Northwest Bank and Trust v. First Ill. Nat'L. Bank

• Decision Date: 31 December 2003
• Docket Number: No. 02-3746.,02-3746.
• Citation: 354 F.3d 721
• Parties: NORTHWEST BANK AND TRUST COMPANY, Plaintiff-Appellant, v. FIRST ILLINOIS NATIONAL BANK, now known as The National Bank; Christopher L. Bryant, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

354 F.3d 721

NORTHWEST BANK AND TRUST COMPANY, Plaintiff-Appellant, v. FIRST ILLINOIS NATIONAL BANK, now known as The National Bank; Christopher L. Bryant, Defendants-Appellees.

No. 02-3746.

United States Court of Appeals, Eighth Circuit.

Submitted: November 21, 2003.

Filed: December 31, 2003.

Alan C. Kohn, argued, St. Louis, MO (Robert F. Murray, St. Louis, on the brief), for appellant.

Thomas D. Hanson, argued, Des Moines, IA (Fred E. Beaver, Clark G. McDermott, Des Moines, IA, on the brief), for appellee.

Before MURPHY, LAY, and BRIGHT, Circuit Judges.

LAY, Circuit Judge.

Northwest Bank and Trust Company ("Northwest") alleges that First Illinois National Bank and its president, Christopher Bryant (collectively, "FINB"), acted improperly in both procuring Northwest's participation in, and managing the servicing of, a loan participation agreement. Northwest asserts claims of: 1) fraudulent inducement, 2) fraudulent conveyance, 3) breach of fiduciary duty, 4) breach of contract, and 5) unjust enrichment. The district court entered summary judgment in favor of FINB on all counts, and Northwest appeals. All parties agree that Iowa law applies. We affirm in part and reverse in part.

I

This case arises out of a loan participation agreement entered into between Northwest and FINB, two commercial lending institutions located in the Quad Cities area of eastern Iowa and western Illinois. At all times relevant to this action, one of FINB's most important customers was Thomas Jager, a Quad Cities entrepreneur. Jager had a successful business as a seller/servicer of Government National Mortgage Association ("GNMA") mortgage loans, which he owned and operated under the name of Whitehall Funding, Inc. ("Whitehall"). Between 1996 and 1998, Whitehall generated annual revenues of over $2 million, allowing Jager to engage in real estate speculation, whereby he purchased foreclosed properties and attempted to resell them at a profit.

Sometime in the fall of 1998, Jager purchased a tool and die business out of bankruptcy, renaming it New Uchtorff Corporation ("New Uchtorff"). New Uchtorff needed major cash infusions to refurbish its operation and to buy new tool and die equipment. Much of this money came in the form of an inter-company loan from Whitehall. To obtain the remainder, Jager sought out a substantial loan from FINB. Despite its amicable banking relationship with Jager, FINB was close to its legal lending limit and therefore unable to advance the entire amount requested. Jager began looking for a bank that would be willing to purchase a loan participation agreement from FINB for the additional financing of New Uchtorff.

Northwest expressed interest in acting as a participating lender in a loan to New Uchtorff with FINB acting as the lead lender. Because New Uchtorff's financial position was too precarious to support any lending, FINB proposed that the loan be made to Whitehall, the only Jager entity with a financial statement and cash flow that could service any new debt. In order to make a decision, Northwest requested additional information about the financial position of Jager and his various corporate entities. FINB forwarded a package of materials to Northwest, including a Loan Presentation prepared by FINB and Whitehall's prior three years of audited financial statements. After reviewing these and other materials, on December 28, 1998, Northwest entered into a loan participation agreement with FINB, contributing $1.3 million of a total $3.6 million loan to Whitehall. Sometime in early 2001, Whitehall declared bankruptcy and stopped making loan payments.

The remainder of the relevant facts are disputed by the parties. Northwest asserts that the information provided to it by FINB was false and misleading in several respects, and made for the purpose of inducing Northwest to enter into a loan participation agreement. Northwest claims that rather than financing New Uchtorff, the true purpose of the loan was to allow FINB to maintain a satisfactory federal bank rating necessary to service Whitehall's GNMA accounts, which represented a significant portion of FINB's business. In fact, shortly after receiving the loan, Whitehall effectively transferred $1.5 million back to FINB. Northwest also asserts that FINB's conduct in servicing the loan was improper in several respects, and that FINB sought to further its own interests to the exclusion of Northwest improperly applying loan repayments and failing to inform Northwest of detrimental changes in Whitehall's financial position.

For its part, FINB states that the materials it provided to Northwest were complete and accurate in all respects, and that Northwest was not misled into signing the loan participation agreement. FINB claims that rather than divert its attention from the true financial position of Jager and his corporations, FINB granted Northwest full access to its loan files, and the omissions of which Northwest now complains could have been discovered by the exercise of ordinary diligence. FINB also states that the proceeds of the loan were properly applied, as Whitehall used them to purchase equipment for New Uchtorff, and that FINB acted in complete accord with its rights and obligations as lead lender.

Factual disputes such as these are to be expected in the ordinary course of litigation. As far as a motion for summary judgment is concerned, they are generally resolved in favor of the non-moving party. This general rule is complicated, however, when one party disputes whether the "material facts" relied upon by the other are worthy of that designation. In the present appeal, both Northwest and FINB dispute the universe of material facts that were before the district court when ruling on FINB's motion for summary judgment. Under such circumstances, we must determine the factual record against which the district court's entry of summary judgment is to be evaluated.

II

The instant uncertainty regarding the record stems from the district court's application of Local Rule 56.1 of the Local Rules of the United States District Courts for the Northern and Southern Districts of Iowa to exclude some of the material facts proffered by Northwest in opposition to FINB's motion for summary judgment. Local Rule 56.1 imposes various requirements upon the parties in connection with a motion for summary judgment. In order to assist the district court in ruling on the motion, the moving party must file a concise statement of material facts supported by specific citations to an appendix. L.R. 56.1(a). The party opposing summary judgment must file a response to the movant's statement that either "expressly admits, denies, or qualifies" each of the movant's material facts. L.R. 56.1(b)(2). A response to a statement of material fact that is not expressly admitted must be supported by specific citations to an appendix. L.R. 56.1(b). In addition, the party opposing summary judgment must file its own concise statement of material facts with supporting appendix citations. L.R. 56.1(b).

In the present case, FINB filed a Statement of Material Facts in Support of Motion for Summary Judgment ("Statement of Material Facts"). In opposition, Northwest filed a Response to Defendants' Statement of Material Facts ("Response"), as well as a Statement of Additional Material Facts Precluding Summary Judgment ("Statement of Additional Material Facts"). The district court found that Northwest's filings did not comport with the Local Rule. See Northwest Bank & Trust Co. v. First Ill. Nat'l Bank, 221 F.Supp.2d 1000, 1003-06 (S.D.Iowa 2002). As a sanction for this noncompliance, the district court ordered that Northwest be deemed to have admitted all of FINB's Statement of Material Facts. Id. at 1005. In addition, the district court limited its consideration of Northwest's Statement of Additional Material Facts to those facts that were specifically referenced by Northwest in its brief in opposition to summary judgment to the extent that they did not contradict those of FINB. Id. at 1005-06.

We review the district court's application of its local rules for an abuse of discretion. See Silberstein v. IRS, 16 F.3d 858, 860 (8th Cir.1994). The concision and specificity required by Local Rule 56.1 seek to aid the district court in passing upon a motion for summary judgment, reflecting the aphorism that it is the parties who know the case better than the judge. See Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 922 (7th Cir.1994) ("[D]istrict courts are not obliged in our adversary system to scour the record looking for factual disputes and may adopt local rules reasonably designed to streamline the resolution of summary judgment motions."). The district court found that Northwest's voluminous filings were replete with conclusory allegations and legal argument, obfuscating any concise and specific statements of material fact that were contained within their pages. Local Rule 56.1 exists to prevent a district court from engaging in the proverbial search for a needle in the haystack. In fact, although not required to do so by the Local Rules, the district court exercised some lenity in considering those specific facts referenced by Northwest in its brief. See Little v. Cox's Supermarkets, 71 F.3d 637, 641 (7th Cir. 1995). We therefore hold the district court committed no abuse of discretion.

III

Having thus determined the extent of the record on appeal, we review the district court's entry of summary judgment de novo, viewing...