United Pacific Insurance Company v. Chase Manhattan Bank
Published: Jun. 3, 2000 | Result Date: Feb. 20, 2000 | Filing Date: Jan. 1, 1900 |Case number: 793782 Bench Decision – $0
Judge
Court
Orange Superior
Attorneys
Plaintiff
Defendant
Howard S Fredman
(Fredman Lieberman & Pearl LLP)
Facts
Plaintiff United Pacific Insurance Company (United) sued defendant Chase Manhattan Bank (Chase), for the
imposition of a constructive trust and for conversion.
The case arises out of ChaseÆs receipt on Sept. 17, 1997, from its revolving loan customer, Riedel
Environmental Services Inc., of a warrant in the form of a check, number 07-476163, dated Sept. 9, 1997 in the
amount of $300,988.98, issued by the State of California. Riedel was a contractor in the business of
remediating contaminated sites. The $300,000 check was issued as a progress payment in connection with
contract No. 1214, which Riedel entered into with the State of California on April 14, 1995. The contract
provided for JP-4 tank removal in the military department of Los Alamitos, Orange County, California.
On April 27, 1995, United had issued a payment bond to Riedel in the penal sum of $87,500 for use in
obtaining the contract for the Los Alamitos Project. Previously, on March 10, 1994, United had issued a
contractorÆs bond, in the penal sum of $7,500 to Canonie Environment Services Corp. (Canonie).
As of 1995, Canonie was RiedelÆs parent corporation. In September 1997, Riedel and its affiliates were
borrowers under a $35 million credit facility of which Chase was the agent for itself and another bank. Under
that facility, Chase had a fully perfected security interest in RiedelÆs accounts and the proceeds thereof.
Upon receipt of the $300,000 check from Riedel, Chase applied it, in accordance with RiedelÆs instructions, to
pay down RiedelÆs revolving credit balance. Three weeks later, on Oct. 8, 1997, Riedel and its affiliates filed a
Chapter 11 bankruptcy petition.
The Los Alamitos project was completed by Riedel prior to the filing of its bankruptcy petition. However,
certain subcontractors and materialmen on the Los Alamitos project were not paid, and United was ultimately
required to pay $95,000, the full penal amount of the bonds.
During the course of this action, United obtained an assignment from certain subcontractors and materialmen
of about $160,000, the full amount of their claims with respect to the Los Alamitos project.
Plaintiff sought recovery of approximately $200,000.
Settlement Discussions
Plaintiff's demand was $95,000 and defendant's offer was $5,000.
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