Armstrong v. Resolution Trust Corp.
| Decision Date | 21 August 1992 |
| Docket Number | No. 3-91-0737,3-91-0737 |
| Citation | 599 N.E.2d 1209,234 Ill.App.3d 162,175 Ill.Dec. 195 |
| Parties | , 175 Ill.Dec. 195 Ralph E. ARMSTRONG and Rema J. Armstrong, Plaintiffs-Appellees, v. RESOLUTION TRUST CORPORATION, as Receiver for Chillicothe Federal Savings and Loan Association, Defendant-Appellant. |
| Court | United States Appellate Court of Illinois |
Ronald M. DeHaan (argued), Randolph E. Ruff (argued), DeHaan & Richter, P.C., Chicago, Christopher Bellotto, F.D.I.C., Washington, D.C., and Gregory S. Bell, Sutkowski & Washkuhn Assoc., Peoria, for Resolution Trust Corp.
Thomas E. Leiter (argued) and Sandra J. Birdsall (argued), The Leiter Group, Peoria, for Ralph E. and Rema J. Armstrong.
Plaintiffs sued a savings and loan association, alleging that fraudulent misrepresentations were made in conjunction with the transfer of some land by plaintiffs to a third party. The jury awarded $1,133,000 and defendant appeals. We reverse.
On August 8, 1978, Ralph and Rema Armstrong obtained a mortgage from Chillicothe Federal Savings & Loan ("Chillicothe Federal") to finance construction of an apartment building. Adjacent to that building was another apartment building which the Armstrongs had financed through Security Savings and Loan Association. ("Security Savings") By 1983, the apartment complex was losing $25,000 per year. There were unpaid real estate taxes in the amount of $15,000 and the Armstrongs were $5,000 behind in their mortgage payments.
Because of the losses, the Armstrongs decided to sell the two mortgaged buildings and a third adjacent undeveloped tract. They listed the properties with Russell Smith, a real estate agent with the Bob Smith Agency. After initial attempts to sell were fruitless, Smith proposed that the Armstrongs convey the property to a group of local businessmen which Smith would put together. Smith theorized that such a partnership, corporation or trust might be interested in the tax benefits.
On December 2, 1983, Smith presented the Armstrongs with a written offer to purchase pursuant to this plan. On December 3, the Armstrongs made a counteroffer. On December 16, Smith responded with a second offer which was accepted on December 19.
All offers were subject to the condition that Chillicothe Federal and Security Savings would modify their loan agreements to allow the buyer of the property to assume the loan payments. Under the proposals, the mortgages would not be paid off at the time of the sale. Instead, the buyer was to receive title to the land in consideration for its promise to make the mortgage payments. The Armstrongs would also remain liable on the debt. The buyer would pay the past due taxes and mortgage payments. Both banks subsequently approved the assignment of the mortgages.
At some point prior to closing, both Smith and Walter Giugler, Chillicothe Federal's secretary/manager, advised Ralph Armstrong that he should retain an attorney to represent him in the matter. Nevertheless, plaintiffs never obtained a lawyer.
The closing took place December 31, 1983 at the offices of Chillicothe Federal. The grantee in the three deeds was designated as The First National Bank as Trustee under Trust No. 01-77-5616-00-6. When Ralph Armstrong inquired what that was, Giugler stated that it was to keep the identity of the businessmen private and that Smith would be managing the property. Giugler also informed Armstrong that the buyer group was made of of nine local businessmen of good reputation, but did not specifically name them.
Giugler then stated to the Armstrongs, "Ralph, you understand if these guys can't pay this bill, we'll still look to you for the mortgage." Ralph Armstrong acknowledged this fact then responded by saying "But as I understand it, you will first look to the businessmen, the nine buyers, before you will look to me." Giugler responded "Yes".
The Armstrongs also allege that Giugler represented to the Armstrongs during closing that the individual investors were personally assuming the loans. Giugler denies this. Smith testified that he had previously informed the Armstrongs that the members of the buyer group were never going to be personally liable. The deeds were the only closing documents and make no mention of the investors assuming any personal liability.
During 1984 and 1985, the land trust made payments on the loan. In 1985, the trust decided to end its funding of the apartments because it was losing money. The trust tendered the buildings back to the Armstrongs, but the Armstrongs refused the tender. The buyer group then stopped making payments to Chillicothe Federal and Security Savings.
On May 1, 1986, Chillicothe Federal obtained a confession of judgment against the Armstrongs in the amount of $257,351.43, which it subsequently recorded. Foreclosure proceedings were initiated approximately two years later, but by the time of trial, no foreclosure sale had been held. Meanwhile, on November 24, 1986, Security Savings foreclosed on its mortgage and obtained a deficiency judgment against the Armstrongs in the amount of $24,008.07.
The Armstrongs filed suit against the nine individuals comprising the buyer group on May 27, 1986. On August 5, 1988, the Armstrongs voluntarily dismissed those individuals and joined Chillicothe Federal as a defendant.
On January 10, 1989, the Armstrongs filed their Third Amended Complaint. Count I alleged that Chillicothe Federal, through Giugler, fraudulently made the following two misrepresentations: (1) the members of the buyer group were personally assuming liability on the mortgages; and (2) in the event of default, the bank would first look to the members of the buyer group before seeking payment from the Armstrongs. Counts II and III claimed negligent misrepresentation of fact and breach of duty of good faith, respectively.
In support of these claims, plaintiffs point to the fact that they had previously dealt with Giugler on numerous business deals and held him in high respect. They also point to the fact that Giugler received 25% of the real estate commissions paid as a result of the closing. Giugler received this pursuant to an agreement between himself and Robert Smith, Russell Smith's brother. Robert Smith is also Giugler's brother-in-law and owns the real estate brokerage company. This agreement dates back to 1972 when Giugler sold his partnership in the brokerage business to Robert Smith. The fact that Giugler was financially interested in this transaction was not revealed to plaintiffs. In addition, plaintiffs point out that Giugler had been instrumental in helping them obtain the mortgage initially from Security Savings. Giugler also represented Security Savings' interests at the closing which is the subject of this dispute. In addition, there are allegations that Giugler added some language to the deeds after the Armstrongs had signed them. Giugler was never joined as a defendant in this action.
After this suit was filed, Chillicothe Federal was placed into conservatorship with the Federal Savings and Loan Insurance Corporation. On August 23, 1990, the Resolution Trust Corporation ("RTC") was appointed as receiver for Chillicothe Federal. In December 1990, RTC was substituted as the proper party defendant, effective August 23, 1990.
RTC then filed a motion for summary judgment. During the pendency of that motion, the Armstrongs filed a claim with the RTC as required by 12 U.S.C. sec. 1821(d). RTC argued in its motion that plaintiffs were first required to exhaust the administrative claims procedure prior to proceeding in the courts. In the alternative, the RTC argued that plaintiffs' cause of action was barred by 12 U.S.C. sec. 1823(e) and/or by the Supreme Court's ruling in D'Oench, Duhme & Co. v. Federal Deposit Insurance Corp. (1942), 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956, and its progeny. The circuit court denied that motion on February 15, 1991.
A jury trial was held in late February and early March of 1991. The jury returned a verdict for the plaintiffs on Count I and awarded damages of $1,133,000.00. On June 24, 1991, the RTC disallowed the Armstrongs' administrative claim. The trial court denied RTC's post trial motion and this appeal followed.
RTC's first contention is that the circuit court lacked subject matter jurisdiction to hear this claim. RTC argues that no court had jurisdiction during the pendency of the administrative action. RTC then argues that after the administrative remedies have been exhausted, jurisdiction lies solely in the federal district court.
In support of its claim, RTC points to 12 U.S.C. sec. 1821(d), which provides, in pertinent part:
the claimant may request administrative review of the claim in accordance with subparagraph (A) or (B) of paragraph (7) or file suit on such claim (or continue an action commenced before the appointment of the receiver) in the district court of the United States for the district within which the depository institution's principal place of business is located or the United States District Court for the District of Columbia (and such court shall have jurisdiction to hear such claim.
* * * * * *
(13)(D) Except as otherwise provided in this subsection, no court shall have jurisdiction over--
(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or
(ii) any claim relating to any act or omission of...
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