Court Opinion

ID: 2769683
Source: CourtListenerOpinion
Date Created: 2015-01-13 23:04:45.298069+00
Date Added: 2024-06-11T11:13:11.615449
License: Public Domain

Illinois Official Reports

                                       Appellate Court

                        Aliaga Medical Center, S.C. v. Harris Bank N.A.,
                                  2014 IL App (1st) 133645

Appellate Court           ALIAGA MEDICAL CENTER, S.C., Plaintiff-Appellant, v.
Caption                   HARRIS BANK N.A., a/k/a BMO Harris Bank, N.A.,
                          Defendant-Appellee.

District & No.            First District, First Division
                          Docket No. 1-13-3645

Filed                     November 10, 2014

Held                       The trial court properly dismissed plaintiff’s complaint alleging that
(Note: This syllabus defendant bank improperly honored a check with preprinted language
constitutes no part of the that the check was “void after 90 days,” since plaintiff’s claim was
opinion of the court but barred by the parties’ written deposit account agreements and several
has been prepared by the provisions of the Uniform Commercial Code, including plaintiff’s
Reporter of Decisions agreement to order defendant in person, online or in writing to stop
for the convenience of payment by giving defendant the account number, the check number,
the reader.)               the date of the check, the payee’s name and the amount by a certain
                           deadline and pay a stop payment fee, and absent compliance with
                           these requirements, defendant could honor the check; furthermore,
                           plaintiff did not file suit within one year from the date the statement
                           was made available.

Decision Under            Appeal from the Circuit Court of Cook County, No. 12-L-14567; the
Review                    Hon. Margaret Ann Brennan, Judge, presiding.

Judgment                  Affirmed.
     Counsel on                Burch & Associates, of Chicago (David Delgado and Dale Smirl, of
     Appeal                    counsel), for appellant.

                               Akerman LLP, of Chicago (Eric J. Gribbin and Julia R. Lissner, of
                               counsel), for appellee.

     Panel                     PRESIDING JUSTICE DELORT delivered the judgment of the court,
                               with opinion.
                               Justices Hoffman and Connors concurred in the judgment and
                               opinion.

                                                 OPINION

¶1         This case concerns whether a bank properly honored a check bearing preprinted language
       stating it was “void after 90 days.” It illustrates that bank customers run tremendous risks if
       they do not reconcile their bank statements in a timely manner. In its first amended
       complaint, plaintiff Aliaga Medical Center (plaintiff or Aliaga) sought reimbursement of
       $50,000 that defendant Harris Bank N.A., a/k/a BMO Harris Bank, N.A. (Harris Bank),
       improperly debited from its checking account when it honored a check containing “void after
       90 days” language. Harris Bank moved to dismiss Aliaga’s complaint under section 2-619 of
       the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2012)), because the
       claim was barred by the terms of the parties’ written deposit account agreements and several
       provisions of the Uniform Commercial Code (UCC) (815 ILCS 5/1-101 et seq. (West 2012)).
       The circuit court dismissed Aliaga’s first amended complaint, and we affirm.

¶2                                         BACKGROUND
¶3         The facts are essentially uncontested. Aliaga first opened a business checking account
       with Harris Bank in December 2003. Upon opening the account, Aliaga received the “Harris
       Bank Handbook for Personal and Business Deposit Accounts,” which was effective
       September 1, 2003. Aliaga acknowledged receipt of the agreement and agreed that it would
       govern its account with Harris Bank. The introduction section of the agreement confirmed
       that Aliaga “agree[s] to the terms of this Agreement when [Aliaga] sign[s] [Harris Bank’s]
       account opening form or signature card, make[s] deposits or withdrawals, or leave[s] funds
       on deposit.”1 In November 2010, Aliaga opened an additional business account and received
       a “Harris Handbook for Personal and Business Deposit Accounts,” which was effective

            The September 1, 2003, agreement was replaced by amended versions of the “Harris Handbook
             1

       for Personal and Business Deposit Accounts,” which became effective September 6, 2008. Aliaga,
       however, has acknowledged that the terms relevant to this dispute did not change in the 2008 amended
       account agreement.

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     September 18, 2010. Aliaga acknowledged receipt of this agreement and agreed that it would
     govern its accounts with Harris Bank.2
¶4       The agreement required that if Aliaga wanted to stop payment on a check it had written,
     the following requirements would apply:
              “If you do not want us to pay a check you have written, you can order us to stop
              payment. You can notify us in person, by Harris Telephone Banking
              (1-888-340-2265), by Harris Online Banking or by mail to Harris, Attn.: Support,
              P.O. Box 94033, Palatine, IL 60094-4033. For business accounts, you can contact our
              Business Banking Service Center at 1-888-489-2265. Your stop payment order must
              include your account number, the number and date of the check, the name of the
              payee, and the amount. We must receive your stop payment order before our stop
              payment cut-off time, which is 10 a.m. Central Time (C.T.) on the next Business Day
              after the check is presented to us for payment. We will accept a stop payment order
              from any account owner regardless of who signed the check. Your stop payment
              order will be effective for six months. If you want the stop payment order to continue
              after six months, you must renew it. A stop payment order will not be effective on a
              check which we have already paid or certified. There is a stop payment fee as shown
              in the Services Guide.”
     Furthermore, under the agreement, Harris Bank specifically “reserve[d] [its] right to pay ***
     a stale check.”3
¶5       The agreement contained a number of other relevant notification provisions, including:
              “You must also notify us of any other account problem, including an erroneous
              statement entry *** or improper charges within 60 days of the date we send or make
              your statement available to you.
                                                  ***
                  We shall not be liable for errors *** unless you have given us the required notice.
              You agree that you will not commence any legal action or proceeding against us
              regarding any such error *** unless you do so within one year of the date we send or
              make available to you the statement *** in question.”
¶6       On July 10, 2010, Dr. Federico Aliaga, the plaintiff’s president, issued a check in the
     amount of $50,000 (the check), payable to his wife, whom he was divorcing. The face of the
     check included the statement “void after 90 days” immediately above the signature line.
     Harris Bank honored the check on December 30, 2010. Aliaga never placed a stop payment
     order on the check and, in fact, never communicated with Harris about the check anytime
     between July 10, 2010, and December 30, 2010.
¶7       In January 2011, Harris Bank sent and made available to Aliaga its December 2010
     checking account statement, which showed that Harris Bank had honored the check on
     December 30, 2010. Aliaga, however, did not notify Harris Bank of the improper check
     payment within the 60-day notification period delineated in the parties’ agreement.
     Additionally, Aliaga did not initiate this lawsuit within one year of the date Harris Bank sent
     or made available the December 2010 statement. Instead, Aliaga waited until October or

        2
         We refer to the various agreements collectively as the “agreement.”
        3
         A stale check is one that is “more than six months old.”

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       November 2012, nearly two years after the December 2010 statement was made available,
       before disputing the check with Harris.
¶8         Harris moved to dismiss the amended complaint. The trial court granted the motion, and
       this appeal followed.

¶9                                              ANALYSIS
¶ 10        “A motion to dismiss under section 2-619(a) of the Code *** admits the legal sufficiency
       of the complaint, but asserts affirmative matter outside the complaint that defeats the cause of
       action.” Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 361 (2009). This court reviews an
       order of dismissal “accepting as true all well-pled facts contained in the complaint and in any
       uncontradicted affidavits attached to that motion.” Napleton v. Great Lakes Bank, N.A., 408
Ill. App. 3d 448, 450 (2011). The question on review of a dismissal under section 2-619 is
       “whether the existence of a genuine issue of material fact should have precluded the
       dismissal or, absent such an issue of fact, whether dismissal is proper as a matter of law.”
       (Internal quotation marks omitted.) Id. at 450-51. “In conducting de novo review, the
       appellate court will examine the complaint and all evidentiary material before the trial court
       at the time of entry of the [dismissal] order ***.” Vala v. Pacific Insurance Co., 296 Ill. App.
3d 968, 970 (1988). After a defendant satisfies its burden of going forward on a section
       2-619(a) motion to dismiss, “the burden then shifts to the plaintiff, who must establish that
       the affirmative defense asserted either is unfounded as a matter of law or requires the
       resolution of an essential element of material fact before it is proven.” Barrett v. Fonorow,
       343 Ill. App. 3d 1184, 1189 (2003).
¶ 11        Aliaga does not dispute the applicability of the various contractual provisions on which
       Harris relies, but argues that the use of the printed word “void” on the check and the passage
       of time somehow took it outside the scope of the account agreement. We disagree. Like the
       proverbial bird that is identified as a duck because of its distinctive characteristics, the
       document in question was a check. It was in the standard form of a check, contained standard
       check language, bore the bank’s name, routing number and the account number set in
       electronically readable magnetic ink character recognition (MICR) type, and was otherwise
       presented, paid, and accounted for as a check in the normal course of the account’s regular
       operation. We cannot agree with Aliaga’s characterization, as it would create unworkable
       burdens on financial institutions in this era of ubiquitous electronic check processing. The
       agreement between the parties governs.

¶ 12                                   A. Stop Payment Provision
¶ 13       Harris had the right to pay the check despite the “void after 90 days” language because
       Aliaga failed to properly stop payment of the check. Under the parties’ agreement, if Aliaga
       did not want Harris Bank to pay a check it had written, then Aliaga had to comply with
       certain requirements. In particular, Aliaga must order Harris Bank either in person, online, or
       in writing to stop payment of a check by including an “account number, the number and date
       of the check, the name of the payee, and the amount” by a certain deadline and must also pay
       a stop payment fee. Here, Aliaga acknowledges that it did not comply with the stop payment
       provisions of the agreement. Without the required stop payment order, Harris Bank
       maintained its right to honor the check. Therefore, the check’s “void” language did not

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       suffice to stop payment because the agreement contains no exception for such language on
       checks.
¶ 14       Aliaga’s contention that it was not required to comply with the stop payment terms of the
       parties’ agreement is without merit. Aliaga claims that under a UCC provision (810 ILCS
       5/4-403(a) (West 2012)), it was only required to stop payment “in a time and manner that
       gives the bank a reasonable opportunity to comply” and that its notation on the check
       “certainly achieves this.” However, Aliaga’s contention is without merit for several reasons.
       First, the UCC permits that “[t]he effect of [its] provisions *** may be varied by agreement.”
       810 ILCS 5/4-103(a) (West 2012). Here, the parties entered into an agreement, which
       included specific notice and fee requirements for stopping payment of a check. Those
       agreed-upon requirements superseded the UCC provision in question.
¶ 15       In Napleton, the appellate court upheld the same principle in a case where the plaintiff
       bank customer failed to comply with a notice provision set forth in the customer’s account
       agreement with the defendant bank. Napleton, 408 Ill. App. 3d at 449, 456. The court found
       that the customer’s account agreement with the bank properly modified the terms of the UCC
       concerning the customer’s duty to notify the bank and, as a result, the court affirmed
       dismissal of the customer’s actions against the bank. Id. at 456.
¶ 16       Additionally, the Official Comment to section 4-103 explains: “In view of the technical
       complexity of the field of bank collections, the enormous number of items handled by banks,
       the certainty that there will be variations from the normal in each day’s work in each bank,
       the certainty of changing conditions and the possibility of developing improved methods of
       collection to speed the process, it would be unwise to freeze present methods of operation by
       mandatory statutory rules.” 810 ILCS Ann. 5/4-103, Uniform Commercial Code Comment 1,
       at 400 (Smith-Hurd 2014). Indeed, “ ‘[i]t is a fundamental principle of banking law that the
       relationship between a bank and its depositor is created and regulated by the express ***
       contracts between them.’ ” Napleton, 408 Ill. App. 3d at 456 (quoting Symanski v. First
       National Bank of Danville, 242 Ill. App. 3d 391, 394 (1993)). Accordingly, absent Aliaga’s
       compliance with the notice and fee requirements of the stop payment provision in the
       agreement, Harris Bank had a right to pay the check.
¶ 17       Furthermore, even if Aliaga is correct that the stop payment provision of the agreement
       was neither exclusive nor meant to override the UCC, the “void” notation was ineffective
       because it did not comply with section 4-403(a) of the UCC by providing notice “at a time
       and in a manner that affords the bank a reasonable opportunity to act on it.” 810 ILCS
       5/4-403(a) (West 2012). Here, Aliaga admitted that it did not provide the check bearing the
       language “void” directly to Harris Bank; it was first transmitted to the payee of the check.
       Thus, Aliaga neither knew when the check would be received at Harris Bank nor the means
       by which it would be processed once it was received. This type of notation, alone, is not a
       reasonable means by which to direct a bank to stop payment on a check. As commentators on
       the UCC have stated:
                    “In light of the manner in which checks are processed, banks need to have the
                right to pay checks no matter how old the check is. This is because banks process
                checks by feeding the checks through a computer that reads only the MICR-encoded
                line. The only information that the computer can use in determining whether or not to
                pay a check is the MICR-encoded information. The MICR-encoded information does
                not include the date the check was written. As a result, a prohibition on paying a

                                                  -5-
               check more than six months old would require that a bank visually inspect every
               check to determine whether the check is stale.” 7 Lary Lawrence, Lawrence’s
               Anderson on the Uniform Commercial Code § 4-404:6 [Rev.], at 464 (3d ed. 2013).
       6A William D. Hawkland et al., Uniform Commercial Code Series § 4-404:2 (2013).
       Accordingly, we do not view the “void” notation on the check as constituting a stop payment
       order under section 4-403(a).
¶ 18       Furthermore, under the parties’ agreement, Harris Bank specifically “reserve[d] the right
       to pay *** a stale check.” Aliaga’s contention that this provision is inapplicable because the
       check “was not *** stale *** [but instead] it was void” is without merit. (Emphasis in
       original.) The effect of a bank customer writing “void after 90 days” on a check has been
       described as making the check stale after the initial 90-day period. See, e.g., Hawkland,
       supra § 4-404:2 (“ ‘void after 60 days’ should operate to make a check stale after 60 days”);
       Lawrence, supra § 4-404:8 [Rev.], at 466 (same). Aliaga has not cited to any case nor
       identified any other authority supporting its proposition that there is a substantive difference
       between stale checks and those marked void after a certain time. Instead, Aliaga attempts to
       rely on cases that are distinguishable; they fail to apply Illinois law and do not involve a
       bank’s obligation to comply with a similar type of notation on a check. See, e.g., State v.
       Gonnelly, 496 N.W.2d 671 (Wis. Ct. App. 1992) (concerning a Wisconsin statute prohibiting
       gaming contracts). Accordingly, we hold that, under the terms of the stop payment provision
       of the parties’ agreement, Harris Bank appropriately paid the check.

¶ 19 Barb. 60-Day Notice Requirement
¶ 20       Aliaga also failed to comply with its obligation to timely notify Harris Bank of the
       alleged unauthorized payment of the check within 60 days after Harris Bank made Aliaga’s
       December 2010 statement available to it. Under the agreement, as a prerequisite to bringing
       this action, Aliaga was required to “notify [Harris Bank] of *** account problem[s],
       including an erroneous statement entry *** or improper charges within 60 days of the date
       [Harris Bank] send[s] or make[s] [Aliaga’s] statement available to [it].” Aliaga further agreed
       that “[Harris Bank] shall not be liable for errors *** unless [Aliaga] [has] given [Harris
       Bank] the required notice.”
¶ 21       Here, Aliaga admitted that it did not comply with these terms of the agreement by
       providing timely notice to Harris Bank within 60 days of the date that it sent, or otherwise
       made available to Aliaga, the December 2010 statement. Aliaga further conceded that it did
       not contact Harris Bank about the payment within 60 days of receiving the December 2010
       statement. As a result, Aliaga’s claim is untimely. Napleton, 408 Ill. App. 3d at 456 (bank
       customer’s failure to comply with the terms of agreement with bank and timely notify bank
       of forged check after monthly statement was mailed to him precluded his claims against the
       bank).
¶ 22       Aliaga, however, contends that it was not bound by the agreement’s 60-day notification
       requirement. Specifically, Aliaga asserts that the UCC, not the agreement, controls and the
       agreement does “not specifically address the bank’s negligent acceptance of a void check.”
       We reject Aliaga’s arguments because they are inconsistent with the UCC, disregard the
       Napleton decision, and ignore the plain and unambiguous terms of the parties’ agreement. As
       we noted above, the UCC permits that “[t]he effect of [its] provisions *** may be varied by
       agreement.” 810 ILCS 5/4-103(a) (West 2012). As such, the Napleton court found that it is

                                                  -6-
       “clearly permissible” to enforce a shorter notification timeframe established by a bank
       customer’s account agreement with its bank. Napleton, 408 Ill. App. 3d at 452 (holding that
       “the plaintiff’s duty to ‘promptly notify’ the bank of any unauthorized charges [under the
       UCC] was modified to mean 30 days from the date the Monthly Statement was mailed to
       plaintiff”).
¶ 23       Aliaga cannot circumvent the clear and unambiguous terms of its agreement with Harris
       Bank that it “must *** notify [Harris Bank] of *** account problem[s], including an
       erroneous statement entry *** or improper charges within 60 days of the date [Harris Bank]
       send[s] or make[s] [Aliaga’s] statement available to [it],” and “[Harris Bank] shall not be
       liable for errors *** unless [Aliaga] [has] given [Harris Bank] the required notice.” The
       alleged unauthorized payment of the check was reflected on the December 2010 statement,
       which plainly fell within the province of an “account problem,” “erroneous statement entry,”
       “improper charge[ ],” and “error” contained within the agreement’s provision. Accordingly,
       Aliaga cannot claim Harris Bank’s decision to honor the check was erroneous, given its own
       failure to comply with the 60-day notice provision set forth in the parties’ agreement.

¶ 24                                 C. One-Year Notice Requirement
¶ 25       Finally, Aliaga failed to timely commence this lawsuit within one year from the date that
       Harris Bank sent or made available the December 2010 statement. Under the parties’
       agreement, Aliaga “agree[d] that [it] [would] not commence any legal action or proceeding
       against [Harris Bank] regarding any *** error *** unless [Aliaga] [did] so within one year of
       the date [Aliaga] sen[t] or ma[d]e available to [Aliaga] the statement *** [showing the
       transaction] in question.”
¶ 26       Here, Aliaga admits that it neither complied with these terms of the agreement by
       commencing this lawsuit within one year of the date that Harris Bank sent or otherwise made
       available the December 2010 statement nor did it commence this suit within one year of
       receiving the December 2010 statement. In fact, Aliaga neither notified Harris Bank nor
       instituted this lawsuit until October or November 2012, nearly two years after the December
       2010 statement was made available.
¶ 27       Aliaga claims that the parties’ agreement is procedurally unconscionable and that the
       three-year limitations period set forth in section 4-111 of the UCC should apply instead of
       the agreement’s one-year period. 810 ILCS 5/4-111 (West 2012). The appellate court has
       explained what constitutes unconscionability:
                   “Unconscionability has two components: procedural and substantive. A contract
               provision is procedurally unconscionable if some impropriety in the formation of the
               contract leaves a party with no meaningful choice in the matter. A provision is
               substantively unconscionable if it is overly harsh or one-sided. [Citation.] In order to
               be unconscionable, a contract provision must be both procedurally and substantively
               unconscionable.” Kinkel v. Cingular Wireless, LLC, 357 Ill. App. 3d 556, 562 (2005).
       Here, Aliaga has produced no evidence that the agreement was unconscionable. It is common
       knowledge that account holders should review monthly bank statements to ensure against
       errors and rectify them promptly. See, e.g., Kenneth W. Clarkson, Roger LeRoy Miller,
       Gaylord A. Jentz & Frank B. Cross, Business Law 508 (11th ed. 2008); Lawrence J. Gitman,
       Michael D. Joehnk & Randy Billingsley, Personal Financial Planning 137 (13th ed. 2013);
       Robert A. Brechner & George Bergeman, Contemporary Mathematics for Business and

                                                  -7-
       Consumers 105 (7th ed. 2014). Thus, there is nothing in the record to suggest that the
       one-year limitation period or any other provision of the parties’ agreement is procedurally
       unreasonable or “overly harsh or one-sided” so as to be unenforceable in this case.
       Accordingly, Aliaga’s lawsuit is untimely because it filed the suit almost two years after
       Harris Bank sent or made the December 2010 statement available to Aliaga.

¶ 28                                     CONCLUSION
¶ 29      Accordingly, we affirm the judgment of the circuit court.

¶ 30      Affirmed.

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