The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Seventh Avenue Boutique, Inc. ("Boutique")*fn1 sued Aetna
Insurance Company ("Aetna") for payment under a business
personal property hazard insurance policy (the "Policy").
Boutique also named its secured lender, Small Business
Administration ("SBA"), as a defendant, asserting the loss
payable clause under the Policy entitled SBA to all the
insurance proceeds. Aetna has deposited $22,708.08 (the "Fund")
with this Court in settlement of its liability under the
In October 1981 SBA loaned Boutique $100,000 on condition that
Boutique obtain an equivalent amount of hazard insurance on all
its equipment and inventory,*fn4 with a standard loss
payable clause*fn5 protecting SBA's interest as a secured
party. SBA simultaneously took a security interest in
Boutique's inventory, fixtures, accounts and proceeds.*fn6
In compliance with the loan agreement Boutique obtained the
requisite insurance from Aetna effective July 21, 1981 through
July 21, 1982.
On February 14, 1982 a fire at Boutique's premises destroyed
much of the insured property. Sometime after the fire Boutique
filed for bankruptcy, and the bankruptcy judge ordered the
insurance proceeds abandoned due to Boutique's lack of equity
in those proceeds.*fn7
In support of its claim Rabens cites Illinois "equitable fund"
cases, under which subrogors' attorneys have recovered fees
from their clients' subrogees in proportion to the benefits
received by the latter from the attorneys' services.*fn8
Baier v. State Farm Insurance Co., 66 Ill.2d 119, 124, 5
Ill.Dec. 572, 574, 361 N.E.2d 1100, 1102 (1977), followed in
Lemmer v. Karp, 56 Ill. App.3d 190, 13 Ill.Dec. 720,
371 N.E.2d 655 (2d Dist. 1977); Sobczak v. Whitten, 75 Ill. App.3d 208,
30 Ill.Dec. 733, 393 N.E.2d 1080 (5th Dist. 1979);
accord. Remsen v. Midway Liquors, Inc., 30 Ill. App.2d 132,
174 N.E.2d 7 (2d Dist. 1961).
Those cases are inapposite to the present situation. SBA is
not a mere subrogee to Boutique's rights against Aetna, for
the loss payable clause (executed by Aetna's agent) grants SBA
direct rights against Aetna wholly independent of Boutique.
City of Chicago v. Maynur, 28 Ill. App.3d 751, 754,
329 N.E.2d 312, 315 (1st Dist. 1975); Aetna State Bank v. Maryland
Casualty Co., 345 F. Supp. 903, 905 (N.D. Ill. 1972). SBA's
independent contractual relationship places it in a different
position from the derivative situation of a mere subrogee,
whose interest is necessarily dependent on the subrogor's
actual recovery from the tortfeasor. See Glidden v. Farmers
Automobile Insurance Ass'n,
57 Ill.2d 330, 338, 312 N.E.2d 247, 251-52 (1974).
In applying the equitable fund doctrine, the Illinois courts
recognize the subrogee's inherent reliance on the subrogor's
efforts. For just that reason those courts have restricted such
application to insurance subrogation cases or class actions.
McKeeBerger-Mansueto, Inc. v. Board of Education of the City
of Chicago, 691 F.2d 828, 835-36 (7th Cir. 1982); Maynard v.
Parker, 54 Ill. App.3d 141, 145, 11 Ill.Dec. 898, 901,
369 N.E.2d 352, 355 (3d Dist. 1977), aff'd, 75 Ill.2d 73, 25
Ill.Dec. 642, 387 N.E.2d 298 (1979); Boehm and Weinstein,
Chtd. v. City of Chicago, 62 Ill. App.3d 68, 70, 19 Ill.Dec.
489, 491, 379 N.E.2d 4, 6 (1st Dist. 1978).
Rabens argues its efforts resulted in benefit to SBA. SBA
disputes that claim (R.Mem. 2-3). But even if Rabens were
correct, under Illinois law that would not be enough to saddle
SBA with Boutique's attorneys' fees. See
McKee-Berger-Mansueto, 691 F.2d at 835; Kaplan v. Mahin,
79 Ill. App.3d 848, 851-52, 35 Ill.Dec. 481, 484-85,
399 N.E.2d 315, 317-18 (1st Dist. 1979). This Court cannot extend the
"equitable fund" doctrine beyond its Illinois boundaries.
SBA's right to the Fund is superior to Rabens' claim.
Accordingly, the Clerk of this Court is ordered to pay the
entire Fund to SBA pursuant to its interest under the loss
payable clause. This is a ...