MEMORANDUM OPINION AND ORDER
Defendant, First Midwest Bank, N.A. ("First Midwest"), filed a motion for summary judgment on Counts IX and X of plaintiff's, Lawyers Title Insurance Corporation's ("Lawyers Title"), Second Verified Amended Complaint. First Midwest and Lawyers Title also filed cross-motions for summary judgment on First Midwest's counterclaim.
For the reasons stated below, First Midwest's motion for summary judgment on Counts IX and X is denied, its motion for judgment on the pleadings on its counterclaim is denied, and Lawyers Title's motion for summary judgment on First Midwest's counterclaim is granted.
Lawyers Title underwrites title insurance. It entered into an Agency Agreement with Dearborn Title Corporation ("Dearborn") whereby Dearborn would act as Lawyers Title's agent. The Agency Agreement excluded Dearborn's escrow activities from the scope of the agency relationship. Dearborn, however, did independently act as an escrow agent when conducting closings for mortgage lenders and borrowers. Dearborn maintained its escrow account at First Midwest.
In addition to underwriting title insurance policies, Lawyers Title also issued closing protection letters to mortgage lenders who used Dearborn's closing and escrow services. In these letters, Lawyers Title agreed to reimburse the lenders for losses resulting from Dearborn's failure to comply with the lender's instructions and from fraud. Lawyers Title issued these letters upon the request of a lender whose borrower agreed to procure title insurance through Dearborn.
According to Lawyers Title, Dearborn fraudulently mishandled money entrusted to it as an escrow agent. Lawyers Title reimbursed 166 lenders under the terms of the closing protection letters and then sued Dearborn, and others, including First Midwest. Lawyers Title argues that because First Midwest knew that Dearborn held those funds in trust for others in its escrow account, First Midwest is liable for Dearborn's actions under the Illinois Fiduciary Obligations Act ("IFOA"), 760 ILCS 65/1 et seq., and the Illinois Uniform Commercial Code ("IUCC"), 810 ILCS 5/3-307.
First Midwest counterclaimed, seeking injunctive relief under the Illinois Title Insurance Act ("ITIA"), 215 ILCS 155/1 et seq. First Midwest contends that Lawyers Title's practice of issuing closing protection letters should be enjoined as it misleads the lenders about the scope of Dearborn's agency relationship and it promotes the provision of escrow services by companies not authorized to provide escrow services. First Midwest has not suffered any damages as a result of this practice. Its only damage stems from costs relating to the defense of this case.
Counts IX and X
First Midwest moves for summary judgment on Counts IX and X on the grounds that Lawyers Title has not identified the specific checks or instruments that are the basis of its claims under the IFOA, 760 ILCS 65/9, and the IUCC, 810 ILCS 5/3-307. First Midwest contends that Lawyers Title has identified only $ 61,000 of suspicious checks and all of those checks pre-date the earliest closings involving the 166 lenders. Thus, First Midwest argues that Lawyers Title cannot identify any check or instrument that represents a misappropriation of any funds given to Dearborn by one of the 166 claimants.
The flaw in First Midwest's argument is that it does not follow the logical consequence of the misappropriation of funds, by specific checks or instruments, prior to the deposits by the 166 claimants. If funds were misappropriated, it means that money was not in the account when it should have been; therefore, subsequent deposits into the account would need to cover the shortfalls. The claimants' deposits could have been used to cover the shortfalls from those misappropriated checks. Therefore, when it came time to pay the claimants, there were insufficient funds in the account.
Nowhere in the statute does it say that the misappropriated checks or instruments have to be contemporaneous with the claimants' deposits. Dearborn has identified specific checks or instruments as required by the statutes. Whether or not Lawyers Title can link the claimants' loss to those checks is a separate question. Thus, summary judgment is denied.
Lawyers Title moves for summary judgment on two grounds: that First Midwest does not have a private cause of action under the ITIA and that no triable issue of material facts exists as to whether or not Lawyers Title deceived mortgage lenders about the scope of its agency relationship with Dearborn. First Midwest moves for judgment on the pleadings arguing that it does have a private cause of action and that Lawyers Title violated Section 21(a) of the ITIA by issuing the closing protection letters.
Section 25 of the ITIA provides a private cause of action for damages and for injunctive relief:
(a) Any person or persons who violate the prohibitions or limitations of subsection (a) of Section 21 of this Act shall be liable to the person or persons charged for the settlement service involved in the violation for actual damages.
(b) Any title insurance company or a title insurance agent who violates the prohibitions or limitations of subsection (a) of Section 21 of this Act shall be subject to injunctive relief. If a permanent injunction is granted, the court may award actual damages. Reasonable attorney's fees and costs may be awarded to the prevailing party.