Appeal from the Circuit Court of Cook County. Honorable Ronald F. Bartkowicz,
The opinion of the court was delivered by: Justice Neville
JUSTICE NEVILLE delivered the opinion of the court: New Randolph Halsted Currency Exchange (New Randolph) cashed a check drawn on a bank account of Regent Title Insurance Agency (Regent). Regent stopped payment on the check. New Randolph sued Regent for payment, claiming that New Randolph qualified as a holder in due course of the check. Following a bench trial, the trial court held that New Randolph was not a holder in due course because the check-cashing transaction raised several warning signals that should have alerted New Randolph to the possibility of fraud. The court entered judgment in favor of Regent.
New Randolph also sought sanctions against Regent for its responses to requests to admit. The court imposed sanctions for one of the responses but not for others.
On New Randolph's appeal, we find that New Randolph took commercially reasonable precautions before cashing the check, and therefore it qualifies as a holder in due course, and we reverse the trial court. We also find that the trial court did not abuse its discretion by denying part of New Randolph's motion for sanctions, and we affirm the trial court. On Regent's cross-appeal,
we find that the trial court did not abuse its discretion by imposing the sanction against Regent, and we affirm the trial court. Thus, we affirm in part, reverse in part, and remand this case to the trial court.
Regent served as a settlement agent for closing real estate transactions. Regent cut checks to distribute funds to all the parties to such transactions.
On December 23, 2005, New Randolph cashed a check from Regent, made out to Charae Pearson, for $1,945.99. Four days later, New Randolph cashed another check for Pearson, again from Regent, this time for $2,500. On January 11, 2006, Pearson brought to New Randolph Regent's check number 22221, for $29,588.31. Unlike the prior checks, which spelled Pearson's name correctly, this check showed the payee as "CHAREA PAERSON." The check indicated that Pearson received it as a "LOAN PAYOFF." Pearson presented the check to Patrice Keys, manager of New Randolph. Pearson showed Keys her state identification card, which had been issued on December 30, 2005. Pearson told Keys that Regent issued the check to her to pay her a commission she earned from the sale of property.
PLS Check Cashers, which owned New Randolph, did not authorize Keys to cash checks in excess of $5,000 without approval from her supervisor. Keys contacted Sandra Arizaga of PLS. Arizaga authorized Keys to cash the check.
Police arrested Pearson on January 23, 2006, charging her with check fraud. Two days later, police arrested Tatiana Auson, an employee of Regent, on the same charge. Regent had hired Auson to work as a funder, meaning that Regent authorized Auson to cut checks for the parties to real estate transactions. According to Regent's investigator, Auson cancelled checks intended for parties to real estate transactions, then issued new checks to different payees for the amounts of the original checks. Pearson admitted that Auson gave her the three checks New Randolph cashed for Pearson. Pearson kept about $5,000 of the proceeds from the checks, and she gave the remainder to Auson. All three checks appeared to bear the signature of Karen Hendricks, who had authority to sign checks on behalf of Regent.
Regent told its bank to stop payment on the check. New Randolph sued Regent for payment of the check, claiming that its status as a holder in due course entitled it to payment, despite the evidence that Auson and Pearson conspired to defraud Regent. See 810 ILCS 5/3-302 (West 2006); First of America Bank-Northeast Illinois, N.A. v. Bocian, 245 Ill. App. 3d 495, 499 (1993).
Before the trial, New Randolph sent to Regent a request to admit certain facts, including the following:
"1. On or about January 11, 2006, Regent Title drew its check number 22221 in the amount of $29,588.31 on American Chartered Bank of Downers Grove, Illinois ...