instruments subject to Articles 3 and 4." Farmers and Merchants State Bank, 841 F.2d at 1440. Similarly, the Third Circuit, in TPO, explained its view that a cashier's check "is equivalent to a negotiable promissory note of a bank . . . . not the same as cash as has been loosely asserted." TPO, 487 F.2d at 136.
The rejection by the non-Illinois courts of the "acceptance" and "cash equivalency" treatment of cashier's checks leads directly to their recognition of a bank's ability to stop payment in the case of fraud. Having concluded that issuance of a cashier's check is not acceptance under § 4-403 and that a cashier's check is not necessarily equivalent to cash, the courts, not applying Illinois law, were free to analyze the check as they would any other negotiable instrument, in terms of whether the plaintiff seeking payment was a holder in due course. If the plaintiff in a wrongful dishonor action is guilty of fraud, he would not be a holder in due course. Consequently, under § 3-306, the bank would be entitled to present all defenses which would be available on a simple contract such as lack of consideration or fraud. Farmers & Merchants State Bank, 841 F.2d at 1442; TPO, 487 F.2d at 136.
The holding and reasoning of Able & Associates clearly indicates that Illinois courts have adopted the § 4-303 acceptance and cash equivalency method of analyzing cashier's checks, not the holder in due course analysis exhibited in the cases cited by Northern. Indeed, the Illinois Appellate Court, in Able & Associates, explicitly considered and rejected the approach taken by the Third Circuit in TPO.
Able & Associates, 77 Ill. App. 3d at 380-82, 32 Ill. Dec. at 759-60. This court cannot accept Northern's attempt to avail itself of the defenses to dishonor provided by the Third and Ninth Circuit's interpretations of the UCC because Illinois law, which applies in this case, contradicts the theory of cashier's checks upon which they, and Northern, rely.
As a consequence of the application of Illinois law to the subject of cashier's checks, Northern, under § 4-303, can raise no excuse "whether or not effective under other rules of law" justifying its refusal to pay.
The proper context for Northern's arguments regarding Bank One's alleged bad faith is its counterclaim rather than as a defense to Bank One's action for wrongful dishonor. Unfortunately for Northern in this case, its claim concerning the underlying transaction is not yet ready for judgment.
Northern therefore must honor its cashier's check and seek to recover the funds in the hands of Bank One, just as it would have to do if it had paid cash. Under Illinois law, Northern assumed the risk of having to pursue litigation to recover improperly paid funds when it issued the cashier's check. This result, which is dictated by Illinois law, serves the interest of preserving the free negotiability of cashier's checks while at the same time affording Northern the opportunity to remedy what it views as a wrong.
For the foregoing reasons, plaintiff's motion for partial summary judgment is GRANTED. The parties are urged to discuss settlement. The case is set for status on October 23, 1991 at 10 a.m.