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05/08/89 Donald Hayner Et Al., v. Theresa Fox Et Al.

May 8, 1989

DONALD HAYNER ET AL., PLAINTIFFS-APPELLEES

v.

THERESA FOX ET AL., DEFENDANTS-APPELLEES (CONNECTICUT NATIONAL BANK, F/K/A HARTFORD NATIONAL BANK, ET AL., THIRD-PARTY PLAINTIFFS-APPELLEES; LASH, WARNER



Before revealing the outcome of our search for other provisions in the Code, we need to expound on the parties' dispute in this case. Connecticut/Ravenswood argues that Lash, Warner confuses the concept of transfer with negotiation when it contends that its signature constituted merely a relinquishment of its rights as opposed to a transfer of an instrument. We understand this argument to be that the distinction between transfer and negotiation is that a transfer is the relinquishment of any interest in an instrument, whereas a negotiation conveys an entire instrument.

APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION

& Associates, Third-Party, Defendant-Appellant)

542 N.E.2d 1134, 182 Ill. App. 3d 989, 134 Ill. Dec. 627 1989.IL.688

Appeal from the Circuit Court of Cook County; the Hon. Thomas J. O'Brien, Judge, presiding.

APPELLATE Judges:

JUSTICE BUCKLEY delivered the opinion of the court. CAMPBELL and O'CONNOR, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE BUCKLEY

Connecticut National Bank (Connecticut) and the Bank of Ravenswood (Ravenswood) brought this third-party action, arising from a judgment entered against them for accepting and paying a draft with forged indorsements, against Lash, Warner & Associates (Lash, Warner), a copayee and subsequent indorser of the forged instrument. The circuit court, on cross-summary judgment motions, entered judgment in favor of Connecticut/Ravenswood in the amount of $32,534. Lash, Warner appeals from these orders, contending that the circuit court erred in finding that it had created statutory warranties of good title and authenticity of prior endorsements pursuant to the Uniform Commercial Code (the Code) (Ill. Rev. Stat. 1987, ch. 26, pars. 3-417(1)(a), (2)(a), (2)(b)).

We reverse and remand this case to the circuit court with instructions to enter summary judgment in favor of Lash, Warner.

This controversy arose from a $32,534 insurance check issued to six payees in settlement of a fire damage claim for real estate. The sequence of the payee endorsements occurred as follows. The check was first indorsed by Pioneer Bank & Trust Company, which was the land trustee, and First Federal Savings & Loan to the order of Donald Hayner and Andrew Van Styn, the contract sellers. The contract purchaser, Theresa Fox, in possession of the check with the signatures of the two banks and Hayner and Van Styn appearing on the check, then gave the check to Lash, Warner, the public adjustor who negotiated settlement. Lash, Warner indorsed the check in exchange for Fox' check for $4,706.25 as payment for its services as adjustor. The final payee indorsement was made by Fox when she presented the check for payment to Ravenswood, which, in turn, forwarded the check to Connecticut for final payment.

Hayner and Van Styn then brought an action against Fox, Pioneer Bank & Trust Company, Ravenswood, and Connecticut alleging that their indorsements had been forged and that Ravenswood and Connecticut had converted the check. Judgment was entered in favor of Hayner and Van Styn in the full amount of the check. Connecticut/Ravenswood *fn1 then filed this third-party complaint now on appeal against Lash, Warner, alleging that Lash, Warner had breached its warranties under the Code. Lash, Warner denied in its answer that it breached any warranties to Connecticut/Ravenswood, but it admitted in response to discovery that at the time it indorsed the check, Hayner's and Van Styn's indorsements appeared on the check. Lash, Warner also admitted that it had indorsed the check and returned it to Fox in exchange for payment for its services in the amount of $4,706.25.

The facts of this case being undisputed, we determine whether Lash, Warner created, as a matter of law, statutory warranties under the Code.

The Code's warranty provisions in issue here are section 3 -- 417(1)'s warranty of good title and section 3 -- 417(2)'s warranties of good title and that all prior signatures are genuine or authorized. The precise question presented for our review is whether these warranties are triggered where a payee indorses a check in exchange for a copayee's payment for services rendered, such endorsement being made after the forged signature of another payee but before all necessary signatures appear on the check. As the parties have conceded in oral argument that no Illinois cases have addressed the effect of these warranties on this factual scenario and as we have not ...


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