The opinion of the court was delivered by: Judge James B. Zagel
MEMORANDUM OPINION AND ORDER
Defendant Fifth Third Bank ("Fifth Third") moves to dismiss Travelers Casualty and Surety Company of America's ("Travelers") amended complaint pursuant to 12(b)(6). In its amended complaint, Travelers asserts claims in subrogation for conversion, an accounting, and a constructive trust against Fifth Third. For the following reasons, Defendant's motion to dismiss is granted in part and denied in part.
Travelers, a surety, is seeking indemnification for payments it made on various defaulted contracts on behalf of Defendant John Paderta ("Paderta") and his company Krahl Construction. On January 20, 2010, Travelers filed a Complaint against Paderta alleging claims for breach of contract, exoneration and quia timet, specific performance under an indemnity agreement between Travelers and Paderta, and for a preliminary injunction. Fifth Third then moved to intervene to protect its ability to enforce its own rights under a guarantee agreement entered into between Fifth Third and Paderta. I granted Fifth Third's motion to intervene and ordered that no collateral posted by Paderta to satisfy his debt to Travelers could be used without further order of the court. I did not assign a priority interest in any collateral. Travelers then filed an Amended Complaint naming Fifth Third as a defendant and adding claims for conversion, an accounting, and for a constructive trust.
John P. Paderta ("Paderta") was the President of Krahl Associates, Inc. d/b/a Krahl Construction ("Krahl"). Krahl was a private general contracting construction firm that was hired by property owners for construction services for public and private construction projects in the states of Illinois and Colorado. Krahl hired various subcontractors who contributed to the construction of the overall projects.
Pursuant to the Illinois Public Construction Bond Act, the Colorado Construction Bond Act, and the Miller Act (collectively, the "Bond Acts"), Krahl was required to obtain payment and performance surety bonds on its projects to guarantee its performance obligations under public contracts, and to ensure payment of subcontractors hired by Krahl on the projects. Krahl obtained the required bonds under the Bond Acts, as well as certain payment and performance bonds pursuant to contracts signed with private property owners. Krahl contracted with Travelers to supply the required payment and performance bonds. As a condition of issuing such bonds, both Krahl and Paderta entered into a General Agreement of Indemnity with Travelers.
Krahl maintained a general demand deposit checking account at Fifth Third. Fifth Third loaned in excess of $6,000,000.00 to Krahl, and pursuant to various Revolving Note Loan Agreements ("Loan Agreements"), Fifth Third was entitled to repayment upon Krahl's default under the terms of the Loan Agreements.
In January 2010, Krahl was raided by the FBI. Krahl ceased operations on January 8, 2010. On that same day, Fifth Third declared Krahl in default of its loan and asserted its right of setoff against funds maintained by Fifth Third in Krahl's demand account to partially settle Krahl's outstanding debt on the loans. Fifth Third setoff $2,720,019.65, which was the entire balance of funds contained in Krahl's checking account.
Travelers asserts that at least $1,442,686.03 of the funds in the demand account was comprised of bonded contract funds which were being held in trust by Krahl. After Fifth Third asserted its right of setoff, Travelers received certain claims on the bonds it issued to Krahl from subcontractors hired by Krahl. Travelers paid some of these claims and seeks indemnification for its losses. Travelers is now subrogated to the rights of Krahl and the subcontractors.
Fifth Third moves to dismiss Counts V, VI, and VII on three grounds.*fn1 First, Fifth Third argues that Travelers had no right as a subrogee at the time Fifth Third asserted its right of setoff, and therefore cannot maintain any action against Fifth Third. Alternatively, Fifth Third argues that even if Travelers can be said to have had rights over the funds setoff prior to any alleged right of subrogation vested, it has not set forth facts sufficient to support its claimed right of subrogation. Finally, Fifth Third argues that the amended complaint insufficiently pleads counts for conversion, an accounting, and constrictive trust.
A. Travelers Has Rights as a Subrogee.
Travelers' claims against Fifth Third are made under a theory of subrogation. Subrogation is a method by which "one who has involuntarily paid a debt or claim of another succeeds to the rights of the other with respect to the claim or debt so paid." Ritter v Hachmeister, 356 Ill. App. 3d 926, 930 (Ill App. Ct 2005) (quoting Dix Mut Ins. Co v. LaFramboise, 149 Ill.2d 314, 319 (Ill. 1992)). A subrogee is entitled to indemnity only to the extent of "the money actually paid by him to discharge the obligation  or value of the property applied for that purpose." American Nat. Fire Ins. Co. ex rel Tabacalera Contreras Cigar Co v. Yellow Freight Systems, 325 F.3d 924, 935 (7th Cir. 2003).
Fifth Third relies heavily on Capitol Indemnity Corp v. United States,
41 F.3d 320, 326 (7th Cir. 1994) for the proposition that Travelers
had no right of subrogation to the disputed funds at the time of the
setoff. Specifically, Fifth Third states that because it asserted its
right of setoff prior to any demand made on Travelers by Krahl's
subcontractors, Travelers has no right to the setoff funds.*fn2
Fifth Third contends that at the time of the setoff,
Travelers, as Krahl's surety, ...