In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 04-3629 to 04-3636

FIDELITY NATIONAL TITLE INSURANCE COMPANY

OF NEW YORK,

Plaintiff-Appellant,

v.

HOWARD SAVINGS BANK, et al.,

Defendants-Appellees.

____________

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

Nos. 02 C 643-44, 646-47, 649, 651, 667-68—William J. Hibbler, Judge.

____________

ARGUED NOVEMBER 7, 2005—DECIDED FEBRUARY 9, 2006

____________

Before POSNER, EASTERBROOK, and WOOD, Circuit Judges.

POSNER, Circuit Judge. Before us is an appeal in a series of

diversity suits (which for the sake of simplicity we’ll treat as

one) against a number of Chicago banks by a title insurance

company under the Uniform Fraudulent Transfer Act, in

force in Illinois as 740 ILCS 160. On the defendants’ motion

for summary judgment, the district judge dismissed the suit

as barred by the Act’s statute of limitations. 740 ILCS

160/10.

Fidelity insured escrow accounts that were controlled by

Intercounty Title Company, which conducted real estate
2 Nos. 04-3629 to 04-3636

closings, placing the purchase money in escrow until the

sale closed. Intercounty’s owners had the company remove

money from the escrow accounts and use it to buy certificates of deposit from the defendant banks. The company

pledged the certificates to secure personal loans that the

banks made to the owners, and then directed the banks to

sell the certificates of deposit and use the proceeds to

discharge the loans that the banks had made to the owners.

Thus the owner-borrowers got to keep the money they had

borrowed from the banks (because the banks had repaid

themselves by selling the certificates of deposit), and in this

fashion money in the escrow accounts was funneled to

them. This was only one of the methods that Intercounty’s

owners used to plunder the escrow accounts; others are

described in Fidelity National Title Ins. Co. v. Intercounty

National Title Ins. Co., 412 F.3d 745 (7th Cir. 2005).

Fidelity wants to recover from the banks the money that

was diverted to them (for the purchase of certificates of

deposit) from the escrow accounts. It argues that the banks

received this money without giving consideration to the

equitable owners of the money—the people who had

deposited their purchase money in escrow accounts controlled by Intercounty. Those people—and their insurer,

Fidelity—received neither the certificates of deposit nor

anything else of value from the banks, while the banks

received money from the escrow accounts in exchange for

the certificates of deposit. Fidelity does not contend,

however, that the banks’ action in setting off the certificates

of deposit against the Intercounty insiders’ debts (which

they did by selling the certificates and applying the proceeds to those debts) was a fraudulent transfer, though it

was a critical step in the transfer of money from the escrow

accounts to the insiders.
Nos. 04-3629 to 04-3636 3

The banks sold the last of the certificates of deposit to

Intercounty in 1995, but it was not until 2000 that Fidelity

learned that money was missing from the escrow accounts

that it had insured. The missing amount was huge—as

much as $50 million, or even more. Fidelity began an

investigation to determine the whereabouts of the missing

money. The investigation revealed that Intercounty had

bought a certificate of deposit from a bank named Banco

Popular to fund a statutory bond that Intercounty had to

post, but that instead of posting it Intercounty had used the

certificate of deposit as security for a personal loan that

Banco Popular had made to one of Intercounty’s owners. In

December of 2000, Fidelity filed suit under the Uniform

Fraudulent Transfer Act against Banco Popular, but it is not

one of the suits consolidated in the present litigation.

Later that month Fidelity interviewed George Stimac,

Intercounty’s controller, who confirmed that Intercounty

had invested escrow funds in certificates of deposit purchased from various banks. According to notes of the

interview that were taken by one of Fidelity’s investigators,

Stimac “understands (apparently through office scuttlebutt)

that the CDs were sometimes pledged for personal use.”

Stimac did not know which banks had sold those certificates

of deposit, but a search of Intercounty databases produced

a list of them and subpoenas to the banks resulted in

Fidelity’s learning which banks had liquidated the certificates of deposit that had been sold by them to Intercounty

and then pledged to them by Intercounty to secure personal

loans. By the end of January 2001, Fidelity had identified all

but two of the banks that it has sued in this litigation, but it

did not file the suit until January of the following year.

The Uniform Fraudulent Transfer Act requires that suit be

brought within four years “after the [fraudulent] transfer

was made” or, “if later, within one year after the transfer . . .
4 Nos. 04-3629 to 04-3636

was or could reasonably have been discovered by the

claimant.” 740 ILCS 160/10. The transfers of escrow money

to the defendant banks occurred more than four years

before Fidelity sued, so the suit was timely only if brought

within a year after Fidelity discovered or could reasonably

have discovered the transfers. By the time its investigators

interviewed Stimac, which was more than a year before it

sued, it knew that banks had participated in transactions

that had resulted in escrow money being improperly

diverted to Intercounty’s owners. It had already sued one of

those banks—Banco Popular—and it had learned from

Stimac that probably there were others. It knew that fraudulent transfers had occurred, because a great deal of money

was missing from the escrow accounts and no explanation

was forthcoming other than that it had been stolen by

Intercounty’s owners. It particularly knew that fraudulent

transfers as it understands the term (incorrectly, as we’ll see)

had occurred, because it thinks that any money originating

in the escrow accounts that passed through a bank en route

to Intercounty’s owners was a fraudulent transfer to the

bank.

Apart from Banco Popular, Fidelity did not know who the

transferees were. But when a statute of limitations does not

begin to run until “discovery,” the discovery referred to is

merely discovery that the plaintiff has been wrongfully

injured. E.g., Golla v. General Motors Corp., 657 N.E.2d 894,

898 (Ill. 1995); Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 633

N.E.2d 627, 630-31 (Ill. 1994); Evans v. City of Chicago, 2006

WL 29209, at *12 n. 28 (7th Cir. Jan. 6, 2006) (Illinois law).

He doesn’t have to know who injured him. He has the

limitations period to discover that, draft his complaint, and

file suit. If despite the exercise of reasonable diligence he

cannot discover his injurer’s (or injurers’) identity within the

statutory period, he can appeal to the doctrine of equitable
Nos. 04-3629 to 04-3636 5

tolling to postpone the deadline for suing until he can

obtain the necessary information. Cada v. Baxter Healthcare

Corp., 920 F.2d 446, 450-52 (7th Cir. 1990).

Now admittedly it is still unresolved whether Illinois

recognizes equitable tolling. Clark v. City of Braidwood, 318

F.3d 764, 767 (7th Cir. 2003). The Illinois cases that mention

the term seem to mean by it equitable estoppel, Chicago Park

District v. Kenroy, Inc., 402 N.E.2d 181, 184 (Ill. 1980); Medical

Disposal Services, Inc. v. EPA, 677 N.E.2d 428, 433 (Ill. App.

1996), a distinct doctrine governing cases in which the

defendant misleads the plaintiff into thinking that he

doesn’t have to sue yet, or in some other way prevents him

from suing within the statutory period. Equitable tolling

does not require that the defendant have borne any responsibility for the plaintiff’s having missed the deadline.

There is no need to try in this case to answer the question

whether Illinois accepts the doctrine of equitable tolling,

though we venture the guess that it does (or would); it is a

commonplace limitations doctrine and a sensible one. What

is important is simply that once the limitations period has

expired, any further extension is limited to the time necessary to find such additional information as the plaintiff

absolutely needs in order to be able to file a suit. Unterreiner

v. Volkswagen of America, Inc., 8 F.3d 1206, 1213 (7th Cir.

1993); Cada v. Baxter Healthcare Corp., supra, 920 F.2d at 453.

So the one-year “discovery” statute of limitations began

to run in December 2000 (if not earlier), when Fidelity

discovered (and surely by then should have discovered) that

there had been fraudulent transfers from the escrow

accounts that it had insured. Fidelity therefore had to sue by

December 2001 unless it could not identify the transferees

by then; in that event, Fidelity could appeal to the doctrine

of equitable tolling for an extension. But in fact it learned
6 Nos. 04-3629 to 04-3636

the identity of most of them by the end of January 2001, and

it does not even argue equitable tolling. It is right not to

because nothing prevented it from suing those defendants

and adding others later as the facts about them emerged.

Fidelity argues, however, that the standard analysis of a

discovery statute of limitations does not apply to the

Uniform Fraudulent Transfer Act. As Fidelity points out, the

“discovery rule” (the rule that makes the claim accrue on

the date on which the plaintiff discovers that he has been

the victim of a wrongful injury) is normally a judge-made

graft on statutes of limitations that do not mention discovery, see, e.g., Cada v. Baxter Healthcare Corp., supra, 920 F.2d

at 451; Lama v. Preskill, 818 N.E.2d 443, 448 (Ill. App. 2004),

while here the rule is stated in the statute. But we cannot

fathom why that should make a difference in the content of

the rule. Numerous statutes of limitations incorporate a

discovery rule explicitly, and their discovery rule is interpreted the same way as the judge-made graft on the silent

statutes is. E.g., Golla v. General Motors Corp., supra, 657

N.E.2d at 898; Gilbert Bros., Inc. v. Gilbert, 630 N.E.2d 189,

192 (Ill. App. 1994); SASCO 1997 NI, LLC v. Zudkewich, 767

A.2d 469, 474-75 (N.J. 2001).

A more promising distinction is that between a fraudulent

transfer and an ordinary tort, including fraud. The doctrine

of fraudulent transfer creates a species of receiver liability.

740 ILCS 160/8(a); Aps Sports Collectibles, Inc. v. Sports Time,

Inc., 299 F.3d 624, 629-30 (7th Cir. 2002) (Illinois law). When

the owners of Intercounty diverted money in the escrow

accounts to their own pockets, they committed a fraud. Had

they then turned the money over to their adult children,

who either suspected that the money they were getting had

a tainted origin or provided no consideration for receiving

the money, the children would have been the recipients of

fraudulent transfers and would therefore have been liable
Nos. 04-3629 to 04-3636 7

to Fidelity. United States v. Engh, 330 F.3d 954, 956 (7th Cir.

2003) (Illinois law); Regan v. Ivanelli, 617 N.E.2d 808, 815 (Ill.

App. 1993); Gary-Wheaton Bank v. Meyer, 473 N.E.2d 548, 554

(Ill. App. 1984); Harris v. Aimco, Inc., 383 N.E.2d 631, 633 (Ill.

App. 1978). The fraudulent transfer does not occur, however, until money is handed to a person from whom the true

owner can recover it by virtue of the doctrine. Island Holding, LLC v. O’Brien, 775 N.Y.S.2d 72, 74 (N.Y. App. Div.

2004). And this implies that the discovery statute of limitations does not begin to run until the plaintiff has discovered

or should have discovered not that money has been transferred illegally but that it has been transferred to someone

who is a fraudulent transferee, for otherwise it is not a

fraudulent transfer and the owner of the money has no

claim against the transferee.

But this just means that the mere fact of a transfer of funds

to which one has a claim does not trigger a duty of investigation and thus start the limitations period running; there

must be something fishy about the transfer. This doesn’t

mean that you have to know or have reason to know the

identity of the transferee; you have the statutory limitations

period to discover that, and if that isn’t long enough you

can fall back on equitable tolling. Nor does it mean, as

Fidelity argues, that you have to know of the particular

fraudulent transfers that have occurred. All you have to

know or suspect is that such transfers are occurring; for

knowing that, it is irresponsible to sit back and wait until

the particular transfers are identified to you. Knowing that

Banco Popular had received a fraudulent transfer (at least as

Fidelity interprets “fraudulent transfer”), knowing that

Intercounty had bought other certificates from other banks,

and having reason to think that “scuttlebutt” about some of

those certificates of deposit having been used to repay

personal loans was reliable because it had been repeated by
8 Nos. 04-3629 to 04-3636

Intercounty’s controller, Fidelity should have known that

fraudulent transfers not limited to Banco Popular had

occurred. It therefore had only one more year in which to

sue.

A statute of limitations is not intended to provide a period

of rest and recuperation after the completion of the plaintiff’s investigation. Fidelity had more than four years in

which to discover that money in the escrow accounts that it

had insured had been transferred fraudulently to specific

banks. It did not require an additional 13 months to identify

the specific transfers. The one-year limitations period that

remained to it was ample. Had it not been adequate,

Fidelity could as we have said have appealed to the doctrine

of equitable tolling, and it has not tried to do so.

So the suit was properly dismissed. But for completeness

and perhaps to head off some futile litigation against other

banks, we address briefly the contention of two of the

defendant banks that it is clear (without need for any

further factual development) that there was no fraudulent

transfer to these banks. When Intercounty bought certificates of deposit from the banks and pledged them as

collateral for the loans the banks had made to Intercounty’s

owners, the company did not reveal to the banks, or cause

them to suspect, that Intercounty was buying the certificates

with escrow money. It told the banks it owed its owners the

money they had borrowed, and it therefore directed the

banks to liquidate the certificates and use the proceeds to

repay the owners’ loans. The bank merely acted as a transfer

agent between Intercounty and the owners. There is nothing

suspicious per se about a corporation’s paying money to its

shareholders, and as far as the banks knew, that was all that

was happening.

Fidelity argues that the transfers to the banks of the

money used to buy the certificates of deposit were fraudu-
Nos. 04-3629 to 04-3636 9

lent because no consideration was given to the equitable

owners of the money transferred, that is, to the owners of

the escrow money and to Fidelity itself as their subrogee.

But to be a fraudulent transferee, you must know or suspect

that you are not giving any return value to the owner. 740

ILCS 160/9(a); Kennedy v. Four Boys Labor Service, Inc., 664

N.E.2d 1088, 1093 (Ill. App. 1996); Scholes v. Lehmann, 56

F.3d 750, 759 (7th Cir. 1995) (Illinois law). As far as the

banks knew, the money was owed by Intercounty to its

shareholders, and the banks were giving full consideration

for the receipt of the money by issuing the certificates of

deposit.

Fidelity’s theory of fraudulent transfer would cast a dark

cloud over the banking business, and so it is not surprising

that the theory has no legal basis. Fidelity cites a decision of

ours for the proposition that the consideration for a transfer

must flow to the true owner of the money transferred.

Scholes v. Lehmann, supra, 56 F.3d at 758. The transfer held to

be fraudulent in that case was to the ex-wife of the perpetrator of a fraud. She may have had valid claims against him

arising from their divorce, and the release of those claims

was urged as consideration for the transfer. But the transfer

was not of the perpetrator’s funds but of corporate funds,

and the corporation received no benefit from the release of

her personal claims against the perpetrator. Unlike the

banks in this case, she knew she had no claims against the

corporation—knew therefore that she was receiving corporate funds without any quid pro quo. See also Wilkey v. Wax,

225 N.E.2d 813, 814 (Ill. App. 1967). That knowledge, which

made her a fraudulent transferee, is missing here.

AFFIRMED.
10 Nos. 04-3629 to 04-3636

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—2-9-06