IBA Compliance Connection

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One of our customers is complaining that we improperly cashed a cashier’s check payable to “John and Jane JTWROS.” It was issued in July of 2002, and we cashed it for John in August of 2002. The customer, Jane, is complaining that we cashed the check without her signature. We believe that only one signature was required because it was payable JTWROS. Does Jane have a claim?

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admin

Under the Uniform Commercial Code (UCC), your customer had three years in which to bring a claim for conversion of the cashier’s check or for breach of a warranty by your bank. Without commenting on your bank’s conclusion that Jane’s endorsement was unnecessary, we believe that any claim she may have is no longer be viable, now that more than sixteen years have passed since the transaction took place. However, we strongly recommend consulting with bank counsel regarding your bank’s potential liability to Jane.

For resources related to our guidance, please see:

  • UCC, 810 ILCS 5/3-118(g) (An action “(1) for conversion of an instrument, for money had and received, or like action based on conversion [or] (ii) for breach of warranty . . . must be commenced within 3 years after the cause of action accrues.”)
  • UCC, 810 ILCS 5/3-420(a) (“The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by (i) the issuer or acceptor of the instrument or (ii) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.”)
  • UCC, 810 ILCS 5/3-110(d) (“If an instrument is payable to 2 or more persons alternatively, it is payable to any of them and may be negotiated, discharged, or enforced by any or all of them in possession of the instrument. If an instrument is payable to 2 or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them. If an instrument payable to 2 or more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively.”)
  • Sanwa Bus. Credit Corp. v. Continental Ill. Nat. Bank and Trust Co., 247 Ill.App.3d 155, 160–161 (1st Dist. 1993) (“The checks at issue here named both Club and Golf as payees but Golf alone had endorsed them. . . . Thus, without Club’s endorsement, the checks were not ‘properly payable’ under section 4–401 . . . .”)
  • Conder v. Union Planters Bank, N.A., 384 F.3d 397, 401 (7th Cir. 2004) (“The [intended payee] rule provides that if a bank transfers a check without a proper endorsement but the transfer is to a person whom the drawer of the check wanted (or would if consulted have wanted) to have the money, the bank is not liable for any loss the drawer may have suffered as a result of the transfer, since the transfer would have gone through even if the bank had insisted that the check be properly endorsed.”)