Lawson v. Household Bank F.S.B., 93-2220

• Decision Date: 06 April 1994
• Docket Number: No. 93-2220,93-2220
• Citation: 20 F.3d 786
• Parties: Mary LAWSON and Matt Lawson, on behalf of themselves and all persons similarly situated, Plaintiffs-Appellants, v. HOUSEHOLD BANK F.S.B., Defendant-Third/Party Plaintiff-Appellee, v. RESOLUTION TRUST CORPORATION, Third/Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 786

20 F.3d 786

Mary LAWSON and Matt Lawson, on behalf of themselves and all

persons similarly situated, Plaintiffs-Appellants, v. HOUSEHOLD BANK F.S.B., Defendant-Third/Party Plaintiff-Appellee, v. RESOLUTION TRUST CORPORATION, Third/Party Defendant-Appellee.

No. 93-2220.

United States Court of Appeals Seventh Circuit.

Argued Dec. 9, 1993.

Decided April 6, 1994.

Steven M. Levin, Levin & Perconti, Edward T. Joyce (argued), Arthur W. Aufmann Eric K. Wein, Kubasiak, Cremieux & Fylstra, Chicago, IL, for Mary and Matt Lawson.

Steven P. Handler, Christopher M. Murphy, McDermott, Will & Emery, Chicago, IL, for Household Bank F.S.B.

Michael A. Weinberg, Novack & Macey, Chicago, IL, Dennis S. Klein, Kevin M. Crotty (argued), Hughes, Hubbard & Reed, Washington, DC, for Resolution Trust Corp.

Before BAUER, FRIEDMAN, ^* and RIPPLE, Circuit Judges.

FRIEDMAN, Circuit Judge.

In this suit, the owners of certificates of deposit (CD's) issued by a savings and loan association that shortly after issuance became insolvent, seek to recover from a bank that acquired the association's deposits and assumed its liabilities the amount of the interest rate on the CD's, that was higher than the interest rate the acquiring bank offered to the CD holders. In the purchase and acquisition agreement by which the bank acquired the deposits, the bank explicitly did not assume the association's obligations concerning the terms or rate of interest on the CD's. The district court rejected the CD owners' claim to this additional interest, and we affirm.

I

A. In January 1991, the appellants Lawson acquired from Imperial Federal Savings Association (Imperial) five one-year CD's, each for $100,000 and bearing interest at 8.3 percent annually. On April 19, 1991, the Treasury Department declared Imperial insolvent and appointed the Resolution Trust Corporation (Resolution) as receiver. On the same day, Resolution entered into a purchase and assumption agreement with Household Bank F.S.B., under which Household Bank acquired specified assets and assumed specified liabilities of Imperial. In Section 2.1 of the agreement, Household Bank

expressly assumes ... (a) All Deposits ... provided that ... [Household Bank] is not assuming any agreement between ... [Imperial] and any depositor relating to such Deposits, including, without limitation, any agreement with respect to the term of or rate of interest on such Deposits

Article 6.2 stated that Household Bank

shall pay interest on all Deposits assumed by it pursuant to Section 2.1 in accordance with the terms of each written agreement between ... [Imperial] and the depositors of ... [Imperial] to each such Deposit and honor all the terms and conditions of such agreements, for a period not less than fourteen (14) days commencing the day after Association Closing, ... after the expiration of the fourteenth (14) day, [Household Bank] ... shall pay interest on all time deposits of [Imperial] ... at a rate no less than the then current passbook savings deposit rate of interest paid by [Household Bank].

On the same date, Household Bank informed all of Imperial's depositors whose deposits it acquired (including the Lawsons) that the deposits had been transferred to it, that the depositors would receive interest on their deposits "at the rate established prior to their transfer, through May 3, 1991," and that effective May 4, 1991, the interest rate on one-year CD's would be 6.11 percent (as against the 8.3 percent the CD's originally carried). The notice explained that "[i]n order to remain financially sound, no bank can pay interest rates that are substantially higher than market levels. For this reason, Household Bank cannot offer the same rate on deposit accounts that was paid by the former Imperial Federal Savings Association." The notice informed the Lawsons that "you will have the opportunity to enter into a new deposit agreement, or 'ratify,' the continuation of your deposit accounts at Household Bank.... [y]ou may withdraw your funds without penalty until you enter into a new deposit agreement with Household Bank."

The Lawsons filed suit against Household Bank in an Illinois State court to recover the difference between the 8.3 percent interest the CD's originally carried, and the 6.11 percent Household Bank would pay. Household Bank filed a third-party complaint against Resolution, which had agreed to indemnify the bank. Resolution removed the case to the United States District Court for the Northern District of Illinois, and then moved to dismiss for failure to state a claim on which relief could be granted.

The district court granted the motion and dismissed the case. The court held that the Lawsons "are bound by the terms of the P & A Agreement between RTC and Household Bank," that the agreement "clearly demonstrates" that Resolution did not "pass along Imperial's contract interest rate liability to Household Bank," that under the agreement "Household Bank was only required to maintain Imperial's interest rate for the first 14 days after Imperial's insolvency and to give Imperial depositors notice of the change in their CDs' interest rate," and that "[s]ince Household Bank expressly did not assume Imperial's contractual interest liabilities beyond the initial 14 day period, it cannot be held liable to the Lawsons for such interest."

II

Since the only parties to the CD's were Imperial and the Lawsons, any claims of the Lawsons against Household Bank relating to the CD's interest rate necessarily was based upon the agreement between Resolution and Household Bank, under which the latter acquired certain deposits and assumed...