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Euro Motors Inc. v. Southwest Financial Bank and Trust Co.

June 01, 1998

EURO MOTORS, INC., PLAINTIFF-APPELLANT,
v.
SOUTHWEST FINANCIAL BANK AND TRUST COMPANY, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County 97 L 127 Honorable Sheldon Gardner, Judge Presiding.

The opinion of the court was delivered by: Justice O'mara Frossard

In this action for breach of contract and conversion, plaintiff Euro Motors, Inc. (Euro Motors), filed a complaint against defendant Southwest Financial Bank and Trust Company (Southwest) following Southwest's wrongful payment of two checks having unauthorized signatures. Both parties filed motions for summary judgment in December of 1994. Southwest's motion asserted that Euro Motors did not timely notify Southwest of the unauthorized signatures as required by statute and that Euro Motors "ratified" the subject checks by accepting benefits therefrom. The trial court granted Southwest's motion, and Euro Motors appeals from this grant of summary judgment.

At the center of this appeal is whether section 4-406(f) of the Illinois Uniform Commercial Code (UCC) acts to bar Euro Motors' claim against Southwest. 810 ILCS 5/4-406(f)(West 1994). More specifically, the question is whether the one-year time limitation in section 4-406(f) *fn1 acts as a statute of limitations, which can be tolled, or a statutory prerequisite to suit, which must be met before a claim based on an unauthorized or altered signature may proceed. This issue is a matter of first impression in Illinois.

FACTS

The facts in this case are basically undisputed. In December 1993, Euro Motors opened a commercial checking account at defendant bank, Southwest. The account required two signatures for any check drawn for an amount over $30,000. Three of the officers of Euro Motors, F. James Wolff (Wolff), Lillian Krilich and Aspasia Krilich, were the authorized signatories on the account.

In January 1994, Southwest paid check number 5010 in the amount of $36,300 drawn on Euro Motors' account. The check had only one signature, that of Euro Motors' acting president, Wolff. Southwest provided Euro Motors with the cancelled check and the account statement at the beginning of February, but Euro Motors did not notify Southwest of the missing signature or protest payment of the check.

In March 1994, Southwest paid check number 5182 in the amount of $30,500 drawn on Euro Motor's account, and again the check had only Wolff's signature. Though Southwest again provided Euro Motors with the cancelled check and account statement, the bank received no notification of any problems with the check.

Euro Motors asserts that in March of 1995, Wolff was removed from his position as president of Euro Motors after it was discovered he was "grossly mismanaging" the business. It was not until a subsequent review of the company's financial records was conducted that the wrongful payment of check numbers 5010 and 5182 were discovered. Euro Motors filed this suit on January 4, 1996, to recover the face value of the checks.

Euro Motors claims it could not have discovered the unauthorized signatures earlier, as Wolff had control of the financial documents that indicated the unauthorized payments. Euro Motors further argues that section 4-406(f) of the UCC is properly considered a statute of limitations and should not have begun to run until the unauthorized payments were discovered by the rest of the corporation. Southwest contends that Euro Motors' action is time barred by section 4-406(f), which is not a statute of limitations but, rather, a statute of repose that cannot be tolled. The trial court agreed that section 4-406(f) barred Euro Motors' claims for wrongful payment of check numbers 5010 and 5182, and granted summary judgment to Southwest on this basis. It is from this order that Euro Motors appeals.

ANALYSIS

I.

The appellate review of a grant of summary judgment is de novo. USG Corp v. Sterling Plumbing Group, Inc., 247 Ill. App. 3d 316, 318, 617 N.E.2d 69 (1993). Summary judgment is proper only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1994). The function of the appellate court in reviewing the grant of summary judgment is not to decide disputed issues of fact but rather to determine whether a factual dispute exists. Kerr v. Illinois Central R.R. Co., 283 Ill. App. 3d 574, 583, 670 N.E.2d 759 (1996). The court must construe the evidence strictly against the movant and liberally in favor of the opponent. Quality Lighting, Inc. v. Benjamin, 227 Ill. App. 3d 880, 883, 592 N.E.2d 377 (1992); Zekman v. Direct American Marketers, Inc., 286 Ill. App. 3d 462, 467, 675 N.E.2d 994 (1997).

The focus of this appeal is whether Euro Motors' cause of action against Southwest is time barred by section ...


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