{ "id": 3331676, "name": "SALEM NATIONAL BANK, Plaintiff-Appellee, v. RAY CHAPMAN, d/b/a Triple R. Motor Company, Defendant-Appellant", "name_abbreviation": "Salem National Bank v. Chapman", "decision_date": "1978-09-13", "docket_number": "No. 77-516", "first_page": "625", "last_page": "628", "citations": [ { "type": "official", "cite": "64 Ill. App. 3d 625" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "373 N.E.2d 568", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "57 Ill. App. 3d 844", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3420849 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/57/0844-01" ] }, { "cite": "22 Utah 2d 433", "category": "reporters:state", "reporter": "Utah 2d", "case_ids": [ 8867930 ], "weight": 2, "pin_cites": [ { "page": "888" } ], "opinion_index": 0, "case_paths": [ "/utah-2d/22/0433-01" ] } ], "analysis": { "cardinality": 422, "char_count": 7677, "ocr_confidence": 0.888, "pagerank": { "raw": 2.342911615349634e-07, "percentile": 0.7923666592144948 }, "sha256": "47f2d7be80e417f92fe8e8d80f77eaa6c13e2d957951320ae61bbc42c90b0d1a", "simhash": "1:a587c68a56ccd7e1", "word_count": 1316 }, "last_updated": "2023-07-14T19:48:21.732212+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "SALEM NATIONAL BANK, Plaintiff-Appellee, v. RAY CHAPMAN, d/b/a Triple R. Motor Company, Defendant-Appellant." ], "opinions": [ { "text": "Mr. PRESIDING JUSTICE EBERSPACHER\ndelivered the opinion of the court:\nThis is an appeal from the judgment of the circuit court of Marion County, which held defendant, Ray Chapman, liable in the amount of *6,844.88 to the plaintiff, Salem National Bank of Salem, Illinois.\nRay Chapman, doing business as Triple R. Motor Company, maintained a checking account with Salem National Bank. As a matter of course, he would deposit checks received by him as payment for vehicles in the Salem account for collection, and write checks upon the account.\nIn mid-August 1976, defendant deposited a *4,240 bank draft payable through the Indiana National Bank in Indianapolis, Indiana. The item was sent for collection, was marked \u201cvoid,\u201d and was dishonored.\nThe defendant overdrew his checking account in the amount of *6,844.88, which amount included the *4,240 due on the dishonored draft. The bank, in November 1976, brought suit to collect on the overdraft. The defendant answered, and alleged in his second amended answer the affirmative defense of failure by the bank to notify him of the dishonor in a timely manner, and sought discharge as an indorser on the *4,240 item. Defendant Chapman maintained that he was not notified of the dishonor until approximately one month after the bank received its notification. The bank, however, maintained that it notified the defendant \u201cimmediately\u201d after it received notification.\nThe matter was heard by the trial court sitting without a jury, and as indicated, the court found in the bank\u2019s favor in the sum of *6,844.88 and judgment was entered in that amount against the defendant.\nThere are two issues presented. First, was Salem National Bank required to notify defendant of the dishonor by the Uniform Commercial Code as adopted in Illinois? And, if so, then second, did Salem National notify the defendant in a timely manner as required by statute?\nThe laws regulating commercial paper and bank deposits and collections in Illinois are codified in Illinois\u2019 adoption of the Uniform Commercial Code (UCC), as Ill. Rev. Stat. 1975, ch. 26, arts. 3 and 4.\nNotice of dishonor was required from Salem National to defendant under the UCC (Ill. Rev. Stat. 1975, ch. 26, pars. 4 \u2014 212(1) and (4)), which provides as follows:\n\u201c(1) If a collecting bank has made provisional settlement with its customer for an item and itself fails by reason of dishonor, suspension of payments by a bank or otherwise to receive a settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer\u2019s account or obtain refund from its customer whether or not it is able to return the items if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. These rights to revoke, charge-back, and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final (subsection (3) of Section 4 \u2014 211 and subsections (2) and (3) of Section 4 \u2014 213).\n(4) The right to charge-back is not affected by\n(a) prior use of the credit given for the item; or\n(b) failure by any bank to exercise ordinary care with respect to the item but any bank so failing remains liable.\u201d\nPlaintiff Salem Bank contends that since subsection (1) does not specifically require notice of dishonor to defendant, the bank is not required to give such notice. However, the statute does state that the bank may revoke a provisional settlement, charge-back the amount of any credit given or obtain a refund from its customer if \u201cit returns the item or sends notification of the facts.\u201d Since the \u201cfact\u201d which entitles the bank to revoke the provisional settlement, and charge-back or obtain refund from the customer, is the fact of dishonor, it seems clear that the collecting bank, i.e., the Salem National Bank, is required to give notice by its midnight deadline or within a reasonable time after it learns the fact of dishonor, to the customer.\nThis position is reinforced by section 4 \u2014 202(1) (b) of the UCC (Ill. Rev. Stat. 1975, ch. 26, par. 4 \u2014 202(1) (b)) which provides as follows:\n\u201c(1) A collecting bank must use ordinary care in 0#\u00ab\n(b) Sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank\u2019s transferor \u201d #\nIt seems logical that the drafters of the Code, and our legislature in adopting it, would not prescribe a standard of care for a requirement, and specifically mention that requirement in the section stating the standard of care, if it was not meant to apply.\nIn First Security Bank v. Lundahl, Inc. (1969), 22 Utah 2d 433, 454 P.2d 886, 888, the Supreme Court of Utah stated the same conclusion for different reasons when it said:\n\u201cThe plaintiff\u2019s (bank\u2019s) contention is that it had accepted the check in question as an agent for collection only, and that it took upon itself no liability as the owner of the check. It is true that under the Uniform Commercial Code there is a presumption that a collecting bank acts as agent for its depositor. Sec. 70A \u2014 4\u2014201(1), U. C. A. 1953. However, this presupposes that the bank acts in accordance with its duty imposed by law; and this requires presentation to the payor bank in the due course of business, and, if the check is dishonored, notice to its depositor \u2018by its midnight deadline or within a longer reasonable time\u2019 under the circumstances. Sec. 70A \u2014 4\u2014212(1), U. C. A. 1953. If there is a substantial failure of the bank to perform its duty, it loses its right to charge-back. Sec. 70A \u2014 4\u2014212, U. C. A. 1953.\n# # #\nThis failure of the plaintiff bank to discharge its duty prescribed by the statutes discussed above makes it responsible for the resulting loss.\u201d\nHaving resolved that the bank did have the obligation to notify its customer of the dishonor, the issue becomes whether the bank in fact did notify the defendant. The trial court held that the bank did notify defendant Chapman orally on the basis of the testimony of a bank officer that he called defendant \u201cimmediately\u201d after the bank was notified, and orally notified defendant of the dishonor. Section 3 \u2014 508(3) of the UCC (Ill. Rev. Stat. 1975, ch. 26, par. 3 \u2014 508(3)) provides oral notice is satisfactory. That section states:\n\u201c(3) Notice may be given in any reasonable manner. It may be oral or written and in any terms which identify the instrument and state that it has been dishonored.\u201d\nIt was the court\u2019s conclusion that the matter of when notice was given really became a question of credibility and he found the evidence of the bank more credible than that of the defendant. Viewing the evidence as a whole, we cannot say that the trial court erred in its finding of fact that notice of dishonor was given \u201cimmediately\u201d after the bank was notified. It is not the function of this court to substitute its judgment for that of the trial court. The trial court was in the best position to observe the witnesses and to give consideration to the evidence presented; unless the trial court\u2019s determination is contrary to the manifest weight of the evidence, it should not be disturbed. In re Gates (5th Dist. 1978), 57 Ill. App. 3d 844, 373 N.E.2d 568.\nWe therefore affirm the judgment of the circuit court of Marion County.\nAffirmed.\nG. J. MORAN and KARNS, JJ., concur.", "type": "majority", "author": "Mr. PRESIDING JUSTICE EBERSPACHER" } ], "attorneys": [ "James M. Wexstten, of Walker, Gende, Hatcher, Doyle & Giamanco, of Mt. Vernon, for appellant.", "Miller, Pfaff & Gamer, of Salem, for appellee." ], "corrections": "", "head_matter": "SALEM NATIONAL BANK, Plaintiff-Appellee, v. RAY CHAPMAN, d/b/a Triple R. Motor Company, Defendant-Appellant.\nFifth District\nNo. 77-516\nOpinion filed September 13, 1978.\nJames M. Wexstten, of Walker, Gende, Hatcher, Doyle & Giamanco, of Mt. Vernon, for appellant.\nMiller, Pfaff & Gamer, of Salem, for appellee." }, "file_name": "0625-01", "first_page_order": 647, "last_page_order": 650 }