{ "id": 4277370, "name": "MIDAMERICA BANK, FSB, Plaintiff-Appellee, v. CHARTER ONE BANK, FSB, Defendant and Third-Party Plaintiff-Appellant (David Hernandez et al., Third-Party Defendants-Appellees); MIDAMERICA BANK, FSB, Plaintiff-Appellant, v. CHARTER ONE BANK, FSB, Defendant and Third-Party Plaintiff-Appellee (David Hernandez et al., Third-Party Defendants-Appellees)", "name_abbreviation": "MidAmerica Bank v. Charter One Bank", "decision_date": "2008-06-02", "docket_number": "Nos. 2-07-0064, 2-07-0158 cons.", "first_page": "243", "last_page": "254", "citations": [ { "type": "official", "cite": "383 Ill. App. 3d 243" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "351 Ill. App. 3d 645", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 1083923 ], "year": 2004, "pin_cites": [ { "page": "652" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/351/0645-01" ] }, { "cite": "17 S. Ill. U. L.J. 719", "category": "journals:journal", "reporter": "S. Ill. U. L.J.", "year": 1993, "pin_cites": [ { "page": "725" } ], "opinion_index": 0 }, { "cite": "775 F. Supp. 266", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 5871993 ], "year": 1991, "pin_cites": [ { "parenthetical": "noting split between this approach and the Illinois approach" } ], "opinion_index": 0, "case_paths": [ "/f-supp/775/0266-01" ] }, { "cite": "27 Wake Forest L. Rev. 613", "category": "journals:journal", "reporter": "Wake Forest L. Rev.", "year": 1992, "pin_cites": [ { "page": "621", "parenthetical": "hereinafter Davis" } ], "opinion_index": 0 }, { "cite": "38 Okla. L. Rev. 359", "category": "journals:journal", "reporter": "Okla. L. Rev.", "year": 1985, "pin_cites": [ { "page": "362", "parenthetical": "hereinafter Carter" } ], "opinion_index": 0 }, { "cite": "14 Ill. App. 3d 729", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2683868, 2685676 ], "year": 1973, "pin_cites": [ { "parenthetical": "departed from in Able" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/14/0729-01", "/ill-app-3d/14/0729-02" ] }, { "cite": "59 Ill. 2d 211", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2959222 ], "year": 1974, "pin_cites": [ { "page": "216", "parenthetical": "\"The cashier's check is substantially equivalent to a certified check in that neither generally can be countermanded and both circulate in the commercial world as primary obligations of the issuing bank as substitutes for the money represented\"" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/59/0211-01" ] }, { "cite": "268 A.2d 327", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1970, "pin_cites": [ { "page": "329" } ], "opinion_index": 0 }, { "cite": "111 N.J. Super. 347", "category": "reporters:state", "reporter": "N.J. Super.", "case_ids": [ 303645 ], "year": 1970, "pin_cites": [ { "page": "351-52" } ], "opinion_index": 0, "case_paths": [ "/nj-super/111/0347-01" ] }, { "cite": "600 F. Supp. 1008", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3725015 ], "weight": 5, "year": 1984, "pin_cites": [ { "page": "1012", "parenthetical": "summarizing criticism" }, { "page": "1011", "parenthetical": "explaining various approaches" }, { "page": "1011" }, { "page": "1011" } ], "opinion_index": 0, "case_paths": [ "/f-supp/600/1008-01" ] }, { "cite": "77 Ill. App. 3d 375", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3289508 ], "weight": 2, "year": 1979, "pin_cites": [ { "page": "377" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/77/0375-01" ] } ], "analysis": { "cardinality": 998, "char_count": 26932, "ocr_confidence": 0.802, "pagerank": { "raw": 5.550597901983371e-08, "percentile": 0.3494041544507035 }, "sha256": "8967e09439765a41c6571fdcb94c42261dd45fdfe14fce1b15d9ccd0efb3a555", "simhash": "1:2bcc9024026ebd7d", "word_count": 4541 }, "last_updated": "2023-07-14T19:46:05.228492+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "MIDAMERICA BANK, FSB, Plaintiff-Appellee, v. CHARTER ONE BANK, FSB, Defendant and Third-Party Plaintiff-Appellant (David Hernandez et al., Third-Party Defendants-Appellees). \u2014 MIDAMERICA BANK, FSB, Plaintiff-Appellant, v. CHARTER ONE BANK, FSB, Defendant and Third-Party Plaintiff-Appellee (David Hernandez et al., Third-Party Defendants-Appellees)." ], "opinions": [ { "text": "JUSTICE O\u2019MALLEY\ndelivered the opinion of the court:\nIn this consolidated appeal of the trial court\u2019s ruling after a bench trial, defendant Charter One Bank (Charter One) appeals the trial court\u2019s ruling that Charter One was liable to plaintiff MidAmerica Bank (MidAmerica) for the $50,000 value of a cashier\u2019s check Charter One had refused to honor, and MidAmerica appeals the trial court\u2019s ruling denying it attorney fees. For the reasons that follow, we reverse in part and affirm in part.\nThe parties do not dispute the basic underlying facts. Mary Chris-telle, the mother of David Hernandez (who was also president of Essential Technologies of Illinois, Inc. (ETI)), purchased a $50,000 check payable to ETI with funds from her Charter One account, and the check was deposited in ETI\u2019s account at MidAmerica. Four days after ETI deposited the cashier\u2019s check, Christelle asked Charter One to stop payment on the check. Charter One did so and subsequently refused to honor the check when MidAmeriea presented it for payment. Charter One returned the check to MidAmeriea with a \u201cstop payment\u201d stamp across the front, and MidAmeriea sent the check to ETI after removing the $50,000 credit from ETI\u2019s account. Within two weeks, the balance of ETI\u2019s MidAmeriea account dropped to approximately negative $52,000 due to a series of checks that were returned for insufficient funds. MidAmeriea closed the account and instigated a lawsuit in which it was assigned ETI\u2019s interest in the $50,000 check. MidAmeriea then filed the present suit against Charter One to recover the value of the check, and Charter One in turn filed a third-party complaint against Christelle, David Hernandez, his wife Gina M. Nelson Hernandez, and ETI. Though a copy of the cashier\u2019s check was used as an exhibit at trial, the parties were unable to produce the original cashier\u2019s check. Some testimony indicated that the check may have been in an out-of-state ETI office, but there was no definitive evidence as to the check\u2019s location.\nAfter hearing testimony and receiving other evidence, the trial court ruled that Charter One was obligated to honor its cashier\u2019s check and thus was hable to MidAmeriea for $50,000, because \u201c[t]he law under the [Uniform Commercial Code (Code) (810 ILCS 5/1 \u2014 101 et seq. (West 2002))] is that [cashier\u2019s checks] are as good as currency.\u201d The court further found that ETI and David and Gina Hernandez had used Christelle as a pawn in a check-kiting scheme to defraud Charter One and that Charter One was entitled to a judgment against them for the same $50,000. Based on its reading of the relevant case law, the court declined to award MidAmeriea attorney fees in connection with the lawsuit. Charter One had argued that it was entitled to a setoff against MidAmeriea because MidAmeriea, as an assignee of ETI, inherited ETI\u2019s $50,000 liability to Charter One along with the right to enforce the $50,000 check against Charter One. However, because Charter One had failed to request a setoff in its pleadings, the court declined to award one. Charter One and MidAmeriea both filed timely appeals.\nIn its appeal (case No. 2 \u2014 07\u20140064), Charter One first argues that its refusal to honor its cashier\u2019s check was justified, because it accepted a stop payment order from Christelle. MidAmeriea counters that Illinois law does not allow a bank to stop payment on a cashier\u2019s check and thus that Charter One\u2019s refusal to honor its check was not justified.\nIn support of its position, MidAmerica directs us to the decision in Able & Associates, Inc. v. Orchard Hill Farms of Illinois, Inc., 77 Ill. App. 3d 375 (1979). In Able, the court addressed the very question presented here: whether the law allows a bank to stop payment on a cashier\u2019s check. Able, 77 Ill. App. 3d at 377. The court in Able recognized a split of authority between cases, including one Illinois Appellate Court case that held that a bank could stop payment on a cashier\u2019s check \u201cconsistent with those provisions of the Uniform Commercial Code relat[ed] to holders in due course,\u201d and cases that \u201cadhere[d] to a contrary rule that cashier\u2019s checks are not, under any circumstances, subject to countermand by the issuing bank.\u201d Able, 11 Ill. App. 3d at 380. The court sided with the latter line of cases, and it explained its reasoning as follows:\n\u201cIt is clear that in Illinois, a cashier\u2019s check is regarded as accepted by the act of issuance. [Citations.] Further, under section 4 \u2014 403 of the Uniform Commercial Code, a stop order is ineffective \u2018after the bank has *** accepted or certified the item.\u2019 (Ill. Rev. Stat. 1977, ch. 26, par. 4 \u2014 303.)\u201d Able, 11 Ill. App. 3d at 381.\nOther courts clarified that this rule, that a cashier\u2019s check be considered accepted by the act of issuance, was based on language from the Code that \u201c [acceptance is the drawee\u2019s signed engagement to honor the draft as presented\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 410(1)); these courts considered a bank officer\u2019s signature on a cashier\u2019s check as sufficient for acceptance under the quoted language. See Do Silva v. Sanders, 600 F. Supp. 1008, 1012 n.11 (D.C. 1984).\nThe Able court also argued that policy considerations favored its holding, because cashier\u2019s checks operate as the commercial equivalent of cash, and allowing a bank to stop payment (and thus renege on its guarantee to honor the check) would \u201c \u2018undermine the public confidence in the bank and its checks and thereby deprive the cashier\u2019s check of the essential incident which makes it useful.\u2019 \u201d Able, 11 Ill. App. 3d at 382, quoting National Newark & Essex Bank v. Giordano, 111 N.J. Super. 347, 351-52, 268 A.2d 327, 329 (1970).\nThe Able decision was consistent with Illinois case law preceding it. See, e.g., Gillespie v. Riley Management Corp., 59 Ill. 2d 211, 216 (1974) (\u201cThe cashier\u2019s check is substantially equivalent to a certified check in that neither generally can be countermanded and both circulate in the commercial world as primary obligations of the issuing bank as substitutes for the money represented\u201d). But see Bank of Niles v. American State Bank, 14 Ill. App. 3d 729 (1973) (departed from in Able). The approach followed in Able came to be known as the \u201ccash substitute\u201d or \u201ccash equivalency\u201d approach, or the \u201cacceptance approach.\u201d See J. Carter, Uniform Commercial Code: A Bank\u2019s Right to Dishonor a Cashier\u2019s Check, 38 Okla. L. Rev. 359, 362 (1985) (hereinafter Carter) (discussing differing views to the problem presented in Able)-, B. Davis, The Future of Cashier\u2019s Checks Under Revised Article 3 of the Uniform Commercial Code, 27 Wake Forest L. Rev. 613, 621 (1992) (hereinafter Davis).\nWhile Illinois followed the cash-equivalency approach described above, other jurisdictions followed a divergent approach that allowed a bank to dishonor its cashier\u2019s check where it could assert a defense that would be valid against enforcement of a note. See Bank One, Merrillville, NA v. Northern Trust Bank/DuPage, 775 F. Supp. 266, 270 n.4 (N.D. Ill. 1991) (noting split between this approach and the Illinois approach); Carter, 38 Okla. L. Rev. at 364-65 (discussing two approaches under which courts treated cashier\u2019s checks as negotiable instruments instead of cash equivalents). Proponents of this approach, which we term for purposes of this discussion the \u201cnote approach,\u201d criticized the cash-equivalency approach\u2019s reliance on the Code rule that a stop order may be issued only before acceptance (see Ill. Rev. Stat. 1977, ch. 26, par. 4 \u2014 303(a)). They argued that \u201cthe concept of stopping payment has relevance only to relations between a bank and its customer who draws a check against the bank\u201d and, \u201csince the bank, as drawer and drawee, is its own customer when it issues a cashier\u2019s check, it is nonsensical *** to speak of the bank\u2019s liability to itself for failing to stop payment on its own cashier\u2019s check.\u201d Da Silva, 600 F. Supp. at 1012 (summarizing criticism). Critics of the cash-equivalency approach also argued that it contravened section 3 \u2014 118(a) of the Code, which provided that \u201c[a] draft drawn on the drawer is effective as a note\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 118(a)). Davis, 27 Wake Forest L. Rev. at 621 (criticizing approaches that treated cashier\u2019s checks as drafts instead of notes). These critics instead advocated for a position that would allow a bank to dishonor a cashier\u2019s check to the extent it had any defense that would be valid against a note. See Ill. Rev. Stat. 1977, ch. 26, pars. 3 \u2014 305, 3 \u2014 306 (defenses to honoring a note).\nMost courts that reached this result did so in two different ways. Da Silva, 600 F. Supp. at 1011 (explaining various approaches). Some courts relied on section 3 \u2014 118(a), quoted above, to hold that a cashier\u2019s check should be treated as a note. Da Silva, 600 F. Supp. at 1011. Other courts agreed with the premise from the cash-equivalency approach that a cashier\u2019s check could be considered a draft accepted by the act of issuance, but they argued that, under section 3 \u2014 413(1) of the Code, an acceptor was bound in the same way as was a maker and thus should have the same defenses as a maker. Da Silva, 600 F. Supp. at 1011; see Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 413(1) (\u201cThe maker or acceptor engages that he will pay the instrument according to its tenor at the time of his engagement\u201d); see also Davis, 27 Wake Forest L. Rev. at 622-23 (discussing this approach).\nIn an attempt to quell this dispute and provide uniformity to the treatment of cashier\u2019s checks, \u201cthe National Conference of Commissioners on Uniform State Laws and the American Law Institute completely revised Article 3 of the U.C.C.\u201d Davis, 27 Wake Forest L. Rev. at 614. Effective January 1, 1992, the Illinois General Assembly adopted the amendments to Article 3. R. Robertson, Survey of Illinois Law: Commercial Law, 17 S. Ill. U. L.J. 719, 725 (1993), citing Pub. Act 87 \u2014 582, eff. January 1, 1992. Though MidAmerica urges that we follow the Able decision discussed above, Able predates the revision of the Code and is thus an imperfect guide for us here. However, we find ample guidance nonetheless in the plain language of the amended Code.\nThe current version of the Code (810 ILCS 5/1 \u2014 101 et seq. (West 2002)) provides as follows, in pertinent part:\n\u201cThe issuer of a note or cashier\u2019s check or other draft drawn on the drawer is obliged to pay the instrument *** according to its terms at the time it was issued ***. The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under Section 3 \u2014 415.\u201d 810 ILCS 5/3 \u2014 412 (West 2002).\nThus, the revised version of the Code treats a cashier\u2019s check as a note, and it rejects the cash-equivalency approach that many courts, including those in Illinois, followed. See Davis, 27 Wake Forest L. Rev. at 631 (\u201cThe theory that ultimately prevails under the revised Article 3, with important limitations ***, is that cashier\u2019s checks should be treated as demand notes, with the issuing bank making a contract equivalent to that of a maker of a note\u201d). Since a cashier\u2019s check must be treated as a note, all of the defenses to enforcement of a note apply. See 810 ILCS 5/3 \u2014 305 (West 2002).\nWe find further support under section 3 \u2014 411 of the Code for the notion that a bank may dishonor a cashier\u2019s check under certain circumstances. Section 3 \u2014 411 provides as follows:\n\u201c(a) In this Section, \u2018obligated bank\u2019 means the acceptor of a certified check or the issuer of a cashier\u2019s check or teller\u2019s check bought from the issuer.\n(b) If the obligated bank wrongfully *** refuses to pay a cashier\u2019s check ***, the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment ***.\n(c) Expenses *** under subsection (b) are not recoverable if the refusal of the obligated bank to pay occurs because (i) the bank suspends payments, (ii) the obligated bank asserts a claim or defense of the bank that it has reasonable grounds to believe is available against the person entitled to enforce the instrument, (iii) the obligated bank has a reasonable doubt whether the person demanding payment is the person entitled to enforce the instrument, or (iv) payment is prohibited by law.\u201d 810 ILCS 5/3 \u2014 411 (West 2002).\nAs Charter One observes, because the plain language of subsection (b) of section 3 \u2014 411 limits the section to a situation in which a bank \u201cwrongfully\u201d refuses to pay a cashier\u2019s check, there must, by implication, be a situation in which a bank\u2019s refusal to pay a cashier\u2019s check is not wrongful.\nBased on the above discussion, we accept Charter One\u2019s position that a bank may dishonor a cashier\u2019s check under certain circumstances. The question becomes whether any of those circumstances exist here.\nCharter One first argues that it properly dishonored the check pursuant to section 3 \u2014 312 of the Code, which discharges a bank\u2019s obligation to honor a cashier\u2019s check when a person who claims the right to receive the amount of a lost, destroyed, or stolen cashier\u2019s check files a written declaration of loss as part of an effort to recover the value of the check from the issuing bank. 810 ILCS 5/3 \u2014 312 (West 2002). Even though no written declaration of loss appears in the record or was produced at trial, Charter One asserts that Christelle asserted such a claim here because, according to testimony at trial, \u201cthe only way that Charter One would have placed the stop payment order on the Cashier\u2019s Check is if Christelle had prepared and submitted to Charter One\u201d a declaration of loss. Charter One thus argues that its stop payment order was valid. However, Charter One overlooks some important qualifications on the procedure outlined in section 3 \u2014 312. A section 3 \u2014 312 claim made to a bank \u201cbecomes enforceable at the later of (i) the time the claim is asserted, or (ii) the 90th day following the date of [a cashier\u2019s check]\u201d (810 ILCS 5/3 \u2014 312(b)(1) (West 2002)), and, \u201c[u]ntil the claim becomes enforceable, it has no legal effect\u201d (810 ILCS 5/3 \u2014 312(b)(2) (West 2002)). Only if \u201cthe claim becomes enforceable before the check is presented for payment\u201d may the obligated bank avoid its obligation to pay the check. 810 ILCS 5/3\u2014 312(b)(3) (West 2002).\nSection 3 \u2014 312 allows a bank to pay a claimant the value of a lost cashier\u2019s check without fear of double liability in the event the original check resurfaces; the section is not, as Charter One implies, a blanket authorization for a bank to stop payment on a cashier\u2019s check upon the request of a customer. That said, even assuming that Christelle asserted a lost-check claim under section 3 \u2014 312 when she asked Charter One to stop payment on the check four days after issuance (a dubious assumption, if for no other reason than that a request to stop payment on a check is quite different from the claim to the value of the check contemplated in section 3 \u2014 312), the claim could have no legal effect until 90 days after the date of the check. See 810 ILCS 5/3 \u2014 312(b)(2) (West 2002). By the time 90 days had passed, Mid-America had presented the check to Charter One for payment, received the check back from Charter One, returned the check to ETI, and closed ETI\u2019s account. Section 3 \u2014 312 did not authorize Charter One\u2019s decision to dishonor the cashier\u2019s check.\nTo the extent Charter One argues that a bank should have a broad right to stop payment on a cashier\u2019s check upon a request from the customer who purchased the check, we note that the current version of the Code appears designed to penalize just such a practice. See 810 ILCS Ann. 5/3 \u2014 411, Uniform Commercial Code Comments \u2014 1992, at 239 (Smith-Hurd 1993) (\u201cA debtor using [cashier\u2019s checks, teller\u2019s checks, or certified checks] has no right to stop payment. Nonetheless, some banks will refuse payment as an accommodation to a customer. Section 3 \u2014 411 is designed to discourage this practice\u201d); 810 ILCS Ann. 5/3 \u2014 411, Uniform Commercial Code Comments \u2014 1992, at 239 (Smith-Hurd 1993) (\u201cSubsection (c) provides that expenses *** are not recoverable if the refusal to pay is because of the reasons stated. The purpose is to limit that recovery to cases in which the bank refuses to pay even though its obligation to pay is clear and it is able to pay. Subsection (b) applies only if the refusal to honor the check is wrongful. If the bank is not obliged to pay there is no recovery\u201d); Davis, 27 Wake Forest L. Rev. at 639 (\u201cthe drafters included modifications to prevent banks from being too easily persuaded to dishonor the checks or from feeling compelled to do so upon a customer\u2019s request\u201d).\nCharter One also argues that MidAmerica should not now be able to enforce the cashier\u2019s check, because ETI procured it through fraud and MidAmerica, as assignee of ETI\u2019s interest in the check, stands in the shoes of ETI. Before addressing this argument, we must clarify precisely what right to enforcement is at issue. The parties base their written arguments at least partially on a dispute as to whether Charter One wrongfully dishonored the check at the time MidAmerica originally presented it. However, that dispute is not before us. Regardless of the propriety of Charter One\u2019s decision to dishonor the check, MidAmerica, upon having the check returned, removed the $50,000 credit from ETI\u2019s account and gave the check to ETI. (ETI\u2019s Mid-America account later accrued a negative balance after subsequent checks deposited by ETI were dishonored due to insufficient funds.) MidAmerica did not suffer any damage as a result of the Charter One check. In a suit to recover the negative balance of ETI\u2019s account, Mid-America was assigned ETI\u2019s right to enforce the check. Therefore, the dispute before us is whether ETI has a current right to enforce the check against Charter One.\nWe turn to the Code to resolve the dispute. The Code defines a \u201c[p]erson entitled to enforce\u201d an instrument as, among other things, \u201cthe holder of the instrument.\u201d 810 ILCS 5/3 \u2014 101 (West 2002). However, the Code also places limitations on a party\u2019s right to enforce an instrument:\n\u201c3 \u2014 305. Defenses and claims in recoupment.\n(a) Except as stated in subsection (b), the right to enforce the obligation of a party to pay an instrument is subject to the following:\n(1) a defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity or illegality of the transaction which, under the law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings;\n(2) a defense of the obligor stated in another Section of this Article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and\n(3) a claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.\n(b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in subsection (a)(1), but is not subject to defenses of the obligor stated in subsection (a)(2) or claims in recoupment stated in subsection (a)(3) against a person other than the holder.\n(c) Except as stated in subsection (d) [dealing with obligations of accommodation parties], in an action to enforce the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument (Section 3 \u2014 306) of another person, but the other person\u2019s claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.\u201d 810 ILCS 5/3 \u2014 305(a), (b), (c) (West 2002).\nAs noted, Charter One asserts that MidAmerica has no right to enforce the cashier\u2019s check here because ETI obtained the check through a fraud on Charter One. MidAmerica counters by challenging the trial court\u2019s finding that ETI engaged in fraud. MidAmerica\u2019s argument on this point has three prongs. First, it argues that Charter One failed to plead fraud against ETI and therefore cannot now assert such fraud, regardless of the proof adduced at trial. Charter One does not respond to this argument in its reply brief. However, we note that, when the trial court found that ETI defrauded Charter One, it did so not to sustain liability against ETI but to establish a factual predicate to its ruling on the respective rights of MidAmerica and Charter One, because, as ETI\u2019s assignee, MidAmerica\u2019s right to enforce the instrument coincided with ETI\u2019s right to enforce it. This question of fact was raised even if ETI was not a proper party to the suit.\nSecond, MidAmerica argues that the trial court lacked jurisdiction over ETI due to a failure of service of process, and, therefore, the trial court could not enter a finding of fraud against ETI. We reject this argument for the same reason we reject MidAmerica\u2019s first argument.\nThird, MidAmerica argues that \u201cabsolutely no evidence was introduced by Charter One establishing that ETI was involved in the alleged check-kiting scheme or that MidAmerica was aware of it.\u201d Of course, since the issue is whether ETI has a right to enforce the instrument, whether MidAmerica was aware of any fraud is irrelevant. That said, Charter One directs us to ample evidence to support the trial court\u2019s finding that ETI defrauded Charter One. The trial court heard evidence that Christelle\u2019s Charter One account had never had more than $5,000 in activity in a single month before January 2002, when the account value rose to over $100,000 before two $50,000 checks were returned for insufficient funds. There was also evidence that items were being deposited and withdrawn from Christelle\u2019s account for the same dollar amount in a very short period of time. Further, David Hernandez, an agent of ETI, asserted his fifth amendment privilege against self-incrimination when asked about allegations that he had manipulated Christelle\u2019s finances and when asked about ETI\u2019s financial transactions. As the trial court noted in its ruling, the cashier\u2019s check was made out to ETI, and thus ETI was poised to benefit from the check. We will not overturn a trial court\u2019s factual findings unless they are against the manifest weight of the evidence. E.g., Thomas v. Diener, 351 Ill. App. 3d 645, 652 (2004). In light of the evidence that supports the notion that ETI defrauded Charter One, we will not disturb the trial court\u2019s finding on that point. We therefore reject all three prongs of MidAmerica\u2019s challenge to the trial court\u2019s finding that ETI procured the check by fraud through a check-kiting scheme, and we consider whether ETI (and thus its assignee, Mid-America) may enforce the instrument after committing such fraud to obtain it.\nThe type of fraud at issue here, termed \u201cfraud in the inducement,\u201d is a defense of the obligor under section 3 \u2014 305(a)(2). J. White & R Summers, Uniform Commercial Code \u00a714 \u2014 10, at 542-43 (5th ed. 2000). MidAmerica argues that, even if ETI committed fraud, Charter One may not assert fraud as a defense to enforcement because, pursuant to section 3 \u2014 305(b), defenses of the obligor do not apply against holders in due course, a status MidAmerica ascribes to ETI. Section 2 \u2014 203 of the Code provides a quick rejoinder to MidAmerica\u2019s argument:\n\u201cTransfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.\u201d 810 ILCS 5/3 \u2014 203(b) (West 2002).\nBecause the trial court found that ETI procured the cashier\u2019s check by fraud, ETI cannot claim the protection of holder-in-due-course status. Also because the trial court found that ETI procured the instrument by fraud, Charter One has a valid defense against ETI\u2019s right to enforce the instrument. Since MidAmerica stands in the shoes of ETI, Charter One\u2019s defense is also valid against MidAmerica\u2019s right to enforce the instrument. We must therefore reverse the trial court\u2019s ruling that Charter One was liable to MidAmerica (through ETI) for the value of the check.\nIn its appeal (case No. 2 \u2014 07\u20140158), MidAmerica argues that the trial court erred by refusing to award it attorney fees for Charter One\u2019s wrongful refusal to pay on the cashier\u2019s check. However, we hold above that MidAmerica, as an assignee of ETI, cannot enforce the cashier\u2019s check against Charter One. Therefore, we do not reach this issue.\nFor the foregoing reasons, we reverse the judgment of the circuit court of Du Page County holding that MidAmerica could enforce the cashier\u2019s check against Charter One. We affirm the trial court\u2019s decision not to award attorney fees to MidAmerica.\nNo. 2 \u2014 07\u20140064, Reversed.\nNo. 2 \u2014 07\u20140158, Affirmed.\nBYRNE, P.J., and ZENOFF, J., concur.\nMidAmerica relies on the committee comments to argue that an issuing bank may never refuse to pay a cashier\u2019s check. However, as demonstrated by our discussion above, the revised Code requires that cashier\u2019s checks be treated as notes, and thus defenses to the enforcement of notes apply. The committee comments do not indicate that a bank may never dishonor a check; they indicate that a bank should not try to stop payment on a check as an accommodation to a customer.", "type": "majority", "author": "JUSTICE O\u2019MALLEY" } ], "attorneys": [ "Richard J. Nogal and Martha K. Milia, both of Goldstine, Skrodzki, Russian, Nemec & Hoff, Ltd., of Burr Ridge, for Charter One Bank.", "Patrick J. Williams and Vincent C. Mancini, both of Ekl Williams PLLC, of Lisle, for MidAmerica Bank." ], "corrections": "", "head_matter": "MIDAMERICA BANK, FSB, Plaintiff-Appellee, v. CHARTER ONE BANK, FSB, Defendant and Third-Party Plaintiff-Appellant (David Hernandez et al., Third-Party Defendants-Appellees). \u2014 MIDAMERICA BANK, FSB, Plaintiff-Appellant, v. CHARTER ONE BANK, FSB, Defendant and Third-Party Plaintiff-Appellee (David Hernandez et al., Third-Party Defendants-Appellees).\nSecond District\nNos. 2\u201407\u20140064, 2\u201407\u20140158 cons.\nOpinion filed June 2, 2008.\nRichard J. Nogal and Martha K. Milia, both of Goldstine, Skrodzki, Russian, Nemec & Hoff, Ltd., of Burr Ridge, for Charter One Bank.\nPatrick J. Williams and Vincent C. Mancini, both of Ekl Williams PLLC, of Lisle, for MidAmerica Bank." }, "file_name": "0243-01", "first_page_order": 259, "last_page_order": 270 }