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Krick v. First Nat. Bank of Blue Island

NOVEMBER 6, 1972.

ISABEL KRICK, PLAINTIFF-APPELLANT,

v.

FIRST NATIONAL BANK OF BLUE ISLAND, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. SAMUEL B. EPSTEIN, Judge, presiding.

MR. JUSTICE BURKE DELIVERED THE OPINION OF THE COURT:

An action brought by Isabel Krick sought to recover stock certificates, bonds (in bearer form), damages and interest, from the First National Bank of Blue Island (hereinafter called the Bank). The court gave judgment finding plaintiff to be lawfully entitled to the stock certificates but not to the bonds, damages or interest. Plaintiff and defendant appeal. The plaintiff contends that the court erred in refusing to award her the bonds and in refusing to award money damages and interest for the detention of her stock certificates. Defendant contends that the court erred in ruling the plaintiff to be entitled to the stock certificates.

Isabel Krick maintained a rented safety deposit box at the First National Bank of Blue Island. On numerous occasions Irving Krick, the plaintiff's brother, entered the box for the purpose of depositing and withdrawing various documents at plaintiff's request.

Between November 9, 1965 and August 16, 1969, plaintiff's brother borrowed from the bank, various sums totaling in excess of $250,000. He secured the payment of these loans by pledging various securities issued in his sister's name which he had feloniously taken from her deposit box at the Bank. It is undisputed that the plaintiff had no knowledge of these loans or of the fact that her brother had used her stocks and bonds as security.

In addition to the deposit box plaintiff maintained a checking account at the Bank. Plaintiff's brother was authorized to draw checks on that account, which authority he did not exercise. Although plaintiff visited the Bank on numerous occasions and customarily spoke with the Bank's officers, she was not informed of her brother's dealings or of the fact that her securities had been used to secure her brother's loans. Plaintiff did not enter her deposit box between June 1, 1960 and October 3, 1969.

The loans and their renewals were approved by the Bank's officers without examining the securities and without comparing the endorsements with plaintiff's authentic signature available to the Bank. The record indicates that the Bank never requested plaintiff to verify the pledges and that she demanded the return of her documents in October 1969, at which time she was informed of her brother's illicit activities.

The issue of whether Miss Krick is entitled to possession of the stock certificates depends upon the application of Section 8-311 of the Uniform Commercial Code (Ill. Rev. Stat. 1969, ch. 26, par. 8-311), to the factual situation of this case. The statute reads:

"Par. 8-311. Effect of Unauthorized Endorsement. Unless the owner has ratified an unauthorized endorsement or is otherwise precluded from asserting its ineffectiveness

(a) he may assert its ineffectiveness against the issuer or any purchaser other than a purchaser for value and without notice of adverse claims who has in good faith received a new, reissued or reregistered security on registration of transfer; * * *."

In Alton Banking and Trust Co. v. Alton Building and Loan Association, 289 Ill. App. 177, 6 N.E.2d 921, this court construed paragraph 8-311's predecessor, Section 23 of the Negotiable Instruments Act (Ill. Rev. Stat., 1935, ch. 98, par. 43), (See Illinois Code Comment to Section 8-311 of the Uniform Commercial Code) and at 289 Ill. App. 177, 187, 6 N.E.2d 921, 926 stated:

"Section 23 of the Negotiable Instruments Act, [citation omitted], provides that where a signature is forged or made without authority it is wholly inoperative and cannot be enforced `unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.'"

The Bank advances two theories in support of its contention that plaintiff should be precluded from asserting the ineffectiveness of her brother's signature. First, it contends that because she allowed her brother access to the deposit box, and to have his name on her checking account at that Bank, she had clothed him with apparent authority to pledge her securities; second, that she was put on notice of her brother's dealings by virtue of his endorsement of certain Santa Fe Corporation stock certificates *fn1 and by the fact that on July 29, 1971, she ratified the forgery of her signature on certain stock certificates of the Commonwealth Edison Company. We do not agree that plaintiff should be estopped from asserting the ineffectiveness of her brother's forgeries.

Again the language of the court in the Alton case, is pertinent to the decision in the present case. At 289 Ill. App. 177, 187, 6 N.E.2d 921, 926, the court stated:

"Before a party can assert an estoppel against another, two things must be proved: first, that he acted and relied upon the conduct or representation of the party sought to be estopped, and second, that he was without knowledge of such ...


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