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NBASE COMMUNS., INC. v. AMERICAN NAT'L BANK & TRUS

June 8, 1998

NBASE COMMUNICATIONS, INC., a Maryland corporation, Plaintiff,
v.
AMERICAN NATIONAL BANK & TRUST COMPANY OF CHICAGO, a national bank association, and STATE FARM MUTUAL INSURANCE COMPANY, an Illinois insurance company, Defendants.



The opinion of the court was delivered by: GRADY

MEMORANDUM OPINION

 The parties' cross motions for summary judgment are before the court. For the reasons explained below, both are denied.

 BACKGROUND

 It must be a rare occurrence for a payment, mistakenly sent to a wrong address, to reach a recipient who may have a legitimate claim to it. But such is the case here.

 Plaintiff NBase Communications, Inc. ("NBase"), seeks restitution on a theory of unjust enrichment from defendant American National Bank ("ANB") based on the following events: ANB was the lender and secured creditor of a company called Illinois Computer Cable ("ICC"). ICC sold computer networking products. (ICC filed for bankruptcy in September of 1996, shortly before the filing of this lawsuit.) The loan was secured by the receivables, which were sent by ICC's customers to a lock box at ANB.

 One of ICC's customers was State Farm. Unlike other customers, State Farm did not send payments to the lock box at ANB because State Farm's account was unique in that ICC, when selling to State Farm, was acting as an undisclosed agent for NBase and selling NBase's products. Because of this arrangement with NBase, ICC wanted State Farm to remit payments to a lock box controlled by NBase and not to the lock box controlled by ANB.

 Despite ICC's wishes, a State Farm payment ended up in the hands of ANB. This happened in April of 1996, when ICC issued two invoices to State Farm in the aggregate amount of $ 204,333.04. Both invoices listed two addresses for remittance. At the top of each invoice was the "remit to" address for the ANB lock box. At the bottom of each invoice was the "remit to" address for the NBase lock box. State Farm's payment supervisor approved the payments, highlighted the NBase lock box address on each one, and sent the invoices to State Farm's accounting department for payment. Instead of sending the payment to the highlighted address, State Farm's accounting department then sent the check (made payable to ICC) to the ANB lock box.

 ANB received the check via the lock box on May 13, 1996. At that time, ICC owed ANB approximately $ 900,000 on its loan. Two days later, on May 15 at 10:18 a.m., an ICC employee named Patricia Sebby called ANB and said the check was mailed by mistake. Sebby said the check was not an ICC receivable and requested that it be returned to ICC by placing it in an operating account ICC maintained at ANB. ANB declined to do so. ANB posted the checks to ICC's account, thereby reducing the amount of ICC's debt, although the facts are not clear on when this posting occurred.

 NBase brought suit against ANB and State Farm, claiming entitlement to the money under a theory of unjust enrichment. (State Farm was voluntarily dismissed as a defendant in September of 1997.) The parties' cross motions for summary judgment are before the court. They agree that Illinois law governs this diversity case.

 DISCUSSION

 Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering such a motion, the court construes the evidence and all inferences that reasonably can be drawn therefrom in the light most favorable to the nonmoving party. O'Connor v. DePaul University, 123 F.3d 665, 669 (7th Cir. 1997). "A dispute over material facts is genuine if 'the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Kennedy v. Children's Serv. Soc'y of Wis., 17 F.3d 980, 983 (7th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)). The court will enter summary judgment against a party who does not "come forward with evidence that would reasonably permit the finder of fact to find in [its] favor on a material question." McGrath v. Gillis, 44 F.3d 567, 569 (7th Cir. 1995).

 In response to NBase's claim of unjust enrichment and in its motion for summary judgment, ANB raises the affirmative defense of the "discharge for value" rule. The rule, in relevant part, says that

 
A creditor of another ... who has received from a third person any benefit in discharge of the debt ... is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests or duties, if the transferee made no misrepresentation and did not have notice of the transferor's mistake.

┬áRESTATEMENT OF RESTITUTION ┬ž 14 (1937) (hereinafter "Restatement"). NBase argues that ANB cannot prevail based on the discharge for value rule because (1) Illinois does not follow it; and (2) even if Illinois did, the ...


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