                              In the

United States Court of Appeals
               For the Seventh Circuit

Nos. 11-1811 & 11-1959

W EST B END M UTUAL INSURANCE C OMPANY,
                                                  Plaintiff-Appellant,
                                                      Cross-Appellee,
                                  v.



B ELMONT S TATE C ORPORATION, et al.,

                                                            Defendants,
                                 and


B ANCO P OPULAR N ORTH A MERICA,

                                                Respondent-Appellee,
                                                    Cross-Appellant.


            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
                 No. 09 C 354—Amy J. St. Eve, Judge.



    A RGUED S EPTEMBER 6, 2012—D ECIDED M ARCH 19, 2013
2                                 Nos. 11-1811 & 11-1959

 Before EASTERBROOK, Chief     Judge, and   FLAUM and
WILLIAMS, Circuit Judges.
  E ASTERBROOK, Chief Judge. Belmont State Corp. did not
pay subcontractors and suppliers for work and materials
on some projects. Jan Gad, its CEO, is on the lam.
West Bend Mutual Insurance Co. laid out more than
$2 million to satisfy Belmont’s obligations and has a
judgment for that amount against Belmont, Gad, and
Mark Gizynski. This appeal presents several questions
arising from West Bend’s effort to recover some of the
$2 million from Banco Popular, where Gizynski had
an account.
  Gizynski signed checks for more than $100,000 on
Belmont’s account at U.S. Bank. The checks were
payable to Banco Popular (the Bank). Gizynski told it
to apply the funds to his outstanding loan. He had bor-
rowed on the security of some commercial real estate; it
had both a mortgage and an assignment of the rents.
Belmont was among Gizynski’s tenants; the Bank
knew this from a lease in its files. So it did not become
suspicious when Gizynski told it to route money from
Belmont to the balance of the mortgage loan, and it
did not ask Belmont how the funds were to be ap-
plied—even though the Bank, not Gizynski, was the
payee on the checks.
  Illinois law, which controls all of the issues in this
diversity litigation, requires banks named as payees to
ask the drawer how funds are to be applied; they cannot
just take the word of whoever has the checks in his pos-
session. See Mutual Service Casualty Insurance Co. v.
Nos. 11-1811 & 11-1959                                    3

Elizabeth State Bank, 265 F.3d 601 (7th Cir. 2001) (Illinois
law). The Bank did not ask Belmont, and West Bend
wants it to restore the funds—which means that the
money would inure to West Bend’s benefit.
  Undisputed evidence establishes that the Bank failed
to ask Belmont how the funds should be applied. 2010
U.S. Dist. L EXIS 39318 (N.D. Ill. Apr. 21, 2010). But the
district judge thought that a factual dispute remained:
what would Belmont have said, had it been asked? If
Belmont’s management would have told the Bank to
use the checks for Gizynski’s benefit, then its failure
did not harm Belmont, and West Bend lacks a claim
against the Bank—though West Bend might well have
a claim against Gad or Gizynski for diverting funds in
which West Bend had a superior interest. The 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 about this or much of any-
thing else. But disbelieving Gizynski does not neces-
sarily imply the opposite of his statements. Since Gad
has absconded, that left the record essentially blank.
   The judge held that West Bend, as the plaintiff, has the
burden of production and the risk of non-persuasion.
The court relied not only on the normal rules of civil
litigation but also on Travelers Casualty & Surety Co. v.
Wells Fargo Bank N.A., 374 F.3d 521 (7th Cir. 2004), which
placed these burdens on the plaintiff in a fraudulent-
check case. Because disbelief of Gizynski does not dem-
4                                  Nos. 11-1811 & 11-1959

onstrate what Gad would have said, had he been asked,
the district court entered judgment for the Bank. 2011
U.S. Dist. L EXIS 23329 (N.D. Ill. Mar. 8, 2011).
   In this court, West Bend tries to sidestep the
evidentiary problem by contending that the Bank had
a duty to open a new account in Belmont’s name
and deposit the checks there, keeping the money on
ice until it received further instructions. Then Belmont’s
silence would mean that the money remained available
to its creditors. One problem with this position is lack of
a source in Article 3 of the Uniform Commercial Code,
which governs banking transactions, or any Illinois deci-
sional law. We said in Mutual Service Casualty that
Illinois requires the drawee to ask the drawer, not to
open a new account. No state decision has suggested
otherwise in the twelve years since. Federal courts in
diversity litigation try to predict how the state judiciary
will rule. Having made a prediction in Mutual Service
Casualty, we stand pat unless the state appears restive.
West Bend does not rely on any state decision for its
“open an account and wait” proposal. If it wanted to
seek a change in state law—or to ask the state judiciary
to declare that Mutual Service Casualty misunderstood
Illinois law—West Bend should have sued in state court.
  Under the UCC, a depositary bank’s duty when
receiving a check naming itself as payee—when the
depositary is not the drawer’s creditor and so cannot
apply the funds to its own benefit—is to follow
the drawer’s instructions. Gizynski insists that those in-
structions were (or would have been) to pay him; dis-
Nos. 11-1811 & 11-1959                                    5

credit Gizynski (as the district judge did) and the record
is silent. A plaintiff loses when the facts cannot be ascer-
tained.
  West Bend contends that Deland v. Dixon National Bank,
111 Ill. 323 (1884), puts the burdens of production and
persuasion on the Bank, but that decision long predates
the UCC and dealt with events distinct from the
depositary-bank-as-payee situation that we addressed
in Mutual Service Casualty. Opinions from the nineteenth
century do not justify upsetting decisions we issued in
2001 and 2004. (West Bend also cites cases that Illinois
decided in 1896, 1922, and 1926—yet nothing more recent.)
  At the end of its brief West Bend cursorily ad-
vances what had been its principal contention in the
district court: that §5 of the Uniform Fiduciaries Act,
760 ILCS 65/5, makes the Bank liable because it was
Gizynski’s creditor. The section provides in part: “If [a
check] is payable to a personal creditor of the [drawer’s]
fiduciary and delivered to the creditor in payment of
or as security for a personal debt of the fiduciary to
the actual knowledge of the creditor, or is drawn and
delivered in any transaction known by the payee to be
for the personal benefit of the fiduciary, the creditor
or other payee is liable to the principal if the fiduciary
in fact commits a breach of his obligation as fiduciary
in drawing or delivering the instrument.” West Bend
contends that Gizynski was Belmont’s fiduciary and
committed a breach of his fiduciary obligations when
issuing the checks for his own benefit.
 Trying to demonstrate a breach of fiduciary duty by
Gizynski would give West Bend the same sort of problem
6                                  Nos. 11-1811 & 11-1959

we have been addressing: Gizynski says that he was
an authorized recipient of rent money, and no one has
contradicted him. The district court did not reach
this issue, however, concluding instead that Gizynski
was not Belmont’s fiduciary. By the time he cut the
checks, he was neither an investor (having sold all of his
stock to Gad) nor a manager. He retained authority to
sign Belmont’s checks (Gad may have overlooked the
need to cut him off after the sale of stock), but the
district judge thought signing authority a ministerial
rather than a fiduciary position.
  Section 1 of the Uniform Fiduciaries Act defines “fidu-
ciary” to include “a trustee under any trust, expressed,
implied, resulting or constructive executor, admin-
istrator, guardian, conservator, curator, receiver, trustee
in bankruptcy, assignee for the benefit of creditors,
partner, agent, officer of a corporation, public or
private, public officer, or any other person acting in
a fiduciary capacity for any person, trust or estate.”
760 ILCS 65/1(1). This is regrettably circular (a fiduciary
is a person “acting in a fiduciary capacity”), but the
idea seems to be that a fiduciary is a person with discre-
tion to act on a principal’s behalf. Gizynski did not
have discretion to decide which of Belmont’s debts
would be paid. If Gizynski cut the checks without au-
thority, then he was a thief or embezzler, but it is
possible to misappropriate money without being a fidu-
ciary. A bank guard is not the bank’s “fiduciary” just
because he knows the combination to its safe or can
scoop money from the tellers’ drawers.
Nos. 11-1811 & 11-1959                                       7

  West Bend maintains that anyone authorized to sign
a business’s checks must be its fiduciary. It relies princi-
pally on Prodromos v. Everen Securities, Inc., 341 Ill. App. 3d
718 (2003), yet that decision has nothing to do with check-
signing authority. We have searched in vain for a deci-
sion in Illinois or anywhere else holding that everyone
authorized to sign a check is a fiduciary for the pur-
pose of the Uniform Fiduciaries Act. And the district
court added that the Bank would be protected by §9 of
that Act, 760 ILCS 65/9, because it lacked actual knowl-
edge that Gizynski was not entitled to the money. See
Johnson v. Citizens National Bank of Decatur, 30 Ill. App. 3d
1066, 1070–72 (1975).
  We turn to Banco Popular’s cross-appeal. After West
Bend obtained its judgment and issued a citation to
discover assets (which created a lien on Gizynski’s
funds, see 735 ILCS 5/2–1402(m)(1) and In re Porayko,
No. 12-2777 (7th Cir. Jan. 28, 2013)), the Bank received
about $62,000 from one of Gizynski’s accounts. The
money represented rents from some of Gizynski’s
other tenants. As we have mentioned, the Bank had a
security interest not only in the real estate but also
in the rental payments. But it did not enforce a direct-
payment system or appoint a receiver to collect the
rents on its behalf. That’s why some rental money
flowed through Gizynski’s account. Both Gizynski and
the Bank ignored West Bend’s citation to discover assets
(though copies had been served on each) when dealing
with the rentals. Banco Popular contends that its
security interest is senior to West Bend’s lien—and, if so,
then the Bank keeps the money—but the district court
8                                    Nos. 11-1811 & 11-1959

held that a security interest in rents can be perfected
only through possession, so that West Bend has the
senior claim. The district court directed the Bank to turn
these funds over to West Bend. Order of March 24,
2011, revising a decision reported at 2010 U.S. Dist.
L EXIS 136267 (N.D. Ill. Dec. 23, 2010).
  An assignment of future rental payments is outside
the scope of the Uniform Commercial Code, see UCC
§9–109(d)(11), but at common law still creates a security
interest. See Bloomfield State Bank v. United States, 644
F.3d 521 (7th Cir. 2011). The Bank’s interest is senior to
West Bend’s because an assignment is perfected on
recordation. See Travelers Insurance Co. v. First National
Bank of Blue Island, 250 Ill. App. 3d 641 (1993). The
Bank’s problem is a further rule of Illinois law: when
rentals are paid directly to the debtor, the security
interest evaporates. See Fidelity Mutual Life Insurance
Co. v. Harris Trust & Savings Bank, 71 F.3d 1306, 1309
(7th Cir. 1995) (Illinois law); In re Wheaton Oaks Office
Partners L.P., 27 F.3d 1234, 1244–45 (7th Cir. 1994) (Illinois
law). To take full advantage of an assignment, a creditor
must arrange for the tenants to pay it directly through
a lockbox, or for a third party such as a receiver to
take possession for the lender’s benefit. See Comerica
Bank–Illinois v. Harris Bank Hinsdale, 284 Ill. App. 3d
1030, 1035 (1996). When as in Bloomfield State Bank the
dispute concerns the priority of interests in rent not
yet due, the status of rentals in the debtor’s possession
is unimportant; but here the only sums in dispute are
those that found their way into Gizynski’s hands
before being applied to his loans at the Bank.
Nos. 11-1811 & 11-1959                                   9

  The Bank believes that the rule abrogating its security
interest to the extent that rents come into the debtor’s
possession makes little sense. Perhaps that’s so, though
the limitation might reflect the fact that, once funds
become commingled, third parties lack notice of the
security interest. Our opinion in Fidelity Mutual pro-
vides some background about the doctrine’s origins. 71
F.3d at 1309–10. See also Julia P. Forrester, Still Crazy
after All These Years: The Absolute Assignment of Rents in
Mortgage Loan Transactions, 59 Fla. L. Rev. 487 (2007). But
in diversity litigation it is enough to understand what
state law is; if the doctrine reflects a compromise that
leaves everyone puzzled and frustrated (as compromises
often do), still the federal court’s job is implementa-
tion rather than revision. Litigants that want a court to
make an adjustment in a doctrine of state law are
wasting their breath asking for relief from the federal
judiciary.
  Illinois provides that a person who transfers funds
in violation of the lien created by a citation to discover
assets can be ordered to pay costs. See 735 ILCS
5/2–1402(h). That rarely matters to federal litigation,
where losing litigants normally pay the winner’s costs.
See Marx v. General Revenue Corp., No. 11-1175 (U.S.
Feb. 26, 2013); Fed. R. Civ. P. 54(d)(1). A provision
for attorneys’ fees can have a greater effect, because
in diversity litigation state law governs this subject.
The standby American Rule, under which the parties
bear their own legal expenses, applies only when state
law and the parties’ agreement are silent.
10                                  Nos. 11-1811 & 11-1959

  The district court ordered the Bank to pay West
Bend’s costs in connection with the proceeding to
recover the $62,000 in rentals. But the actual award in-
cludes about $8,000 in attorneys’ fees as well as costs.
Subsection 1402(h) does not authorize awards of legal
fees. Such an award depends on §5/2–1402(f)(1), which
permits a court to treat evasion of the citation as a form
of contempt. Mid-American Elevator Co. v. Norcon, Inc.,
287 Ill. App. 3d 582, 591 (1996), holds that a court
may award attorneys’ fees as part of the penalty under
§5/2–1402(f)(1). (That is the current statute; Norcon dis-
cussed its predecessor, but this aspect of the law did not
change.) The district court referred to subsection (f)(1)
but did not find that the Bank had contumaciously
evaded the citation. To the contrary, it wrote: “West
Bend has not demonstrated, and the Court . . . cannot
find, that Gizynski’s conduct rose to the level of con-
tempt.” If Gizynski did not engage in contempt by
turning rentals over to the Bank, it is hard to see how the
Bank could have engaged in contempt by using the
money to reduce the balance on Gizynski’s loan. For
all we can see, the Bank believed honestly—though
mistakenly—that its security agreement gave it a
claim superior to West Bend’s.
   The order requiring the Bank to pay West Bend’s
legal fees is reversed. The remainder of the judgment
is affirmed.




                          3-19-13
