Federal Deposit Ins. Corp. v. Meyer
| Decision Date | 16 January 1986 |
| Docket Number | No. 84-1010,84-1010 |
| Citation | 781 F.2d 1260 |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, Plaintiff-Appellee, v. George C. MEYER, Margaret Meyer & Edwin A. Meyer, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Richard M. Furgason, Dreyer Foote Streit Furgason & Slocum, Aurora, Ill., for defendants-appellants.
Bryan Krakauer, Sidley & Austin, Chicago, Ill., for plaintiff-appellee.
Before COFFEY and EASTERBROOK, Circuit Judges and GRANT, Senior District Judge. *
The defendants appeal the district court's grant of summary judgment in the favor of the plaintiff, Federal Deposit Insurance Corporation ( "FDIC" ), and ask that the Decree of Foreclosure and that the judgment on a Guaranty be set aside. We affirm.
On September 17, 1975, George Meyer executed and delivered an installment note in the amount of $195,000 to the Drovers National Bank of Chicago ("Drivers National" ). To secure the loan, George Meyer and his wife, Margaret Meyer, signed a personal guaranty of George Meyer's indebtedness and George Meyer individually entered into a security agreement with the bank granting Drovers National a security interest in his beneficial interest in a land trust. 1 The installment note was also secured by an earlier security agreement 2 and a conditional assignment of George Meyer's beneficial interest in the trust, both dated May 5, 1972, that secured George Meyer's liabilities to Drovers National incurred after May 5, 1972.
On January 19, 1978, the Comptroller of the Currency, pursuant to 12 U.S.C. Sec. 191, determined the Drovers National Bank to be insolvent, ordered the bank closed, and tendered the offer of appointment as receiver of the bank to the FDIC as authorized by 12 U.S.C. Sec. 1821(c). The FDIC accepted the appointment as receiver and purchased the assets of the bank, pursuant to 12 U.S.C. Sec. 1823(e). 3 Included in the assets purchased by the FDIC were the two security agreements dated May 5, 1972 and September 17, 1975, the assignment of the beneficial interest, the guaranty and the installment note for $195,000.
On April 2, 1982, the FDIC filed suit in United States District Court for the Northern District of Illinois alleging that the $195,000 installment note was in default. 4 Count I of the complaint sought foreclosure of the security interest in George Meyer's beneficial interest in the land trust. Count II, alleging default on a lease by defendant Walters, was dismissed without prejudice at the plaintiff's request. Count III sought judgment against Margaret Meyer on the guaranty signed by George and Margaret Meyer to secure the $195,000 installment note. The FDIC moved for summary judgment on Counts I and III, supporting its motion with the affidavit of Daniel D. Wilson, an FDIC official, stating that Wilson had personal knowledge of the books and records kept in the ordinary course of business of the Drovers National Bank and later by the FDIC. Wilson asserted that the FDIC was the current owner of the $195,000 installment note, the security agreements, the assignment of the beneficial interest, and the guaranty and further stated that Meyer was in default under the note. Wilson informed the court of the amount due on the principal, accrued interest, tax advances and legal fees and further stated that interest continued to accrue at the per diem rate of, "((P + 3) X 187,395.02 / 365), where P is the prime interest rate, 187,395.02 is the outstanding principal and 365 is the number of days in the year."
George Meyer, Margaret Meyer and Edwin Meyer (collectively "the Meyers") filed a joint response to the FDIC's motion for summary judgment with a supporting memorandum and a "Response to Affidavit of Daniel Wilson" ("Response"). The "Response" stated that the Meyers were "without sufficient information ... to admit or deny [the allegations in Wilson's affidavit] and demand[ed] strict proof thereof ... [s]pecifically, whether Daniel D. Wilson examined the books and records kept in the ordinary course of business by Drovers Bank and that said books and records included exhibits attached to the Federal Deposit Insurance Corporation Complaint to Foreclose Security Interest." In their joint memorandum in response to the summary judgment motion, the Meyers argued, inter alia, that under Home Fed. Sav. & Loan Assoc. v. Zarkin, 89 Ill.2d 232, 59 Ill.Dec. 897, 432 N.E.2d 841 (1982), the FDIC owed a fiduciary duty to the land trust beneficiary, George Meyer, and, because it owed a fiduciary duty to George Meyer, could not foreclose its own security interest. 5
The district court granted summary judgment in favor of the FDIC on Counts I and III and the FDIC moved for entry of a Decree of Foreclosure and for entry of a judgment order against Margaret Meyer. The district court directed the entry of final judgment in favor of the FDIC on Counts I and III of the complaint, entered a Decree of Foreclosure on Count I and entered judgment against Margaret Meyer on Count III. The Meyers filed a "Motion for New Trial and/or to Alter or Amend Judgment and for Additional Time to File Supporting Affidavits" pursuant to Fed.R.Civ.P. 59 and 52 contending: (1) there was an issue as to what interest rate applied to the loan after its stated maturity date; (2) there was an issue as to whether the security agreement was in the nature of a real estate mortgage; (3) the affidavits of the FDIC were improper in form, stated conclusions, were incompetent evidence and were insufficient to support the motion for summary judgment; (4) additional discovery and development of the facts "were necessary before the court [could] properly rule on the motions for summary judgment;" specifically: "George C. Meyer is without sufficient information in his possession to determine what, if any, amounts are due plaintiff;" (5) any genuine issue of material fact as to the underlying obligation also existed as to the alleged guaranty of Margaret Meyer and any amount due thereunder. The Meyers did not submit affidavits in support of the motion but requested the trial court to allow "reasonable additional time in which to conduct discovery to properly determine from the records in the FDIC's possession what, if any, amounts are due the FDIC." After the Meyers' motion was denied, they filed a notice of appeal but failed to seek a stay of execution of either the Decree of Foreclosure entered on Count I or of the Judgment Order entered on Count III. During the pendency of this appeal, George Meyer's beneficial interest in the land trust was sold to the FDIC at a foreclosure sale conducted by the United States Marshal. 6
The Meyers argue to this court that the grant of summary judgment to the FDIC was in error contending that there was an issue of material fact as to the amount due because the Wilson affidavit contained hearsay (Wilson's testimony concerning facts contained in Drovers' records), inadmissible conclusions, and speculation as to the interest rate applicable to the loan after its maturity date. Additionally, the defendants contend that there was a genuine issue of material fact as to the true nature of the financial transaction between George Meyer and the Drovers National Bank. Under the Meyers' theory, the district court's finding that the transaction created a security interest in personal property rather than a real estate mortgage erroneously deprived George Meyer of his right of redemption under Illinois mortgage law. The FDIC argues that the appeal of the Decree of Foreclosure is moot since the property in dispute has been sold. Additionally, the FDIC contends that the appeals of the Decree of Foreclosure and of the Judgment against Margaret Meyer should be dismissed because the Meyers failed to raise the points they now urge on appeal in their response to the summary judgment motion.
The Meyers also argued that the FDIC assumed the role of trustee under the land trust and, as trustee, owed George Meyer a duty to serve his interest with complete loyalty. The Meyers, relying on the Zarkin decision, contended that the court must set aside the transaction between the beneficiary and the trustee if the trustee failed to prove the fairness of the transaction, the disclosure of its conflicts of interest, the beneficiary's voluntary consent, and the fact that there was no overreaching by the trustee. The Meyers concluded that unless Drovers National Bank disclosed its conflict of interest to George Meyer, the transaction between Drovers National Bank and George Meyer was void ab initio and the FDIC, as Drovers National Bank's successor, could not seek a foreclosure on Meyer's beneficial interest and Margaret Meyer was not liable under the guaranty. After the Illinois Supreme Court issued its opinion in Zarkin, the Illinois legislature enacted a statute providing that a land trustee does not breach its fiduciary duty to the beneficiary by foreclosing on an assignment of a beneficial interest in the trust. Ill.Rev.Stat. ch. 148, Sec. 81, et seq. (1982). The Act specifically applies to all land trusts, whether or not the debt was incurred or the land trust was created prior or subsequent to the date the Act was enacted. Id. at Sec. 4. While the appeal in this case was pending, the Illinois Supreme Court held that the retroactivity provision of the Act was valid. Sanelli v. Glenview State Bank, 108 Ill.2d 1, 90 Ill.Dec. 908, 483 N.E.2d 226 (1985). Therefore, we hold that the Act and the Sanelli decision render the Meyers' fiduciary duty argument groundless.
In the absence of a stay of proceedings to enforce a judgment obtained in accordance with Fed.R.Civ.P. 62(d), the mere filing of an appeal does not prevent the judgment creditor from acting to enforce the judgment. In re Facilities Realty Trust, 227 F.2d 651 (7th Cir.1955). In the absence of a stay of the enforcement of a judgment, if a district...
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