In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 13‐2363

STEVEN EDELMAN, et al.,

Plaintiffs‐Appellants,

v.

BELCO TITLE & ESCROW, LLC,

Defendant‐Appellee.

____________________

Appeal from the United States District Court for the

Southern District of Illinois.

No. 3:11‐cv‐001121‐DGW — Donald G. Wilkerson, Magistrate Judge.

____________________

ARGUED JANUARY 10, 2014 — DECIDED APRIL 25, 2014

____________________

Before FLAUM and EASTERBROOK, Circuit Judges, and

GRIESBACH, District Judge.



FLAUM, Circuit Judge. The plaintiffs in this diversity case

are lenders who lost a lot of money on a bad real‐estate in‐

vestment. They sued the transaction’s escrowee for a breach

of fiduciary duty under Illinois law. The plaintiffs argued

                                                 

 Of the Eastern District of Wisconsin, sitting by designation.
2 No. 13‐2363

that because the escrowee signed a form stating that it was

acting as the lenders’ “agent” for the purposes of the escrow

and closing, the escrowee should have communicated to the

plaintiffs that they were not going to receive the first‐priority

mortgage they had been promised by the real‐estate devel‐

opers. We agree with the magistrate judge that Illinois law

does not impose such a duty on an escrowee under the unu‐

sual circumstances of this transaction, and affirm the grant

of summary judgment in favor of the defendant.

I. Background

Plaintiffs Steven Edelman, Will Furman, and C. Bradford

Jeffries,1 together with nonplaintiff investor Nam Yung Suh,

got into business with brothers Craig and John Nicholson

and one of the brothers’ real‐estate development firms, Ca‐

seyville Sport Choice LLC (“Caseyville”). Caseyville was de‐

veloping a multi‐use real‐estate project in Caseyville, Illinois

called Forest Lakes. The plaintiffs had invested with the Ni‐

cholsons before. Edelman, Furman, and Suh had invested in

the Forest Lakes project before, too.

In 2007—as a result of the Nicholsons’ solicitation—

Edelman, Furman, and Suh took a collective $1.6 million that

they had previously loaned to another of the Nicholsons’

firms, Nicholson Property Investments, and transferred that

amount to a new “Phase II” loan for the Forest Lakes project.

                                                 

1 Steven Edelman made his investment as an individual. Will Furman

made the investment as the trustee of the Furman‐Doane Revocable

Trust, and C. Bradford Jeffries as the trustee of the C. Bradford Jeffries

Living Trust. The two trusts are the plaintiffs in this lawsuit—not Fur‐

man and Jeffries themselves—but this detail does not matter to our anal‐

ysis. We will refer to the three plaintiffs collectively throughout this

opinion.  
No. 13‐2363 3

Jeffries put in an additional $1.4 million. The Nicholsons

promised the plaintiffs that in exchange for the Phase II loan,

Caseyville would give them a first‐priority mortgage on the

residential portion of Forest Lakes. This promise was reflect‐

ed in the deal’s written Loan Agreement. Contrary to the Ni‐

cholsons’ representations, however, the plaintiffs received

only a junior mortgage. A mortgage on the residential por‐

tion of Forest Lakes (for $20 million) was already held by

Meridian Bank, which acquired it back in 2005. And when

the bank foreclosed on its mortgage in September 2009, the

plaintiffs lost everything.  

The defendant in this appeal, Belco Title & Escrow, LLC

(“Belco”), is a title company formed by the law firm repre‐

senting Caseyville, Belsheim & Bruckert, LLC (“Belsheim”).

Belsheim created Belco to carry out title work for Ca‐

seyville’s various Forest Lakes transactions—including the

Meridian Bank mortgage in 2005. The law firm and the title

company shared the same office and employees.

The plaintiffs and Caseyville executed the Phase II Loan

Agreement in March 2007. Jeffries had already wire‐

transferred his $1.4 million to Caseyville in February; Edel‐

man, Furman, and Suh’s collective $1.6 million was “jour‐

naled” from Nicholson Property Investments to Caseyville

on the day the parties signed the Loan Agreement.

Throughout this process, the plaintiffs and the Nicholsons

communicated directly with one another. The plaintiffs nev‐

er communicated with Belco.

After Caseyville told Belco who the lenders were, Belco

ordered a title search for the Phase II Forest Lakes property

from Attorney’s Title Guaranty Fund, Inc. (“ATG”), an un‐

derwriter that Belco regularly used for its real‐estate clos‐
4 No. 13‐2363

ings. ATG returned a title search that revealed Meridian

Bank’s senior mortgage on Forest Lakes. After reviewing the

title search, Belco gave “commitment preparation instruc‐

tions” to ATG, and ATG prepared a title commitment which

also disclosed Meridian Bank’s mortgage. Either Belsheim or

the Nicholsons (the record is unclear which) drafted the

plaintiffs’ mortgage agreement for the Phase II property. The

mortgage agreement did not disclose the senior Meridian

mortgage—it incorrectly stated that the Phase II property

was “free and clear of all encumbrances.”

The closing took place on April 25, 2007. It seems that on‐

ly representatives from Belsheim and Belco attended. They

executed a document titled the “Agency/Escrow Disburse‐

ment Agreement”; this document is relevant to the issue the

parties litigate in this appeal. Here is the relevant portion:

1. We, the undersigned Seller and Buyer (or,

for refinance transactions, the Borrower) direct

you to make disbursements for this transac‐

tion, pursuant to the attached HUD‐1 Settle‐

ment Statement ....

2. We understand and agree that for the pur‐

poses of this closing, Belco Title & Escrow, LLC

(hereinafter “Closing Agent”) is acting only as

an agent of the lending institution, and does

not represent either the Seller or the Buy‐

er/Borrower as an attorney or in any other

way. If the Closing Agent’s representation of

the lending institution gives rise to an apparent

conflict of interest, the parties consent to and

waive said conflict of interest. The parties un‐

derstand and agree that all representations
No. 13‐2363 5

made to the Closing Agent by the Borrower

may be made known to the lender and all doc‐

uments executed and delivered to the Closing

Agent may be known and delivered to the

lender at any time hereafter ....

The Agency/Escrow Disbursement Agreement appears to be

a stock form used by ATG. A Belsheim attorney signed the

document on behalf of Caseyville, the “Borrower.” A parale‐

gal employed by Belsheim—but who was acting as a repre‐

sentative of Belco—signed the document on a line designat‐

ed “ATG Member or other Authorized Signatory.” There is

no signature on the line for the “Seller,” and there is no line

at all for the “lending institution.”

The Belsheim attorney signed the rest of the closing doc‐

uments on behalf of Caseyville, and the paralegal signed the

transaction’s HUD‐1 Settlement Statement on behalf of

Belco. Belco had been holding certain settlement costs for the

transaction in escrow. One of the Nicholson entities had

provided the funds for these costs (once again, the record is

not clear on this point). None of the plaintiffs’ $3 million in

loan funds were ever escrowed with Belco, as those funds

had gone directly to Caseyville. On the day of the closing,

Belco distributed the escrowed funds in accordance with the

HUD‐1 Settlement Statement, as it was directed to do in the

Agency/Escrow Disbursement Agreement.

That same day, the Belco paralegal sent an email to Craig

Nicholson telling him that the transaction had closed. The

paralegal attached the title commitment, the Agency/Escrow

Disbursement Agreement, the HUD‐1 Settlement Statement,

and the executed Phase II mortgage. Belco did not email any

of those documents to the plaintiffs. In fact, Belco never once
6 No. 13‐2363

contacted the plaintiffs—before, during, or after the closing.

Craig Nicholson forwarded Belco’s email to plaintiff Edel‐

man, but he only included the mortgage with the email.  

After the Forest Lakes project went under and Meridian

Bank foreclosed on the property, the plaintiffs brought suit

against Belsheim, Belco, and ATG in federal district court.

(Interestingly, the plaintiffs did not sue the Nicholsons or

Caseyville.) The plaintiffs alleged Illinois state‐law claims of

breach of fiduciary duty against Belsheim and Belco and

negligent misrepresentation against ATG. Eventually, the

plaintiffs dismissed their claims against the other two de‐

fendants. This appeal concerns only the plaintiffs’ breach‐of‐

fiduciary‐duty claims against Belco.

The gist of the plaintiffs’ claims is that Belco—as the self‐

avowed “closing agent” for the transaction—owed the lend‐

ers—Belco’s principals—a fiduciary duty to look out for

their interests in the transaction. Naturally, if Belco had been

looking out for their interests, the plaintiffs reason, Belco

would have tipped them off that they were not receiving the

first‐priority mortgage on the Forest Lakes property that

they thought they were getting. The plaintiffs argue that

Belco’s failure to even communicate with them before the

closing was a proximate cause of their going through with

the deal and eventually losing their $3 million investment.  

The magistrate judge, presiding by consent, granted

summary judgment for Belco. The judge agreed that Belco

was the plaintiffs’ agent for the purposes of the escrow and

closing. But he nonetheless found that under Illinois law, an

escrow agent owes its lender‐principal only the very limited

duty “to act only according to the terms of the escrow in‐

structions.” Edelman v. Belco Title & Escrow, LLC, No. 3:11‐cv‐
No. 13‐2363 7

1121‐DGW, 2013 WL 2147627, at *3 (S.D. Ill. May 16, 2013)

(quoting Bescor, Inc. v. Chi. Title & Trust Co., 446 N.E.2d 1209,

1213 (Ill. App. Ct. 1983)). Reasoning that “[t]here is no ques‐

tion here that Belco complied with the terms of the escrow

agreement in that the funds were disbursed according to

[that] agreement,” the court concluded that Belco fulfilled

every obligation it owed to the plaintiffs as the transaction’s

escrowee. Id.

The magistrate judge further found that Belco did not

owe the plaintiffs any additional duties derived from a

source other than the Agency/Escrow Disbursement Agree‐

ment. The judge reasoned that Belco was not the plaintiffs’

agent with respect to the loan itself: the Loan Agreement

was between the plaintiffs and Caseyville, who executed it

before Belco got involved, and the loan funds were never

placed in escrow with Belco. Thus, having concluded that

the relevant Illinois cases “tie the fiduciary duty owed by an

escrow/closing agent to the actual instrument directing the

actions of the agent,” the judge held the plaintiffs could not

show a promise Belco made to the plaintiffs that Belco failed

to adhere to. Id. at *4. The plaintiffs appeal.

II. Discussion

A. Federal Rule of Civil Procedure 8(b)(6)

Before turning to the merits, we must dispense with a

procedural issue. Belco never filed an answer to the plain‐

tiffs’ fourth amended complaint. The plaintiffs argue that as

a result, Belco has admitted all of the allegations against it.

We disagree.

The plaintiffs filed their initial nine‐count complaint

against the three defendants in December 2011. They filed an
8 No. 13‐2363

amended complaint shortly afterward. The magistrate judge

ordered the plaintiffs to file a second amended complaint to

cure jurisdictional deficiencies; the plaintiffs obliged in Janu‐

ary 2012. The second amended complaint alleged three

counts of breach of fiduciary duty against Belco (one count

per plaintiff), which are the claims before us here. In March

2012, Belco filed an answer responding to those counts and

to other parts of the complaint that included information rel‐

evant to its liability.

In May 2012, the magistrate judge granted defendant

ATG’s motion to dismiss the three counts against it. The

judge also granted defendant Belsheim’s motion to dismiss

the counts against Belsheim because the plaintiffs had failed

to allege an element crucial to those claims. But the court al‐

lowed the plaintiffs to replead the Belsheim counts—so the

plaintiffs filed a third amended complaint in June 2012. The

third amended complaint did not amend the Belco counts,

and it added no new allegations relevant to Belco’s liability.

But it did mistakenly include the dismissed counts against

ATG. Accordingly, that same month, the plaintiffs filed a

fourth amended complaint that properly excluded the ATG

counts, but otherwise made no changes to the third version.

In March 2013, Belsheim and Belco filed a joint motion

for summary judgment. At that point, the plaintiffs voluntar‐

ily dismissed Belsheim as a defendant. In their response to

Belco, however, the plaintiffs raised Belco’s failure to file an

answer to the fourth amended complaint as a defense to

summary judgment. Belco asked for leave to file the answer.

The magistrate judge granted the request and required Belco

to file its answer by May 16 (three days after the judge’s or‐

der). But on May 16—without waiting for Belco’s answer to
No. 13‐2363 9

come in—the judge granted Belco’s motion for summary

judgment in a memorandum opinion. Apparently believing

that the judge’s action meant that no answer was necessary,

Belco did nothing. The magistrate judge entered judgment

on May 22, 2013.

Federal Rule of Civil Procedure 8(b)(6) holds that “[a]n

allegation—other than one relating to the amount of damag‐

es—is admitted if a responsive pleading is required and the

allegation is not denied.” The plaintiffs argue that by opera‐

tion of this rule, the judge should have found that Belco ad‐

mitted all of the complaint’s allegations at the summary‐

judgment stage.

This argument overreaches. Belco may not have filed an

answer to the plaintiffs’ fourth amended complaint. Belco

did, however, file an answer to the second amended com‐

plaint. The third and fourth amended complaints stated the

very same allegations against Belco as the second amended

complaint—the only allegations that changed during this

time were against other defendants who have since dropped

out of the case. Thus, at the time the judge ruled on Belco’s

motion for summary judgment, the fourth amended com‐

plaint had effectively reverted back to the one that Belco had

already answered.  

As support for their argument that Rule 8(b)(6) nonethe‐

less requires the court to treat everything in the fourth

amended complaint as admitted, the plaintiffs invoke our

decision in Modrowski v. Pigatto, 712 F.3d 1166 (7th Cir. 2013).

It does not help them. Modrowski merely noted that the de‐

fendants in that case may have admitted all of the allega‐

tions against them by not filing an answer to the plaintiff’s

amended complaint and filing a motion for summary judg‐
10 No. 13‐2363

ment instead. Id. at 1170. But unlike Belco, the Modrowski de‐

fendants never filed a responsive pleading at all. Id. The lan‐

guage in that opinion is inapposite.

As we have emphasized in similar circumstances, “[t]he

Federal Rules reject the approach that pleading is a game of

skill in which one misstep by counsel may be decisive to the

outcome and accept the principle that the purpose of plead‐

ing is to facilitate a proper decision on the merits.” Conley v.

Gibson, 355 U.S. 41, 48 (1957), quoted in Pepper v. Vill. of Oak

Park, 430 F.3d 805, 812 (7th Cir. 2005) (granting summary

judgment against the plaintiff despite the defendant’s failure

to file an answer responding to a new, related claim in the

plaintiff’s amended complaint). The purpose of a responsive

pleading is to put everyone on notice of what the defendant

admits and what it intends to contest. Belco undoubtedly

did this, as it had previously answered all of the allegations

against it. The plaintiffs cannot claim that they were preju‐

diced by Belco’s oversight; “this [is] clearly a no harm, no

foul situation.” Isby v. Clark, 100 F.3d 502, 504 (7th Cir. 1996)

(finding no abuse of discretion in the district court’s not im‐

posing a default judgment against defendants who failed to

file a new answer after the plaintiff amended his complaint).  

B. Breach of fiduciary duty

We now proceed to the merits of the plaintiffs’ breach‐of‐

fiduciary‐duty claim. We review the magistrate judge’s grant

of summary judgment de novo. Ellis v. DHL Express Inc., 633

F.3d 522, 525 (7th Cir. 2011).

To succeed on this claim under Illinois law, the plaintiffs

must show that Belco owed them a fiduciary duty, that Belco

breached this duty, and that Belco’s breach proximately
No. 13‐2363 11

caused the plaintiffs’ injury. Neade v. Portes, 739 N.E.2d 496,

502 (Ill. 2000). If the evidence is undisputed (as it is here), the

determination of whether a fiduciary duty exists is a ques‐

tion of law for the court to decide. Wargel v. First Nat’l Bank

of Harrisburg, 460 N.E.2d 331, 334 (Ill. App. Ct. 1984). The

magistrate judge granted summary judgment on the basis

that the plaintiffs had not shown that Belco, as the escrowee

for the transaction, owed them any of the duties they al‐

lege—namely, a duty to communicate with the lenders be‐

fore the closing, to ask for instructions, and to disclose any

material information that might cause them to reevaluate the

deal.

In response, the plaintiffs argue that they and Belco were

in a principal–agent relationship with respect to the Phase II

loan. Insisting that Belco “admitted” in the Agency/Escrow

Disbursement Agreement that it was the plaintiffs’ agent for

the transaction, the plaintiffs maintain that Belco owed them

the fiduciary duties that any agent owes to its principal. See,

e.g., Khan v. BDO Seidman, LLP, 948 N.E.2d 132, 156 (Ill. App.

Ct. 2011) (“[An] agent and principal are in a fiduciary rela‐

tionship as a matter of law.”); Moehling v. W. E. O’Neil Con‐

str. Co., 170 N.E.2d 100, 107 (Ill. 1960) (“[T]he agent sustains

a position of trust toward his principal, and in all his trans‐

actions affecting the subject of his agency the law dictates he

must act in utmost good faith and must make known to his

principal all material facts within his knowledge which in

anyway [sic] affect the transaction and the subject matter of

his agency.”).

We are puzzled by the plaintiffs’ understanding that they

and Belco shared a principal–agent relationship for the pur‐

pose of the loan transaction. As far as we can tell, the only
12 No. 13‐2363

evidence of such a relationship is a single statement in the

Agency/Escrow Disbursement Agreement that “for the pur‐

poses of this closing” Belco was “acting only as an agent of

the lending institution.” But as the plaintiffs themselves em‐

phasized in their briefing and at oral argument, they never

even saw the Agency/Escrow Disbursement Agreement dur‐

ing the time period at issue, let alone signed it. So the plain‐

tiffs can hardly claim to have expressed their agreement to

Belco’s representation through that form.

Perhaps realizing this, the plaintiffs were quick to clarify

that the Agency/Escrow Disbursement Agreement did not

create the principal–agency relationship between the parties,

but merely served as Belco’s admission of it. But if the form

was not the source of the agency, what was? The plaintiffs

never told us, and we don’t see how, on these facts, an agen‐

cy relationship could have formed. “Agency is the fiduciary

relationship that arises when one person (a ‘principal’) mani‐

fests assent to another person (an ‘agent’) that the agent shall

act on the principalʹs behalf and subject to the principal’s

control, and the agent manifests assent or otherwise consents

so to act.” RESTATEMENT (THIRD) OF AGENCY § 1.01 (2006).

The plaintiffs did not speak to Belco at any time before, dur‐

ing, or after the transaction’s closing. (Indeed, the lack of

communication is one of the things they are complaining

about.) That being the case, the plaintiffs certainly never

manifested their assent to Belco that Belco should represent

their interests in the transaction.

The plaintiffs have a fallback argument. They argue that

under Illinois law, escrowees owe a fiduciary duty to all par‐

ties to an escrow by default. But the case they cite for this

proposition, International Capital Corp. v. Moyer, 806 N.E.2d
No. 13‐2363 13

1166 (Ill. App. Ct. 2004), states only that “[e]scrowees have

been found to owe a fiduciary duty both to the party making

the deposit and the party for whose benefit it is made.” Id. at 1172

(emphasis added); see also Bescor, 446 N.E.2d at 1213 (same).

The plaintiffs never deposited any of their loan funds with

Belco. All three plaintiffs and Suh directed their collective $3

million to Caseyville before the closing took place, and the

money was never escrowed. The only funds that were es‐

crowed as part of this transaction—and thus controlled by

Belco—were the transaction’s settlement costs. Because one

of the Nicholsons’ firms provided the funds for these costs,

the plaintiffs were not “the party making the deposit.” And,

as far as we can tell, the plaintiffs were not the intended ben‐

eficiaries of any of the funds that Belco held in escrow, ei‐

ther.

Even if Belco was in some sense an intended beneficiary

of the escrowed settlement costs, however, the plaintiffs

have not shown that Belco was deficient in its obligations as

an escrow agent. Illinois law holds that “an escrowee, like a

trustee, owes a fiduciary duty to act only according to the

terms of the escrow instructions.” Bescor, 446 N.E.2d at 1213.

Here, the only “escrow instructions” were those contained in

the Agency/Escrow Disbursement Agreement, which told

Belco to distribute the escrowed funds in accordance with

the transaction’s HUD‐1 Settlement Statement. The plaintiffs

do not argue that Belco failed in this regard.  

The magistrate judge interpreted Illinois cases like Bescor

to mean that escrowees have but a single obligation: to act in

accordance with the escrow instructions. In other words, the

judge assumed that an escrowee cannot breach its fiduciary

duty to the parties so long as the escrowee does not disobey
14 No. 13‐2363

the instructions’ explicit terms. We note that another district

court has questioned this assumption. See Home Loan Ctr.,

Inc. v. Flanagan, 10 C 6787, 2012 WL 1108132, at *6 (N.D. Ill.

Apr. 2, 2012) (reasoning, in interpreting Illinois law in a neg‐

ligent‐misrepresentation case, that “[t]he fact that an escrow

agent must follow the closing instructions ... does not pre‐

clude the existence of duties derived from other sources”).

We need not address that issue of Illinois law here, how‐

ever, because the plaintiffs told us at argument (repeatedly)

that they are not contesting the magistrate judge’s premise

that escrowees have only a limited duty to follow their in‐

structions. Instead, the plaintiffs argue that an escrowee’s

duty to follow the parties’ instructions presupposes a duty

to ask for instructions. Thus, in the plaintiffs’ view, Belco had

an obligation to contact the plaintiffs before the closing to

find out how the plaintiffs wanted to proceed—for instance,

to ask whether the plaintiffs still wanted to close the deal

even if they would only receive a junior mortgage on the

Forest Lakes property. But the plaintiffs have identified no

Illinois cases holding that a closing agent is under an obliga‐

tion to seek additional instructions from the transacting par‐

ties when the parties do not see fit to provide them. Again,

Belco did not possess any of the plaintiffs’ loan funds. And

Belco was not a party to the Loan Agreement. If we hold

that, as a matter of law, Belco became responsible for the

plaintiffs’ interests under these circumstances, that ruling

would surely destabilize escrow transactions; the escrow

agent would have no sure way of knowing what responsibil‐

ities it owed to whom.

This was an unusual transaction. The plaintiffs entered

into a loan agreement and handed over the cash directly to
No. 13‐2363 15

the borrowers without first ensuring that they were actually

getting what they paid for. But Illinois law does not hold

Belco responsible for the plaintiffs’ interests under these cir‐

cumstances.

The judgment is AFFIRMED.