United Cent. Bank v. Davenport Estate LLC, No. 15-2406 (7th Cir. 2016)Annotate this Case
In 2008, Mutual Bank (UCB’s predecessor) made loans to the investors to purchase three properties and agreed to loan the investors $700,000 for repairs and renovations. The $700,000 was placed in escrow, but the parties did not enter into a written escrow agreement. Once the investors exhausted other resources on repairs, they requested the $700,000, but never received the money. In 2009, the FDIC shut down Mutual Bank for gross negligence. UCB acquired Mutual’s loans and assets. The investors made repeated demands on UCB to release the $700,000 in escrow but did not receive the money. In 2010, UCB brought suit against the investors to foreclose on the properties and enforce related promissory notes and guarantees. The investors brought counterclaims, including a claim that UCB’s refusal to release the escrow funds constituted a breach of contract. The district court dismissed, citing the Financial Institutions Reform, Recovery, and Enforcement Act, 12 U.S.C. 1823(e)(1)(A), and the Illinois Credit Agreement Act. The Seventh Circuit affirmed. The escrow agreement that forms the basis for the counterclaim tends to diminish the interests of the FDIC and its assignee UCB. Since the agreement was not properly memorialized in writing, the agreement does not meet the requirements of section 1823(e).