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Tomaso v. Plum Grove Bank

OPINION FILED JANUARY 10, 1985.

DONALD J. TOMASO ET AL., PLAINTIFF-APPELLEE AND CROSS-APPELLANT,

v.

PLUM GROVE BANK, DEFENDANT-APPELLANT AND CROSS-APPELLEE.



Appeal from the Circuit Court of Cook County; the Hon. Benjamin Nelson, Judge, presiding.

JUSTICE LINN DELIVERED THE OPINION OF THE COURT:

Plaintiff, Donald Tomaso, brought suit in the circuit court of Cook County claiming that the defendant Plum Grove Bank (the bank) wrongfully withheld two cashier's checks, one in the amount of $130,000 and the other in the amount of $50,000, belonging to plaintiff. Following a bench trial, the court awarded plaintiff judgment in the amount of $180,000 but denied his claim for prejudgment interest. This appeal and cross-appeal followed.

On appeal, the bank maintains (1) that the entry of judgment by the trial court is against the manifest weight of the evidence; (2) that the trial court was without jurisdiction to decide this dispute because certain necessary and indispensable parties were not included as parties defendant; and (3) that the trial court erred in refusing to admit evidence of setoffs against plaintiff's claims. On cross-appeal, plaintiff claims that the trial court erred in denying prejudgment interest on the judgment award.

We affirm in part, reverse in part and remand.

BACKGROUND

The circumstances which led to this litigation concerned the purchase by plaintiff of a 50% interest in a Colorado gold mine known as L. & M. Oro II. Plaintiff testified that he learned of the possibility of purchasing the gold mine interest in October of 1978 through his friend, Sheldon Moss. There were several telephone calls and meetings that month between plaintiff, Moss, and plaintiff's brother, David Tomaso, who was president of the Plum Grove Bank at that time. Plaintiff told David about the gold mine deal and stated that five letters of credit totaling $355,000 would be needed to effectuate the purchase. Plaintiff also told David that for bringing the deal to him and for acting as his agent, Moss would receive 10% of whatever interest plaintiff acquired in the venture. David told plaintiff that the bank could issue the necessary letters of credit, but that the bank would require collateral.

Early in November of 1978, plaintiff wire-transferred $355,000 from an account at the American National Bank to the account of Northeast Illinois Financial Corporation (NIFC) at the Plum Grove Bank to use as collateral in connection with the bank's issuance of the letters of credit. NIFC was a corporation owned by plaintiff, and plaintiff was a signatory on the NIFC account at the bank. Moss had no interest in the NIFC account.

After being informed of the wire transfer, David told plaintiff that written authorization was needed for the bank to withdraw the money from the NIFC account to use as collateral for the letters of credit. David prepared the written authorization, and plaintiff signed it on November 3, 1978. The authorization stated that the $355,000 was to be issued to Moss in five cashier's checks and these checks were to be used as collateral for each letter of credit that was issued. The five cashier's checks were issued with Moss as payee, showing NIFC as the remitter. Moss endorsed the five checks in blank and signed the applications for each letter of credit.

The applications for the letters of credit were obtained by David from the Mount Prospect State Bank, Plum Grove Bank's correspondent. David later testified that he followed his corresponding bank's instructions in filling out the applications and in issuing the letters of credit. Among the terms on the blank application forms was a provision which pledged all the property of the applicant held by the bank, both as security for the letters of credit and for any other liabilities of the applicant to the bank. At the time the letters of credit were issued, Moss had outstanding certain loan accounts at the bank.

Five letters of credit were issued for various amounts to four individuals and to L. & M. Oro II, Inc. The letters of credit showed Moss as the account party. Each letter of credit had an expiration date of March 15, 1979. Nowhere on the letters of credit, the letter of credit applications, or on the cashier's checks did plaintiff's name appear. However, both plaintiff and David testified that David was aware from the beginning that Moss was acting as plaintiff's agent, that the cashier's checks were to be used for the sole purpose of securing the letters of credit, and that the cashier's checks belonged to plaintiff and were to be returned to him if the letters of credit were not presented to the bank before their expiration date.

David also testified that he had told others at the bank about the nature of the transaction. He could not, however, recall whom he told or when he told them. David also recalled mentioning, in written reports to the bank's directors, the fact of plaintiff's involvement in the transaction. At trial, these reports were not offered as evidence by either plaintiff or the bank. David was certain that he told Richard Erler, an officer of the bank, about plaintiff's interest and financial involvement in the transaction. Erler, however, testified that he was aware only of the fact that the bank was holding $355,000 in cashier's checks made out to Sheldon Moss.

Sometime early in 1979, the gold mine deal began to fall apart. Plaintiff asserted that, after learning of the gold mine deal from Moss, he negotiated the purchase arrangements with Larry Moore, a principal in the corporation which owned the gold mine. In return for the $355,000, Moore was to transfer to plaintiff stock certificates in the gold mine corporation. However, in January of 1979, plaintiff had not received the stock. In an effort to halt the transaction, plaintiff contacted David at the bank and asked him to stop payment on the letters of credit. David told plaintiff that the letters of credit were irrevocable and if properly presented, the bank would have to pay out. David further told plaintiff that if the letters were not presented by their expiration date, the bank would need something in writing from plaintiff in order to return the cashier's checks to him.

Shortly thereafter, David left his employment at the bank for unexplained reasons. Plaintiff contacted his attorney, Richard Cochran, to protect his interests at the bank after his brother's departure. Cochran testified that he contacted Milton Perlman, the acting president of the bank, concerning plaintiff's predicament. Perlman told Cochran that the bank had nothing on file indicating that plaintiff had any interest in the cashier's checks securing the letters of credit. Perlman requested that Cochran send the bank an assignment of all of Moss' interest in the cashier's checks so that the bank would have a clear record of plaintiff's ownership. After Cochran explained to Moss why the assignment was necessary, Moss assigned all his interest in the cashier's checks to plaintiff. The written assignment was then sent to Perlman.

Three of the five letters of credit were properly presented to the bank and were paid. A fourth letter of credit was never presented. However, the $50,000 cashier's check securing that particular letter of credit was not returned to plaintiff; rather, the bank cashed it to apply against Moss' other obligations at the bank.

The fifth letter of credit was presented to the bank, but was denied payment because the bank claimed the tender was improper in form, not having the required documentation. The $130,000 cashier's check securing the fifth letter of credit was cashed by the bank sometime in early 1981 and was applied to Moss' other obligations to the bank.

The evidence presented at trial also showed that two other lawsuits resulted from the transaction here at issue. Plaintiff brought suit in Colorado against Larry Moore and L. & M. Oro II, Inc., based on the failed transaction. This litigation was eventually settled. Additionally, the holder of the letter of credit on which the bank had denied payment instituted litigation against the bank in Colorado to enforce payment of the letter of credit. This suit was later dismissed by the Colorado courts based on lack of jurisdiction over the bank. There was also evidence that Sheldon Moss independently invested in the gold mine transaction.

Plaintiff's action against the bank, filed in the circuit court of Cook County, sought the return of the two cashier's checks which had been applied to Moss' other personal obligations to the bank. As noted, following a bench trial, the trial court awarded plaintiff $180,000, representing the issue amount of the two cashier's checks, and ...


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