Appeal from the Circuit Court of Cook County; the Hon. LOUIS
A. WEXLER, Judge, presiding. Judgment reversed and cause remanded
MR. JUSTICE BRYANT DELIVERED THE OPINION OF THE COURT.
Rehearing denied July 31, 1967.
This is an appeal from a judgment of the Circuit Court of Cook County against the University National Bank in the sum of $12,277.66. Judgment was also entered against Georgia Barlas in the sum of $15,694.70; she did not appeal. The basis of the judgment against the University National Bank was that the bank as a payor bank under the Uniform Commercial Code had failed to give timely notice of the dishonor of four drafts which were drawn on defendant Georgia Barlas. Succinctly stated, defendant University National Bank's theory on this appeal is that it was not a payor bank, but a collecting bank, and that it acted in conformity with the UCC and banking customs. Defendant, University National Bank, also contends that the plaintiffs were not entitled to a recovery because they had ratified and confirmed the actions of the defendant.
The transactions which gave rise to this controversy were the sale of common stock by the plaintiffs, who are stockbrokers, to defendant Georgia Barlas. All of the purchases involved here were made by Mrs. Barlas' son, Kosta Barlas, who had a limited agency authorization to buy, sell and trade in stocks on behalf of his mother. All purchases were of Perfect Photo Common Stock listed on the American Stock Exchange. Between May 28, 1962, and December 31, 1962, a total of 4,600 shares were purchased on behalf of Mrs. Barlas by her son. Beginning on December 19, 1962, plaintiffs accepted the signature of Kosta Barlas alone on such delivery instruction letters without further authority or confirmation from Georgia Barlas.
In January 1963 a total of 11,300 shares of Perfect Photo were purchased by Kosta Barlas in the account of his mother. These shares were sent on different dates to University National Bank attached to five separate drafts, each of which represented a collective group of purchases put together by plaintiffs from time to time for delivery. Only the first four drafts are involved in this appeal.
The four drafts in this case were prepared in plaintiffs' office and were then delivered with the stocks attached to Continental Illinois National Bank & Trust Company for collection. Continental then forwarded them to the defendant, University National Bank, for collection.
On Wednesday, February 6, 1963, Continental received a number of drafts from the plaintiffs including the first two involved in this case. These were received by defendant, University National Bank, on the following day, February 7, 1963. On the same date of receipt, defendant immediately mailed out collection notices thereof to defendant, Georgia Barlas. Kosta Barlas claimed that he received them for his mother.
On Thursday, February 7, 1963, Continental Bank received additional drafts from plaintiffs for collection, including the third involved in this case. That draft with stock attached was mailed that day to defendant, University National Bank, for collection. The defendant, University National Bank, received this draft on the following day and immediately mailed out a collection notice thereof to Georgia Barlas dated February 8, 1963. Kosta Barlas claims that he also received this one for his mother.
On Friday, February 8, 1963, Continental also received additional drafts from plaintiffs for collection including the fourth draft involved here. This draft with the stock attached was mailed to defendant, University National Bank, on the same day. While the University National Bank was open until 1:00 p.m. on Saturday, February 9, 1963 (as opposed to a normal closing time of 2:30 p.m.), Mrs. Annetta Purka, Vice President of the defendant, University National Bank, testified that the bank did not receive this draft until Monday, February 11, 1963, when it was processed. Kosta Barlas likewise claims that he also received this notice for his mother.
On Monday, February 11, 1963, defendant, University National Bank, had not heard from Georgia Barlas in response to the notices sent the previous Thursday and Friday the first three drafts involved in this appeal. Mrs. Purka, Vice President of the University National Bank, testified that she tried to reach Mrs. Barlas by telephone but was unsuccessful.
Kosta Barlas came into defendant bank on Monday, February 11 and Mrs. Purka told him about the drafts and stocks for his mother; that notices were sent and that his mother could not be reached by telephone. He told Mrs. Purka that he had purchased the securities on her account and that he was trying to secure financing to take care of the drafts. Kosta Barlas was unable to obtain financing to pay for the stocks, with the result that on February 14, the four drafts in issue were returned by the University National Bank to the Continental Bank. Upon receipt of the stocks the plaintiffs began to sell them to mitigate its damages. Sale of the 10,300 shares of Perfect Photo Stock resulted in a loss of $15,694.70 to the plaintiffs.
The first issue on this appeal is whether the University National Bank was acting as a payor or a collecting bank under section 4-105 of the Uniform Commercial Code. The defendant, University National Bank, contends that it was acting as a "collecting bank," and that it was error for the trial court to have found that the defendant was a "payor bank." Section 4-105, Uniform Commercial Code provides that:
"In this Article unless the context otherwise requires:
"(a) `Depositary bank' means the first bank to which an item is transferred for collection even though ...