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United Central Bank v. Davenport Estate LLC

United States Court of Appeals, Seventh Circuit

March 4, 2016

UNITED CENTRAL BANK, Counter-Defendant-Appellee,
v.
DAVENPORT ESTATE LLC, et al., Counter-Plaintiffs-Appellants

Argued January 22, 2016

Appeal from the United States District Court for the Northern District of Illinois. No. 1:10-CV-03176 -- Andrea R. Wood, Judge.

For UNITED CENTRAL BANK, a Texas Bank Corporation, Plaintiff - Appellee: Andrew J. Abrams, Attorney, Boodell & Domanskis, Chicago, IL.

For DAVENPORT ESTATE LLC, an Iowa Limited Liability Company, UMAR F. PARACHA, an Individual and Resident of the State of Illinois, Defendants - Appellants: Maurice J. Salem, Attorney, Law Offices of Salem & Associates, P.C., Palos Heights, IL.

Before BAUER, FLAUM, and HAMILTON, Circuit Judges.

OPINION

Page 316

Flaum, Circuit Judge.

In 2008, the predecessor to United Central Bank (" UCB" ) made a $700,000 loan to a group of investors.[1] UCB and the investors agreed that the money would be placed in escrow but did not record their understanding in a written escrow agreement. Later, the investors repeatedly asked UCB for the $700,000 but never received it. In 2010, the investors brought a breach of contract claim, and UCB moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). The district court granted UCB's motion to dismiss since there was no written agreement as required by the Financial Institutions Reform, Recovery, and Enforcement Act (" FIRREA" ) and the Illinois Credit Agreement Act (" ICAA" ). We affirm.

I. Background

In 2008, Mutual Bank (UCB's predecessor) made loans to the group of investors to purchase three properties. As part of the transaction, Mutual Bank also agreed to loan the investors $700,000 for repairs and renovations on the properties. The $700,000 was placed in escrow, but the parties did not enter into a written escrow agreement. The only written reference to the escrow money is in the closing documents for each property. Once the investors exhausted much of their resources on repairs, they requested the $700,000 in escrow. However, they never received this money from Mutual Bank.

In 2009, the Federal Deposit Insurance Corporation (" FDIC" ) shut down Mutual Bank for gross negligence and other

Page 317

wrongful conduct. The FDIC, as receiver for Mutual Bank, entered into a Purchase and Assumption Agreement with UCB. Under this agreement, UCB acquired Mutual Bank's loans and assets. The investors made repeated written and oral demands on UCB to release the $700,000 in escrow but did not receive the money.

In 2010, UCB brought suit against the investors to foreclose on the three properties and enforce related promissory notes and guarantees. The investors brought several counterclaims. Their second amended counterclaim, filed in April 2014, contends that UCB's refusal to release the escrow funds constituted a breach of contract. UCB filed a motion to dismiss pursuant to Rule 12(b)(6),[2] ...


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