PSI Res., LLC v. MB Fin. Bank, Nat'l Ass'n

• Decision Date: 27 May 2016
• Docket Number: No. 1–15–2204.,1–15–2204.
• Citation: 404 Ill.Dec. 90,55 N.E.3d 186
• Parties: PSI RESOURCES, LLC, an Illinois Limited Liability Company, Plaintiff–Appellant, v. MB FINANCIAL BANK, NATIONAL ASSOCIATION, as Successor in Interest to Cole Taylor Bank, Defendant–Appellee.
• Court: United States Appellate Court of Illinois

55 N.E.3d 186

404 Ill.Dec. 90

PSI RESOURCES, LLC, an Illinois Limited Liability Company, Plaintiff–Appellant

v.MB FINANCIAL BANK, NATIONAL ASSOCIATION, as Successor in Interest to Cole Taylor Bank, Defendant–Appellee.

No. 1–15–2204.

Appellate Court of Illinois, First District, Fifth Division.

May 27, 2016.

Epaminondas Eddie Manelis, of Chicago, for appellant.

Nathan H. Lichtenstein and Benjamin E. Haskin, both of Aronberg Goldgehn Davis & Garmisa, of Chicago, for appellee.

OPINION

Justice GORDON delivered the judgment of the court, with opinion.

¶ 1 This appeal arises from plaintiff PSI Resources, LLC's breach of contract action against defendant MB Financial Bank, National Association, which the circuit court below dismissed as time-barred under the three-year statute of limitations prescribed in section 4–111 of the Uniform Commercial Code (UCC) (810 ILCS 5/4–111 (West 2012) ).

¶ 2 Plaintiff raises two issues on appeal: (1) whether the circuit court erred in subjecting its claim to the 3–year limitations period governing claims arising from banking transactions involving negotiable instruments (810 ILCS 5/4–111 (West 2012) ) rather than the 10–year limitations period governing claims arising from written contracts (735 ILCS 5/13–206 (West 2012) ) and (2) whether the circuit court erred in finding that plaintiff failed to plead sufficient facts supporting the tolling of the limitations period pursuant to the discovery rule.

¶ 3 For the reasons set forth below we affirm the circuit court's ruling dismissing plaintiff's claim as time-barred.

¶ 4 BACKGROUND

¶ 5 I. Parties

¶ 6 Defendant is the successor in interest to Cole Taylor Bank (Cole Taylor), the bank that held the deposit accounts at issue in the instant case.

¶ 7 Plaintiff is the assignee of the claims of three corporations: Placement Solution, Inc. (PSI), Legal Solutions, Inc. (LSI), and Technical Solutions, Inc. (TSI) (collectively, the corporations). The record does not expressly state whether these three corporations were affiliated with one another. However, the Secretary of State's corporate registration database establishes that each of the now-dissolved corporations had an identical registered agent street address, and the registered agent of each corporation was listed as “David Thomas” (for PSI), “David Thomas Jr.” (for LSI), and “Tina Marie Thomas” (for TSI). See Maldonado v. Creative Woodworking Concepts, Inc., 296 Ill.App.3d 935, 938, 230 Ill.Dec. 743, 694 N.E.2d 1021 (1998) (“records from the Illinois Secretary of State's Office * * * are public records that this court may take judicial notice of”); Garrido v. Arena, 2013 IL App (1st) 120466, ¶ 35, 373 Ill.Dec. 182, 993 N.E.2d 488 ; JP Morgan Chase Bank, N.A. v. Bank of America, N.A., 2015 IL App (1st) 140428, ¶ 11 n. 1, 397 Ill.Dec. 905, 43 N.E.3d 546. Additionally, the record indicates that the three corporations shared the same corporate controller and used the same information technology system to maintain their financial records. Finally, the account agreement and signature verification card for each corporation's deposit account with Cole Taylor, which was attached to the complaint described below, was signed on September 12, 2007, and was signed by both “David Thomas” and “Tina Thomas.”

¶ 8 II. Complaint

¶ 9 On February 6, 2014, plaintiff filed a one-count complaint against defendant in the circuit court of Cook County seeking damages for breach of contract. In this complaint, plaintiff alleges that from December 1, 2007, through November 8, 2010, each of the corporations maintained separate demand deposit accounts with Cole Taylor and that these accounts were governed by the terms and conditions of separate account agreements and account verification cards, which Cole Taylor entered into with each of the corporations.

¶ 10 Plaintiff's complaint further alleges that Cole Taylor, in breach of the account agreements, failed to exercise ordinary care in accepting and depositing the corporations' deposits. In particular, plaintiff alleges that from October 3, 2008, through March 8, 2010, PSI deposited with Cole Taylor a total of $68,901.61 in checks it had received from its clients, but Cole Taylor credited those checks to either LSI's or TSI's accounts and PSI never received payments or credits for those checks. Similarly, plaintiff alleges that from August 25, 2008, through March 3, 2010, LSI deposited with Cole Taylor a total of $117,483.98 in checks it had received from its clients, but Cole Taylor credited those checks to either PSI's or TSI's accounts, and LSI never received payments or credits for those checks. Finally, plaintiff alleges that from December 4, 2007, through November 18, 2010, TSI deposited with Cole Taylor a total of $193,957.50 in checks it had received from its clients, but Cole Taylor credited those checks to either LSI's or PSI's accounts and TSI never received payments or credits for those checks.

¶ 11 Thus, in total, plaintiff alleges that the corporations collectively sustained $380,343.09 in damages as a result of Cole Taylor's failure to exercise ordinary care in maintaining the corporations' separate deposit accounts.¹

¶ 12 Plaintiff's complaint further alleges that Cole Taylor deposited several checks that were endorsed by the wrong corporation. Specifically, according to plaintiff, 13 checks made payable only to PSI had been wrongfully endorsed by either LSI or TSI, 17 checks made payable only to TSI had been wrongfully endorsed by either PSI or LSI, and 13 checks made payable only to LSI had been wrongfully endorsed by either PSI or TSI. Plaintiff thus alleges that Cole Taylor accepted and deposited a total of 43 checks that were endorsed by the wrong corporation.

¶ 13 Finally, plaintiff's complaint alleges that Cole Taylor failed to notify the corporations that it had applied their check deposits to the wrong bank accounts. In this regard, plaintiff admits that Cole Taylor provided each of the corporations with monthly account statements reflecting the monthly deposits and total balance in each of the corporations' accounts. Nevertheless, plaintiff alleges that these monthly account statements did not allow the corporations to discover the misapplied check deposits because they did not include images or copies of the checks deposited into the corporations' respective bank accounts.

¶ 14 III. Motion to Dismiss

¶ 15 On March 21, 2014, defendant filed a motion to dismiss plaintiff's complaint under section 2–619(a)(5) of the Code of Civil Procedure (Code) ( 735 ILCS 5/2–619(a)(5) (West 2012)). In this motion, defendant argued that plaintiff's claim was time-barred because it was not filed within the three-year limitation period governing claims arising from banking transactions involving negotiable instruments (810 ILCS 5/4–111 (West 2012) ). More specifically, defendant argued that the misapplied check deposits alleged in plaintiff's complaint occurred between December 1, 2007, and November 18, 2010, more than three years before February 6, 2014, when plaintiff first filed its complaint.

¶ 16 On April 14, 2014, plaintiff filed a verified response to defendant's motion to dismiss, arguing: (1) that its claim was for breach of a written contract and, therefore, was subject to a 10–year limitations period under section 13–206 of the Code (735 ILCS 5/13–206 (West 2012) ), not a 3–year statute of limitations; and (2) that even under the three-year statute of limitations, its claim remained timely filed, as the limitations period was tolled pursuant to the discovery rule until June 2011, when the corporations first discovered that Cole Taylor had misapplied their check deposits. As part of its argument on the second issue, plaintiff explained the circumstances that led to the discovery of the misapplied check deposits, namely, that the corporate controller for the three corporations had committed malfeasance that did not become apparent until the corporations hired an outside accountant in 2011.

¶ 17 On July 9, 2014, the circuit court denied defendant's motion to dismiss, finding that while plaintiff's claim was indeed subject to the three-year limitations statute governing claims involving negotiable instruments, the claim nevertheless remained timely filed pursuant to the discovery rule because plaintiff had raised facts in its response brief indicating that plaintiff was not aware funds had been misapplied until alerted by an outside audit in June 2011.

¶ 18 On July 31, 2014, defendant filed a motion for reconsideration, arguing that plaintiff had failed to include in its complaint any factual allegations supporting the application of the discovery rule and the tolling of the limitation period. On October 28, 2014, the circuit court granted defendant's motion for reconsideration and granted plaintiff leave to file an amended complaint including factual allegations supporting the tolling of the limitations period pursuant to the discovery rule.

¶ 19 IV. Amended Complaint

¶ 20 On November 18, 2014, plaintiff filed a verified amended complaint, adding allegations that the corporations did not know and could not have known about the misapplied check deposits until June 2011, when an independent audit revealed to the corporations that Stan C. Cavagnetto, who served as the corporate controller for all three of the corporations, was embezzling corporate funds and falsifying the corporations' books and records.²

¶ 21 More specifically, plaintiff alleges that Cavagnetto, as corporate controller, was charged with maintaining the corporations' accounting records and receiving and depositing the corporations' checks into their respective bank accounts. Cavagnetto was also responsible for the corporations' information technology system and accounting software, which the corporations used to maintain their financial records. In January 2011, following the corporations' decision to outsource their payroll operations, Cavagnetto resigned from his position as the corporate controller...