Kidney Cancer Ass'n v. North Shore Comm.

• Decision Date: 23 April 2007
• Docket Number: No. 1-06-1721.,1-06-1721.
• Citation: 869 N.E.2d 186
• Parties: The KIDNEY CANCER ASSOCIATION, an Illinois Not-For-Profit Corporation, Plaintiff-Appellant, v. NORTH SHORE COMMUNITY BANK AND TRUST COMPANY, an Illinois Corporation, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

869 N.E.2d 186

The KIDNEY CANCER ASSOCIATION, an Illinois Not-For-Profit Corporation, Plaintiff-Appellant, v. NORTH SHORE COMMUNITY BANK AND TRUST COMPANY, an Illinois Corporation, Defendant-Appellee.

No. 1-06-1721.

Appellate Court of Illinois, First District, First Division.

April 23, 2007.

Cozen O'Connor, PC, Chicago (Kevin P. Caraher, of counsel), for Appellant.

Greenberg, Traurig, LLP, Chicago (Paul T. Fox, Gregory E. Ostfeld, of counsel), for Appellee.

Justice GARCIA delivered the opinion of the court:

This is a permissive interlocutory appeal brought pursuant to Supreme Court Rule 308 (155 Ill.2d R. 308). The two certified questions before us are:

(1) Whether a series of conversions of negotiable instruments over time can constitute a continuing violation within the meaning of the Illinois Supreme Court's decision in Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill.2d 325, 264 Ill.Dec. 283, 770 N.E.2d 177 (2002), for the purpose of determining when the statute of limitations runs; see also Rodrigue v. Olin Employees Credit Union, 406 F.3d 434 (7th Cir.2005); and

(2) Whether the "discovery rule" applies to a series of conversions of negotiable instruments over time for the purpose of determining when the statute of limitations runs.

For the reasons that follow, we answer both questions in the negative.

BACKGROUND

In October 2005, the plaintiff, Kidney Cancer Association, sued the defendant, North Shore Community Bank & Trust Company, for negligence and conversion. The verified complaint alleged that in July 1997, the Bank permitted Carl F. Dixon, the executive director of the Kidney Cancer Association, to open a savings account in the Association's name. The plaintiff asserted that Dixon lacked authority to open such an account. Between July 1997 and December 2002, Dixon deposited more than $330,000 worth of donation checks made payable to the Association into that account. During that time, Dixon withdrew, for cash, all of the deposited donations less 54 cents. Dixon purportedly made the withdraws in his name, not in the name of the Association, using nonnegotiable savings account withdrawal slips.

The plaintiff asserted that the Bank acted in a commercially unreasonable manner in permitting Dixon to open the account and withdraw the funds because the Bank: (1) failed to ensure the Association had authorized Dixon to open the account; (2) failed to verify the accuracy of the documents Dixon supplied to the Bank when he opened the account; (3) sent the account statements to Dixon's personal post office box rather than to the Association; and (4) permitted Dixon to withdraw the deposited funds for cash. Because the Bank did not verify Dixon's authority to open the account and because Dixon lacked that authority, the Bank's control and possession of the checks made payable to the Association and deposited in that account were unauthorized and wrongful. Specifically, the plaintiff alleged, "The Bank wrongfully and in an unauthorized manner controlled and possessed the Association's funds because it allowed donation checks made payable to the Association to be deposited into the Savings Account without its consent."

The Bank moved to dismiss the complaint pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2004)). In March 2006, the trial court granted the Bank's motion. The court dismissed the negligence count without prejudice, finding that the defendant failed to state a cause of action under the Moorman doctrine (Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982)). As to the conversion count, the court dismissed it with prejudice, finding that the action was time-barred in that it was filed after the three-year statute of limitations for conversion had run. The court cited Belleville Toyota and Rodrigue to support its finding that the conversion was not a single, continuing violation but that each withdrawal supported a separate cause of action.

The plaintiff filed a motion, asking the trial court to certify its holding for immediate appeal under Supreme Court Rule 308 (155 Ill.2d R. 308). In June 2006, the court entered an order certifying the questions set out above. In July 2006, this court granted this interlocutory appeal.

ANALYSIS

"An instrument is * * * converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment." 810 ILCS 5/3-420(a) (West 2004). Section 3-118 of the Illinois Uniform Commercial Code (UCC) provides that an action for conversion must be commenced within three years after the cause of action accrues. 810 ILCS 5/3-118(g) (West 2004). Although the plaintiff contends that the three-year statute of limitations does not apply to its "common-law conversion claim," the plaintiff did not raise that argument in its Rule 308 motion and it was not certified by the trial court. That issue, therefore, is not properly before this court. See Chicago Hospital Risk Pooling Program v. Illinois State Medical Inter-Insurance Exchange, 325 Ill.App.3d 970, 977, 259 Ill.Dec. 230, 758 N.E.2d 353 (2001) ("The scope of our review pursuant to Supreme Court Rule 308 (155 Ill.2d R. 308) is strictly limited to the questions certified by the trial court"). Nevertheless, we are aware of only one case that holds that the statute of limitations period for conversion of a negotiable instrument is other than three years as set forth in section 3-118 of the UCC. That case is Field v. First National Bank of Harrisburg, 249 Ill.App.3d 822, 189 Ill.Dec. 247, 619 N.E.2d 1296 (1993), upon which the plaintiff relies for its continuing violation theory and which we decline to follow as explained below.

I. Continuing Violation

"Generally, a limitations period begins to run when facts exist that authorize one party to maintain an action against another. [Citations.] However, under the `continuing tort' or `continuing violation' rule, `where a tort involves a continuing or repeated injury, the limitations period does not begin to run until the date of the last injury or the date the tortious acts cease.' [Citations.]" Feltmeier v. Feltmeier, 207 Ill.2d 263, 278, 278 Ill.Dec. 228, 798 N.E.2d 75 (2003).

The plaintiff cites Field and Haddad's of Illinois v. Credit Union 1 Credit Union, 286 Ill.App.3d 1069, 222 Ill.Dec. 710, 678 N.E.2d 322 (1997), to support its claim that the series of conversions, carried out from July 1997 through November 2002, were part of a continuing scheme or plan.

In Field, the plaintiff sought to recover funds that were improperly obtained by his sister from January 1980 through March 1984. The plaintiff alleged that his sister deposited their father's pension checks, which were endorsed by their father but restricted by the words "For Deposit Only," into her personal account, and that she drew on that account for her personal needs. Field, 249 Ill.App.3d at 823-24, 189 Ill.Dec. 247, 619 N.E.2d 1296. The trial court granted the defendant bank's motion for summary judgment on the conversion count, finding that it was barred by the applicable statute of limitations.

On appeal, the plaintiff argued that, for the purposes of the statute of limitations, the alleged course of conduct was one continuing transaction, not numerous separate transactions. Field, 249 Ill.App.3d at 824-25, 189 Ill.Dec. 247, 619 N.E.2d 1296. The plaintiff argued that because the deposits were made on a monthly basis, in the same manner, to the same accounts over a four-year period, this evidenced an ongoing "scheme, plan, conspiracy or the like." Field, 249 Ill.App.3d at 825, 189 Ill.Dec. 247, 619 N.E.2d 1296. The Field court agreed with the plaintiff, explaining that although it was "unable to find any cases in which a series of checks cashed is said to constitute a single transaction for purposes of the running of the statute of limitations," because the plaintiff alleged a tort that involved a "continued repeated injury," the limitations period did not begin to run until the date of the last injury or when the tortious act ceased. Field, 249 Ill.App.3d at 825, 189 Ill.Dec. 247, 619 N.E.2d 1296. The court based its determination on the following facts: (1) the checks were cashed by plaintiff's sister over a continuous four-year period; (2) each check was made payable to their father; and (3) all of the checks were restrictively endorsed with "For Deposit Only." The checks, however, were deposited in an account that did not bear the payee's name and he received no information about the accounts from the defendant bank.¹ Field, 249 Ill.App.3d at 826, 189 Ill.Dec. 247, 619 N.E.2d 1296. The Field court further treated the conversion complaint as a common-law conversion with the applicable five-year statute of limitations.² Field, 249 Ill.App.3d at 826, 189 Ill.Dec. 247, 619 N.E.2d 1296.

In Haddad's of Illinois, the plaintiff alleged that from 1988 until 1990, one of its employees, Raychouni, forged endorsements on checks payable to the plaintiff and deposited them into an account at the defendant bank. The plaintiff sued the defendant bank for conversion of the checks it paid over the endorsement forged by Raychouni. The trial court granted the defendant's motion for summary judgment, holding that the plaintiff's action was barred by the statute of limitations. Haddad's of Illinois, 286 Ill.App.3d at 1070, 222 Ill.Dec. 710, 678 N.E.2d 322.

On appeal, the plaintiff argued that the cashing of the checks was part of an ongoing plan constituting a single transaction for purposes of the commencement of the statute of limitations. The Haddad's of Illinois court first addressed whether the statute of limitations period was five or three years. The appellate court concluded: "The proper statute of limitations for actions for...