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F.D. STELLA PRODUCTS CO. v. GENERAL STAR INDEMNITY CO.

December 12, 2005.

F.D. STELLA PRODUCTS COMPANY, Plaintiff,
v.
GENERAL STAR INDEMNITY COMPANY, Defendants.



The opinion of the court was delivered by: JOAN LEFKOW, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff-insured, F.D. Stella Products Company ("Stella"), filed suit against Defendant-insurer, General Star Indemnity Company ("General Star"), for breach of an insurance contract. General Star filed a counterclaim for declaratory judgment. Diversity jurisdiction is properly invoked pursuant to 28 U.S.C. § 1332, as the amount in controversy exceeds $75,000, Stella is a Michigan corporation with its principal place of business in Michigan, and General Star is a Connecticut corporation with its principal place of business in Connecticut. Venue is properly invoked pursuant to 28 U.S.C. § 1391, as a substantial portion of the events giving rise to this claim occurred in Lombard (DuPage County), Illinois.

Because the General Star insurance policy in question does not contain a choice of law provision, the court must look at the choice of law factors set forth by the Illinois Supreme Court in Lapham-Hickey Steel Corp. v. Protection Mut. Ins. Co., 665 N.E.2d 842, 845 (Ill. 1995). These factors require the court to consider (1) the location of the policy's subject matter; (2) the place of the policy's delivery; (3) the domicile of the insured and insurer; (4) the place of the last act giving rise to a valid contract; (5) the location of performance; and (6) any other place bearing a rational relationship to the general contract. Because the policy's subject matter was at all relevant times located in Lombard, Illinois and because the General Star policy was underwritten and delivered in Illinois, the court holds that Illinois law should be applied to resolve this dispute.

  Before the court are Stella's and General Star's cross-motions for summary judgment. For the reasons stated below, Stella's motion is denied and General Star's motion is granted.

  SUMMARY JUDGMENT STANDARDS

  Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). To determine whether any genuine fact exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed.R.Civ.P. 56(c) Advisory Committee's notes. The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris, Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact must be outcome determinative under the governing law. Insolia, 216 F.3d at 598-99. Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in the light most favorable to the non-moving party, as well as view all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). On cross-motions for summary judgment, the court must consider the merits of each motion and assess the burden of proof that each party would bear on an issue at trial. Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997).

  FACTS

  A. Background

  Stella leases and refurbishes restaurant equipment. (General Star L.R. 56.1 ¶ 2). On or about March 11, 1997, Stella entered into an agreement with Ser-Ven Pizza, Inc. d/b/a Venditti's Ristorante to lease restaurant furniture, equipment, and fixtures ("the subject property"). (Stella L.R. 56.1 ¶ 7). Stella and Bancorp Group, Inc. ("Bancorp") financed a portion of the lease of the subject property, and, in return, both received a security interest in the property. (Stella Ex. D). Sometime prior to December of 1999, Ser-Ven Pizza ceased operating Venditti's Ristorante and left the subject property at the premises. (Stella L.R. 56.1 ¶ 8).

  As of December 14, 1999, Chicago Pizza Kitchen occupied the restaurant space formerly used by Venditti's Ristorante and used the subject property in its restaurant operations with Stella's and Bancorp's knowledge.*fn1 (General Star L.R. 56.1 ¶ 10). Immediately thereafter, Stella sent documents related to the financing of the subject property to Sam Miceli, owner of Chicago Pizza Kitchen, but no agreement was reached regarding the lease, sale or use of the subject property. Id. at ¶ 11. At some point between December 1999 and March 2001, Jason and Anthony Brown ("the Browns") assumed ownership of Chicago Pizza Kitchen. Id. at ¶ 12. The Browns, like their predecessor, used the subject property in their restaurant operations with F.D. Stella's and Bancorp's knowledge but without any agreement between Chicago Pizza Kitchen and Bancorp or Stella for the lease, sale or use of the subject property.*fn2 Id.

  On June 19, 2000, Bancorp filed a replevin suit against Chicago Pizza Kitchen, seeking, among other things, surrender of the subject property and an order 1) declaring that Bancorp had a superior right, title to, and interest in the property, 2) ordering that Chicago Pizza Kitchen relinquish possession of the subject property to Bancorp, and 3) empowering Bancorp to enter the premises where the subject property was located to take possession of it. Id. at ¶ 13. On November 15, 2000, the Court granted all of Bancorp's requests. Id. at ¶ 14.

  Effective March 2001, Bancorp assigned all of its rights, title, and interest in the subject property to Stella. Id. at ¶ 15. On March 21, 2001, Stella sent its agent to the Chicago Pizza Kitchen premises to inventory the subject property. Id. at ¶ 16. On April 1, 2001, Stella's agent reported to Stella that a double deck pizza oven, espresso machine, vertical cutter mixer, slicer, under-the-counter cash drawer, range, and glass washer had been removed from the restaurant premises. Id. at ¶ 17; see (Stella Ex. I). Of the subject property, a fire protection system, shelving, refrigerators and freezers, a dish washer, fryers, booths, and tables remained at the premises. Id. On or about April 16, 2001, Stella's attorney informed the Browns by letter of the outcome of the replevin suit and of Bancorp's assignment of all of its rights in the subject property to Stella. Id. at ¶ 19. In the same letter, Stella advised the Browns of its intention to remove the subject property from the restaurant immediately unless adequate financial arrangements were promptly made and Stella also informed the Browns that any prior sale or transfer of the subject property without authorization from Bancorp or Stella was fraudulent. Id. Between April 2001 and August 2001, Stella attempted to negotiate with the Browns regarding the lease or purchase of the subject property. Id. (Stella L.R. 56.1 ¶ 16). Throughout this period, the subject property remained in the Browns' custody at the Chicago Pizza Kitchen. Id. at ¶ 21.

  On August 8, 2001, Stella was notified that the Browns had vacated the property without leaving a forwarding address and removed all of the subject property from the restaurant premises. Id. at ¶ 22. Subsequently, Stella filed a police report on September 4, 2001 concerning the alleged loss or theft of the subject property. Id. at ¶ 22; (Stella Ex. K).

  Thereafter, on or about August 21, 2001, Stella submitted a claim for coverage of the alleged theft of the subject property from the restaurant premises to General Star. Id. at ¶ 24. (Stella Ex. L). General Star denied coverage for Stella's claim on October 22, 2002, because:
. . . loss or damage resulting from a criminal act by anyone to whom you entrust property, voluntary parting with any property if induced so by a fraudulent scheme, trick or false pretense, and loss or damage where the only evidence of loss is determined upon taking inventory or any other instance where there is no physical evidence to show what ...

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