W. Bend Mut. Ins. Co v. Belmont St. Corp.

Belmont did not pay subcontractors and suppliers on some projects. Gad, its CEO, disappeared. West Bend Mutual paid more than $2 million to satisfy Belmont’s obligations and has a judgment against Belmont, Gad, and Gizynski, who signed checks for more than $100,000 on Belmont’s account at U.S. Bank, payable to Banco Popular. Gizynski told Banco to apply the funds to his outstanding loan secured by commercial real estate. Banco had a mortgage and an assignment of rents and knew that Belmont was among Gizynski’s tenants; it did not become suspicious and did not ask Belmont how the funds were to be applied. Illinois law requires banks named as payees to ask the drawer how funds are to be applied. The district judge directed the parties to present evidence about how Belmont would have replied to a query from the Bank. Gizynski testified that Gad, as CEO, would have told the Bank to do whatever Gizynski wanted. The judge found Gizynski not credible, but that West Bend, as plaintiff, had the burden of production and the risk of non-persuasion. The Seventh Circuit affirmed, rejecting an argument based on fiduciary duty, but reversed an order requiring Banco to pay West Bend’s legal fees View "W. Bend Mut. Ins. Co v. Belmont St. Corp." on Justia Law