APPEAL from the Circuit Court of Peoria County; the Hon. JAMES
D. HEIPLE, Judge, presiding.
MR. JUSTICE SCOTT DELIVERED THE OPINION OF THE COURT:
On April 11, 1972, Michael L. Field and Richard M. Shure opened a checking account in the Madison Park Bank in the name of Fieldmoor Associates, a partnership. Fieldmoor Associates was owned by seven partners and on the day the checking account was opened written instructions were given to the bank that one signature only was required on checks up to $500 but two signatures were required on checks over $500.
On February 27, 1974, the bank accepted for payment a check in the amount of $9,000 payable to Michael L. Field & Co., dated February 23, 1974, drawn on the Fieldmoor account and signed by Michael L. Field only. Michael L. Field was a partner in Fieldmoor Associates and he converted the proceeds from the $9,000 check to his personal use.
The bank prepared monthly statements and after May 1972, the statements were sent to Fieldmoor Associates, Michael L. Field, at an address in Northfield, Illinois. The check in question and statement of account were mailed to this address on February 28, 1974.
A dispute arose between the partners of Fieldmoor Associates and for that and other reasons not material to this appeal the Madison Park Bank filed a complaint for interpleader naming the partners in Fieldmoor Associates as defendants. This and related litigation led to the discovery of the check in question, the date being May 15, 1975. An action was brought by certain partners of Fieldmoor Associates as counterplaintiffs against the bank for damages arising out of the payment of the $9,000 check since it was signed by only one instead of two counter signatures. On an agreed statement of facts, and without trial by jury, the circuit court of Peoria County awarded the counterplaintiffs a judgment for $9,000 and this appeal ensued.
The first issue presented in this appeal is whether section 4-406 of the Uniform Commercial Code (Ill. Rev. Stat. 1973, ch. 26, par. 4-406) bars a recovery by the counterplaintiffs for the bank's breach of their contract of deposit. The section provides as follows:
"§ 4-406. Customer's Duty to Discover and Report Unauthorized Signature or Alteration.
(1) When a bank sends to its customer a statement of account accompanied by items paid in good faith in support of the debit entries or holds the statement and items pursuant to a request or instructions of its customer or otherwise in a reasonable manner makes the statement and items available to the customer, the customer must exercise reasonable care and promptness to examine the statement and items to discover his unauthorized signature or any alteration on an item and must notify the bank promptly after discovery thereof.
(2) If the bank establishes that the customer failed with respect to an item to comply with the duties imposed on the customer by subsection (1) the customer is precluded from asserting against the bank
(a) his unauthorized signature or any alteration on the item if the bank also establishes that it suffered a loss by reason of such failure; and
(b) an unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank after the first item and statement was available to the customer for a reasonable period not exceeding 14 calendar days and before the bank receives notification from the customer of any such unauthorized signature or alteration.
(3) The preclusion under subsection (2) does not apply if the customer establishes lack of ordinary care on the part of the bank in paying the item(s).
(4) Without regard to care or lack of care of either the customer or the bank a customer who does not within one year from the time the statement and items are made available to the customer (subsection (1)) discover and report his unauthorized signature or any alteration on the face or back of the item or does not within 3 years from that time discover and report any unauthorized endorsement is precluded from asserting against the bank such unauthorized signature or endorsement or such alteration." Ill. Rev. Stat. 1973, ch. 26, par. 4-406.
• 1 We are of the opinion that the bank cannot utilize the provisions of section 4-406(4) as a defense to the claim of the counterplaintiffs since the absence of one or more authorized signatures on a check does not constitute an "unauthorized signature" within the meaning of the section. Section 4-406(4) (Ill. Rev. Stat. 1973, ch. 26, par. 4-406(4)) is inapplicable because it is only concerned with unauthorized signatures and alterations. An unauthorized signature or endorsement means one made without actual, implied or apparent authority and includes a forgery. (See Ill. Rev. Stat. 1973, ch. 26, par. 1-201(43).) The signature of Michael L. Field which appeared on the check in question was an authorized one. The check was not properly payable because of an ...