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Empire Moving Corp. v. Hyde Park Bank

OPINION FILED OCTOBER 18, 1976.

EMPIRE MOVING AND WAREHOUSE CORPORATION, PLAINTIFF-APPELLEE,

v.

HYDE PARK BANK AND TRUST COMPANY, DEFENDANT-APPELLANT. — (JOHN KIERS, THIRD-PARTY DEFENDANT.)



APPEAL from the Circuit Court of Cook County; the Hon. DANIEL A. COVELLI, Judge, presiding.

MR. PRESIDING JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

Rehearing denied December 21, 1976.

Empire Moving and Warehouse Corporation (plaintiff) brought action against Hyde Park Bank and Trust Company (defendant) for an accounting and injunctional relief. Plaintiff alleged that defendant had cashed checks payable to plaintiff over unauthorized endorsements and had paid the proceeds to persons other than plaintiff. The trial court granted partial summary judgment in favor of plaintiff as to liability and as to some damages and ordered defendant to account to plaintiff for the proceeds of additional checks with provision for ascertainment of other possible damages. Defendant appeals.

In this court, defendant contends that the trial court erred in granting summary judgment in the face of genuine issues of material fact presented by the record and that plaintiff's complaint, which sought only damages, was improperly filed in chancery and failed to state a claim for an accounting. Plaintiff argues that the summary judgment was properly entered and that the complaint was properly filed in chancery.

The pertinent facts appear from the pleadings, motions and supporting affidavits filed by both sides. From June 1971 to May 30, 1974, plaintiff maintained two checking accounts with defendant. One account was exclusively for payroll purposes; the other was a general account. During this entire period, plaintiff had corporate resolutions on file with defendant providing that checks could not be drawn or negotiated on the general account without signatures of two individuals whose names were specified within the resolutions. The resolutions listed two groups of persons and required signature by one member of each group.

John Kiers was an employee of plaintiff during the time in question. His responsibilities as bookkeeper included transaction of plaintiff's day-to-day business with defendant. This generally consisted of making deposits at defendant's drive-up window. He was not an authorized signer in any capacity on plaintiff's accounts with defendant. In addition, employees of plaintiff would frequently endorse their payroll checks in blank and give the checks to Kiers to cash on his trips to the bank. Before taking the payroll checks to the bank, Kiers stamped them with a rubber stamp reflecting only plaintiff's corporate name in full, underscored with a straight solid line. The officials of plaintiff had general knowledge of the existence of the stamp. It was kept on a desk in the bookkeeper's room.

Upon the termination of Kiers' employment with plaintiff, plaintiff's officers discovered that a large number of checks issued by other persons payable to plaintiff had been cashed by defendant and the proceeds had apparently been given to Kiers. The checks in question did not bear the two signature endorsement required by plaintiff's resolution for its general account, but were merely stamped on the back with the same rubber stamp above described which Kiers had used upon the payroll checks. Plaintiff obtained copies of 16 of these checks with a total value of $9009.03. In addition, plaintiff prepared a list from its records of additional checks aggregating $91,269.31 which, it alleged, had also been improperly cashed by defendant under the same circumstances. Plaintiff presented an affidavit by its president asserting that plaintiff had not received the proceeds of the checks in question. The affidavit of an accountant hired by plaintiff stated that he had prepared this list of checks from plaintiff's cash receipts books and that none of the checks listed were recorded as deposits in plaintiff's bank account. He further stated that copies of the 16 checks aggregating $9009.03 had been obtained by solicitation of plaintiff's customers.

Plaintiff's motion for partial summary judgment included two separate portions. The first portion of the motion sought partial summary judgment for plaintiff in the amount of $9009.03 plus interest of $600.57; predicated upon the 16 checks above described. The motion also sought a declaration of liability against defendant for additional checks payable to plaintiff which had similarly been cashed by defendant. The motion prayed further hearings of the cause on the issue of damages. A list of these checks compiled by plaintiff's certified auditor was appended to the motion.

In plaintiff's reply to defendant's memorandum in opposition to plaintiff's motion for summary judgment, plaintiff included excerpts from banking publications. The first of these, used by the American Institute of Banking, states that checks payable to a corporation should not be cashed or accepted for deposit in the account of an individual but should be deposited in the corporation's own account unless a corporate resolution authorizes otherwise. The other statement, promulgated by Bank Administration Institute, is that checks drawn to the order of a corporation should be accepted for deposit only to the account in that name. In rare cases it might be possible that specific written authority to cash these checks is on file and this should be considered before refusal by the bank to cash such checks.

In addition, plaintiff presented the affidavit of a person who had been active in bank management for over 40 years in the Chicago area, as president of two downtown banks and in connection with two other banks. He expressed the opinion that cashing of checks payable to a corporate customer by the bank instead of requiring them to be deposited in the corporation's account, absent a specific corporate resolution authorizing this practice, is contrary to good banking practice, is not in accordance with reasonable commercial standards, and constitutes a lack of ordinary care on behalf of the cashing bank.

In opposition to the plaintiff's motion for summary judgment, defendant presented the affidavit of Robert R. Vong, an employee of a firm of certified public accountants which was retained by defendant to examine books and records of plaintiff. At the time of his affidavit the examination had not been completed. He stated that in examining checks drawn on plaintiff's account with defendant, he had found numerous payroll checks bearing a blank rubber stamp endorsement in plaintiff's name; most of which checks bore no additional endorsement in the form of signatures or restrictive marks. He had requested copies of all financial statements made for plaintiff from January 1971 through June 1974, and was advised that John Kiers had made none. He further stated that after careful examination of plaintiff's records, he had ascertained that of 90 items alleged to be checks payable to plaintiff, totaling $15,303.12, 48 items were determined to be cash and currency received by plaintiff. The total value of those 48 items was $5,813.49.

Defendant also presented an affidavit of Louis J. Lencki, Jr., its vice-president and cashier. He stated that he was chief operating officer of defendant and was familiar with its policies, procedures and practices. He had examined checks drawn on defendant by plaintiff and those payable to plaintiff and found that certain checks bore a stamped blank endorsement which consisted solely of plaintiff's name. That stamp was selected and its use was authorized by plaintiff to facilitate the cashing of its checks at defendant bank.

He further stated that defendant will not cash a check payable to a corporate bank customer except in accordance with special arrangements made with the corporation. In such case the proceeds will be delivered to the corporation's duly authorized representative. With respect to plaintiff's accounts maintained at defendant bank, a special arrangement was in effect permitting plaintiff to cash checks in excess of the bank's $200 transaction limit at its drive-in facility. This arrangement was made at the request of a senior officer of plaintiff in July 1972.

With regard to the bank's policies concerning the cashing of payroll checks for employees of a customer, the bank would require the blank endorsement of its customer prior to charging the cashed check against the customer's account. Otherwise, the bank would not usually cash such checks for anyone but the payee of the item. Prior to the institution of the instant litigation, plaintiff never directed ...


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