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Falk v. Northern Trust Company

December 31, 2001

RALPH FALK, II, PLAINTIFF-APPELLANT
v.
THE NORTHERN TRUST COMPANY, DEFENDANT-APPELLEE



Appeal from the Circuit Court of Cook County. No. 99 CH 3958 Honorable Robert V. Boharic Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Hall

UNPUBLISHED

The plaintiff, Ralph Falk, II, filed a multi-count complaint against the defendant, The Northern Trust Company (the Bank), seeking damages and an accounting based upon the Bank's failure to investigate and alert the plaintiff to fraudulent transactions involving his accounts with the Bank.

The trial court granted the Bank's motion to dismiss the plaintiff's second amended complaint, finding that the plaintiff's action was time-barred under section 4-406(f) of the Uniform Commercial Code (UCC) (810 ILCS 5/4-406(f) (West 1992). The plaintiff filed a timely notice of appeal.

On March 27, 2000, the plaintiff filed his second amended complaint. In his complaint, the plaintiff alleged the following facts.

For over 13 years, the plaintiff employed Patricia Podmokly as his personal assistant. Her duties for the plaintiff included paying his personal bills, handling his bookkeeping, reporting to his accountants, and communicating with his investment advisors. In 1984, in order to carry out her duties, Ms. Podmokly was made a signatory on the plaintiff's demand accounts at the Bank. Ms. Podmokly held a position of a fiduciary with respect to the plaintiff, a fact which was known to the Bank.

In 1993, Ms. Podmokly began misappropriating funds from the plaintiff's accounts at the Bank for her own personal benefit. The misappropriation included drawing large amounts from the plaintiff's accounts through checks payable to cash which Ms. Podmokly used to pay her personal obligations, such as loans she had at the Bank and obligations of her business associates and friends at the Bank. Between 1993 and 1997, Ms. Podmokly misappropriated over $2,000,000 of the plaintiff's funds. According to the plaintiff, the Bank ignored clear evidence of Ms. Podmokly's misappropriation of his funds and allowed her to continue her misappropriations well into 1997. The plaintiff alleged that the Bank was placed on notice of Ms. Podmokly's misappropriation of the plaintiff's funds by the number of changes and irregularities in the plaintiff's account activity at the Bank, beginning in 1993 and continuing into 1997. In addition, in 1995, the Bank accepted an unsigned $2,000 check drawn on the plaintiff's account for payment of Ms. Podmokly's personal equity credit line at the Bank. The Bank was also placed on notice of Ms. Podmokly's misappropriations, since she maintained her own accounts at the Bank, including her mortgage and equity line of credit. Because the Bank made loans to her and in connection with those loans, reviewed her tax returns and other personal information, the Bank was aware that her income was insufficient to support the account and loan activity she was generating.

In his second amended complaint, the plaintiff requested an accounting and alleged causes of action against the Bank in negligence; under the Uniform Fiduciaries Act (the Act) (760 ILCS 65/7, 8 (West 1992)); and under the UCC (810 ILCS 5/3-101 et seq. (West 1992)).

On May 5, 2000, the Bank filed a motion to dismiss pursuant to section 2-619.1 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-619.1 (West 1998)). The Bank maintained, inter alia, that the second amended complaint should be dismissed in its entirety, pursuant to section 2-619(a)(9) of the Code (735 ILCS 5/2-219(a)(9) (West 1998)), because the plaintiff's claims are barred under the provisions of section 4-406(f) of the UCC (810 ILCS 5/4-406(f) (West 1998)) which required him to notify the Bank within one year after receiving his bank statement of any unauthorized signature or alteration or be precluded from bringing an action against the Bank based on those facts.

On May 24, 2000, the plaintiff filed his response to the Bank's motion to dismiss. The plaintiff argued that section 4-406(f) was inapplicable to his claim against the Bank because section 4-406(f) did not apply to claims based upon "actual knowledge" or "bad faith" on the part of the Bank.

On July 26, 2000, the trial court entered an order dismissing the plaintiff's second amended complaint with prejudice based upon the plaintiff's failure to comply with section 4-406(f) of the UCC. On August 15, 2000, the plaintiff filed a timely notice of appeal.

ANALYSIS

The sole issue on appeal is whether section 4-406(f) bars the plaintiff's second amended complaint.

I. Standard of Review

Section 2-619.1 of the Code permits a party to bring a combined motion for dismissal pursuant to sections 2-615 and 2-619 as a single motion, provided that the combined motion presents the bases for dismissal separately. In this case, the trial court granted that part of the motion to dismiss based upon section 2-619 of the Code. Motions to dismiss under section 2-619 of the Code are reviewed de novo. Owens v. McDermott, Will & Emery, 316 Ill. App. 3d 340, 344, 736 N.E.2d 145, 150 (2000).

For purposes of considering a section 2-619 motion, reviewing courts treat all well-pleaded facts and reasonable inferences that can be drawn from the complaint as true. Lykowski v. Bergman, 299 Ill. App. 3d 157, 164-65, 700 N.E. 2d 1064, 1070 (1998). Section 2-619(a)(9) of the Code, the specific provision relied upon by the Bank in this case, provides for involuntary dismissal of a cause of action where the claim asserted is barred by "'affirmative matter'" avoiding the legal effect of or defeating the claim. Lykowski, 299 Ill. App. 3d at 165, 700 N.E.2d at 1070 quoting 735 ILCS 5/2-619(a)(9) (West 1996). The reference to "'affirmative matter'" is said to be something in the nature of a defense that completely negates the cause of action or refutes crucial conclusions of law or conclusions of material fact contained in or inferred from the complaint. Lykowski, 299 Ill. App. 3d at 165, 700 N.E. 2d at 1070. Under section 2-619, a motion to dismiss should be granted if, after ...


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