The Law

Bank Control by Ron Davis The outcome of a dispute over the financing of an Illinois shopping center has not turned out the way the center’s principles had hoped. The Schauburg center has had a troubled history from the time hopeful buyers began negotiations with one particular bank for the needed financing. That bank, BMO Harris Bank National Association, agreed to finance the sale, but would lend funds only to one of the principals of the buyers. Because of that decision, the other principals apparently believed they were induced to signing the documents in error. Nevertheless, the closing on the shopping center occurred, but with the center being acquired by a bank-affiliated trust. Later, the bank’s affiliate filed for foreclosure on grounds that a major complaint had occurred involving the shopping centers principals. Moreover, a question arose regarding the possession and ownership of the shopping center. Still later, the center’s principals complained of consumer fraud. The principals explained that as a result of the bank’s “misconduct” in its activities associated with the financing, the bankers violated state law. Finally, the principals asserted that as a “direct and proximate” result of the “usurpation” of managerial control, they were forced into rejecting tenants that would have created revenue, thus enabling them to repay debt on time. A hearing resulted, and a trial court ruled in favor of the bank. Following that, the shopping center principals said their employees received a number of complaints from bank personnel. Center employees apparently were told that they should not accept “cheap rents.” The shopping center management pointed out that “at least eight potential tenants would have provided additional income, but were rejected based on criteria established by the bank. Such conduct, the center principals argued was, “improper and constituted a breach of fiduciary duty, which resulted in damages to be proven at trial.” At trial an Illinois appellate court found that the bank asserted “dominating control” and “managerial discretion” over the shopping center by dictating which tenants could be accepted and what rental amounts could be charged “There is no indication that the center’s management placed a high level of trust or confidence [in the bank]. The center’s management did not allege facts that would indicate the bank owed them a fiduciary duty. A complaint may not rest on unsupported factual conclusions. “Moreover,” the court added, “the facts that [the center’s management] allege to support the conclusion that the bank and the center’s management were in a fiduciary relationship are the same facts used to prove that the bank dictated which tenants could be accepted and what rental amounts could be charged. Accordingly, we find that it was appropriate to dismiss the claim of breach of fiduciary duty…. Here the only facts relied on by the center management to suggest the bank had ‘dominating control’ and ‘managerial discretion’ were that the bank advised on tenants and rent prices” (Madan v BMO Harris Nat. Ass’n, not reported in N.E.3d (2015)) Decision: July 2015 Published: July 2015