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Heartland Bank & Trust Co. v. Leiter Group

Court of Appeals of Illinois, Third District

July 29, 2014

THE LEITER GROUP, Attorneys and Counselors Professional Corporation, Defendant-Appellant

Page 559

Motion to publish granted September 12, 2014. Modified opinion upon denial of rehearing September 12, 2014.

Appeal from the Circuit Court Appeal from the Circuit Court, Peoria County, Illinois. Circuit No. 11-L-221. Honorable Richard D. McCoy, Judge, Presiding.


When a client of defendant law firm transferred accounts receivable checks the client received from its customers to the law firm and the law firm deposited those checks into its IOLTA trust account and then transferred the funds to its general account, the law firm converted the funds and plaintiff bank was deprived of its rightful possession of the proceeds, and summary judgment was properly entered for the bank on its complaint for conversion, notwithstanding the law firm's contention that it properly used the funds to pay for the services it rendered on behalf of its client, since defendant's client had defaulted on the loan agreement it had with plaintiff bank, the bank had filed a third-party citation to discover assets against the law firm, the bank was entitled to the client's accounts receivable at the time payments were made to the client, and the funds were converted at the time they were deposited into the law firm's trust account.

For APPELLANT: Thomas E. Leiter, (argued), The Leiter Group, Peoria, IL.

For APPELLEE: Timothy J. Howard and Jeffrey G. Sorenson (argued), Howard & Howard Attorneys PLLC, Peoria, IL.

JUSTICE O'BRIEN delivered the judgment of the court, with opinion. Justices McDade and Wright concurred in the judgment and opinion.



Page 560

[¶1] Plaintiff Heartland Bank and Trust sued defendant The Leiter Group for conversion, alleging that Leiter converted collateral in which Heartland had a security interest. The trial court granted summary judgment in favor of Heartland. Leiter appealed. We affirm.

[¶2] FACTS

[¶3] In March 2006, plaintiff Heartland Bank and Trust issued a revolving line of credit to Ross Advertising in the amount of $650,000. Heartland and Ross executed a promissory note and security agreement. The promissory note listed a number of reasons for default, including dissolution or termination of the business. The note provided for a setoff in all of Ross's accounts at Heartland and authorized Heartland " to charge or setoff all sums owing on this Note against any and all such deposit accounts." The security agreement granted Heartland a secured interest in Ross's collateral, including accounts, instruments, deposit accounts and proceeds from the sale of any collateral. Heartland recorded its secured interest by filing a financing statement in Delaware where Ross was organized.

Page 561

[¶4] The loan was extended in April 2009 for one year and the amount increased to $750,000. Thereafter, a dispute arose between Ross and Heartland regarding the loan. On August 5, 2009, Ross and its longtime legal services provider, defendant The Leiter Group, entered into a contract for legal services. The contract required Ross to pay a $60,000 nonrefundable retainer fee, providing, " Client understands and agrees that the legal issues involved in this matter are complex and that an attorney would not undertake representation without the payment of this retainer." Ross was also required to pay Leiter its usual hourly rate for ongoing legal services as performed. Following the August legal services engagement, Ross began to deliver various checks from its clients for deposit into Leiter's Interest on Lawyers' Trust Accounts (IOLTA) account. From time to time, Ross instructed Leiter to pay Ross's bills and payment was made to a number of vendors, including Heartland and Leiter. The total amount of third-party checks deposited and paid between December 2009 and May 2010 was $120,603.

[¶5] On September 11, 2009, the Ross shareholders decided to close the business. On September 15, the shareholders notified Heartland that Ross would cease operations on September 30. Heartland immediately terminated Ross's line of credit, placed a hold on its checking account, and applied the proceeds in the Ross checking account to the outstanding loan balance. On October 22, Heartland sent Ross a default notice due to its insolvency and termination of business. The demand requested Ross pay off its loan before November 10, 2009, and notified Ross that it would ...

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