APPEAL from the Circuit Court of Marion County; the Hon. JAMES
E. McMACKIN, JR., Judge, presiding.
MR. PRESIDING JUSTICE EBERSPACHER DELIVERED THE OPINION OF THE COURT:
This is an appeal from the judgment of the circuit court of Marion County, which held defendant, Ray Chapman, liable in the amount of $6,844.88 to the plaintiff, Salem National Bank of Salem, Illinois.
Ray Chapman, doing business as Triple R. Motor Company, maintained a checking account with Salem National Bank. As a matter of course, he would deposit checks received by him as payment for vehicles in the Salem account for collection, and write checks upon the account.
In mid-August 1976, defendant deposited a $4,240 bank draft payable through the Indiana National Bank in Indianapolis, Indiana. The item was sent for collection, was marked "void," and was dishonored.
The defendant overdrew his checking account in the amount of $6,844.88, which amount included the $4,240 due on the dishonored draft. The bank, in November 1976, brought suit to collect on the overdraft. The defendant answered, and alleged in his second amended answer the affirmative defense of failure by the bank to notify him of the dishonor in a timely manner, and sought discharge as an indorser on the $4,240 item. Defendant Chapman maintained that he was not notified of the dishonor until approximately one month after the bank received its notification. The bank, however, maintained that it notified the defendant "immediately" after it received notification.
The matter was heard by the trial court sitting without a jury, and as indicated, the court found in the bank's favor in the sum of $6,844.88 and judgment was entered in that amount against the defendant.
There are two issues presented. First, was Salem National Bank required to notify defendant of the dishonor by the Uniform Commercial Code as adopted in Illinois? And, if so, then second, did Salem National notify the defendant in a timely manner as required by statute?
The laws regulating commercial paper and bank deposits and collections in Illinois are codified in Illinois' adoption of the Uniform Commercial Code (UCC), as Ill. Rev. Stat. 1975, ch. 26, arts. 3 and 4.
Notice of dishonor was required from Salem National to defendant under the UCC (Ill. Rev. Stat. 1975, ch. 26, pars. 4-212(1) and (4)), which provides as follows:
"(1) If a collecting bank has made provisional settlement with its customer for an item and itself fails by reason of dishonor, suspension of payments by a bank or otherwise to receive a settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer's account or obtain refund from its customer whether or not it is able to return the items if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. These rights to revoke, charge-back, and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final (subsection (3) of Section 4-211 and subsections (2) and (3) of Section 4-213).
(4) The right to charge-back is not affected by
(a) prior use of the credit given for the item; or
(b) failure by any bank to exercise ordinary care with respect to the item but any bank so failing remains liable."
Plaintiff Salem Bank contends that since subsection (1) does not specifically require notice of dishonor to defendant, the bank is not required to give such notice. However, the statute does state that the bank may revoke a provisional settlement, charge-back the amount of any credit given or obtain a refund from its customer if "it returns the item or sends notification of the facts." Since the "fact" which entitles the bank to revoke the provisional settlement, and charge-back or obtain refund from the customer, is the fact of dishonor, it seems clear that the collecting bank, i.e., the ...