West Bend Mutual Ins. Co v. Belmont State Corp.

Federal 7th Circuit Court
Civil Court
Commercial Law
Case Number: 
Nos. 11-1811 & 11-1959 Cons.
Decision Date: 
March 19, 2013
Federal District: 
N.D. Ill., E. Div.
Affirmed and reversed in part
In action by plaintiff-insurance company seeking to recover money paid when its insured failed to pay subcontractors and suppliers on construction projects, Dist. Ct. did not err in finding in favor of defendant-bank, which had applied $100,000 in checks that had been made payable to defendant and had been written on insured’s bank account by individual employed by insured where said funds were used to pay individual’s personal loan. While Ill. law requires bank named as payee to ask drawee (in this case, insured) how funds are to be applied, and instant record indicated that defendant did not ask insured how funds should be applied, Dist. Ct. could still find in favor of defendant where plaintiff failed in its burden to show what insured would have done (i.e., pay subcontractors etc.) if defendant had asked insured how funds should have been applied. Moreover, Dist. Ct. properly directed defendant to turn over $62,000 in rent payments that had been funneled through insured’s bank account since defendant could not assert more senior security interest where insured had actual possession of rent payments. However, Dist. Ct. erred in awarding plaintiff attorney fees generated in seeking said recovery under section 2-1402(f)(1) of Ill. Code of Civil Procedure where Dist. Ct. had failed to find that defendant had contumaciously evaded citation filed to obtain said rent payments.