized and paper “records of regularly conducted activity” 99-101. A computer-generated business record is admissible where it’s shown that(1) the computing equipment is recognized as standard; (2) the input is entered in the regular course of business reasonably close in time to the happening of the recorded event and (3) the source of the information, method and time of preparation are trustworthy. (¶¶ 99-101).
The Estate’s main challenge to plaintiff’s summary judgment affidavit involved a “pay off calculator” document that itemized the loan payments and history. The Court found that the “Calculator Document” complied with Rule 803(6). The Court found that the payoff calculator document satisfied the admission standards for a computerized business records. It was prepared at or near the time of the events recorded, it was kept in the regular course of the bank’s lending business and it was authenticated via affidavit by someone who qualified as a custodian because of her (the affiant) personal knowledge of the bank’s lending and record-keeping processes. (¶¶104-105).
Take-aways: For commercial litigators, the case is a useful summary of computerized business records foundation rules and summary judgment affidavit requirements. The case also provides some needed clarity on (IL) Supreme Court Rule 236 – the rule that governed business records before Evidence Rule 803(6)’s adoption. The Court makes it clear that the two rules can be viewed in tandem and that caselaw construing Rule 236 is still relevant to the business records admissibility question. Finally, East-West Logistics cements the proposition that a fraud plaintiff must prove that the deceptive conduct or misrepresentation actually reached him. Otherwise, he won’t be able to establish the reliance element.