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Dixon, Laukitis and Downing, P.C. v. Bank

Court of Appeals of Illinois, Third District

July 31, 2013

DIXON, LAUKITIS AND DOWNING, P.C., Plaintiff-Appellant,
BUSEY BANK, Defendant-Appellee.

Appeal from the Circuit Court of the 10th Judicial Circuit, Peoria County, Illinois, Appeal No. 3-12-0832 Circuit No. 12-L-8 Honorable David J. Dubicki, Judge, Presiding.

JUSTICE O'BRIEN delivered the judgment of the court, with opinion. Justices Carter and McDade concurred in the judgment and opinion.



¶ 1 Plaintiff Dixon, Laukitis, & Downing, P.C. (DLD) filed this negligence action against defendant Busey Bank, alleging that Busey breached a duty of ordinary care it owed DLD regarding a fraudulent check DLD deposited and drew against, which was later determined to be uncollectible. The trial court dismissed the complaint on Busey's motion and DLD appealed. We affirm.


¶ 3 Plaintiff Dixon, Laukitis & Downing, P.C. is a law firm that maintained its client trust account at defendant Busey Bank. On May 25, 2011, DLD deposited into its trust account a check from one of its clients in the amount of $350, 000. The check was drawn on the account of Intact Insurance Company at Royal Bank of Canada in Toronto, Ontario. The check was marked, "US Funds" and "This Cheque contains a true security watermark – hold at an angle to view." On June 6, 2011, DLD transferred $210, 000 from its trust account to the client who provided the $350, 000 check. On June 8, 2011, DLD transferred $60, 000 from the trust account to the client. On June 10, 2011, the check was returned to Busey uncollected, and Busey notified DLD and charged back $350, 000 to DLD's account the same day.

¶ 4 DLD filed a complaint sounding in negligence in January 2012. After the complaint was dismissed without prejudice for failure to state a claim (735 ILCS 5/2-615 (West 2010)), DLD filed an amended complaint in April 2012. In its amended complaint, DLD alleged that Busey owed it "a duty to act with ordinary care by observing such reasonable commercial standards as prevail in the area where the Bank conducts business" and that the Bank breached its duty by failing to inquire as to the circumstances of how DLD acquired the check; to recognize the check as counterfeit and inform DLD; to advise DLD that funds should not be withdrawn until final payment given the nature of the check and the account; and to notify DLD at the "earliest time it knew or should have known that the Check would not be paid by the drawee bank."

¶ 5 Busey filed a motion to dismiss under section 2-619.1 of the Code of Civil Procedure (Civil Code) (735 ILCS 5/2-619.1 (West 2010)), arguing that dismissal was proper under section 2-615 (735 ILCS 5/2-615 (West 2010)) based on the insufficiency of facts to support a negligence claim and under section 2-619 (735 ILCS 5/2-619 (West 2010)) on the basis that the Moorman doctrine precluded recovery. See Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69 (1982). Attached to its motion to dismiss was the account agreement DLD executed with Busey when the law firm established the client trust account. The agreement provided that it was subject to all applicable state and federal laws, except where varied in the agreement, and that the account holders "agree to be jointly and severally (individually) liable for any account shortage resulting from charges or overdrafts." The agreement further stated, in pertinent part: "DEPOSITS – We will give only provisional credit until collection is final for any items, other than cash, we accept for deposit (including items drawn 'on us')." Also attached to Busey's motion to dismiss was the affidavit of Daniel Daly, executive vice president/market president of Busey Bank. He attested "[t]here was nothing on the face of this Check that gave any indication that it may not be genuine or that it may be dishonored"; the check complied with the requirements for a negotiable instrument under section 3-104 of the Uniform Commercial Code (UCC) (810 ILCS 5/3-104 (West 2010)); the Bank provided written and oral notice to DLD on June 10, 2011, the same day the Bank was informed the check was uncollectible; and the Bank charged back $350, 000 against DLD's account per the account agreement.

¶ 6 A hearing took place on the Bank's motion to dismiss and the trial court issued a verbal ruling granting the motion. Thereafter, the trial court issued a written order granting the section 2-615 motion to dismiss and declining to address the section 2-619 motion to dismiss. The trial court stated the motion to dismiss was granted "for all the reasons stated by the Court in its verbal Ruling from the Bench." The record on appeal does not contain a transcript from the hearing. The trial court also issued a supplemental order in which it found that Busey did not owe DLD a duty under the common law because the UCC provides a comprehensive remedy for check processing which places the risk of loss on the depositor until final collection. In a supplemental order, the trial court also held that DLD's complaint was barred under the Moorman doctrine. DLD appealed.


¶ 8 The issue on appeal is whether the trial court erred when it granted Busey's motion to dismiss DLD's negligence complaint. DLD argues that it alleged facts satisfying each element of a negligence action and dismissal of its complaint should be reversed. According to DLD, Busey owed it a duty of ordinary care under the common law and the UCC, breached its duty, and caused DLD damages. DLD argues that issues of fact as to whether Busey acted consistent with reasonable commercial standards in the local area exist and preclude judgment on the pleadings. Lastly, DLD submits that the UCC does not supplant Busey's common law duty of ordinary care and that the Moorman doctrine does not preclude its negligence action against Busey.

¶ 9 A section 2-619.1 (735 ILCS 5/2-619.1 (West 2010)) motion to dismiss is a hybrid motion combining grounds for dismissal under sections 2-615 and 2-619 (735 ILCS 5/2-615, 619 (West 2010)). A section 2-615 motion admits all well-pleaded facts and attacks the legal sufficiency of the complaint. Seip v. Rogers Raw Materials Fund, L.P., 408 Ill.App.3d 434, 438 (2011). A section 2-615 dismissal is proper where it is apparent the plaintiff cannot prove any set of facts entitling him to relief. Seip, 408 Ill.App.3d at 438. Under section 2-615, the test is " 'whether the allegations of the complaint, when viewed in a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief can be granted.' " Seip, 408 Ill.App.3d at 438 (quoting Canel v. Topinka, 212 Ill.2d 311, 317 (2004)). A section 2-619 motion admits the legal sufficiency of the complaint and asserts affirmative matters defeating the claims. Seip, 408 Ill.App.3d at 438. The test on review of a dismissal under section 2-619 is "whether a genuine issue of material fact exists and whether the defendant is entitled to a judgment as a matter of law." Seip, 408 Ill.App.3d at 438. When considering a dismissal under either section 2-615 or section 2-619, the reviewing court must accept as true all well-pleaded facts as well as all reasonable inferences arising from the facts. Zahl v. Krupa, 365 Ill.App.3d 653, 658 (2006). Our review is de novo. Zahl, 365 Ill.App.3d at 658.

¶ 10 To sustain a negligence action, the plaintiff must establish that the defendant owed it a duty, the defendant breached its duty, and the plaintiff was damaged as a result of the breach. Ward v. K Mart Corp., 136 Ill.2d 132, 140 (1990). The existence of a duty is a question of law to be determined by the trial court. Ward, 136 Ill.2d at 140. The UCC governs the relationship between a bank and its customer. Napleton v. Great Lakes Bank, N.A., 408 Ill.App.3d 448, 451 (2011). The principles of law and equity supplement the UCC unless they are displaced by a particular provision in the UCC. 810 ILCS 5/1-103(b) (West 2010). Article 4 of the UCC governs bank deposits and collections. 810 ILCS 5/4-101 et seq. (West 2010). It sets forth a bank's general duty to exercise ordinary care and states that "action or non-action approved by this Article is the exercise of ordinary care and, in the absence of special instructions, action or non-action consistent with a general banking usage not disapproved by this Article, is prima facie the exercise of ordinary care." 810 ILCS 5/4-103© (West 2010).

ΒΆ 11 A bank that takes an item is a "Depository Bank" and a bank that handles an item for collection and is not a drawee of the draft is a "Collecting Bank." 810 ILCS 5/4-105 (West 2010). A collecting bank acts as an agent of an item's owner until final settlement of the item and "any settlement given for the item is provisional." 810 ILCS 5/4-201(a) (West 2010). In addition, a collecting bank has a superior right over the ...

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