PARKWAY BANK AND TRUST COMPANY, an Illinois Banking Corporation, Plaintiff-Appellant,
STATE FARM FIRE AND CASUALTY COMPANY, an Illinois Corporation, Defendant-Appellee.
In an action to recover the proceeds of an insurance policy issued by defendant following a fire that damaged an apartment building, the entry of summary judgment for defendant and against plaintiff mortgagee was affirmed, since the record showed that checks for the insurance proceeds were paid to the company retained by the insured owner to repair the building pursuant to an endorsement from plaintiff bank forged by an agent of the company, and plaintiff’s remedy was to sue the bank that paid the checks over the forged endorsement for conversion pursuant to section 3-420 of the Uniform Commercial Code.
Appeal from the Circuit Court of Cook County, No. 11-CH-18043; the Hon. Sophia H. Hall, Judge, presiding.
Carey Filter White & Boland, of Chicago (Edmund P. Boland and Emily A. Ralph, of counsel), for appellant.
Sudekum Cassidy & Shulruff, Chtrd. (Frederick J. Sudekum III and Florence M. Schumacher, of counsel), of Chicago, for appellee.
Presiding Justice Hoffman and Justice Cunningham concurred in the judgment and opinion.
¶ 1 Plaintiff, Parkway Bank and Trust Company, filed a declaratory judgment action alleging that defendant, State Farm Fire and Casualty Company, had refused to tender to plaintiff insurance policy proceeds in the amount of $252, 830.94 in connection with a fire loss on certain real property on which plaintiff held a mortgage and was named as a "mortgagee" under the policy. Plaintiff sought a declaration of its entitlement to the insurance proceeds. Defendant filed an answer and affirmative defense stating it had already issued two checks totaling $252, 830.94 naming plaintiff as a co-payee, and that plaintiff's failure to receive said funds resulted from the tortious or fraudulent acts of a third party. Defendant argued that since it had fully performed all of its obligations under the policy, it should not be required to "duplicatively pay" plaintiff additional insurance proceeds. The circuit court granted defendant's motion for summary judgment and denied plaintiff's motion for summary judgment. Plaintiff appeals. We affirm.
¶ 2 Plaintiff is the owner and holder of a promissory note executed by Nelson and Martha Soto (the Sotos), and delivered to plaintiff on July 14, 2005, in consideration for the extension of credit to the Sotos in the amount of $363, 750. The note is secured by a mortgage on the Sotos' apartment building located at 3037 W. Belmont Avenue in Chicago. Defendant issued an insurance policy for the apartment building, identifying the Sotos as the named insureds, and plaintiff as a mortgagee. The policy provided coverage for, among other things, accidental direct physical loss to the apartment building. The policy includes the following loss payment provisions applicable to the Sotos as named insureds (i.e., "you"):
"Loss Payment. In the event of loss covered by this policy:
a. we will give notice, within 30 days after we receive the sworn statement of loss, of our intent to settle the loss according to one of the following methods:
(1) pay the value of lost or damaged property as determined in Condition 2. Valuation;
(2) pay the cost of replacing or repairing the lost or damaged property, plus any reduction in value of repaired items;
(3) take all or any part of the property at an agreed or appraised value; or
(4) repair, rebuild or replace the property with other property of ...