Pommier v. Peoples Bank Marycrest

• Decision Date: 01 July 1992
• Docket Number: No. 91-1093,91-1093
• Citation: 967 F.2d 1115
• Parties: Bernard POMMIER, individually and as a Beneficiary of Land Trust Number 959 of City National Bank of Kankakee, Plaintiff-Appellant, v. PEOPLES BANK MARYCREST (an Illinois Banking Corporation), Donald E. Curry, individually and as an officer of Peoples Bank Marycrest, and James Regnier, individually and as an officer of Peoples Bank Marycrest, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1115

967 F.2d 1115

Bernard POMMIER, individually and as a Beneficiary of Land Trust Number 959 of City National Bank of Kankakee, Plaintiff-Appellant, v. PEOPLES BANK MARYCREST (an Illinois Banking Corporation) Donald E. Curry, individually and as an officer of Peoples Bank Marycrest, and James Regnier, individually and as an officer of Peoples Bank Marycrest, Defendants-Appellees.

No. 91-1093.

United States Court of Appeals Seventh Circuit.

Argued April 15, 1992.

Decided July 1, 1992.

Ellen R. Domph, Robert S. Bailey (argued), Chicago, Ill., Robert J. Waaler, Waaler & Evans, Champaign, Ill., for plaintiff-appellant.

Christopher W. Bohlen (argued), Michael Kramer, Blanke, Norden, Barmann & Bohlen, Kankakee, Ill., Vincent P. Paulauskis, Bourbonnais, Ill., for defendants-appellees.

Before CUMMINGS and POSNER, Circuit Judges, and WILL, Senior District Judge. ^*

WILL, Senior District Judge.

Mr. Pommier is the beneficiary of a land trust. The property that was the corpus of the trust was lost to a mortgage foreclosure, making Pommier's beneficial interest worthless. He filed suit against Peoples Bank of Marycrest and two bank officers, Donald Curry and James Regnier (hereinafter referred to as "Peoples Bank"). Pommier had multiple claims against the defendants, which were either dismissed or lost on summary judgment. On appeal he claims there are two bases of liability on which he is entitled to go to trial: breach of fiduciary duty, and breach of an implied covenant of good faith. This is a diversity case ¹ in which Illinois law applies. ² In reviewing the trial court's grant of summary judgment, we must view all facts in the light most favorable to Pommier. We affirm the district court's actions.

Facts

In 1962 Pommier established land trust # 959 at the City National Bank. Included in this trust was title to property in Kankakee on which he later built the "East Ridge Apartments." A first mortgage on the property was held by Marycrest Savings & Loan, now Crest Savings. In 1972 Pommier borrowed $350,000 from Peoples Bank, through a loan guaranteed by the Small Business Administration. The collateral for this loan was an assignment of Pommier's beneficial interest in the land trust and an assignment of rents from the apartment buildings. This was, in effect, a second mortgage on the property.

In 1973 Peoples Bank was unable to renew the loan, for reasons which are disputed, but irrelevant to this case. Since Pommier could not pay off the loan, Peoples Bank asked the SBA to pay on the guarantee. Peoples Bank received payment on 90% of the outstanding loan from the SBA, remaining exposed on the other 10%. There is a dispute over whether Peoples Bank retained possession of the collateral, or whether it was released to the control of the SBA after the 90% payment was received. We will assume that Peoples Bank retained the collateral for the purposes of deciding this appeal. ³

In 1974 Pommier, with the agreement of the SBA and Peoples Bank, directed the trustee of the land trust to sell the apartment building to the Funk family for $615,000. The Funks and the trustee (on behalf of Pommier's trust) executed "Articles of Agreement" which were essentially a conditional land sale contract. Under the contract the Funks made a down payment of $42,000, and monthly payments of $4800 per month, with the balance due within ten years. Although not explicit on the face of the agreement, the arrangement provided for payment of Pommier's debts to three lenders. The Funks sent their monthly payment to Crest Savings, holder of the first mortgage on the property. Crest Savings deducted its monthly payment, and sent the balance to Peoples Bank. Peoples Bank, acting as a collection agent for the SBA, forwarded the entire payment from Crest to the SBA. The SBA accepted the payment, and remitted 10% to Peoples Bank towards payment of its share of Pommier's outstanding debt. One clause in the agreement prohibited sale of the property or of the Funks' rights under the contract to anyone without the agreement of Pommier, through the trustee.

The Funks made payments through the end of 1983, keeping Pommier's accounts current with the three creditors. In late 1982 or early 1983 Stephen Funk contacted Pommier about possibly selling the apartments to a third party. The proposed arrangement would require Pommier to take a second mortgage, which was unacceptable to him. He did, however, say that he would consider other types of arrangements. Funk told him nothing more about a sale of the property, but did negotiate an extension agreement with him. The final payments under the original Articles of Agreement were due in June, 1984. In May, however, the Funks and Pommier executed an extension agreement continuing the same payment to the banks to cover Pommier's debt, and adding an $800 per month payment directly to Pommier. The trustee did not execute this agreement, and no banks were notified or involved in this extension.

It was not until the fall of 1984, when Pommier was informed by Crest Savings that the first mortgage was in default, that he discovered that the Funks had executed a sales agreement, with a limited partnership known as Horizon Ventures, in November 1983 that purported to transfer all of the Funks' interest in the apartment buildings. Peoples Bank had allowed the Funks to use a room at the bank for the final signing of papers on this deal. In December 1983, Peoples Bank loaned Horizon Ventures $100,000, using as collateral the personal notes of several limited partners, and an assignment of rents in the property. The purpose of the loan may have been to renovate the apartments. Following the sale of their interest in the property to Horizon, the Funks stopped making payments. Horizon Ventures was unable to make the required payments, and the loans went into default. In 1985 Crest Savings foreclosed on the property, and Horizon Ventures filed for bankruptcy. The SBA and Peoples Bank wrote off their debt.

Peoples Bank never notified Pommier about the sale of the property to Horizon Ventures, or that it had stopped receiving payments. It did not act on its assignment of rents after the payments ceased. Apparently Pommier attempted to collect rents on the property, but an agent of Horizon Ventures prevented him from doing so. Peoples Bank did nothing to prevent Pommier from collecting rents. Peoples Bank was not a party to the contract between Pommier and the Funks or between the Funks and Horizon Ventures.

Pommier filed suit against Peoples Bank, two bank officers, and the Funks. The suit against the Funks has been settled. Following the fifth amended complaint, the district court granted in part the defendants' motion to dismiss, and the remaining claims were disposed of on summary judgment. In the motion to dismiss, matters outside of the pleadings were presented to the court, as allowed under F.R.C.P. 12(b), converting it into a summary judgment motion. Although the district court did not make this explicit, this case has been treated by the district court and by the parties on appeal as if it had been decided on summary judgment, and that is therefore the standard under which we review the district court's decision.

Standard of Review

"We review the district court's decision to grant summary judgment de novo and utilize the same standard of decision making as that employed by the district court." McMillian v. Svetanoff, 878 F.2d 186, 188 (7th Cir.1989). Rule 56(c) provides that:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

The party moving for summary judgment has the burden of showing the absence of a genuine issue of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The moving party, if a defendant, is under no obligation to show that a fact necessary to the plaintiff's case is not true, but only to show that the plaintiff has not presented sufficient evidence that the fact is true. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The plaintiff must then show that there is a genuine issue for trial, that is, that "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

Fiduciary Duty

The relationship between Peoples Bank and Pommier when he first took out the loans was that of a creditor and debtor, or a mortgagee and mortgagor. It is disputed whether they were even that closely connected after Peoples Bank was paid its 90% guarantee by the SBA. While Peoples Bank still hoped to get the remaining 10% of the loan paid, by serving as the SBA's collection agent, it is not clear that it had a right to collect directly from Pommier that was independent of the SBA's rights. The SBA had the right to collect from Pommier, and Peoples Bank received 10% of the payments in exchange for serving as the collection agent. Because the loan agreements between Peoples Bank and Pommier, and the guarantee agreements between Peoples Bank and the SBA are not a part of this record, it is impossible to state precisely what the legal relationship between Pommier and Peoples Bank was in 1983. It is safe to say, however, that at most their legal relationship was that of debtor and creditor.

There are certain relationships which give rise to a fiduciary duty as a matter of law, such as attorney-client. DeWitt County Public Building Commission v. DeWitt County, 128 Ill.App.3d 11, 83 Ill.Dec. 82, 93, 469 N.E.2d 689, 700 (1984) However, a debtor-creditor relationship is not a fiduciary relationship as a matter of law. Paskas v. Illini Federal...