APPEAL from the Circuit Court of Winnebago County; the Hon.
JOHN C. LAYNG, Judge, presiding.
MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:
Rehearing denied September 27, 1974.
The plaintiff, Earl Kane, payee of two checks drawn on insufficient funds at the defendant bank, American National Bank & Trust Company (hereinafter American), sued to recover the balance due on the checks alleging that American had held the checks beyond its midnight deadline and thereby became liable to the plaintiff. The trial court entered judgment for $66,262.20, plus interest, and defendant appeals.
American contends that certain regulations of the Federal Reserve Board and operating circulars of the Federal Reserve Bank of Chicago apply to avoid the midnight deadline under the facts of this case; and that alternatively plaintiff has waived his right to claim that the bank is accountable under provisions of section 4-302 of the Uniform Commercial Code. Ill. Rev. Stat. 1971, ch. 26, par. 4-302 (hereinafter UCC).
On July 18, 1966, the plaintiff received two checks of the same date from the Heggemeier Livestock Corporation. At that time Heggemeier owed the plaintiff approximately $108,000 for lambs, feed and wool. The larger check, for $67,413.40, contained the notation "For Fat Lambs", and the smaller check, for $11,849.20, contained the notation "For Wool". The next day plaintiff delivered the checks without endorsing them to the Blackhawk Production Credit Association (BPCA) to whom he was indebted, and BPCA credited his account for the amount of the checks. BPCA deposited the checks at the Freeport State Bank on July 20 and the account of the association was so credited.
The checks went to the Continental Bank in Chicago, then the Federal Reserve Bank of Chicago, and were received by the defendant, American National, on Friday, July 22, 1966. American returned the checks that same day for lack of endorsement. Although at this time the Heggemeier Corporation account did not contain sufficient funds to cover payment on the checks, the checks were not so stamped and neither BPCA nor plaintiff was notified by American of Heggemeier's lack of funds. The checks returned in reverse order of their preceding journey and while at Continental were erroneously stamped "presented twice".
On July 26 the checks returned to the Freeport State Bank. BPCA was called and Mr. Hostetter from BPCA obtained a power of attorney from the plaintiff, who was leaving for a vacation. Mr. Hostetter came down to the Freeport State Bank and supplied the missing endorsements. The checks were then sent back on the 27th; this time directly by mail to American at the request of BPCA. The checks were sent directly to American because the amounts were large and the collection time would have been much longer if the checks were processed through normal collection channels.
Accompanying the checks was a standard collection form containing instructions and identifying the sender, the checks, the amounts, and the date sent. The instructions printed in the lower right hand corner read:
"We enclose for collection and return items as stated above.
Surrender documents attached only on payment.
Return at once if not paid, stating reasons for ...