Midamerica Bank v. Charter One Bank, Fsb

• Decision Date: 19 March 2009
• Docket Number: No. 106804.,106804.
• Citation: 905 N.E.2d 839,232 Ill.2d 560,329 Ill.Dec. 1
• Parties: MIDAMERICA BANK, FSB, Appellant, v. CHARTER ONE BANK, FSB, et al., Appellees.
• Court: Illinois Supreme Court

905 N.E.2d 839

232 Ill.2d 560

329 Ill.Dec. 1

MIDAMERICA BANK, FSB, Appellant, v. CHARTER ONE BANK, FSB, et al., Appellees.

No. 106804.

Supreme Court of Illinois.

March 19, 2009.

Patrick J. Williams, Vincent C. Mancini, of Ekl Williams, PLLC, Lisle, for appellant.

Richard J. Nogal, Christopher J. Novak, of Goldstine, Skrodzki, Russian, Nemec and Hoff, Ltd., Burr Ridge, for appellees.

OPINION

Justice KILBRIDE delivered the judgment of the court, with opinion:

In this appeal, we consider: (1) whether a bank may issue a stop-payment order on a cashier's check under the Illinois Uniform Commercial Code (810 ILCS 5/1-101 et seq. (West 2002)); and (2) whether the circuit court of Du Page County erred in denying MidAmerica loss of interest and attorney fee expenses under the UCC. The circuit court held that a cashier's check is the equivalent of currency and that Charter One must, therefore, honor its cashier's check but declined to award MidAmerica loss of interest and attorney fees. The appellate court reversed the circuit court's holding that Charter One must honor its cashier's check, and affirmed the circuit court's decision not to award loss of interest and attorney fee expenses to MidAmerica. 383 Ill.App.3d 243, 321 Ill.Dec. 627, 889 N.E.2d 1187. We allowed MidAmerica's petition for leave to appeal (210 Ill.2d R. 315). We reverse the appellate court's judgment and remand the cause to the appellate court with directions.

I. BACKGROUND

In 2002, Mary Christelle, the mother of David Hernandez (president of Essential Technologies of Illinois (ETI)), purchased a $50,000 cashier's check from Charter One payable to ETI with funds from her Charter One account. ETI deposited the check in its MidAmerica account. Four days later, Christelle asked Charter One to stop payment on the check. Charter One issued a stop-payment order on the cashier's check, and it then refused to honor the check when MidAmerica presented it for payment, returning it to MidAmerica stamped "stop payment." MidAmerica sent the check to ETI after removing $50,000 from ETI's account. Within two weeks, ETI's account dropped to approximately a negative $52,000.

In 2006, MidAmerica filed suit against Charter One to recover the value of the check. MidAmerica alleged that Charter One wrongfully stopped payment on the cashier's check in violation of section 3-411 of the UCC (810 ILCS 5/3-411 (West 2002)). MidAmerica sought $50,000 plus interest from January 24, 2002, attorney fees, and costs of suit.

Charter One answered the complaint, admitting that it issued a stop-payment order on the cashier's check and that MidAmerica made demands for payment. Charter One also filed affirmative defenses, alleging the cashier's check was issued in furtherance of a fraudulent scheme or by mistake. Charter One then filed a third-party complaint seeking damages against Christelle, Hernandez and his wife, and ETI.

At trial, a MidAmerica employee testified that she first learned of the ETI account in January 2002, when a $50,000 personal check was deposited to ETI's MidAmerica account and returned for insufficient funds. Subsequently, $50,000 was redeposited to ETI's account by the cashier's check issued by Charter One payable to ETI. The cashier's check was then processed through Charter One for payment. On January 24, 2002, the cashier's check was returned to MidAmerica with a stop-payment order placed on it. MidAmerica debited ETI's bank account $50,000 and held the cashier's check until the account reached a positive balance, when the cashier's check was returned to ETI as the payee. Ultimately, ETI's account was closed due to a negative balance after additional deposited checks were returned for insufficient funds. During the investigation of ETI's bank account, MidAmerica found no evidence of any fraudulent ETI scheme.

A security officer for Charter One testified that she investigated the cashier's check in April or May 2002. She stated that Charter One permits stop-payment orders to issue on a cashier's check only if the check is lost, destroyed or stolen, and that bank policy permits it to seek indemnification from the person who placed the stop-payment order. The bank also requires an affidavit to support the stop-payment order, but Charter One could not locate an affidavit in this case. According to the security officer, Christelle's account contained sufficient funds to cover the cashier's check upon issuance. She was unable to determine that ETI was directly involved in the issuance of the cashier's check or that ETI caused Christelle to purchase the cashier's check. Christelle's request was the only basis for the stop-payment order. At the time of the stop-payment order, there was no shortage in Christelle's account, nor was there any evidence of fraud.

At the conclusion of trial, MidAmerica submitted an affidavit supporting its claimed attorney fees of $33,731.25, plus the costs of suit. In its written closing argument, MidAmerica also sought interest from January 22, 2002.

The circuit court ruled in favor of MidAmerica, awarding it $50,000 plus costs. The circuit court, however, denied MidAmerica's request for loss of interest and attorney fee expenses.

The appellate court affirmed the circuit court's decision not to award attorney fees to MidAmerica but reversed its holding that MidAmerica could enforce the cashier's check against Charter One. We allowed MidAmerica's petition for leave to appeal (210 Ill.2d R. 315).

II. ANALYSIS

In this appeal, we consider: (1) whether a bank may issue a stop-payment order on a cashier's check under the Illinois Uniform Commercial Code (810 ILCS 5/1-101 et seq. (West 2002)); and (2) whether the circuit court erred in denying MidAmerica loss of interest and attorney fees. We first consider the stop-payment issue.

A. Stop-payment Orders on Cashier's Checks

MidAmerica asserts that the UCC does not permit stop-payment orders on cashier's checks. Charter One counters that the UCC entitled it to dishonor the cashier's check because the check was procured by fraud. The parties agree that the pertinent facts of this case are uncontroverted. Accordingly, the issue on appeal is limited to application of the law to the undisputed facts and, thus, our standard of review is de novo. City of Champaign v. Torres, 214 Ill.2d 234, 241, 291 Ill.Dec. 768, 824 N.E.2d 624 (2005).

We begin our review by addressing MidAmerica's argument that stop-payment orders on cashier's checks are not permitted under the UCC. Our "primary objective * * * when construing the meaning of a statute is to ascertain and give effect to the intent of the legislature." DeLuna v. Burciaga, 223 Ill.2d 49, 59, 306 Ill.Dec. 136, 857 N.E.2d 229 (2006). We look to the plain language of the statute as "the most reliable indication of the legislature's objectives * * * and when the language of the statute is clear, it must be applied as written without resort to aids or tools of interpretation." DeLuna, 223 Ill.2d at 60, 306 Ill.Dec. 136, 857 N.E.2d 229. When the language of a statute is ambiguous, we must construe the statute to avoid rendering any part meaningless or superfluous. People v. Jones, 214 Ill.2d 187, 193, 291 Ill.Dec. 663, 824 N.E.2d 239 (2005). We do not depart from the plain language of a statute by reading into it exceptions, limitations, or conditions that conflict with the legislature's expressed intent. People v. Martinez, 184 Ill.2d 547, 550, 235 Ill.Dec. 452, 705 N.E.2d 65 (1998).

Section 4-403(a) of the UCC addresses a customer's right to stop payment on checks, as follows:

"(a) A customer or any person authorized to draw on the account if there is more than one person may stop payment of any item drawn on the customer's account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on it before any action by the bank with respect to the item described in Section 4-303." (Emphasis added.) 810 ILCS 5/4-403(a) (West 2002).

A cashier's check is an item drawn on the issuing bank. See 810 ILCS 5/3-104(g) (West 2002) ("`Cashier's check' means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank"). Thus, a cashier's check is not an item drawn on the customer's account. The plain language of section 4-403 permits a customer to stop payment only on items drawn "on the customer's account." It does not authorize a bank to stop payment on a cashier's check at a customer's request because cashier's checks are not drawn "on the customer's account."

Our interpretation of section 4-403 is supported by UCC comment 4 to section 4-403, stating:

"4. A cashier's check or teller's check purchased by a customer whose account is debited in payment for the check is not a check drawn on the customer's account within the meaning of subsection (a); hence, a customer purchasing a cashier's check or teller's check has no right to stop payment of such a check under subsection (a). If a bank issuing a cashier's check or teller's check refuses to pay the check as an accommodation to its customer or for other reasons, its liability on the check is governed by Section 3-411. There is no right to stop payment after certification of a check or other acceptance of a draft, and this is true no matter who procures the certification. See Sections 3-411 and 4-303. The acceptance is the drawee's own engagement to pay, and is not required to impair its credit by refusing payment for the convenience of the drawer." 810 ILCS Ann. 5/4-403, Uniform Commercial Code Comment 4, at 413 (Smith-Hurd 1993).

As indicated by UCC comment 4 to section 4-403, by refusing to pay the cashier's check as an accommodation to Christelle, Charter One's liability on the check is governed by section 3-411 of the UCC.

Section 3-411 of the UCC, in turn, provides for liability of a bank that refuses to pay its issued...