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Sahadi v. Continental Illinois National Bank & Trust Co. of Chicago
United States Court of Appeals for the Seventh Circuit
706 F.2d 193 (1983)
Great Lakes and European Lines, Inc. (GLE), an international shipping line, secured a $3 million loan from Continental Illinois National Bank and Trust Company (the bank) (defendant) that was personally guaranteed by GLE’s owners, Fred and Helen Sahadi (plaintiffs). The bank later promised to increase its loan commitment. But when the business relationship between GLE, the Sahadis, and the bank deteriorated, the bank failed to follow through. GLE threatened to sue and withheld interest payments on the outstanding loan, and the bank threatened to call in that loan. After eventual negotiations, the Sahadis agreed to release the bank from any liability for its repudiation and to provide additional collateral. The bank agreed not to call in the outstanding loan if GLE paid all accrued interest by November 15. When that date passed without payment, the bank immediately called in the outstanding loan, refusing to accept GLE’s proffered interest payment one day later. The move surprised GLE, because the bank had previously accepted late payments. GLE ultimately went bankrupt, and the Sahadis faced significant personal liability. The Sahadis sued the bank in federal district court, seeking release from the personal guarantee and damages for the bank calling in the loan despite its agreement to forbear. The bank countered that GLE’s failure to meet the payment deadline constituted a material breach, entitling the bank to terminate its obligation not to call in the loan. The district court granted partial summary judgment in the bank’s favor, and the Sahadis appealed to the Seventh Circuit.
Rule of Law
Holding and Reasoning (Wood, J.)
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