{ "id": 3256559, "name": "WILDER BINDING COMPANY, Appellee, v. OAK PARK TRUST AND SAVINGS BANK, Appellant", "name_abbreviation": "Wilder Binding Co v. Oak Park Trust & Savings Bank", "decision_date": "1990-02-16", "docket_number": "No. 67709", "first_page": "121", "last_page": "140", "citations": [ { "type": "official", "cite": "135 Ill. 2d 121" } ], "court": { "name_abbreviation": "Ill.", "id": 8772, "name": "Illinois Supreme Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "173 Ill. App. 3d 34", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3477313 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/173/0034-01" ] }, { "cite": "66 Or. App. 589", "category": "reporters:state", "reporter": "Or. App.", "case_ids": [ 4371040 ], "weight": 6, "pin_cites": [ { "page": "593" }, { "page": "332" }, { "page": "598" }, { "page": "335", "parenthetical": "Van Hoomissen, J., dissenting" } ], "opinion_index": 0, "case_paths": [ "/or-app/66/0589-01" ] }, { "cite": "108 A.D.2d 420", "category": "reporters:state", "reporter": "A.D.2d", "case_ids": [ 3417404 ], "year": 1981, "opinion_index": 0, "case_paths": [ "/ad2d/108/0420-01" ] }, { "cite": "489 N.Y.S.2d 338", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1981, "opinion_index": 0 }, { "cite": "402 So. 2d 586", "category": "reporters:state_regional", "reporter": "So. 2d", "case_ids": [ 9570252 ], "year": 1981, "opinion_index": 0, "case_paths": [ "/so2d/402/0586-01" ] }, { "cite": "129 Ariz. 7", "category": "reporters:state", "reporter": "Ariz.", "case_ids": [ 1600527 ], "weight": 2, "year": 1971, "opinion_index": 0, "case_paths": [ "/ariz/129/0007-01" ] }, { "cite": "463 S.W.2d 465", "category": "reporters:state_regional", "reporter": "S.W.2d", "case_ids": [ 10149420 ], "year": 1985, "opinion_index": 0, "case_paths": [ "/sw2d/463/0465-01" ] }, { "cite": "111 Ill. 2d 229", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3166688 ], "weight": 3, "pin_cites": [ { "page": "240" }, { "page": "240" }, { "page": "240" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/111/0229-01" ] }, { "cite": "66 Or. App. 589", "category": "reporters:state", "reporter": "Or. App.", "case_ids": [ 4371040 ], "weight": 7, "pin_cites": [ { "page": "592-97" }, { "page": "332-34" }, { "page": "593" }, { "page": "332" }, { "page": "593" } ], "opinion_index": 1, "case_paths": [ "/or-app/66/0589-01" ] }, { "cite": "111 Ill. 2d 229", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3166688 ], "opinion_index": 1, "case_paths": [ "/ill-2d/111/0229-01" ] }, { "cite": "482 F. Supp. 501", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 5767048 ], "weight": 3, "pin_cites": [ { "page": "506" }, { "page": "506" }, { "page": "509" } ], "opinion_index": 1, "case_paths": [ "/f-supp/482/0501-01" ] }, { "cite": "170 Conn. 691", "category": "reporters:state", "reporter": "Conn.", "case_ids": [ 509736 ], "pin_cites": [ { "page": "702-03" } ], "opinion_index": 1, "case_paths": [ "/conn/170/0691-01" ] }, { "cite": "368 A.2d 149", "category": "reporters:state_regional", "reporter": "A.2d", "pin_cites": [ { "page": "155" } ], "opinion_index": 1 }, { "cite": "464 A.2d 907", "category": "reporters:state_regional", "reporter": "A.2d", "case_ids": [ 7971805 ], "year": 1980, "pin_cites": [ { "page": "915" } ], "opinion_index": 1, "case_paths": [ "/a2d/464/0907-01" ] }, { "cite": "10 Mass. App. Ct. 715", "category": "reporters:state", "reporter": "Mass. App. Ct.", "case_ids": [ 3964565 ], "pin_cites": [ { "page": "723" } ], "opinion_index": 1, "case_paths": [ "/mass-app-ct/10/0715-01" ] }, { "cite": "412 N.E.2d 889", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "894-95" } ], "opinion_index": 1 }, { "cite": "391 Ill. 52", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2512417 ], "weight": 2, "pin_cites": [ { "page": "63" }, { "page": "63" } ], "opinion_index": 1, "case_paths": [ "/ill/391/0052-01" ] }, { "cite": "195 Ill. 156", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5585014 ], "pin_cites": [ { "page": "163" } ], "opinion_index": 1, "case_paths": [ "/ill/195/0156-01" ] }, { "cite": "848 F.2d 291", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1783310 ], "weight": 2, "pin_cites": [ { "page": "294" }, { "page": "295-96" } ], "opinion_index": 1, "case_paths": [ "/f2d/848/0291-01" ] }, { "cite": "23 Utah 2d 422", "category": "reporters:state", "reporter": "Utah 2d", "case_ids": [ 8866727 ], "weight": 2, "year": 1977, "pin_cites": [ { "page": "427" }, { "page": "588" } ], "opinion_index": 1, "case_paths": [ "/utah-2d/23/0422-01" ] }, { "cite": "199 Neb. 81", "category": "reporters:state", "reporter": "Neb.", "case_ids": [ 2549436 ], "weight": 2, "pin_cites": [ { "page": "87" }, { "page": "652" } ], "opinion_index": 1, "case_paths": [ "/neb/199/0081-01" ] } ], "analysis": { "cardinality": 1122, "char_count": 32169, "ocr_confidence": 0.755, "pagerank": { "raw": 1.5286761709876132e-07, "percentile": 0.6706802211248609 }, "sha256": "8b351438fa5baf687b8af1a35806607b4b3ee738eac71c4d44284f9cef50e1a2", "simhash": "1:2fafa13f8e6b32e0", "word_count": 5164 }, "last_updated": "2023-07-14T20:44:01.441971+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "WILDER BINDING COMPANY, Appellee, v. OAK PARK TRUST AND SAVINGS BANK, Appellant." ], "opinions": [ { "text": "CHIEF JUSTICE MORAN\ndelivered the opinion of the court:\nPlaintiff, Wilder Binding Company, filed this breach of contract action in the circuit court of Cook County against defendant, Oak Park Trust and Savings Bank. Plaintiff sought to recover $19,630 in damages from defendant, because of its alleged improper payment of a series of forged checks. Plaintiff filed a motion for summary judgment pursuant to section 2 \u2014 1005 of the Code of CivH Procedure (Code) (Ill. Rev. Stat. 1985, ch. 110, par. 2 \u2014 1005). The circuit court granted the motion and entered judgment in favor of plaintiff in the amount of $19,630.\u00b0 Defendant appealed.\nOn appeal, a majority of the appellate court affirmed, holding that there was no genuine issue as to any material fact and that plaintiff was entitled to summary judgment as a matter of law. The court reasoned that a bank fails to exercise ordinary care under section 4 \u2014 406(3) of the Uniform Commercial Code (Ill. Rev. Stat. 1985, ch. 26, par. 4 \u2014 406(3)) (section) when it uses automated check-sorting equipment and automatically pays checks drawn for less than a designated amount without manually verifying the signatures on those checks. The dissent stated that summary judgment should not have been entered, because the question regarding whether a bank exercised ordinary care in paying checks under the section is one of fact which should be answered by the trier of fact. 173 Ill. App. 3d 34.\nThis court granted defendant\u2019s petition for leave to appeal (107 Ill. 2d R. 315) and accepted amicus curiae briefs from the Illinois Public Action Council in support of plaintiff, and from the American Bankers Association, the Illinois Bankers Association and the Chicago Clearing House Association in support of defendant. 107 Ill. 2d R. 345.\nThe only issue presented for review is whether the appellate court erred in affirming the circuit court\u2019s entry of summary judgment in favor of plaintiff.\nOn April 23, 1981, plaintiff opened a business checking account with defendant. On that same date, plaintiff filed a signature card with defendant which designated Donald W. McCarrell, plaintiff\u2019s president, and Douglas S. McCarrell, plaintiff\u2019s vice-president, as the authorized signatories on its business checking account No. 864\u2014 398.\nIn December 1983, Lorine Daniels was hired as plaintiffs bookkeeper. Between December 20, 1983, and June 29, 1984, Daniels embezzled $25,254.78 from plaintiff by forging Douglas S. McCarrell\u2019s signature on 42 checks which were made payable to herself. Each of the forged checks was drawn for less than $1,000.\nOnce defendant paid the forged checks, they were cancelled and returned to plaintiff in the monthly statements of account. Plaintiff received statements containing forged checks for the following months: December 1983 and January, February, March, April, May, June and July 1984. However, under plaintiff\u2019s bookkeeping system, Daniels reviewed the monthly statements and cancelled checks.\nThe checks forged by Daniels were not discovered until July 15, 1984, when plaintiff\u2019s comptroller found them while examining company records. On July 20, 1984, plaintiff notified defendant of the forged checks and demanded reimbursement of $25,254.78, the sum total of the 42 forged checks.\nAs an accommodation to plaintiff, a long-standing customer, defendant reimbursed $5,624.78, which represented the sum total of forged checks contained in the monthly statements for June and July 1984. Defendant refused to reimburse the remaining $19,630 on the basis that affirmative defenses contained in the Commercial Code prevented plaintiff from recovering those funds.\nOn December 24, 1984, plaintiff filed its verified complaint seeking to recover $19,630 in damages from defendant. On March 20, 1985, defendant filed its answer and affirmative defenses to plaintiff\u2019s verified complaint. Defendant asserted as its affirmative defenses sections 3 \u2014 404, 3 \u2014 406 and 4 \u2014 406 of the Commercial Code (111. Rev. Stat. 1985, ch. 26, pars. 3 \u2014 404, 3 \u2014 406, 4 \u2014 406). On July 9, 1985, plaintiff filed its answer to defendant\u2019s affirmative defenses alleging the insufficiency of those defenses.\nOver one year later, on July 16, 1986, plaintiff filed a \u201cRequest to Admit Facts.\u201d The request provided in relevant part that: (1) between December 1, 1983, and July 1, 1984, defendant utilized automated check-sorting equipment which separated checks drawn for less than $1,000 from checks drawn for $1,000 or more; (2) the signatures on checks which were drawn for less than $1,000 were not manually verified before being paid; and (3) as a consequence of defendant\u2019s use of automated check-sorting equipment, none of the signatures on the forged checks were manually verified. As defendant neither denied nor objected to plaintiff\u2019s \u201cRequest to Admit Facts,\u201d the aforementioned facts were considered admissions by defendant pursuant to Supreme Court Rule 216(c) (107 Ill. 2d R. 216(c)).\nApproximately two weeks later, on August 1, 1986, plaintiff filed its motion for summary judgment (111. Rev. Stat. 1985, ch. 110, par. 2 \u2014 1005). The motion was supported by a memorandum of law and the affidavit of Douglas S. McCarrell. The affidavit provided in part that: (1) Douglas S. McCarrell was plaintiff\u2019s vice-president; (2) only he and Donald W. McCarrell were authorized signatories on plaintiff\u2019s checking account No. 864 \u2014 398; (3) 42 checks purportedly bearing his signature were drawn on plaintiff\u2019s account, but neither did he sign the checks nor did he or anyone else authorize the signing of those checks; (4) plaintiff\u2019s comptroller discovered the forged checks and notified him of them on July 15, 1984; and (5) plaintiff notified defendant of the forged checks and demanded reimbursement of the total amount paid, but defendant only reimbursed $5,624.78 and has refused to reimburse the remaining $19,630.\nOn November 10, 1986, defendant responded to plaintiff\u2019s motion for summary judgment by filing a memorandum of law and the counter affidavit of Robert S. Visconti, defendant\u2019s assistant vice-president. The counteraffidavit provided in part that: (1) Robert S. Visconti was defendant\u2019s assistant vice-president in charge of bookkeeping and check disbursement; (2) defendant processed an average of between 8,000 and 11,000 checks per day and that an average of 650 to 750 of those checks were written for more than $1,000; (3) defendant maintained a staff of five full-time employees and additional part-time employees to manually verify the signatures on all checks written for $1,000 or more; (4) defendant and at least four other banks in the metropolitan Chicago area utilized automated check-sorting equipment to separate checks drawn for less than the designated amount from checks drawn for the designated amount or more; and (5) the signatures on checks drawn for less than the designated amount were not manually verified before being paid, while signatures on checks drawn for more than the designated amount were manually verified before being paid.\nPlaintiff contends that the appellate court did not err in affirming the circuit court\u2019s entry of summary judgment. Its contention is based on its belief that no genuine issue as to any material fact exists and, accordingly, that it is entitled to summary judgment. It argues that defendant\u2019s admitted use of automated check-sorting equipment and automatic payment of checks drawn for less than $1,000 without manual verification of the signatures on those checks conclusively establishes, as a matter of law, defendant\u2019s failure to exercise ordinary care under the section.\nSection 4 \u2014 406 of the Commercial Code provides banks with an affirmative defense to the general rule that they are liable for paying forged checks. (See 111. Rev. Stat. 1985, ch. 26, par. 3 \u2014 401.) Under sections 4\u2014 406(1) and (2) of the Commercial Code, if a bank pays a forged check and later establishes that its customer was negligent in examining bank statements, detecting forgeries and notifying the bank of the forgeries, the customer is precluded from asserting the bank\u2019s liability. (111. Rev. Stat. 1985, ch. 26, pars. 4 \u2014 406(1), (2).) However, under the section, if the customer establishes that his bank failed to exercise ordinary care in paying a forged check, the bank\u2019s section 4 \u2014 406(1) and (2) affirmative defense is inapplicable and, as such, the bank is liable to its customer for the total amount of the forged checks. Therefore, according to plaintiff, even assuming arguendo that it was negligent, defendant is nevertheless liable for the total amount of the forged checks, because defendant's admissions conclusively establish, as a matter of law, its failure to exercise ordinary care under the section.\nNotwithstanding its admissions, defendant argues that its use of automated check-sorting equipment and automatic payment of checks drawn for less than $1,000 without manual verification of the signatures on those checks constitutes the prima facie exercise of ordinary care. Defendant\u2019s argument is based on section 4 \u2014 103(3) of the Commercial Code, which provides in pertinent part:\n\u201c[I]n the absence of special instructions, action or non-action consistent *** with a general banking usage not disapproved by this Article, prima facie constitutes the exercise of ordinary care.\" (Emphasis added.) Ill. Rev. Stat. 1985, ch. 26, par. 4 \u2014 103(3).\nThe term general banking usage \u201cis not defined but should be taken to mean a general usage common to banks in the area concerned.\" (Emphasis added.) (Ill. Ann. Stat., ch. 26, par. 4 \u2014 103, Uniform Commercial Code Comment, at 441 (Smith-Hurd 1963).) Additionally,\n\u201c[wjhere the adjective \u2018general\u2019 is used, the intention is to require a usage broader than a mere practice between two or three banks but it is not intended to require anything as broad as a country-wide usage. A usage followed generally throughout a state, a substantial portion of a state, a metropolitan area or the like would certainly be sufficient.\u201d (Emphasis added.) (Ill. Ann. Stat., ch. 26, par. 4 \u2014 103, Uniform Commercial Code Comment, at 441 (Smith-Hurd 1963).)\nTherefore, defendant concludes that its use of automated check-sorting equipment and automatic payment of checks drawn for less than $1,000 without manual verification of the signatures on those checks constitutes the prima facie exercise of ordinary care. Defendant\u2019s conclusion is based on Visconti\u2019s counteraffidavit, which indicates that more than two or three banks in the metropolitan Chicago area also use automated check-sorting equipment and automatically pay checks drawn for less than a designated amount without manually verifying the signatures on those checks.\nIn affirming the circuit court\u2019s entry of summary judgment, the appellate majority relied primarily on the case of Medford Irrigation District v. Western Bank (1984), 66 Or. App. 589, 676 P.2d 329. In Medford, a majority of the Oregon Court of Appeals held that, as a matter of law, Western Bank failed to exercise ordinary care pursuant to the Oregon Commercial Code when it used automated check-sorting equipment and automatically paid checks drawn for less than $5,000 without manually verifying the signatures on those checks. (Medford, 66 Or. App. at 593, 676 P.2d at 332.) The dissent expressed the opinion that the question regarding whether a bank exercised ordinary care in the payment of checks is one of fact which should be answered by the trier of fact. Medford, 66 Or. App. at 598, 676 P.2d at 335 (Van Hoomissen, J., dissenting).\nLike the Medford dissent and the dissent in this case, several other courts have held that the question of whether a bank exercised ordinary care in paying a check presents a genuine issue of material fact which should be answered by the trier of fact and, therefore, summary judgment should not be entered. (See Five Towns College v. Citibank, N.A. (1985), 108 A.D.2d 420, 489 N.Y.S.2d 338; Space Distributors, Inc. v. Flagship Bank (Fla. App. 1981), 402 So. 2d 586; K & K Manufacturing, Inc. v. Union Bank (App. 1981), 129 Ariz. 7, 628 P.2d 44; Exchange Bank & Trust Co. v. Kidwell Construction Co. (Tex. App. 1971), 463 S.W.2d 465; see also 7 R. Anderson, Uniform Commercial Code \u00a74 \u2014 406:12 (3d ed. 1985).) We agree with the rationale of these cases. Accordingly, in order to determine whether the appellate court erred in affirming the circuit court\u2019s entry of summary judgment in this case, the general principles governing summary judgment must be discussed.\nThe purpose of a summary judgment proceeding is to determine whether there are any genuine issues of material fact. (Purtill v. Hess (1986), 111 Ill. 2d 229, 240.) Summary judgment should be granted only when \u201cthe pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.\u201d Ill. Rev. Stat. 1985, ch. 110, par. 2-1005(c).\nSummary judgment is both \u201can aid in the expeditious disposition of a lawsuit\u201d and \u201ca drastic means of disposing of litigation.\u201d (Purtill, 111 Ill. 2d at 240.) When considering the pleadings, depositions, admissions, exhibits and affidavits on file, a court \u201cmust construe them strictly against the movant and liberally in favor of the opponent\u201d and enter a summary judgment \u201conly when the right of the moving party is clear and free from doubt.\u201d Purtill, 111 Ill. 2d at 240.\nIn applying these general principles to this case, we must consider the pleadings, admissions, exhibits and affidavits on file and construe them strictly against plaintiff and liberally in favor of defendant. After carefully reviewing the record, including both defendant\u2019s admissions and Visconti\u2019s counteraffidavit, we believe that a genuine issue of material fact exists regarding whether defendant exercised ordinary care in paying checks under the section. Therefore, it should be left up to the trier of fact to determine whether defendant\u2019s use of automated check-sorting equipment and automatic payment of checks drawn for less than $1,000 without manual verification of signatures on those checks is \u201cconsistent with general banking usage\u201d and, accordingly, \u201cprima facie constitutes the exercise of ordinary care.\u201d As such, we hold that the appellate court erred in affirming the circuit court\u2019s entry of summary judgment in favor of plaintiff.\nFor the reasons stated above, the decisions of both the appellate court and the circuit court are reversed and this cause is remanded to the circuit court for proceedings consistent with this opinion.\nAppellate court reversed; circuit court reversed; cause remanded.\nJUSTICE STAMOS took no part in the consideration or decision of this case.", "type": "majority", "author": "CHIEF JUSTICE MORAN" }, { "text": "JUSTICE CALVO,\ndissenting:\nBecause I conclude defendant\u2019s failure to review checks drawn for under $1,000 constituted a lack of ordinary care as a matter of law, I respectfully dissent. In my view, the appellate court properly affirmed the trial court\u2019s order granting plaintiff\u2019s motion for summary judgment. Accordingly, I would affirm the appellate court.\nApplying the summary judgment principles of Purtill v. Hess (1986), 111 Ill. 2d 229, the requirements of the Uniform Commercial Code (Code) (Ill. Rev. Stat. 1983, ch. 26, par. 1 \u2014 101 et seq.), and the rationale and decision of the Oregon court in Medford Irrigation District v. Western Bank (1984), 66 Or. App. 589, 676 P.2d 329, I conclude no issue of material fact existed as to whether defendant exercised ordinary care. Defendant did not manually verify signatures on checks written for under $1,000, and had no system for verifying signatures on checks under that amount. Defendant\u2019s automatic payment of all checks drawn for less than $1,000, without manual verification of the signatures on those checks, conclusively established defendant\u2019s failure to exercise ordinary care under the Code. Complete absence of review accompanied by an absence of a system for review, in my view, constitutes, as a matter of law, lack of ordinary care.\nAs the majority indicates, banks are generally liable for paying forged checks. (See Ill. Rev. Stat. 1983, ch. 26, par. 3 \u2014 401(1) (\u201cNo person is liable on an instrument unless his signature appears thereon\u201d); Ill. Rev. Stat. 1983, ch. 26, par. 3 \u2014 404(1) (\u201cAny unauthorized signature is wholly inoperative as that of the person whose name is signed\u201d); Ill. Rev. Stat. 1983, ch. 26, par. 1\u2014 201(43) (an unauthorized signature includes a forgery); Illl. Rev. Stat. 1983, ch. 26, par. 4 \u2014 401(1) (a bank may charge against a customer\u2019s account only those items which are \u201cproperly payable\u201d).) Nevertheless, if a bank pays a forged check and later establishes its customer\u2019s negligence in examining the bank statements, and failing to detect and notify the bank of forgeries, the customer cannot assert the bank\u2019s liability. (Ill. Rev. Stat. 1983, ch. 26, pars. 4 \u2014 406(1), (2).) The bank\u2019s defense is inapplicable, however, if the customer establishes the bank\u2019s failure to exercise \u201cordinary care\u201d in paying the forged check. Ill. Rev. Stat. 1983, ch. 26, par. 4 \u2014 406(3).\nThe Code does not define \u201cordinary care.\u201d (111. Ann. Stat., ch. 26, par. 4 \u2014 103, Uniform Commercial Code Comment, at 440 (Smith-Hurd 1963).) Instead, for purposes of the Code, ordinary care is \u201cused with its normal tort meaning and not in any special sense relating to bank collections.\u201d (111. Ann. Stat., ch. 26, par. 4 \u2014 103, Uniform Commercial Code Comment, at 440 (SmithHurd 1963).) Under section 4 \u2014 103(3) of the Code, however, action or inaction by a bank which is consistent with general banking usage \u201cprima facie constitutes the exercise of ordinary care.\u201d (111. Rev. Stat. 1983, ch. 26, par. 4 \u2014 103(3).) Nevertheless, customers can:\n\u201cprescribe other standards and where there may be no direct supervision or control of clearing houses or banking usages by official supervisory authorities, the confirmation of ordinary care by compliance with these standards is prima facie only, thus conferring on the courts the ultimate power to determine ordinary care in any case where it should appear desirable to do so. The prima facie rule does, however, impose on the party contesting the standards to establish that they are unreasonable, arbitrary or unfair.\u201d (Ill. Ann. Stat., ch. 26, par. 4 \u2014 103, Uniform Commercial Code Comment, at 441 (Smith-Hurd 1963).)\nConsequently, while proof of compliance with general banking usage can provide the bank with prima facie evidence of ordinary care, a customer can rebut this evidence with proof that the bank\u2019s standards are unreasonable, arbitrary or unfair.\nDefendant asserts it provided prima facie evidence of ordinary care through Visconti\u2019s affidavit. Defendant also contends plaintiff provided no proof whatsoever that defendant\u2019s procedures or standards were unreasonable, arbitrary or unfair. The majority holds that the trier of fact should determine whether defendant\u2019s automatic payment of checks drawn for less than $1,000 is consistent with general banking usage, and thus constitutes prima facie evidence of ordinary care.\nI agree with plaintiff\u2019s contention that defendant\u2019s complete lack of procedures to detect forgeries is unreasonable in and of itself and therefore proves the absence of ordinary care, even if defendant established its prima facie case. Plaintiff\u2019s proof consisted of defendant\u2019s admitted lack of procedures; this proof revealed a lack of ordinary care.\nEven if defendant \u201cestablished conformity with local standards,\u201d defendant \u201cis not automatically exonerated.\u201d (Hanover Insurance Cos. v. Brotherhood State Bank (D. Kan. 1979), 482 F. Supp. 501, 506.) The industry standard may be considered as evidence of compliance with ordinary care, but such evidence is not conclusive. \u201c \u2018Even an entire industry, by adopting such careless methods to save time, effort or money, cannot be permitted to set its own uncontrolled standard.\u2019 \u201d (Hanover, 482 F. Supp. at 506, quoting W. Prosser, Law of Torts 167 (4th ed. 1971).) In Perley v. Glastonbury Bank & Trust Co. (1976), 170 Conn. 691, 702-03, 368 A.2d 149,155, the court held:\n\u201cAn officer of one of the defendant banks testified that it was customary bank procedure to accept *** a check as presented without authenticating the endorsements and to rely on its ability to charge the account of the payee if the endorsements proved invalid. Such procedure may well be common among banks, but the defendants failed to show that such conduct is reasonable. An examination of signature cards to determine the genuineness of endorsements may not be entirely practical under modern banking methods, but we do not feel that that necessarily relieves banks of the risk of loss from payment on forged checks. [Citation.] The law places the risk of loss from forged endorsements on the drawee bank unless it can affirmatively prove the drawer\u2019s negligence and its own due care. Such a legal presumption accords with the practical realities of commercial banking transactions since the banks are in a better position than private parties *** to secure means of insurance against losses by forgeries.\u201d\n(See also American Machine Tool Distributors Association v. National Permanent Federal Savings & Loan Association (D.C. 1983), 464 A.2d 907, 915; First National Bank v. Hovey (1980), 10 Mass. App. Ct. 715, 723, 412 N.E.2d 889, 894-95.) \u201cMere technological innovations, an increased workload and a desire to save time, money and effort do not relieve the bank of its responsibility to exercise ordinary care.\u201d (Hanover, 482 F. Supp. at 509.) We should not permit an industry to set standards which thereby insulate it from liability. .\nDefendant claims it does not lack procedures to discover forgeries; rather, it has one such procedure. That procedure involves sending bank statements and can-celled checks to customers monthly. In this way, customers, who are in the best position to do so, can detect forgeries once they review the statements. Defendant\u2019s argument has absolutely no merit. Customers already have a duty to examine their bank statements under sections 4 \u2014 406(1) and 4 \u2014 406(2). Defendant cannot abdicate its duty of ordinary care under section 4 \u2014 406(3) to plaintiff. Defendant is, in effect, relying on its customers\u2019 duty of review to fulfill its own duty of ordinary care. I cannot sanction such a result. The result I reach in no way lessens a customer\u2019s responsibility to promptly examine bank statements. I simply conclude that a bank cannot use its customers\u2019 duty to discharge its own duty of care.\nWhile in some circumstances, the decision as to what amounts to ordinary care may be an issue of fact, the situation before this court does not present such an instance. The affidavits and admissions before the circuit court indicated defendant\u2019s system of clearing checks precluded any review of the checks and forgeries here in question. Defendant\u2019s affidavit revealed that out of 8,000 to 11,000 checks processed per day, an average of 650 to 750 of the checks are written for more than $1,000. Defendant\u2019s automatic check-sorting equipment separates these 650 to 750 checks from the other checks for manual review. Thus, defendant verifies the signatures on about 7% of the checks processed. Defendant does not verify the signatures on approximately 93% of all checks. Automatic preclusion from review of 93% of all checks processed based solely on the amount of the check does not present a genuine issue as to any material fact.\nOrdinary care is to be used with its \u201cnormal tort meaning.\u201d (Ill. Ann. Stat., ch. 26, par. 4 \u2014 103, Uniform Commercial Code Comment, at 440 (Smith-Hurd 1963).) Defendant points out that issues of negligence are usually questions of fact. (See Berg v. New York Central R.R. Co. (1945), 391 Ill. 52, 63.) Even under tort law, however, negligence may be a question of law if the acts constituting negligence \u201c \u2018are of such a character that all reasonable men would concur in pronouncing them so.\u2019 \u201d (Berg, 391 Ill. at 63, quoting Chicago, Burlington & Quincy R.R. Co. v. Pollock (1902), 195 Ill. 156, 163.) I conclude all reasonable persons would agree that defendant\u2019s lack of procedures constituted negligence. As a matter of law, an absence of any review amounts to a lack of ordinary care.\nMy decision does not mean defendant would have to manually review the signatures on all of the checks which cross defendant\u2019s threshold prior to payment. Nevertheless, every check crossing defendant\u2019s threshold should be subject to some probability of examination. For example, the court in Rhode Island Hospital Trust National Bank v. Zapata Corp. (1st Cir. 1988), 848 F.2d 291, 294, found the bank exercised ordinary care when the bank (1) examined signatures on every check for more than $1,000; (2) examined signatures on checks between $100 and $1,000, if the bank had reason to suspect a problem (e.g., if a check was drawn on an account with insufficient funds); and (3) examined signatures on a randomly chosen 1% of all other checks between $100 and $1,000. In Rhode Island, though the bank did not review every check, the bank\u2019s system subjected virtually every check to the potential for sight review prior to payment. I cannot say the procedure in Rhode Island would conclusively constitute ordinary care. The facts of Rhode Island played a significant role in that decision and I cannot at this time determine whether the $100 threshold or the 1% level would be appropriate. Nevertheless, Rhode Island provides an example of a system of review. In addition, the Rhode Island court intimated the practices in Medford were \u201cmore obviously unreasonable\u201d than the practices of the bank before it. Rhode Island, 848 F.2d at 295-96.\nThe Oregon Court of Appeals in Medford, in determining the issue before it as one of law and not of fact, noted:\n\u201cThe reasonableness of commercial banking standards must be analyzed in the context of a bank\u2019s duty in relation to the depositor\u2019s account. Although a procedure may be common throughout the banking industry, it is not, by that fact alone, a reasonable procedure. Implied in the relationship between a bank and its checking account depositors is a contractual undertaking on the part of the bank that it will only discharge its obligation to a depositor on an authorized signature. ***\n*** We do not hold that a bank must adopt a particular procedure, such as \u2018sight review,\u2019 in order to comply with the statutory mandate. We do hold that the procedure used must reasonably relate to the detection of unauthorized signatures in order to be considered an exercise of or dinary care or reasonable commercial banking standards. [The bank\u2019s] approach is automatically to pay all checks under $5,000 without any procedure to detect unauthorized signatures on those items. While that approach, based on considerations of cost and efficiency, may be a prudent business decision and followed by most banks, it does not meet the bank\u2019s responsibility under the statutes.\n* * *\nWe conclude that, because [the bank] failed to exercise ordinary care or to follow reasonable commercial banking practices, it is foreclosed from asserting plaintiff\u2019s negligence and is liable for paying the face amount of the forged checks. There is no issue of fact as to [the bank\u2019s] liability or the amount.\u201d (Emphasis added.) (Medford, 66 Or. App. at 592-97, 676 P.2d at 332-34.)\nAs in Medford, defendant in the case at bar admitted it has no procedure for reviewing the signatures on checks drawn for under a certain dollar amount. Such automatic nonreview violates the statutory duty of care owed the bank customer. I agree with the Medford court that \u201cthe procedure used must reasonably relate to the detection of unauthorized signatures in order to be considered an exercise of ordinary care.\u201d Medford, 66 Or. App. at 593, 676 P.2d at 332.\nDefendant asserts Medford is distinguishable because the threshold amount was $5,000 and thus greater than the $1,000 threshold amount in the case at bar. I do not find this distinction significant, especially because defendant only reviewed approximately 7% of the checks it processed using the lower threshold. Even with the lower threshold, defendant still did not exercise ordinary care.\nI find the cases the majority cites for support distinguishable on their facts. As I stated earlier, some instances may occur where the issue of ordinary care is a question of fact; such is not the case here. Medford is more factually similar to the case at bar than the cases cited by defendant and the majority, and I find the court\u2019s reasoning in Medford persuasive.\nDefendant asserts the appellate court\u2019s holding is contrary to the policy behind section 4 \u2014 406 because sight review of checks does not necessarily detect forgeries. Defendant also contends that the Code does not require banks to know the genuineness of a customer\u2019s signature on a check. Moreover, defendant points out banks have no statutory duty to perform any specific review procedure, including sight review.\nFirst, I am not requiring a bank to guaranty the signatures on all of the checks it sight reviews. In other words, if a bank institutes sight review, it is not automatically liable for any forgeries it may fail to detect. The Code only requires banks to exercise ordinary care; that is, to exercise the degree of care which would \u201creasonably relate to the detection of unauthorized signatures.\u201d Medford, 66 Or. App. at 593, 76 P.2d at 332.\nSecond, the Code only allows banks to pay checks with authorized (nonforged) signatures (Ill. Rev. Stat. 1983, ch. 26, pars. 3 \u2014 404, 1 \u2014 201(43)) and checks which are \u201cproperly payable\u201d (Ill. Rev. Stat. 1983, ch. 26, par. 4 \u2014 401(1)). Moreover, defendant required plaintiff to sign and have on file signature cards. Consequently, while the Code does not expressly require banks to sight review checks, banks are required to know their customers\u2019 signatures. (See W.P. Harlin Construction Co. v. Continental Bank & Trust Co. (1970), 23 Utah 2d 422, 427, 464 P.2d 585, 588; Maddox v. First Westroads Bank (1977), 199 Neb. 81, 87, 256 N.W.2d 647, 652 (the court affirmed entry of summary judgment for plaintiffs, holding the bank liable for savings account withdrawal slips containing forged signatures based on the same rules applicable to banks with respect to forged checks).) How banks choose to fulfill their duty is up to them as long as they exercise ordinary care. As I have indicated, defendant did not exercise such care.\nIn summary, it is of little consequence that four other banks in the area use the same procedures as defendant. We should not permit an industry to establish a standard which relieves it of its duty of care to a large segment of its customers. Defendant has no procedure to review the signatures on checks drawn for less than $1,000, even though it has a duty to plaintiff. Where a duty is owed and none is given, the only reasonable conclusion is the one reached by the circuit and appellate courts.\nJUSTICE CLARK joins in this dissent.", "type": "dissent", "author": "JUSTICE CALVO," } ], "attorneys": [ "William B. Davenport, Lynn A. Goldstein and Mary S. Binder, of the Law Department of The First National Bank of Chicago; Michael B. Susman, Robert J. Krull and Jonathan L. Loew, of Spitzer, Addis, Susman & Krull, all of Chicago, for appellant.", "Loren J. Mallon and Marc R. Jacobs, of Gottlieb & Schwartz, of Chicago, for appellee.", "John J. Gill, Michael F. Grotty and Thomas J. Greco, of Washington, D.C., for amicus curiae American Bankers Association.", "Michael J. Sweeney and Timothy R. Kane, of Sidley & Austin, of Chicago, for amicus curiae Chicago Clearing House Association.", "Harvey B. Stephens, Emmet A. Fairfield and Denise M. Druhot, of Brown, Hay & Stephens, of Springfield, for amicus curiae Illinois Bankers Association.", "Johnson & Colmar, of Chicago (Mark V. Chester and Elizabeth J. Cohen, of counsel), for amicus curiae Illinois Public Action Council." ], "corrections": "", "head_matter": "(No. 67709.\nWILDER BINDING COMPANY, Appellee, v. OAK PARK TRUST AND SAVINGS BANK, Appellant.\nOpinion filed February 16, 1990.\nRehearing denied April 9, 1990.\nSTAMOS, J., took no part.\nCALVO, J., joined by CLARK, J., dissenting.\nWilliam B. Davenport, Lynn A. Goldstein and Mary S. Binder, of the Law Department of The First National Bank of Chicago; Michael B. Susman, Robert J. Krull and Jonathan L. Loew, of Spitzer, Addis, Susman & Krull, all of Chicago, for appellant.\nLoren J. Mallon and Marc R. Jacobs, of Gottlieb & Schwartz, of Chicago, for appellee.\nJohn J. Gill, Michael F. Grotty and Thomas J. Greco, of Washington, D.C., for amicus curiae American Bankers Association.\nMichael J. Sweeney and Timothy R. Kane, of Sidley & Austin, of Chicago, for amicus curiae Chicago Clearing House Association.\nHarvey B. Stephens, Emmet A. Fairfield and Denise M. Druhot, of Brown, Hay & Stephens, of Springfield, for amicus curiae Illinois Bankers Association.\nJohnson & Colmar, of Chicago (Mark V. Chester and Elizabeth J. Cohen, of counsel), for amicus curiae Illinois Public Action Council." }, "file_name": "0121-01", "first_page_order": 131, "last_page_order": 150 }