{ "id": 2619438, "name": "DONALD HAYNER et al., Plaintiffs-Appellees, v. THERESA FOX et al., Defendants-Appellees (Connecticut National Bank, f/k/a Hartford National Bank, et al., Third-Party Plaintiffs-Appellees; Lash, Warner & Associates, Third-Party Defendant-Appellant)", "name_abbreviation": "Hayner v. Fox", "decision_date": "1989-05-08", "docket_number": "No. 1\u201487\u20143641", "first_page": "989", "last_page": "996", "citations": [ { "type": "official", "cite": "182 Ill. App. 3d 989" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "628 P.2d 1110", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 2552754 ], "pin_cites": [ { "page": "1115" } ], "opinion_index": 0, "case_paths": [ "/mont/192/0487-01" ] }, { "cite": "361 N.E.2d 587", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "589" } ], "opinion_index": 0 }, { "cite": "46 Ill. App. 3d 1045", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2972232 ], "pin_cites": [ { "page": "1048" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/46/1045-01" ] } ], "analysis": { "cardinality": 629, "char_count": 15721, "ocr_confidence": 0.784, "pagerank": { "raw": 4.03580807328026e-08, "percentile": 0.08279266474609137 }, "sha256": "3a2125c9dea82903aaa0496057c155b7d4aec9273224ef2e057ca54082e680e5", "simhash": "1:449f93c68604fc7b", "word_count": 2544 }, "last_updated": "2023-07-14T18:08:14.831486+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "DONALD HAYNER et al., Plaintiffs-Appellees, v. THERESA FOX et al., Defendants-Appellees (Connecticut National Bank, f/k/a Hartford National Bank, et al., Third-Party Plaintiffs-Appellees; Lash, Warner & Associates, Third-Party Defendant-Appellant)." ], "opinions": [ { "text": "JUSTICE BUCKLEY\ndelivered the opinion of the court:\nConnecticut National Bank (Connecticut) and the Bank of Ravenswood (Ravenswood) brought this third-party action, arising from a judgment entered against them for accepting and paying a draft with forged indorsements, against Lash, Warner & Associates (Lash, Warner), a copayee and subsequent indorser of the forged instrument. The circuit court, on cross-summary judgment motions, entered judgment in favor of Connecticut/Ravenswood in the amount of $32,534. Lash, Warner appeals from these orders, contending that the circuit court erred in finding that it had created statutory warranties of good title and authenticity of prior indorsements pursuant to the Uniform Commercial Code (the Code) (Ill. Rev. Stat. 1987, ch. 26, pars. 3 \u2014 417(1)(a), (2)(a), (2)(b)).\nWe reverse and remand this case to the circuit court with instructions to enter summary judgment in favor of Lash, Warner.\nThis controversy arose from a $32,534 insurance check issued to six payees in settlement of a fire damage claim for real estate. The sequence of the payee indorsements occurred as follows. The check was first indorsed by Pioneer Bank & Trust Company, which was the land trustee, and First Federal Savings & Loan to the order of Donald Hayner and Andrew Van Styn, the contract sellers. The contract purchaser, Theresa Fox, in possession of the check with the signatures of the two banks and Hayner and Van Styn appearing on the check, then gave the check to Lash, Warner, the public adjustor who negotiated settlement. Lash, Warner indorsed the check in exchange for Fox\u2019 check for $4,706.25 as payment for its services as adjustor. The final payee indorsement was made by Fox when she presented the check for payment to Ravenswood, which, in turn, forwarded the check to Connecticut for final payment.\nHayner and Van Styn then brought an action against Fox, Pioneer Bank & Trust Company, Ravenswood, and Connecticut alleging that their indorsements had been forged and that Ravenswood and Connecticut had converted the check. Judgment was entered in favor of Hayner and Van Styn in the full amount of the check. Connecticut/ Ravenswood then filed this third-party complaint now on appeal against Lash, Warner, alleging that Lash, Warner had breached its warranties under the Code. Lash, Warner denied in its answer that it breached any warranties to Connecticut/Ravenswood, but it admitted in response to discovery that at the time it indorsed the check, Hayner\u2019s and Van Styn\u2019s indorsements appeared on the check. Lash, Warner also admitted that it had indorsed the check and returned it to Fox in exchange for payment for its services in the amount of $4,706.25.\nThe facts of this case being undisputed, we determine whether Lash, Warner created, as a matter of law, statutory warranties under the Code.\nThe Code\u2019s warranty provisions in issue here are section 3\u2014 417(l)\u2019s warranty of good title and section 3 \u2014 417(2)\u2019s warranties of good title and that all prior signatures are genuine or authorized. The precise question presented for our review is whether these warranties are triggered where a payee indorses a check in exchange for a co-payee\u2019s payment for services rendered, such indorsement being made after the forged signature of another payee but before all necessary signatures appear on the check. As the parties have conceded in oral argument that no Illinois cases have addressed the effect of these warranties on this factual scenario and as we have not found any cases from other jurisdictions addressing this situation, we look to the language of the Code and the drafters\u2019 intent to reach our determination of this question.\nThe \u201cpresentment\u201d warranty in section 3 \u2014 417(1)(a) provides:\n\u201cAny person who obtains payment or acceptance and any prior transferor warrants to a person who in good faith pays or accepts that\n(a) he has a good title to the instrument or is authorized to obtain payment or acceptance on behalf of one who has a good title.\u201d (Ill. Rev. Stat. 1987, ch. 26, par. 3 \u2014 417(1)(a).)\nUnder this provision, a person who gives his signature in exchange for payment under section 3 \u2014 417(1) warrants that \u201che has a good title to the instrument.\u201d In the absence of a Code definition for the term \u201cgood title,\u201d evidence of the drafters\u2019 intent as to this term, or the parties\u2019 citation to any authority to the contrary, we rely on the plain meaning of the above phrase in concluding that section 3 \u2014 417(1) applies to one who presents an instrument as one who purports to have and transfer title of the instrument by his indorsement. Lash, Warner could not have been purporting to have title to the check at the time it indorsed the check because a payee\u2019s signature was missing at the time. Thus, we hold that Lash, Warner\u2019s indorsement did not create the section 3 \u2014 417(1) presentment warranty of good title.\nTurning to the \u201ctransfer\u201d warranties, sections 3 \u2014 417(2)(a), and (2)(b) provide, in relevant part:\n\u201cAny person who transfers an instrument and receives consideration warrants to his transferee and if the transfer is by indorsement to any subsequent holder who takes the instrument in good faith that\n(a) he has a good title to the instrument ***\n(b) all signatures are genuine or authorized.\u201d (Ill. Rev. Stat. 1987, ch. 26, pars. 3 \u2014 417(2)(a), (2)(b).)\nLash, Warner contends that the events concluding in its signature did not trigger the \u201ctransfer\u201d warranties because there was no \u201ctransfer of an instrument.\u201d It argues instead that its signature was merely a relinquishment of its rights in the instrument or an authorization to a copayee to negotiate the check. Connecticut/Ravenswood, on the other hand, argues that Lash, Warner transferred the check when it gave up all rights it had in the instrument.\nThe Code does not define \u201ctransfer of an instrument,\u201d nor do the drafters elucidate on the usage of the phrase. The parties, though, rely on different sections of the Code as indicating the drafters\u2019 intent in this regard. We find none of these sections to be of much assistance.\nLash, Warner cites section 3 \u2014 116(b), which states, in part, that \u201can instrument payable to the order of two or more persons *** may be negotiated *** only by all of them.\u201d (Ill. Rev. Stat. 1987, ch. 26, par. 3 \u2014 116(b).) This section, however, was intended by the drafters not to define the warranty liability under section 3 \u2014 417, but to clarify the distinction between an instrument payable to payees in the alternative and payable jointly as it relates to the negotiability of the instrument. Ill. Ann. Stat., ch. 26, par. 3 \u2014 116, Uniform Commercial Code Comment, at 72 (Smith-Hurd 1963).\nConnecticut/Ravenswood cites section 3 \u2014 201, providing that a \u201c[t]ransfer of an instrument vests in the transferee such rights as the transferor has therein\u201d (Ill. Rev. Stat. 1987, ch. 26, par. 3 \u2014 201), and this section\u2019s explicatory comment that the section \u201capplies to any transfer, whether by a holder or not. Any person who transfers an instrument transfers whatever rights he has in it. The transferee acquires those rights even though they do not amount to \u2018title.\u2019 \u201d (Ill. Ann. Stat., ch. 26, par. 3 \u2014 201), Uniform Commercial Code Comment 1, at 95 (Smith-Hurd 1963).) While this section explains the effect of a transfer, it sheds no light on when there is a \u201ctransfer of an instrument.\u201d The Uniform Commercial Code Comment to the section on negotiation, section 3 \u2014 202, so illustrates. In stating that negotiation is merely a special form of transfer, which importance lies entirely in the fact that it makes a transferee a holder, it states that \u201cany negotiation carries a transfer of rights as provided in *** Section 3 \u2014 201.\u201d Ill. Ann. Stat., ch. 26, par. 3 \u2014 201, Uniform Commercial Code Comment 1, at 101 (Smith-Hurd 1963).\nConnecticut/Ravenswood further cites section 3 \u2014 118(e), which provides: \u201c[ujnless the instrument otherwise specifies two or more persons who sign as maker, acceptor or drawer or indorser and as part of the same transaction are jointly and severally liable even though the instrument contains such words as T promise to pay.\u2019 \u201d (Ill. Rev. Stat. 1987, ch. 26, par. 3 \u2014 118(e).) We find no merit to Connecticut/Ravenswood\u2019s contention that this section provides for several liability against each of the payee indorsers in the instant case even though each individual indorser is not conveying the entire instrument.\nAs its title explains, section 3 \u2014 118 is intended to clarify ambiguous terms and rules of construction. The drafters clearly intended that this section clarify the contract liability of an indorser or coindorsers to pay if an instrument is dishonored, not define the warranty liability of indorsers. The Uniform Commercial Code Comment to section 3 \u2014 118(e) states that this joint and several liability rule \u201capplies only where such parties sign as part of the same transaction; successive indorsers are, of course, liable severally but not jointly.\u201d (Ill. Ann. Stat., ch. 26, par. 3 \u2014 118(e), Commercial Code Comment 6, at 79 (Smith-Hurd 1963).) The comment\u2019s latter sentence demonstrates that section 3 \u2014 118(e) does not address the successive indorsement situation and the warranty liability of such indorsers. The \u201csame transaction\u201d language obviously refers to the contract liability of coindorsers, rather than the warranty liability of successive indorsers. Moreover, as Lash, Warner urges, construing section 3 \u2014 118(e) to apply to section 3 \u2014 417 would be illogical because it would suggest that if a check is issued to multiple payees, the first payee to indorse could be liable for subsequent forgeries of other payees.\nBefore revealing the outcome of our search for other provisions in the Code, we need to expound on the parties\u2019 dispute in this case. Connecticut/Ravenswood argues that Lash, Warner confuses the concept of transfer with negotiation when it contends that its signature constituted merely a relinquishment of its rights as opposed to a transfer of an instrument. We understand this argument to be that the distinction between transfer and negotiation is that a transfer is the relinquishment of any interest in an instrument, whereas a negotiation conveys an entire instrument.\nIn our judgment, the Code provision relating to negotiation and the Uniform Commercial Code Comment suggest that the distinction between transfer and negotiation is not the quantum of the interest in the instrument that a person is purporting to convey but what rights the recipient acquires. The two reveal the correlation between the terms \u201ctransfer\u201d and \u201cnegotiation.\u201d Uniform Commercial Code Comment 1 to section 3 \u2014 202 states:\n\u201cNegotiation is merely a special form of transfer, the importance of which lies entirely in the fact that it makes the transferee a holder ***.\u201d (Ill. Ann. Stat., ch. 26, par. 3 \u2014 202, Uniform Commercial Code Comment 1, at 101 (Smith-Hurd 1963).)\nSection 3 \u2014 202(3) provides:\n\u201cAn indorsement is effective for negotiation only when it conveys the entire instrument ***. If it purports to be of less it operates only as a partial assignment.\u201d (Ill. Rev. Stat. 1987, ch. 26, par. 3-202(3).)\nThe Code comment demonstrates that a negotiation and transfer are not separate and distinct concepts; their dissimilarity lies only in what the recipient acquires. A negotiation confers upon the recipient the status of a holder, whereas the recipient of a transfer may or may not acquire this status. Because the distinction in these two terms does not lie in the quantum of the instrument to be conveyed and because section 3 \u2014 202(3) provides that to negotiate an instrument, an indorsement must convey the entire instrument, it follows that one must convey the entire instrument to \u201ctransfer an instrument.\u201d The drafters\u2019 use of the words \u201cpartial assignment\u201d in section 3 \u2014 202 instead of \u201ctransfer\u201d to describe the effect of a conveyance of less than the entire instrument further supports this conclusion.\nAs a separate ground for holding that the \u201ctransfer\u201d warranties are inapplicable to the instant case, we do not believe that the drafters could have intended the warranty provisions to apply to persons in the position of Lash, Warner. It is contrary to reasonable commercial expectations that in a multiple-payee situation, a payee could not give up his personal interest, however limited, to other copayees without warranting the title to the document or the genuineness of the signatures of other copayees who have previously signed the instrument. Contrary to Connecticut/Ravenswood\u2019s argument that the drafters contemplated this situation and provided the protection of \u201cwithout recourse\u201d to such copayees, an indorser who signs \u201cwithout recourse\u201d disclaims his contract liability, but with the exception of limiting the subsection (2)(d) warranty to one that the indorser has no knowledge of any defenses, such an indorser makes all of the other section 3 \u2014 417 warranties. Ill. Ann. Stat., ch. 26, par. 3 \u2014 417, Uniform Commercial Code Comment 9, at 320 (Smith-Hurd 1963); see Wolfram v. Halloway (1977), 46 Ill. App. 3d 1045, 1048, 361 N.E.2d 587, 589.\nAccordingly, we find that Lash, Warner is not liable under the Code\u2019s warranty provisions because it did not \u201ctransfer an instrument\u201d under section 3 \u2014 417(2) or purport to convey good title under section 3 \u2014 417(1)(a). Thus, we reverse the trial court\u2019s summary judgment order in favor of Connecticut/Ravenswood and remand this case to the circuit court with directions to enter summary judgment in favor of Lash, Warner.\nReversed and remanded with directions.\nCAMPBELL and O\u2019CONNOR, JJ., concur.\nThe $32,534 judgment was paid by Ravenswood, which had admitted its liability to Connecticut on its presentment warranty.\n6 R. Anderson, Uniform Commercial Code \u00a73 \u2014 417:27 (3d ed. 1984) supports our conclusion in stating that \u201cit can be readily concluded that \u2018good title\u2019 requires all indorsements necessary to plaintiff\u2019s chain of title be genuine and authorized.\u201d We may infer from this comment that the necessary indorsements must exist and the warranty does not come into play where a necessary indorsement is missing. Accord First National Bank v. Nunn (Mont. 1981), 628 P.2d 1110, 1115.\nLash, Warner argues that Connecticut/Ravenswood is procedurally barred from relying on section 3 \u2014 118(e) on appeal because it sued Lash, Warner for breach of warranty under section 3 \u2014 417(2)(b) and it did not argue the \u201cjoint liability theory\u201d under section 3 \u2014 118(e) in its motion for summary judgment or in its response to Lash, Warner\u2019s motion for summary judgment. Connecticut/Ravenswood correctly points out, however, that its reliance on section 3 \u2014 118(e) is not reliance on a new theory or substantive right; rather, section 3 \u2014 118 is definitional. As the section\u2019s title explains, it is intended to clarify \u201cAmbiguous Terms and Rules of Construction.\u201d\nStatus of holder of a negotiable instrument is a prerequisite to qualifying as a holder in due course, which allows a person to take the instrument free from personal defenses. Ill. Rev. Stat. 1987, ch. 26, par. 3 \u2014 305.", "type": "majority", "author": "JUSTICE BUCKLEY" } ], "attorneys": [ "Beermann, Swerdlove, Woloshin, Barezky & Berkson, of Chicago (Alvin R. Becker, Howard A. London, of counsel), for appellant.", "Levenfeld, Eisenberg, Janger, Glassberg, Samotny & Halper, of Chicago, for appellees Connecticut National Bank and Bank of Ravenswood." ], "corrections": "", "head_matter": "DONALD HAYNER et al., Plaintiffs-Appellees, v. THERESA FOX et al., Defendants-Appellees (Connecticut National Bank, f/k/a Hartford National Bank, et al., Third-Party Plaintiffs-Appellees; Lash, Warner & Associates, Third-Party Defendant-Appellant).\nFirst District (1st Division)\nNo. 1\u201487\u20143641\nOpinion filed May 8, 1989.\nRehearing denied August 30, 1989.\nBeermann, Swerdlove, Woloshin, Barezky & Berkson, of Chicago (Alvin R. Becker, Howard A. London, of counsel), for appellant.\nLevenfeld, Eisenberg, Janger, Glassberg, Samotny & Halper, of Chicago, for appellees Connecticut National Bank and Bank of Ravenswood." }, "file_name": "0989-01", "first_page_order": 1011, "last_page_order": 1018 }