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Meng v. Maywood Proviso State Bank

October 16, 1998

HANS MENG AND KLAUS A. WIESKE, PLAINTIFFS-APPELLANTS,
v.
MAYWOOD PROVISO STATE BANK, AND FIRST SECURITY TRUST AND SAVINGS BANK, DEFENDANTS-APPELLEES, (GREATER ILLINOIS TITLE INSURANCE COMPANY, DEFENDANT) HANS MENG AND KLAUS A. WIESKE, PLAINTIFFS-APPELLANTS,
v.
ALBANY BANK AND TRUST COMPANY, N.A., A/K/A ALBANK, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County, No. 97 L 2282; Honorable Kenneth L. Gillis, Judge Presiding. Appeal from the Circuit Court of Cook County, No. 96 L 5971; Honorable Kenneth L. Gillis, Judge Presiding.

The opinion of the court was delivered by: Justice Greiman

JUSTICE GREIMAN delivered the opinion of the court:

Plaintiffs Hans Meng and Klaus A. Wieske purchased three cashier's checks from defendant Albany Bank & Trust Company, N.A., a/k/a Albank (Albank), which subsequently were honored by three separate institutions (defendants Maywood Proviso State Bank, First Security Trust & Savings Bank, and Greater Illinois Title Insurance Company *fn1 ). Plaintiffs made two of the cashier's checks payable to John Parolin and David Kelly, who is a fictional person. The third cashier's check was payable to one of the plaintiffs, who specially indorsed it to Parolin and the fictitious Kelly. Parolin indorsed each cashier's check with his name and the name of Kelly, cashed the checks and absconded with the funds.

Plaintiffs first filed a complaint against Albank, asserting a breach of contract claim. Upon the trial court's granting summary judgment in favor of the bank, plaintiffs filed a complaint against the three institutions that separately honored the cashier's checks, which was dismissed by the trial court for failure to state a cause of action.

This consolidated appeal raises three issues: (1) whether the fictitious payee rule codified in section 3--404(b)(ii) of the Uniform Commercial Code (Code) (810 ILCS 5/3--404(b)(ii) (West 1994)) precludes plaintiffs' breach of contract claim against the bank (Albank) that issued the cashier's checks; (2) whether a cashier's check that names two payees, absent any instructions as to whether they are joint payees or alternate payees, constitutes an ambiguous instrument, which is deemed to be payable in the alternative under section 3--110(d) of the Code (810 ILCS 5/3--110(d) (West 1994)); and (3) whether plaintiffs' negligence claim against the institutions that honored the cashier's checks is precluded under section 3--404(d) of the Code (810 ILCS 5/3--404(d) (West 1994)). We answer each issue in the affirmative and, thus, affirm both orders from the trial court.

In 1995, plaintiffs wanted to purchase a building located at 712 West Diversey in Chicago, Illinois. The building was in foreclosure and a federal government agency (United States Department of Housing and Urban Development (HUD)) held the mortgage. To accomplish the purchase, plaintiffs retained John F. Parolin, an attorney who has since been disbarred. Parolin advised plaintiffs that, before HUD would consider plaintiffs as a potential purchaser, plaintiffs were required to establish a fund in the amount of the purchase price by obtaining cashier's checks. Parolin further advised plaintiffs that the cashier's checks must be made payable to himself and David L. Kelly, an alleged HUD employee who was authorized to make the sale. In fact, David L. Kelly does not, and never did, exist. David L. Kelly is a fictional person.

Plaintiffs purchased the following three cashier's checks from Albank, totaling $712,500: (1) $350,000; payable to Klaus Wieske; dated March 1, 1995; check no. 404885; (2) $125,000; payable to David L. Kelly and John Parolin; dated May 24, 1995; check no. 407067; and (3) $237,500; payable to David L. Kelly and John F. Parolin; dated June 26, 1995; check no. 410255.

Plaintiffs delivered each check to Parolin.

The first check was specially indorsed by Klaus Wieske in the following manner:

[INSERT SCAN OF CHECK ENDORSEMENT]

All three cashier's checks were cashed by Parolin at defendants Maywood Proviso State Bank (check No. 1), First Security Trust & Savings Bank (check No. 2), and Greater Illinois Title Insurance Company (check No. 3), respectively. When cashed, each check bore the signatures of both Parolin and Kelly, the fictional person. Upon presentment, Albank made payment on the three checks.

Appeal No. 1--97--3289 (Albank)

On May 24, 1996, plaintiffs filed a complaint against Albank, alleging that Albank breached a contract with plaintiffs by making payment on the cashier's checks without the endorsement of David L. Kelly. Plaintiffs alleged that the cashier's checks were issued by Albank with the agreement that the checks had to be endorsed by both Parolin and Kelly, as payees, before Albank would make payment on the checks. Plaintiffs further alleged that Kelly never endorsed the checks and that Parolin forged the endorsement of Kelly. Thus, plaintiffs contended that "the payment of the checks without the endorsement of David L. Kelly was a breach of the contract between the Plaintiffs and" Albank.

On December 9, 1996, Albank filed a motion for summary judgment, asserting that it had paid the cashier's checks in the ordinary course of business, in good faith and without knowledge that Kelly was a fictitious payee. To its motion, Albank attached an affidavit from the personnel assistant at HUD in the Chicago regional office, who attested that no one by the name of David Kelly or David L. Kelly was employed by HUD in the entire United States during the time period 1994 through 1996. Albank contended, and the trial court agreed, that the fictitious payee rule completely absolves a bank from any liability for payment over a forged endorsement.

On February 5, 1997, the trial court entered summary judgment in favor of Albank, finding that Albank was only the nominal drawer of the subject cashier's checks, that plaintiffs were the drawers of the checks, and that Albank properly paid the disputed items pursuant to the Code (810 ILCS 5/3--404(b)(ii) (West 1994)). On August 4, 1997, the trial court denied plaintiff's motion to reconsider the summary judgment for Albank.

Appeal No. 1--97--3288 (Maywood Bank)

On February 26, 1997, plaintiffs filed a complaint against the three defendant institutions that cashed the three cashier's checks, alleging that defendant institutions failed to exercise ordinary care in paying or taking the instrument under section 3--404(d) of the Code (810 ILCS 5/3--404(d) (West 1994)). Both Maywood and First Security filed section 2--615 motions to ...


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