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West Bend Mutual Insurance Co. v. Belmont State Corp.

April 21, 2010

WEST BEND MUTUAL INSURANCE COMPANY, PLAINTIFF,
v.
BELMONT STATE CORPORATION, JAN GAD, MARK GIZYNSKI, KIRK FORBES AND PETER WALA, DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge

Honorable Amy J. St. Eve

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff West Bend Mutual Insurance Company's ("West Bend") Motion to Impose Constructive Trust on Funds Paid to Banco Popular Banco Popular North America ("Banco Popular"). For the following reasons, the Court denies West Bend's motion.

BACKGROUND

I. Procedural History

West Bend's Amended Complaint in this case alleges claims for, inter alia, fraud, conspiracy, RICO claims, and breach of contract arising out of West Bend's issuance of a bond to Defendant Belmont State Corporation ("Belmont") for public projects and Belmont's ensuing failure to pay its subcontractors and suppliers. The subcontractors and suppliers made claims on West Bend's bond, and West Bend paid the claims. On September 17, 2009, the Court entered default judgment against Belmont, and individual defendants Mark Gizynski and Peter Wala, in the amount of $2,150,33.60. (R. 25-1.) The Court vacated the default as to Defendant Wala on April 16, 2010.

With respect to Banco Popular, West Bend served Banco Popular with a third party citation to discover assets on October 29, 2009. Banco Popular responded by providing documents and information to West Bend regarding the application of checks drawn on Belmont's checking account payable to Banco Popular, and applied to the personal debt of Gizynski. West Bend now seeks to impose a constructive trust against Banco Popular for this uncollected judgment.

II. Facts Relating to Banco Popular

Defendant Gizynski obtained a personal loan from Banco Popular secured by a mortgage and assignment of rents on property he owned located at 4938-44 W. Belmont Avenue, Chicago, Illinois. (R. 46-1, Ex. A, Gizynski Dep., 54; Ex. B.) Defendant Gizynski renewed the loan on July 5, 2009. (R. 46-1, Ex. B.) Belmont was a tenant at 4942 W. Belmont Avenue, Chicago, Illinois and Banco Popular has a copy of the lease between Gizynski and Belmont in its underwriting file. Id. According to Banco Popular, Belmont has never held an account at Banco Popular. Id.

Gizynski testified that Belmont maintained a bank account at U.S. Bank, and that he was the sole signatory on that account. (R. 46-1, Ex. A, Gizynski Dep., 23, 72.) During 2008, Gizynski signed a series of checks drawn on Belmont's account at U.S. Bank totaling $107,564.03 and applied those checks to his mortgage with Banco Popular. (R. 46-1, Ex. A, Gizynski Dep., 73, Ex. 16 Ex. B.) Gizynski testified that he was not authorized to apply funds in Belmont's U.S. Bank account to his personal debt. Id. at 25. Gizynski also testified, however, that Jan Gad, the individual to whom Gizynski testified that he sold Belmont, owed him rental fees, and that he accordingly paid for his mortgage with Belmont funds. Id. at 25, 73-74.

LEGAL STANDARD

I. Constructive Trust

"Under Illinois law, 'a constructive trust is imposed to prevent unjust enrichment by imposing a duty on the person receiving [a] benefit to convey the property back to the person from whom it was received.'" Dexia Credit Local v. Rogan, 624 F. Supp. 2d 970, 983 (N.D. Ill. 2009) (citing Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33, 56, 643 N.E.2d 734, 745, 205 Ill. Dec. 443 (1994)). "In order to impose a constructive trust, it is sufficient that a party has received money properly belonging to another under circumstances that, in equity, the party ought not be allowed to retain." Jackson v. Callan Publishing, Inc., 356 Ill. App. 3d 326, 334, 826 N.E.2d 413, ...


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