APPELLATE COURT OF ILLINOIS, THIRD DISTRICT
531 N.E.2d 146, 176 Ill. App. 3d 303, 126 Ill. Dec. 13 1988.IL.1691
Appeal from the Circuit Court of Peoria County; the Hon. Thomas G. Ebel, Judge, presiding.
JUSTICE SPITZ delivered the opinion of the court. LUND AND KNECHT, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SPITZ
This appeal and cross-appeal arise from an action initiated by plaintiff Auto-Owners Insurance Company against defendant South Side Trust and Savings Bank in the circuit court of Peoria County. Plaintiff sought to have the trial court reform a letter of credit issued by defendant to secure a performance bond issued by plaintiff on behalf of Grawey Electric, Inc. Defendant counterclaimed to recover $5,620.08 which the bank had mistakenly paid in reliance on the letter of credit.
During a bench trial, the trial court entered judgment in favor of defendant at the close of plaintiff's case, ruling that plaintiff failed to meet the burden of proof. At the close of all the evidence, the trial court granted judgment in favor of plaintiff and against defendant on the counterclaim.
In this appeal, there are three issues. The first issue is whether the documents submitted by plaintiff comply with the letter of credit, thereby requiring payment from defendant. In the event the first issue is answered in the negative, this court must then decide whether there was proved such mutual mistake as would require reformation of the letter of credit. Lastly, if defendant is not obligated to pay on the letter of credit, is defendant entitled to be reimbursed for payments already made? The facts relevant to a determination of these issues follow.
Grawey Electric, Inc. (Grawey), is an Illinois corporation, operated by George Collins and his son Don. Don Collins is president of Grawey.
In 1980 a business opportunity developed for Grawey to perform electrical subcontracting work on the construction of a K mart store at the Cherry Tree Shopping Center (Cherry Tree) in Washington, Illinois. To obtain this work, Grawey needed to secure a performance bond in excess of $200,000.
To obtain that bond, Don Collins went to his insurance agent, Nick Yates, in May 1980. Yates is an independent agent and does performance bond business through plaintiff as well as other companies.
Yates contacted plaintiff on May 15, 1980, and spoke with Donna Hansen, an employee in the bond department. Hansen told Yates that plaintiff would issue a performance bond for Grawey, but only on several conditions, one of which was the obtaining of an irrevocable letter of credit as security for the bond.
On the following day, Yates called Charles Dan Karpowicz, vice-president and cashier of defendant. Yates specifically told Karpowicz he needed to obtain a performance bond for Grawey and plaintiff was willing to issue the performance bond, but plaintiff insisted upon first obtaining an irrevocable letter of credit from defendant.
Karpowicz stated that Grawey had an established line of credit with the defendant but that the line of credit had already been extended. Karpowicz stated that he did not feel the defendant at that time would issue an irrevocable letter of credit. However, he did not absolutely foreclose the possibility of the defendant issuing a letter of credit for Grawey.
On May 20, 1980, Yates had a conversation with another bonding company, Western Insurance Company. Yates had provided Western Insurance Company with financial information concerning Grawey. On May 20, Western Insurance Company's agent said that he could not issue a performance bond based upon the financial information the company had been given.
On the same date, Yates spoke again to Don Collins. He told Collins that Western Insurance Company had declined to issue the performance bond.
Hansen called Yates on May 21. She stated that she had been given permission to issue the performance bond if a $75,000 irrevocable letter of credit was obtained. Yates did not tell Hansen during that conversation or at any time that a ...