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Verbaere v. Community Bank

OPINION FILED SEPTEMBER 30, 1986.

PETER VERBAERE ET AL., PLAINTIFFS-APPELLANTS,

v.

COMMUNITY BANK OF HOMEWOOD-FLOSSMOOR, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County; the Hon. Thomas J. O'Brien, Judge, presiding.

PRESIDING JUSTICE LINN DELIVERED THE OPINION OF THE COURT:

Plaintiffs, Peter and Angela Verbaere, bring this appeal seeking reversal of the trial court's order dismissing the first four counts of their nine-count complaint *fn1 In their complaint the Verbaeres allege that defendant Community Bank of Homewood-Flossmoor (the bank) wrongfully seized $8,754.84 from the Verbaeres' savings account. Count I alleges that the bank breached a contract it had with the Verbaeres; count II alleges that the bank breached a fiduciary duty it owed to the Verbaeres; count III alleges that the bank breached an express trust existing between it and the Verbaeres; and count IV alleges that the bank breached a resulting trust existing between it and the Verbaeres.

Although the record is somewhat confusing, it appears the trial court dismissed counts I through IV after finding that the bank complied with industry custom in seizing the Verbaeres' cash deposit and applying those funds to a mortgage debt which the bank held against the Verbaeres' residence.

We affirm in part, reverse in part, and remand for further proceedings.

BACKGROUND

This matter is before us following the trial court's ruling that counts I through IV of the Verbaeres' complaint fail to state a cause of action under Illinois law. Accordingly, we must accept as true all of the well-pleaded allegations contained in counts I through IV and must draw all reasonable inferences in the Verbaeres' favor. Cook v. Askew (1975), 34 Ill. App.3d 1055, 341 N.E.2d 13.

The Verbaeres' complaint reveals that the origin of this dispute rests in an April 1978 loan transaction that occurred between the Verbaeres and the bank. At that time, the Verbaeres borrowed $19,891.95 from the bank. At that time, amount, $15,500 was borrowed for the purchase of a "Chinook Concourse Mini-Motor Home," and the remaining $4,391.95 was used to purchase a credit-life and credit-disability insurance policy required by the bank. The terms of the credit-life and credit-disability policy provided that in the event that Peter Verbaere was unable to make the payments for the loan as a result of death or disability, the insurance company would thereafter make the loan payments for the motor home on his behalf.

As collateral for the motor-home loan, the bank received: (1) the credit-life and credit-disability insurance policy; (2) a purchase-money security interest in the motor home; and (3) a second mortgage on the Verbaeres' residence.

In the months that followed the motor-home purchase, the Verbaeres tendered all of their monthly payments in a timely fashion. In December of 1978, however, plaintiff Peter Verbaere sustained injuries that left him permanently disabled. Pursuant to the terms of the credit-life and credit-disability insurance policy, the insurance company began making the monthly payments on the motor home purchased by the Verbaeres.

The insurance company continued to make the monthly payments on the Verbaeres' motor home for the next three years. Then, in March of 1982, the Verbaeres contracted to sell their residence. This was the same residence on which the Verbaeres had previously given the bank a second mortgage as additional collateral for the motor-home purchase. In order to transfer clear title to their residence, the Verbaeres were required to obtain a release from the bank for the second mortgage.

The Verbaeres approached the bank and informed one of the bank's loan officers of their desire to satisfy the mortgage and thereby obtain clear title for their residence. After discussing the matter, the bank agreed to release the second mortgage on the Verbaeres' residence in return for the Verbaeres depositing with the bank $8,754.84, an amount equal to the remaining balance on the motor home. In addition, the bank agreed that it would send the Verbaeres a check each month (deducted from the $8,754.84) equal to the amount of the monthly payment made by the insurance company. By doing this, the cash collateral deposited by the Verbaeres with the bank would remain equal to the outstanding balance on the motor home. Thus, the bank and the Verbaeres agreed to an exchange of the type of collateral being held by the bank as security for the motor home loan: the second mortgage on the Verbaeres' residence was released in return for the Verbaeres depositing with the bank an amount of cash equal to the outstanding balance on the motor-home loan.

Four months later, on October 15, 1982, the bank notified the Verbaeres that it had seized the $8,754.84 deposit being held as collateral and had paid off the motor-home loan in full. This was done without the consent of the Verbaeres and in spite of the fact that the insurance company had made all of the payments due on the motor-home loan in a timely fashion. In addition, when the insurance company subsequently learned that the loan on the motor home had been paid off (as a result of the bank's seizure), it immediately stopped making the payments due under the credit-life and credit-disability insurance policy.

Soon thereafter, the Verbaeres demanded that the bank return the $8,754.84 or, in the alternative, that the insurance company forward to them the remaining payments due under the credit-life and credit-disability policy. Both the bank and the insurance company denied the Verbaeres' request, thereby prompting the Verbaeres to file this lawsuit.

As noted, pursuant to the bank's motion, counts I through IV were dismissed. The Verbaeres now bring this appeal.

OPINI ...


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