Page 9 - John Hundley 2016

Banking Law Roundup

Sharp Thinking

No. 138 Perspectives on Developments in the Law from Sharp-Hundley, P.C. December 2016

Three-Year Statute Applies To Misapplied Deposits

The three-year statute of limitations of Uniform Commercial Code § 4-111 (810 ILCS 5/4-111) applies
to a lawsuit pleaded as a common-law breach-of-contract case if the claim is related to banking transactions
involving negotiable instruments, a panel of the Appellate Court in Chicago has reiterated.

Relying on Continental Cas. Co. v. American Nat’l B.&T. Co., 329 Ill. App. 3d 686
(2002), the court rejected a plea that because the suit involved a breach of contract,
Illinois’ 10-year statute for breaches of written contracts (735 ILCS 5/13-206) should
apply. It said that where two statutes of limitation arguably apply to the same cause
of action, “the one which more specifically relates to the action must be applied.” PSI
Resources, LLC v. MB Fin. Bank, N.A., 2016 IL App (1st) 152204.
In PSI Resources, a bank allegedly applied a series of check deposits to the wrong
corporate account holder among a series of related corporations. The account holder
to which deposits should have been credited claimed it had not known this because
the bank’s monthly statements did not itemize the specific deposits credited on a given
day and because the account holder’s inside financial officer had been embezzling
money. It contended the three-year statute of the UCC did not apply as its claim was pleaded as a simple
breach of contract; alternatively, it claimed that the UCC statute did not begin to run until it actually
discovered the misdeposits, which was within the three years.
Finding the UCC statute to be the more specific and hence the more applicable
statute, the court moved to the issue of whether the plaintiff was saved under the
“discovery rule.” It said the discovery rule “protects a plaintiff only until he knows or
reasonably should know of the injury, not until he has actual knowledge.” See also
CitiMortgage, Inc. v. Parille, 2016 IL App (2d) 150286 ¶¶ 41-42.
While the bank’s monthly statements did not specifically itemize the deposits they
credited, they did list the total deposited each date, and “even a cursory review of some
of the account statements would have caused a reasonable person to inquire further.” (The allegedly
misapplied deposits totaled hundreds of thousands of dollars.)

As to the controller’s embezzlement, the panel said it was unclear that it had any relation to the
misdeposited checks, as all the money was accounted for, even if in the wrong corporation’s account.

Both Owners Must Sign Mortgage To Encumber Entireties Property

A mortgage signed by only one of two entireties owners is a legally ineffective document, a panel of the
Appellate Court’s Second District has ruled.

I n CitiMortgage, Inc. v. Parille, 2016 IL App (2d) 150286, a lender in a refi transaction permitted a
mortgage signed by both spouses to be replaced by a mortgage signed by only one of them. Because it

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking shall
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