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Mcbride v. Commercial Bk. of Champaign





APPEAL from the Circuit Court of Champaign County; the Hon. CREED D. TUCKER, Judge, presiding.


A bank as escrow agent.

Can it relinquish documents in escrow solely upon the demand of one party to the agreement?

No — if it does, it is at its own peril.

In 1973, plaintiff Bruce McBride and his wife Ruth Ann contracted to buy a parcel of real estate in Grand Traverse County, Michigan, from F.R. Inskip and Ruth F. Inskip, Ruth Ann's parents. In connection with this purchase, the McBrides gave the Inskips 12 promissory notes for $12,000 each, payable each January 10 from 1974 through 1985, plus a $9,000 note due January 10, 1986.

The contract between the McBrides and the Inskips provided that defendant Commercial Bank of Champaign (Bank) should "act as escrow agent for the Buyers and Sellers during the existence of this agreement." In addition to requiring the buyers to pay the $5 escrow fee, the contract provided:

"The Warranty Deed provided for, the original of this agreement, the insurance policy, and the Abstract of Title shall, as soon as practicable, be deposited with the escrow agent to be held by it until this agreement is fully performed by the Buyers, or otherwise terminated."

The Inskips' attorney delivered these documents to the Bank and in an accompanying letter indicated that the parties anticipated that the Inskips would cancel a $12,000 note each January.

Plaintiff filed a complaint against the Bank, alleging that he had performed all acts required of him in the contract and had notified the Bank of his full performance by letter on April 24, 1979. In this letter, plaintiff demanded delivery of the warranty deed that the Bank held as escrow agent. The complaint further alleges that on May 4, 1979, the Bank had marked the deed "Cancelled" and returned it to the Inskips' agent. The complaint alleges that the Bank thus breached its fiduciary duty to plaintiff, causing him to lose an undivided one-half interest in the real estate and possession of the real estate.

After filing its answer to the complaint, the Bank moved for summary judgment. In support of its motion, it filed an affidavit of J. Michael O'Byrne and also incorporated by reference an affidavit by O'Byrne which had been filed earlier with a motion to dismiss. In the earlier affidavit, O'Byrne stated that he was the Inskips' attorney in the sale of the real estate to plaintiff. He personally delivered the original of the contract, the warranty deed, the promissory notes, and the initial escrow fee to the Bank. On March 30, 1979, he sent to plaintiff a "Notice of Default," which was attached to the affidavit as an exhibit. That notice states that plaintiff had failed to pay five $12,000 notes due in 1975 through 1979 and had failed to pay interest on six other notes. The notice advised plaintiff that unless payment of the $60,000 and interest was made, the contract would be "declared forfeited" and the documents held in escrow would be "cancelled" and his interest in the property "terminated." "[T]he aforesaid payments shall be payable in full on or before the 10th day of May, 1979."

O'Byrne's first affidavit further stated that the Inskips had received no payments curing the default and that on May 2, 1979, O'Byrne had notified the Bank of plaintiff's failure to make payment and provided it with a copy of the notice of default. On May 2, O'Byrne told the Bank that the contract had been terminated because of plaintiff's default and asked that the deed be cancelled and, along with the notes, returned to O'Byrne. The Bank complied with that request.

In his second affidavit, which was filed along with the motion for summary judgment, O'Byrne stated that a lawsuit was then in progress in Grand Traverse County, Michigan — with the Inskips as plaintiffs and the McBrides as defendants — to quiet title to the real estate involved in the contract.

Also used as support for the motion for summary judgment was a previously filed motion for dismissal of the complaint, signed by the Bank's president, Richard M. Jorgenson. That motion stated that (1) plaintiff had not been deprived of any interest in the real estate by the Bank's return of the deed to the Inskips, (2) the Bank was not required by the contract to deliver the deed to plaintiff, (3) plaintiff's mere delivery of the promissory notes to the Inskips was not payment in performance of the contract, and (4) the Inskips had terminated the contract and, based on that termination, the Bank had cancelled the deed and returned it to the Inskips' attorney.

Plaintiff filed a motion to strike O'Byrne's and Jorgenson's affidavits for failure to comply with Supreme Court Rule 191(a) (73 Ill.2d R. 191(a)). The record contains no ruling by the trial court on plaintiff's motion to ...

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