The Journal of The DuPage County Bar Association

Back Issues > Vol. 19 (2006-07)

CASH ME IF YOU CAN: Enforcing Bank Liability for a Wrongfully Cashed Multi-payee Check
By Edward N. Tiesenga

This is the third in a series of articles on legal issues facing contractors who must collect payment for their work from insurance companies. The checks used to pay for this work are the flash points for numerous problems. The first article covered "Joint Payees on Contractor-Generated Insurance Proceeds." The second article dealt with unique issues arising from mortgagee escrows of these insurance proceeds.

GENERAL RULE: All "and" payees on a multi-payee check must endorse it before a bank can legally cash it.


1. If a bank does not get all signatures, a non-endorsing co-payee may recover against the bank;

2. For the face amount of the check; and

3. If the bank refuses to pay, it may be sued for conversion.


The cell phone’s early bird ring interrupts your quiet, even lyrical Saturday morning somewhere in the deliberately zoned, well-taxed confines of DuPage County. Your client is already at his office, and wants to tell you something about another bad check. But wait. That’s not exactly it. This check was good but someone else cashed it.

More background facts stir your legal reason– the check was cashed two years ago, and the insurance company’s fraud unit finally found a copy to show your client, the contractor who repaired an insured loss but never got a dime for it. The check was made payable to your client and to the mortgage company.3 When the client got it, the client sent it to the mortgage company to endorse it first. The mortgage company endorsed it, but then sent the check back to the insured, an elderly couple4. They, in turn, endorsed their names on the back of the check, took it to their local bank, and cashed it.5 That’s the story. "Fax it over; I’m headed to the office anyway." "OK" says the client, "just tell me what I can do to these guys." It sounds kind of hopeless; it’s less than $4,000.00; and the people who cashed the check in Illinois have probably moved to Minnesota.

On the way to your office you think about that. Two old people stealing insurance money from a contractor, then leaving town like "magpies over the valley, larcenous even in flight."6 The check is for more than $1,500.007 so the client corporation will still need a lawyer to go through small claims court; how, then, to collect?8

As lawyers sometimes do, you wonder where this will go. Will everyone up the payment chain from your client want to play games? Dodge service? Deny signatures? Act dumb? Try to wear you down and demoralize you from doing your job within the dollar constraints of the case? You feel in your bones that you already know these thieves from their likely behavior, and you dread a conflagration that will wipe out the value of the fight, if it is a fight. Your client prefers cash over conflict. He has what economists call a "Liquidity Preference.9" So do you, as you note the price of gas at the corner before pulling into your parking lot.


On your way into the building you stop to get coffee at the shop next door, and they’re playing an old Eric Clapton song: 10 Catch me if you can; I won’t be easy to find. It’s still playing on your way out:

Catch me if you can; it won’t be easy to do. And I’m warning you brother I won’t be leaving no clues

You grab the fax, switch on your computer and while it boots up, think a moment about our economy, in which checks function according to rules governing the central bank of the United States, or Federal Reserve. The same system that sets interest rates, controls the money supply, insures deposits, and establishes fractional reserve lending rules also dictates how a check is identified, where it goes, and how it is marked and routed through the system.11 Our current system has been in place since 1914, governed by the Federal Reserve Board in Washington, DC, orchestrating the activities of 12 regional Federal Reserve banks.12 Each bank in the United States has a 9-digit Routing Transit Number ("RTN"), also called an ABA13 number, that starts with the first four digits traceable to one of these Federal Reserve Regions, and then the next four digits are the "ABA Institution Identifier" numbers unique to that specific bank. This number system has been in place for almost 100 years, and the network of federal banks in turn traces back, with a few historical interruptions, to the Bank of the United States started by Alexander Hamilton—without any express constitutional authority—three years after ratification of the U.S. Constitution.14 So these two customers of your client are abusing the entire banking system for their own wrongful gain.

Thinking like a banker now, if you applied a capital asset pricing model to the faxed photocopy of this check, you would be inclined to assign it a low value, unless you knew about UCC Section 3-420.15 Legally, 3-420 can transform this piece of cashed paper back into money, but to do so, you need to find the bank that cashed it. What is the chance of that? "You would expect people in the market place, in pursuit of avid and intelligent self-interest to take account of those elements of future events that in a probability sense may be discerned to be casting their shadows before them (because past events cast ‘their’ shadows after them, future events can be said to cast their shadows before them.)"16

Holding the copy of the back of the check up to your desk lamp, you look for the name of the bank that cashed it. All you see is a partial, fuzzy machine-stamped string of incomplete letters, one of which might be the letter "A." But what’s that right above the unknown name? Clear enough, it’s the complete routing number of the unknown bank. The shadow of this check’s future is suddenly clear.


Bank routing numbers are placed on the back of every cashed check as part of the clearing process, to show which bank paid out on the check to the person presenting it. The unique routing number can be entered into a publicly available website form field,17 which will "reverse trace" the number and match it to the bank that cashed it. Now you have the name of the bank. Many banks have a vast number of branches, so although not legally required to make out a case, it is useful to try to find the exact branch where the conversion was accomplished.

You can find the branch of that bank if you know approximately where the thieving endorsers lived or operated, at the time it was cashed. This can be done by using an internet search utility. For example, Yahoo! Maps 18lets you type in "Wheaton, Illinois" and then under "Community Services" you click "Banks" and you get a display of all banks in Wheaton. This can help you find the branch of the bank that cashed the check.


With Professor Michael Spak’s grating mnemonic bar review cadences echoing in your head, you reach for your Commercial Paper outline.19 It’s time to get the bank. Spak says that the "transfer of an order instrument…with one of several indorsements missing…may be effective to transfer possession, but it is not effective to transfer title."20 And this check is exactly that kind of instrument based on UCC 3-110(d)21 and Harder v. First Capital Bank.22

"Bank Deposits and Collections" are governed by Article 4 of the UCC,23 but all you need to know from Article 4 is that "[t]he bank is liable to [the non-indorsing joint payee] for conversion of his interest in the check. It makes no difference that the bank was acting in good faith."24 UCC 3-420 codifies this "conversion of instrument" cause of action25 and specifies damages as the face amount of the check.26 You have three years to sue.27 This can be translated into UCC language: "If any one of these indorsements is not authorized, the presenter is not the holder and the bank cannot properly charge the drawer’s account if it pays."28


It’s one thing to know it; and another to do it, to turn truth into justice.29 So here’s how you write the letter:

Sloppy Bank, N.A.

666 Mockingbird Lane

Munsters, IL 66666

Dear Sir or Madam:

Please be advised that I represent Excellent Client in its claim against Sloppy Bank, N.A. for conversion of a check payable to the order of "Excellent Client & Anonymous Mortgage Co., Its Successors &/Or Assigns" in the amount of $________ and dated _________________, 200__. I have enclosed a copy of both the front and back sides of the check for your review.

As you can see, Sloppy Bank made payment of this check when it was presented on or about ______________, 200__. The check was endorsed solely by Anonymous Mortgage, LLC, one of the two payees, and by strangers to the check, Bertha Forger and Billy Forger. It is obvious that Excellent Client, the second payee, did not endorse the check. Therefore, pursuant to Section 3-420 of the Illinois Uniform Commercial Code, my client has a claim for conversion against Sloppy Bank due to the bank’s payment with respect to this instrument without my client’s endorsement.

Section 3-420(b) provides that the measure of Sloppy Bank’s liability to Excellent Client is the amount payable on the instrument, which in this case is $________________. This letter shall serve as my client’s demand for immediate payment of said sum. Excellent Client is prepared to release Sloppy Bank from all claims upon receipt of said payment.

My client has authorized me to bring action on its behalf if payment is not immediately forthcoming. Contact me immediately if Sloppy Bank seeks time to investigate this matter.

Very truly yours,

Commercial Attorney


Counsel for the bank calls you two days later asking if your firm’s name should go on the check with your client.30 "No. Just their name. We’re OK with that." Flush with success, you dial your client to tell him that the framework of federal bank regulation has made it possible for you to identify and hold the bank responsible for a two year old wrongful conversion of a negotiable instrument under Illinois law. But instead of all that, you just say: "Hey, we got your check."

Your client can’t believe how easy this was, and offers you tickets to the next White Sox game.31 So ends another episode of grappling with extraordinarily powerful laws developed over hundreds of years, brought down to the "appropriate smallness" of our immediate commercial practice, to solve a problem before it ever gets to the courthouse.

1 Tiesenga, "Joint Payees on Contractor-Generated Insurance Proceeds," DCBA Brief, (Jan. 2005).

2 Tiesenga, "Deconstructing Insurance Proceeds Escrows to Get Your Contractor Client Paid,"

DCBA Brief (Jan. 2005).

3 The client verifies that it was "and" between both payee names; not "or" and not just two names next to or on top of each other. Your client remembers reading your article about how important it is to see "and" on a multi-payee check.

4 This is a common and disturbing practice by mortgagees, who seem to have policies or practices requiring them to route all signed insurance proceeds checks back to the mortgagors, instead of to the other joint payee on the check.

5 We’ll call them Bertha Forger and Billy Forger. Interestingly, on the top part of the check, the insurance company had typed "Claim #666 Payment on behalf of Bertha Forger and Billy Forger." This seems to have inspired Mr. and Mrs. Forger to boldly endorse the back of the check and try cashing it.

6 John McPhee, Annals of the Former World, Book 4: Assembling California (Paperback ed. 2000) at 537.

7 Ill. Sup. Ct. R. 282(b).

8 You stare down the Black Dog of professional despair glowering within you as you contemplate the puny scale of this case. Then you remember the scene from Zen and the Art of Motorcycle Maintenance where Robert Pirsig meets the old mechanic off a country road in the middle of nowhere, and marvels at the quality of the gentleman’s work as he re-welds and remounts the chain guard on Pirsig’s motorcycle. Today you get to be that old welder for a minor component of your client’s bigger business. See, Robert M. Pirsig, Zen and the Art of Motorcycle Maintenance: An Inquiry into Values (Quill

Paperback ed. 1979).

9 As explained by speculator and Bretton Woods system of international exchange rates designer John Maynard Keynes, The General Theory of Employment, Interest, and Money (Harcourt Brace 1936), people want assets they can convert into spending to stimulate the economy.

10 Eric Clapton and Gary Brooker. "Catch Me if You Can," featured on Another Ticket (1981).

11 The Federal Reserve’s website has a comprehensive guide to the routing numbers assigned to each Federal Reserve Bank District, excerpted from the Code of Federal Regulations (CFR), last updated May 20, 2003.http://www.federal Another useful guide to the check routing system is available on Wikipedia.

12See generally, N. Gregory Mankiw, Principles of Economics (Dryden Press 1998) at 598.

13 Named after the American Bankers Association, which came up with this numbering system in 1910.

14 Article 1, Section 8 of the U.S. Constitution says "the Congress shall have power … to make all laws which shall be necessary and proper for carrying into execution the foregoing powers."

In 1819 the U.S. Supreme Court construed this language to support formation a federal central bank that had initially been set up in 1791, akin to the Bank of England. McCullough v. Maryland, 17 U.S. 316, 4 Wheaton 316 (1819) ("Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.") Relying on this pedigree, the federal government can now make every bank stamp its federal routing number on every check.

15 810 ILCS 5/3-420, Sec. 3-420(a).






ActName=Uniform+Commercial+Code%2E Another good searchable UCC cite is:

16 Paul Samuelson (1965), cited at Peter L. Bernstein, Capital Ideas: The Improbable Origins of Modern Wall Street at 119-120 (1992).

17 Here are two "reverse trace" websites: and





19 Michael Spak, Ryan Commercial Paper Capsule (Harcourt Brace 1984)

20 Spak, Supra fn 19, at 19 (emphasis in original).







22 332 Ill.App.3d 740, 775 N.E.2d 610 (4th Dist. 2002)

23 810 ILCS 5/4-101 et seq.

24 Spak, Supra fn. 19, at 20 (emphasis in original).

25 810 ILCS 5/3-420, Sec. 3-420(a).

26 810 ILCS 5/3-420, Sec. 3-420(b).

27 810 ILCS 5/3-118, Sec, 3-118(g)(i).






28 Charles M. Weber and Richard E. Speidel,

Commercial Paper in a Nutshell (West 1982) at 349. (The bank can go back after the customer who cashed the check, if the bank wants to track them down in Minnesota : "The bank’s remedy is to proceed on the presenters’ warranty of title given by the presenter and all transferors back to and including the wrongdoer, all of whom lacked title." Id.)

29 "I say that justice is truth in action."
Benjamin Disraeli

30 Now, they get all technical about names on the check.

31 Proving Pirsig’s point that "A person who knows how to fix motorcycles—with Quality—is less likely to run short of friends than one who doesn’t….he’s likely to discover that he becomes a much more interesting person and much less of an object to the people around him because his Quality decisions change him too." Pirsig, supra fn. 8, at 357.

Edward N. Tiesenga is a partner in the law firm of Tiesenga & Tiesenga P.C. located at 1200 Harger Road, Ste. 830 Oak Brook, IL 60523.

DCBA Brief