## Facts

- The State Bank of Clearing (Illinois) made two large loans totaling about $300,000 to a borrower (Ringbloom).
- The loan proceeds were promptly transferred to Braemoor Associates, a real-estate joint venture that was short of cash.
- Paul Bere, the bank’s president, was also a joint venturer in Braemoor and arranged the loans without required board approval.
- After the bank failed, the Illinois banking commissioner appointed the FDIC as receiver.
- The FDIC transferred bank assets, including the bank’s state-law claim against Braemoor, from itself as receiver to itself in its corporate capacity.
- The FDIC (corporate capacity) sued Braemoor and the five surviving joint venturers, seeking equitable restitution (constructive trust) for funds allegedly diverted through Bere’s fiduciary breach.
- After a bench trial presentation of the FDIC’s evidence, the district court dismissed under Rule 41(b), finding the FDIC had not shown the other venturers’ actual or constructive knowledge of Bere’s misconduct.

## Issues

1. Whether federal subject-matter jurisdiction exists under 12 U.S.C. § 1819 when the FDIC sues in its corporate capacity as owner/assignee of a failed state bank’s claim.
2. Whether the § 1819 proviso withdrawing jurisdiction for suits where the FDIC acts “in its capacity as receiver” applies when the FDIC sues as corporate assignee.
3. Whether a constructive-trust/restitution claim against a joint venture requires proof that the non-breaching venturers had actual or constructive knowledge of the fiduciary’s diversion of funds.
4. Whether, under Illinois joint-venture/partnership principles, the fiduciary venturer’s conduct and knowledge may be imputed to the venture for purposes of restitution.

## Decision

- The Seventh Circuit held federal jurisdiction existed under 12 U.S.C. § 1819 because the FDIC sued in its corporate capacity as owner/assignee of the claim, not as receiver.
- The court ruled the § 1819 proviso did not apply on those facts, even though the FDIC acquired the claim through its receivership role.
- On the merits, the court reversed the Rule 41(b) dismissal in substantial part and remanded.
- The court held the district court used an overly narrow liability framework by treating the other venturers’ knowledge as a prerequisite to pursuing venture-level restitution for funds received through Bere’s breach.
- The court emphasized that the FDIC, as assignee, could not enlarge the underlying state-law cause of action and any recovery would be limited by Illinois law and equitable defenses.

## Legal Principles

- Under 12 U.S.C. § 1819, civil suits to which the FDIC is a party are deemed to arise under federal law, creating federal-question jurisdiction, unless the statutory proviso applies.
- The § 1819 proviso withdrawing jurisdiction applies only when the FDIC is a party in its capacity as receiver of a state bank and the suit involves only specified state-law rights and obligations; it does not apply when the FDIC sues as corporate owner/assignee of the claim.
- An assignee (including the FDIC in its corporate capacity) generally takes the assigned state-law claim as it exists and does not obtain expanded substantive rights by virtue of the assignment.
- Under Illinois joint-venture/partnership principles, a venturer’s acts (and, in relevant contexts, knowledge) within the scope of venture business may be imputed to the venture, supporting venture-level liability even if other venturers lacked personal culpability.
- A constructive trust may be an available equitable remedy to restore property transferred as a result of a fiduciary’s breach, subject to state-law elements and equitable limits (including defenses tied to the recipient’s status and what it received).

## Conclusion

The Seventh Circuit held that § 1819 conferred federal jurisdiction because the FDIC sued as corporate assignee rather than as receiver, reversed the dismissal that treated the other venturers’ knowledge as dispositive, and remanded for further proceedings applying Illinois restitution and joint-venture imputation principles, with recovery limited to the bank’s state-law rights.


Federal Deposit Ins. Corp. v. Braemoor Assocs., 686 F.2d 550 (7th Cir. 1982)