Title: Eric M. Schmitz v. Firstar Bank Milwaukee
Citation: 2003 WI 83
Docket Number: 2001AP002139
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: July 1, 2003

2003 WI 83 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
01-2139 
 
 
 
COMPLETE TITLE: 
 
 
Eric M. Schmitz,  
          Plaintiff-Appellant-Petitioner, 
     v. 
Firstar Bank Milwaukee,  
          Defendant-Respondent, 
Putnam Mutual Funds Corporation, Putnam  
Investments, Northern Trust Company,  
Fortis Investors, Inc., and Putnam  
Fiduciary Trust Company,  
          Defendants. 
 
 
 
 
MOTION FOR RECONSIDERATION 
2003 WI 21 
Reported at: 260 Wis. 2d 24, 658 N.W.2d 442 
 
 
OPINION FILED: 
July 1, 2003   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
        
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
        
 
COUNTY: 
        
 
JUDGE: 
        
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
      
 
 
2003 WI 83 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No. 01-2139   
(L.C. No. 
99 CV 209) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Eric M. Schmitz,  
 
          Plaintiff-Appellant-Petitioner, 
 
     v. 
 
Firstar Bank Milwaukee,  
 
          Defendant-Respondent, 
 
Putnam Mutual Funds Corporation, Putnam  
Investments, Northern Trust Company,  
Fortis Investors, Inc., and Putnam  
Fiduciary Trust Company,  
 
          Defendants. 
 
FILED 
 
JULY 1, 2003 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
MOTION for reconsideration.  Reconsideration denied.   
 
¶1 
PER CURIAM (on motion for reconsideration).  Firstar 
Bank moves the court to reconsider ¶35 of its opinion in Schmitz 
v. Firstar Bank Milwaukee, 2003 WI 21, 260 Wis. 2d 24, 658 
N.W.2d 442, asserting that a portion of the language is 
unnecessary to the holding and contrary to the law of commercial 
banking in the State of Wisconsin.  Firstar Bank does not ask 
the court to reconsider its holding.   
No. 
01-2139   
 
2 
 
¶2 
Paragraph 35 of the Schmitz opinion reads as follows: 
While it appears clear that accepting a check when the 
payee's endorsement is missing is not in accordance 
with the reasonable commercial standards of banking 
and that the acceptance by a depositary bank of such a 
check for deposit is commercially unreasonable as a 
matter of law,1 there is far less case law addressing 
who constitutes the payee when a check is made out to 
an individual in the care of an investment company.2  
Accordingly, we remand the issue of liability on the 
larger Putnam check to the circuit court for further 
proceedings. 
¶3 
Firstar Bank asserts that under Wis. Stat. § 404.205 
(U.C.C. § 4-205), accepting checks without an endorsement is not 
only in compliance with reasonable commercial standards but it 
is standard practice.  Furthermore, according to Firstar Bank, 
accepting 
checks 
without 
an 
endorsement 
is 
commercially 
reasonable as a matter of law.   
¶4 
Firstar Bank explains that Wis. Stat. § 404.205, as it 
currently reads, permits a depositary bank to accept a check for 
deposit with a missing endorsement under "lock-box" agreements 
with 
customers 
who 
receive 
a 
high 
volume 
of 
checks.  
Section 404.205, effective August 1, 1996, reads as follows: 
Depositary bank holder of unendorsed item.   
                                                 
1 See, e.g., Mid-Atl. Tennis Courts, Inc. v. Citizens Bank & 
Trust Co. of Md., 658 F. Supp. 140, 142-43 (D. Md. 1987); Great 
Am. Ins. Cos. v. Am. State Bank of Dickinson, 385 N.W.2d 460, 
463 (N.D. 1986); see also Ronald A. Anderson, 6A Uniform 
Commercial Code § 3-419:72, at 95 (1998); William D. Hawkland & 
Lary Lawrence, 4 Uniform Commercial Code Series § 3-419:5, at 
Art. 3-912-16. 
2 But see Geraldo v. First Dominican Mut. Life Ins. Co., 
2002 WL 31002770, ¶41 (Ohio App. 2002) (unpublished opinion). 
No. 
01-2139   
 
3 
 
If a customer delivers an item to a depositary bank 
for collection, all of the following apply:  
(1) The depositary bank becomes a holder of the item 
at the time that it receives the item for 
collection if the customer at the time of 
delivery was a holder of the item, whether or not 
the customer endorses the item, and, if the bank 
satisfies the other requirements of s. 403.302, 
it is a holder in due course.   
(2) The depositary bank warrants to collecting banks, 
the payer bank or other payer and the drawer that 
the amount of the item was paid to the customer 
or deposited to the customer's account. 
Firstar Bank explains that the statute is designed to speed up 
collections by eliminating any need to return to a non-bank 
depositor any items he may have failed to endorse and argues 
that ¶35 of the Schmitz opinion "has the potential to impact 
banks 
considering 
that 
many 
businesses 
now 
use 
lock-box 
arrangements under which checks are mailed directly to the 
depositary bank for deposit without the endorsement of the payee 
as provided in Wis. Stat. § 404.205" (emphasis added).   
¶5 
Eric M. Schmitz, the plaintiff, responds that Firstar 
Bank's argument is incorrect and misplaced.  The plaintiff notes 
that the current version of Wis. Stat. § 404.205 was not in 
effect at the time the larger Putnam check was deposited by 
Georgetown Financial.3  Nevertheless, argues the plaintiff, under 
either version of the statute, Firstar Bank is still incorrect. 
                                                 
3 The version of Wis. Stat. § 404.205 (1993-94) that was in 
effect in July, 1996, when the transaction involving the larger 
Putnam check took place reads as follows: 
Supplying missing indorsement; no notice from prior 
indorsement.   
No. 
01-2139   
 
4 
 
¶6 
The plaintiff argues that under the prior statute, the 
payee was the plaintiff Schmitz, not Firstar Bank's customer 
Georgetown Financial, and that Firstar Bank could supply only 
the endorsement of its customer.  Under the newer version of 
§ 404.205, the plaintiff explains that a depositary bank may 
supply a missing endorsement only where the "customer" is a 
"holder" as defined in Wis. Stat. § 401.201 with respect to the 
negotiable instrument, and that in the present case, Georgetown 
Financial never became a holder because the check was payable to 
Schmitz, not Georgetown Financial and it was never endorsed over 
to Georgetown Financial. 
¶7 
We conclude that the general rule is as stated in ¶35 
of the Schmitz opinion.  Accepting a check when the payee's 
endorsement is missing is not in accordance with the reasonable 
commercial standards of banking and the acceptance by a 
depositary bank of such a check for deposit is commercially 
unreasonable 
as 
a 
matter 
of 
law. 
 
Either 
version 
of 
Wis. Stat. § 404.205 excepts from the general rule depositary 
banks that receive unendorsed checks from customers when the 
                                                                                                                                                             
(1) A depositary bank which has taken an item for 
collection may supply any indorsement of the customer 
which is necessary to title unless the item contains 
the words "payee's indorsement required" or the like.  
In the absence of such a requirement a statement 
placed on the item by the depositary bank to the 
effect that the item was deposited by a customer or 
credited to the customer's account is effective as the 
customer's endorsement. 
No. 
01-2139   
 
5 
 
missing endorsement is that of the customer.4  Thus, the Schmitz 
opinion remanded to the circuit court the determination of who 
constitutes the payee when a check is made out to an individual 
in the care of an investment company.5   
¶8 
For 
the 
foregoing 
reasons, 
the 
motion 
for 
reconsideration is denied without costs. 
By the Court.—The motion for reconsideration is denied 
without costs.   
¶9 
WILLIAM A. BABLITCH and JON P. WILCOX, JJ., did not 
participate.   
 
 
                                                 
4 "If there is a break in the chain of indorsements prior to 
the customer of the bank, the bank cannot add the indorsement 
that is missing in order to cure the break."  Ronald A. 
Anderson, 6C Uniform Commercial Code § 4-205:4, at 34 (1998) 
(citing Perini Corp. v. First Nat'l Bank of Habersham County, 
553 F.2d 398 (5th Cir. 1977) (applying Georgia law)). 
5 See Lewis v. Tel. Employees Credit Union, 87 F.3d 1537, 
1555 (9th Cir. 1996) ("The depository bank, however, may not 
supply the indorsement of just any customer.  For a supplied 
indorsement to be effective under [the equivalent U.C.C. 
provision], the payee of the check and the customer in whose 
account the check is deposited must be one and the same."). 
No. 
01-2139   
 
 
 
1