ILLINOIS OFFICIAL REPORTS
Appellate Court
Republic Bank of Chicago v. 1st Advantage Bank, 2013 IL App (1st) 120885
Appellate Court REPUBLIC BANK OF CHICAGO, Plaintiff-Appellee, v. 1ST
Caption ADVANTAGE BANK; ABCO LEASING, INC.; ACADEMIC
CAPITAL GROUP, INC.; ADVANCE FINANCIAL SOLUTIONS,
INC.; ALERUS FINANCIAL, N.A.; ALFA FINANCIAL, N.A.; ALFA
FINANCIAL CORPORATION DBA OFC CAPITAL; ALL POINTS
CAPITAL CORPORATION.; ALLIANCE COMMERCIAL CAPITAL,
INC.; ALLIANCE LEASING, INC.; ALTEC CAPITAL (QUAIL
CAPITAL); ALTEC CAPITAL SERVICES, LLC; AMERICAN BANK,
FSB; AMERICAN BANK LEASING CORPORATION; AMERICAN
CHARTERED BANK; ASSOCIATED BANK, NATIONAL
ASSOCIATION; AUTO CAPITAL GROUP; BMT LEASING, INC.;
BALBOA LEASING; BANK MIDWEST, N.A.; BANK OF DIXON
COUNTY; BANK OF THE WEST; BARRETT TRADE AND
FINANCE GROUP, LLC; BRYN MAWR; BUTLER CAPITAL
CORPORATION; CFC INVESTMENT COMPANY; CM FINANCIAL;
CENTER CAPITAL CORPORATION; CENTER NATIONAL BANK;
CHARTER NATIONAL BANK AND TRUST; CHERRY CREEK
ASSET-BACKED INCOME FUND, L.P.; CITIZENS BANK AND
TRUST COMPANY OF CHICAGO; COACTIV CAPITAL
PARTNERS, LLC; COMERICA LEASING, a Division of Comerica
Bank; COURT SQUARE LEASING CORPORATION; CROSSROADS
BANK; CUPERTINO NATIONAL BANK, c/o Greater Bay Equipment
Finance; DEERBART FINANCIAL SERVICES COMPANY;
DIAMOND LEASE U.S.A., INC.; ENTERPRISE FUNDING GROUP
LLC; EQUILEASE FINANCIAL SERVICES, INC.; EQUIPMENT
ACQUISITION RESOURCES, INC.; EVANS NATIONAL LEASING,
INC.; EVERGREEN LEASING, INC.; FARMERS AND MERCHANTS
BANK; FIFTH THIRD BANK (CHICAGO); FIRST BANK; FIRST
BANK AND TRUST; FIRST COMMUNITY BANK; FIRST CREDIT
FUNDING, LLC; FIRST DUPAGE BANK; FIRST FEDERAL
SAVINGS BANK; FIRST MIDWEST BANK; FIRST MUTUAL
BANK; FIRST NATIONAL BANK OF MCHENRY; FIRST NATION-
AL EQUIPMENT FINANCING, INC.; FIRST PREMIER CAPITAL,
LLC; FIRSTLEASE INC.; GIS ROLLING, L.L.C.; GIS VENTURE;
HEWLETT-PACKARD FINANCIAL SERVICES COMPANY;
HIGHLAND BANK; HOME FEDERAL SAVINGS BANK; HORIZON
BANK; IBM CREDIT LLC; IRWIN BUSINESS FINANCE
CORPORATION; KCL, LLC; KLC FINANCIAL, INC.; KSP
ACQUISITION CORPORATION; KEY GOVERNMENT FINANCE,
INC.; LFC CAPITAL, INC.; LAKELAND BANK EQUIPMENT
LEASING DIVISION; LEAF FUNDING, INC.; LEASECORP, INC.;
LEASING INNOVATIONS, INC.; LEASING ONE CORPORATION;
LIBERTYVILLE BANK AND TRUST; LOYALTY FINANCE, INC.;
LYON FINANCIAL SERVICES, INC.; MB FINANCIAL BANK N.A.;
MANUFACTURERS ACCEPTANCE CORPORATION DBA
HERITAGE PACIFIC LEASING; MARLIN LEASING
CORPORATION; MICHIGAN HERITAGE BANK; MILLENNIUM
BANK; MINWEST BANK; NATIONAL CITY COMMERCIAL
CAPITAL COMPANY, LLC; NATIONAL CITY COMMERCIAL
CAPITAL CORPORATION; NORSTATES BANK; NORTHWAY
STATE BANK; OFC CAPITAL CORPORATION; PNB CAPITAL
LEASING, LP; PENTECH FINANCIAL SERVICES, INC.; PEOPLE’S
CAPITAL AND LEASING CORPORATION; PEOPLE’S NATIONAL
BANK OF KEWANEE; PLAINS CAPITAL LEASING, LP; PULLMAN
BANK AND TRUST COMPANY; RED OAK CAPITAL; ROCKFORD
CAPITAL LEASING, INC.; SG EQUIPMENT FINANCE USA
CORPORATION; SHERMAN AND COMPANY; SKY BANK
LEASING; SOVEREIGN BANK; STAR FINANCIAL BANK; STATE
FINANCIAL BANK; STEFAN SYDOR OPTICS; STERLING
NATIONAL BANK; SUNTRUST LEASING CORPORATION;
SUSQUEHANNA COMMERCIAL; TD BANKNORTH LEASING
CORPORATION; THE COMMUNITY BANK; THE NORTH SIDE
BANK AND TRUST COMPANY; TOWN AND COUNTRY LEASING
LLC; TRINITY, a Division of Bank of the West; UC BANCORP; US
FINANCIAL, LLC; VARILEASE TECHNOLOGY FINANCE GROUP,
INC.; VELOCITY LEASE FUNDING, LLC; WAUKEGAN SAVINGS
BANK; and UNKNOWN CLAIMANTS, Defendants (Icon Ear, LLC,
and Icon Ear II, LLC, Defendants-Appellants).
District & No. First District, First Division
Docket No. 1-12-0885
-2-
Filed September 16, 2013
Held In an action arising from lessees’ default on their leases of equipment
(Note: This syllabus from defendant, the trial court properly held that when defendant
constitutes no part of foreclosed on Wyoming real estate owned by the individual lessees and
the opinion of the court mortgaged to defendant to secure their agreements to guaranty the
but has been prepared performance of their lease obligations, defendant’s purchase of the real
by the Reporter of estate with a bid of the total lease obligation satisfied both the lessees’
Decisions for the debt to defendant and their obligations under the guaranty agreements,
convenience of the and plaintiff, one of the lessees’ creditors, was free to pursue its claim for
reader.)
the leased equipment.
Decision Under Appeal from the Circuit Court of Cook County, No. 10-CH-14025; the
Review Hon. Peter Flynn, Judge, presiding.
Judgment Affirmed.
Counsel on Reed Smith, LLP, of Chicago (Stephen T. Bobo, Michael D. Richman,
Appeal and Peter M. Stasiewicz, of counsel), for appellants.
Ruff, Weidenaar & Reidy, Ltd., of Chicago (Edward P. Freud and
Michael B. Bregman, of counsel), for appellee.
Panel JUSTICE CUNNINGHAM delivered the judgment of the court, with
opinion.
Presiding Justice Connors and Justice Hoffman concurred in the
judgment and opinion.
OPINION
¶1 This appeal arises from a March 6, 2012 order entered by the circuit court of Cook
County which granted summary judgment in favor of plaintiff-appellee Republic Bank of
Chicago (Republic Bank). On appeal, defendants-appellants Icon Ear, LLC, and Icon Ear II,
LLC (collectively, Icon), argue that: (1) the trial court erred in granting summary judgment
in favor of Republic Bank because the law of guaranties governs in this case; and (2) the trial
-3-
court erred in granting summary judgment in favor of Republic Bank because the “full credit
bid rule” does not apply in this case. For the following reasons, we affirm the judgment of
the circuit court of Cook County.
¶2 BACKGROUND
¶3 Icon is a specialty finance company and manager of publicly registered funds that invest
in business-essential equipment and corporate infrastructures. Equipment Acquisition
Resources, Inc. (EAR), was an Illinois corporation that developed processes for
manufacturing wafer chips for the semiconductor industry, as well as refurbished and resold
related semiconductor manufacturing equipment. On December 24, 2007, Icon entered into
a lease agreement with EAR which stated that Icon would lease equipment to EAR pursuant
to various leasing schedules. On lease schedule number one, the equipment that EAR
received was listed at a price of $6,935,000.
¶4 According to Icon, in January 2008, Icon learned that Sheldon Player (Sheldon), one of
EAR’s principals, had previously been convicted and sentenced for participating in a
fraudulent scheme involving equipment financing. Consequently, EAR offered Icon
additional collateral in the form of mortgages encumbering Wyoming real estate, in exchange
for Icon agreeing to finance additional lease schedules. The Wyoming real estate consisted
of six parcels of land owned by Sheldon and his family. On March 18, 2008, Sheldon, his
son, Dale Player (Dale), and his daughter, Dana Malone (Dana) (collectively, the Players),
executed guaranty agreements as consideration for Icon’s agreement to execute lease
schedule number two and future lease schedules. In addition to the guaranties, the Players
mortgaged the Wyoming real estate to Icon. The terms of the guaranties stated, in pertinent
part: “[Icon’s] sole and exclusive remedy against [the Players] shall be limited to [the
Players’] interest in the Mortgage Premises.” (Emphasis in original.)
¶5 On April 24, 2008, Icon leased equipment that was listed at a price of $6,347,500.02 to
EAR, pursuant to lease schedule number two. On June 6, 2008, Icon leased equipment that
was listed at a price of $6,325,500 to EAR, pursuant to lease schedule number three. On June
30, 2008, Icon leased equipment that was listed at a price of $2,469,000 to EAR, pursuant
to lease schedule number four. As of June 30, 2008, Icon had leased equipment worth a total
of $22,077,000.02 to EAR.
¶6 During the summer of 2009, EAR defaulted on its lease payments to Icon. On October
23, 2009, EAR filed a voluntary petition for bankruptcy in the United States Bankruptcy
Court for the Northern District of Illinois, Eastern Division. On November 19, 2009, the
bankruptcy court entered an order which granted Icon’s emergency motion to modify the
automatic stay. The court’s order lifted the automatic stay with respect to the Wyoming real
estate that was subject to Icon’s mortgages. Icon then began the process of foreclosing its
mortgages on the Wyoming real estate. On December 1, 2009, the sheriff of Teton County,
Wyoming, sold the Wyoming real estate through foreclosure proceedings. Icon successfully
purchased the Wyoming real estate with a credit bid of $22,743,564.44, which represented
the full amount of the debt owed to Icon under the lease agreement with EAR.
¶7 On March 22, 2010, Icon filed a complaint for replevin against EAR in the circuit court
-4-
of Cook County. In its complaint, Icon sought immediate possession of the equipment that
was leased to EAR. Additionally, numerous other lessors and lenders filed similar complaints
against EAR. On April 2, 2010, Republic Bank filed a complaint against EAR for judicial
foreclosure and declaratory judgment under case number 10 CH 14025. On April 5, 2010,
the court consolidated the multiple complaints into a single action under case number 10 CH
14025. On June 30, 2010, Icon filed an answer and affirmative defenses which contested
Republic Bank’s right to the equipment that was leased to EAR and sought return of the
equipment. Additionally, Icon filed counterclaims which sought a declaratory judgment that
Icon was the owner of all of the equipment and that its interests in the equipment were senior
to the rights of all other parties.
¶8 From June 2010 through July 2011, Icon sold five of the six parcels of the Wyoming real
estate to unrelated third parties. Icon realized total net proceeds of $2,159,777.05 from the
sales of the real estate. The sixth parcel of the Wyoming real estate remains unsold. On
August 26, 2010, the trial court entered an order which authorized the hiring of an auctioneer
to sell the equipment that had been leased to EAR. The trial court’s order stated that all
parties with claims to the equipment “retain all heretofore existing rights and claims to the
Auction Proceeds.” On September 23, 2011, Icon filed a proof of claim to the proceeds of
the sale of the equipment that was leased to EAR. Icon’s proof of claim alleged that after
accounting for the proceeds from the sales of the Wyoming real estate, the net amount owed
to Icon by EAR was $17,487,520.30.
¶9 On January 3, 2012, Republic Bank filed a motion for summary judgment against Icon.
The motion alleged that EAR’s debt to Icon was extinguished because at the foreclosure sale
of the Wyoming real estate, Icon made a “credit bid” for the full amount of the debt owed
by Ear to Icon. On January 31, 2012, Icon filed a response to Republic Bank’s motion for
summary judgment. On March 6, 2012, the trial court held a hearing on Republic Bank’s
motion for summary judgment. The court found that Icon’s credit bid at the foreclosure sale
of the Wyoming real estate satisfied both the obligations under the guaranty agreements and
Icon’s claim against EAR. The trial court reasoned that the effect of a full credit bid under
Wyoming law is to extinguish the debt and that the individuals who executed the guaranty
agreements did not have an independent debt to Icon. Thus, the trial court granted Republic
Bank’s motion for summary judgment. The trial court found that the judgment was final and
appealable pursuant to Illinois Supreme Court Rule 304(b) (eff. Feb. 26, 2010).
¶ 10 On March 23, 2012, Icon filed a timely notice of appeal. Therefore, this court has
jurisdiction to consider Icon’s arguments on appeal pursuant to Illinois Supreme Court Rule
303 (eff. May 30, 2008) and Rule 304(b).
¶ 11 ANALYSIS
¶ 12 As a preliminary matter, we note that this case raises an issue of conflict of laws. Both
parties argue that because this case involves real estate that is located in Wyoming, Wyoming
law should govern our analysis. We agree. In resolving conflict-of-laws questions, Illinois
courts rely on the principles of the Restatement (Second) of Conflict of Laws and the
traditional legal doctrine that “the law of the State where the real estate is situated governs
-5-
the rights of the parties.” Lake County Trust Co. v. Two Bar B, Inc., 238 Ill. App. 3d 589, 595
(1992). Therefore, we apply Wyoming law in our analysis of this case.
¶ 13 On appeal, we determine whether the trial court erred in granting summary judgment in
favor of Republic Bank. We note that both parties present numerous arguments on appeal.
However, not all of the parties’ arguments have bearing on our resolution of the case.
Therefore, we will only discuss the parties’ most relevant arguments.
¶ 14 Icon first argues that the trial court erred in granting summary judgment in favor of
Republic Bank because the law of guaranties governs in this case. Icon argues that under the
law of guaranties, a guaranty is an obligation to pay the debt of another. Icon contends that
a guaranty is a separate and independent obligation from that of the principal obligor and that
a guaranty may be discharged without discharging the principal obligor. Therefore, Icon
argues that the guaranty agreements executed by the Players were separate and independent
obligations from EAR’s debt to Icon. Also, Icon asserts that the guaranty agreements were
executed for separate and distinct consideration, which was Icon’s agreement to execute
lease schedule number two. Icon argues that the terms of the guaranty agreements clearly
state that Icon’s sole and exclusive remedy against the Players was limited to their interest
in the Wyoming real estate. Thus, Icon contends that its purchase of the Wyoming real estate
only satisfied the guaranty agreements and not the full amount of EAR’s debt to Icon.
¶ 15 Additionally, Icon argues that the trial court made incorrect conclusions regarding the
Players’ ability to recoup their losses from EAR. Icon points out that in making its ruling, the
trial court made the following statements:
“THE COURT: A guarantor, it seems to me, pretty much invariably if he pays the
debt, can collect from the actual debtor the amount that the guarantor paid to discharge
the debtor’s obligation.
It would seem to me that under Wyoming law, the amount of the guarantor’s claim
against the debtor would be the amount of Icon’s full credit bid. If that is correct, then
we are in a situation in which [the Players have to pay EAR] *** the $22 million that
Icon bid.”
Also, Icon points out that the trial court further stated that if EAR paid the Players the
amount of Icon’s bid, while Icon continued to assert its claims against EAR and claim title
to the equipment, this would result in a “double whammy” to the other creditors of EAR.
Icon claims that the trial court’s conclusions were incorrect because under Wyoming law, the
right of a guarantor to recover from the principal obligor is based in equity. Icon contends
that the principle of equity states that the law promises reimbursement to a guarantor when
the guarantor pays the debt of the principal debtor. Thus, Icon claims that the Players’
recovery against EAR should be limited to the value of the Wyoming real estate, which was
$2,159,777.05. Icon argues that the Players should only be entitled to recover from EAR the
value of the property they actually lost. Icon asserts that it would be nonsensical and
inequitable for the Players to receive a windfall of more than $22 million when the Wyoming
real estate was only worth around $3 million.
¶ 16 Next, Icon argues that the trial court erred in granting summary judgment in favor of
Republic Bank because the “full credit bid rule” does not apply in this case. Icon points out
-6-
that the full credit bid rule provides that at a foreclosure sale, a “full credit bid” is equal to
“ ‘the unpaid principal and interest of the mortgage debt, together with the costs, fees and
other expenses of the foreclosure.’ ” Alliance Mortgage Co. v. Rothwell, 900 P.2d 601, 608
(Cal. 1995) (quoting Cornelison v. Kornbluth, 542 P.2d 981, 992 n.10 (Cal. 1975)). If the full
credit bid results in the acquisition of the property, the lender, in effect, pays itself the full
outstanding balance of the debt and costs of foreclosure. Alliance, 900 P.2d at 608. Thus, the
lender takes title to the property placed as security and the borrower is released from further
obligations under the note. Id. Additionally, the lender “is precluded for purposes of
collecting its debt from later claiming that the property was actually worth less than the bid.”
Id. Icon argues that the trial court erred in granting summary judgment in favor of Republic
Bank because the court applied the full credit bid rule when it concluded that EAR’s debt to
Icon was extinguished due to Icon’s full credit bid at the foreclosure sale for the Wyoming
real estate.
¶ 17 Icon contends that the full credit bid rule cannot be applied in this case because no
Wyoming court has ever applied the rule in any case. Icon argues that under Wyoming law,
courts will not create additional protection for borrowers absent explicit legislative
pronouncements. Icon asserts that the full credit bid rule is a judicially created protection for
borrowers, and thus, Wyoming courts will not recognize the rule. Icon argues that this court
should not create new law interpreting the Wyoming statutory foreclosure scheme. Icon
contends that under Wyoming law, it is the mortgage that is satisfied by a full credit bid, as
opposed to the vague category of “the debt.” Icon claims that the obligations under the
guaranty agreements were satisfied by Icon’s credit bid; however, EAR’s debt to Icon is
separate and distinct from the guaranty agreements. Also, Icon argues that even if Wyoming
recognized the full credit bid rule, there is no precedent in any state suggesting that the rule
would apply to the debt of EAR because EAR is not a party to the guaranty agreements. Icon
asserts that the full credit bid rule is not meant to protect third parties such as tortfeasors or
competing creditors like Republic Bank. Icon contends that it sued EAR under the tort theory
of replevin, and multiple states have held that the full credit bid rule does not bar tort claims
against third parties.
¶ 18 Further, Icon argues that its credit bid has the same result under the language of the
guaranty agreements as it does under Wyoming law. Icon asserts that Wyoming, by statute,
follows a “lien theory” mortgage foreclosure scheme, which states that the proceeds of a
foreclosure sale are used to first pay expenses and attorney fees; then used to satisfy the
obligations secured by the mortgage being foreclosed; and then distributed to junior
lienholders. Wyo. Stat. Ann. § 34-4-113(a) (West 2010). Any remaining proceeds are paid
to the mortgagor as a surplus, while the mortgagor remains liable for any deficiency. Wyo.
Stat. Ann. § 34-4-113(c) (West 2010). After the property has been sold through foreclosure,
the mortgagor has the right to redeem the real estate by paying the purchaser the amount of
the bid, if purchased by the mortgagee under a mortgage. Wyo. Stat. Ann. § 1-18-103(a)
(West 2010). Icon argues that the lien theory scheme binds a mortgagor to the terms of the
initial bargain and prevents the mortgagor from redeeming the property at a deflated price
after foreclosure. Thus, Icon claims that when it bid on the Wyoming real estate at the
foreclosure sale, it was bidding on the Players’ obligation, as opposed to EAR’s debt. Icon
-7-
asserts that by bidding more than $22 million, Icon was precluding the Players from being
able to redeem their property at a lesser price. Icon argues that the fact that it made separate
$22 million bids for each of the lots of the Wyoming real estate is further evidence that the
credit bid extinguished only the mortgages securing the potential liability of the Players. Icon
claims that the multiple $22 million bids also highlight that the amount of the credit bids
bore no relationship to the value of the underlying property. Icon argues that the only
theoretical result of the credit bid is that Icon was binding itself to the value of the Wyoming
real estate if it thereafter pursued a deficiency claim against the Players relating to their
mortgages. Therefore, Icon argues that the trial court erred in applying the full credit bid rule
in this case and erred in granting summary judgment in favor of Republic Bank.
¶ 19 In response, Republic Bank first argues that the trial court did not err in granting
summary judgment in favor of Republic Bank because the loan documents and Wyoming law
support the court’s judgment. Specifically, Republic Bank argues that Icon’s argument is
contradictory because Icon claimed that its credit bid was valid and enforceable when it
obtained title to the Wyoming real estate, but the same credit bid was of no legal significance
in reference to the remaining debt owed by EAR. Republic Bank contends that the plain and
unambiguous language of the mortgages and guaranties supports the trial court’s judgment.
Republic Bank points out that each of the mortgages executed by the Players and Sheldon’s
wife, Donna Malone (Donna), contains identical language, most notably in the section which
defines the term “Secured Debt.” The mortgages state, in pertinent part:
“Secured Debt: to the extent not prohibited by Laws, Guarantor’s unconditional and
absolute guaranty of the due and punctual Rent (as defined by the Guaranty) payments
due under the Lease Documents and any other monies due or which may become due
under the Lease documents, including those monies due as a result of any loss or damage
to the Equipment (as defined by the Guaranty), and the due and punctual performance
and observance by [EAR] (‘Lessee’), under the Lease Documents, of any other terms,
covenants, and conditions of the Lease Documents on the part of Lessee to be kept,
observed or performed, and any remedies described by the Lease Documents available
to Mortgagee, as Lessor under the Lease, as a result of Lessee’s default under the terms
and conditions of the Lease Documents, whether according to the present terms thereof,
at any earlier date or dates as provided therein, or pursuant to any extension of time or
to any change or changes in the terms, covenants and conditions thereof now or at any
time hereafter made or granted.”
¶ 20 Republic Bank argues that under this definition, the secured debt was the same debt
incurred by EAR under the lease. Thus, Republic Bank asserts that the plain language of the
mortgages show that the mortgages secured EAR’s debt, as opposed to the obligations under
the guaranty agreements. Republic Bank points out that the mortgages also authorized Icon
to sell the mortgaged property in the event of default and authorized Icon to credit bid at the
sale of the mortgaged property. Additionally, the mortgages stated that all sums realized at
the sale of the mortgaged property shall be applied to the secured debt. Because Icon credit
bid more than $22 million for the Wyoming real estate, Republic Bank argues that the full
amount of Icon’s bid must be applied to the secured debt. Republic Bank asserts that since
the secured debt is the same debt incurred by EAR, then Icon’s credit bid satisfied EAR’s
-8-
debt in full.
¶ 21 Next, Republic Bank argues that although Wyoming follows a lien theory mortgage
foreclosure scheme, Icon’s credit bid paid EAR’s debt in full. Republic Bank contends that
Wyoming law allows for deficiency judgments against mortgagors in addition to the loss of
the mortgaged real estate. However, Republic Bank points out that Icon did not pursue a
deficiency judgment against EAR or any of the individuals that executed the guaranty
agreements. Instead, Icon chose to credit bid the full amount of EAR’s debt on the Wyoming
real estate. Republic Bank claims that under Wyoming law, Icon’s credit bid was applied in
satisfaction of obligations secured by the mortgage being foreclosed. Thus, Republic Bank
asserts that the proceeds of the foreclosure sale of $22,743,564.44 were credited to Icon and
applied toward EAR’s underlying debt.
¶ 22 Additionally, Republic Bank argues that it never based its argument on the full credit bid
rule before the trial court, and does not argue on appeal, that the rule should be applied.
Likewise, Republic Bank claims that the trial court did not apply the rule in making its
ruling. Republic Bank agrees with Icon and states that Wyoming does not recognize the full
credit bid rule. Rather, Republic Bank argues that the trial court based its ruling on the fact
that Icon bid more than $22 million at the foreclosure sale, and that applicable Wyoming
statutes and Wyoming case law state that the proceeds of a foreclosure sale satisfy the
mortgage debt.
¶ 23 Turning to the merits of the appeal, we determine whether the trial court erred in granting
summary judgment in favor of Republic Bank. We review the trial court’s grant of a motion
for summary judgment under the de novo standard of review. American Family Mutual
Insurance Co. v. Chiczewski, 298 Ill. App. 3d 1092, 1094 (1998).
¶ 24 As recognized by both parties, the full credit bid rule is not recognized in the state of
Wyoming. As we have determined that Wyoming law applies, we therefore will not discuss
the construction or application of the full credit bid rule. Rather, we shall discuss the effect
of Icon’s credit bid under Wyoming law, analyzed under the terms of the guaranty
agreements, mortgages, and lease agreement applicable to the transaction.
¶ 25 Despite the numerous arguments presented by both parties, the seminal issue in this case
is whether the mortgages executed by the Players secured EAR’s debt. Under Wyoming law,
when a lender bids the full amount due to him at a foreclosure sale, the mortgage is satisfied
and discharged. Federal Land Bank of Omaha v. Sells, 280 P. 98, 100 (Wyo. 1929); Wyo.
Stat. Ann. § 34-4-113(a) (West 2010). A guaranty agreement is a contract to pay the debt of
another, and is secondary to the instrument it guarantees. Belden v. Thorkildsen, 2008 WY
148, ¶ 20, 197 P.3d 148, 154 (Wyo. 2008).
¶ 26 As Icon points out, Wyoming follows a “lien theory” mortgage foreclosure scheme which
states that the proceeds of a foreclosure sale are used to first pay expenses and attorney fees;
then used to satisfy the obligations secured by the mortgage being foreclosed; and then
distributed to junior lienholders. Wyo. Stat. Ann. § 34-4-113(a) (West 2010). Any remaining
proceeds are paid to the mortgagor as a surplus, while the mortgagor remains liable for any
deficiency. Wyo. Stat. Ann. § 34-4-113(c) (West 2010). After the property has been sold
through foreclosure, the mortgagor has the right to redeem the real estate by paying the
-9-
purchaser the amount of the bid if purchased by the mortgagee under a mortgage. Wyo. Stat.
Ann. § 1-18-103(a) (West 2010). “[T]he right to sue for a deficiency is logical to bind a
mortgagor to the terms of the initial bargain and prevent redemption at a deflated price after
foreclosure. “ Fitch v. Buffalo Federal Savings & Loan Ass’n, 751 P.2d 1309, 1312 (Wyo.
1988).
¶ 27 Icon argues that guaranty agreements are separate and distinct obligations from the
underlying debts for which they are collateral. We agree with that general principle of law.
Icon also points out that the guaranty agreements executed by the Players in this transaction
state that Icon’s sole and exclusive remedy against the Players is limited to the Players’
interest in the Wyoming real estate. However, Wyoming law states that when a lender makes
a full credit bid at a foreclosure sale, “the mortgage is satisfied and discharged.” (Emphasis
added.) Federal Land Bank, 280 P. at 100. Thus, in addition to the language of the guaranty
agreements, we must look to the plain language of the mortgages to determine what debt the
mortgages secured. The mortgages executed by the Players defined the debt that they secured
in the “Secured Debt” section of the mortgages. The mortgages state, in pertinent part:
“Secured Debt: to the extent not prohibited by Laws, Guarantor’s unconditional and
absolute guaranty of the due and punctual Rent (as defined by the Guaranty) payments
due under the Lease Documents and any other monies due or which may become due
under the Lease documents ***.”
¶ 28 Icon argues that in the phrase “Guarantor’s unconditional and absolute guaranty,” the use
of the word “guaranty” shows that the mortgages secured the guaranty agreements executed
by the Players, as opposed to EAR’s debt as a whole. On the other hand, Republic Bank
argues that the mortgages state that the secured debt is the same debt as EAR’s debt to Icon.
We agree with Republic Bank’s argument. In each of the mortgages, the term “Guaranty” is
defined as the guaranty agreements executed by the Players. However, in the definition of
“Secured Debt,” the phrase “Guarantor’s unconditional and absolute guaranty” uses the term
“guaranty” in its lowercase form, as opposed to “Guaranty” in its uppercase form. Further,
in the same sentence, the term “Guaranty” is used in the uppercase form regarding the
definition of the term “Rent.” If the parties intended the term “guaranty” to refer to the
guaranty agreements executed by the Players, they could have easily used the uppercase form
of the term just as they did later in the same sentence. However, the mortgages state that the
Secured Debt is the “unconditional and absolute guaranty of the due and punctual Rent.”
Applying the meaning of the plain language of all the terms in this clause, it is clear that the
Secured Debt as defined in the mortgages is the same debt that EAR owed to Icon:
specifically, the unpaid rent for the leased equipment. Additionally, the mortgages state that
“[a]ll sums realized by [Icon] shall be applied to the Secured Debt.” Thus, the full amount
of Icon’s bid must be applied to the secured debt. Under Wyoming law, and by Icon’s own
admission, the effect of a successful credit bid is to satisfy and discharge a mortgage. Thus,
the effect of Icon’s $22 million credit bid was to satisfy and discharge the mortgages and
guaranty agreements executed by the Players. Because the mortgages in this case secured the
same debt that EAR owed to Icon, Icon’s $22 million credit bid satisfied EAR’s debt to Icon.
¶ 29 We acknowledge Icon’s argument that the purpose of the $22 million credit bid was to
make sure that the Players did not redeem the Wyoming real estate at a deflated price under
-10-
Wyoming’s theory of lien foreclosure. While this may have been a sound and reasonable
business strategy, the plain language of the mortgage agreements stated that they secured the
same debt that EAR owed to Icon. If the mortgage agreements had stated that only the
guaranty agreements executed by the Players were secured, then Icon’s strategy would have
been successful and its claims against EAR would not have been extinguished. Unfortunately
for Icon, based on the plain meaning of the language which the parties agreed upon when
they entered into the mortgage agreements, EAR’s debt was satisfied.
¶ 30 Additionally, we note that Icon argues that the trial court made incorrect assumptions in
making its ruling when it stated that the Players may have a claim against EAR for the full
amount of Icon’s credit bid. We find the trial court comments regarding that issue to be dicta.
Accordingly, we cannot rely on such comments as a basis for reversing the trial court’s
judgment. Therefore, we find that the trial court did not err in granting Republic Bank’s
motion for summary judgment.
¶ 31 For the foregoing reasons, the ruling of the circuit court of Cook County is affirmed.
¶ 32 Affirmed.
-11-