Forgery; Trusts; Partnerships

Grot v. First Bank of Schaumburg, 684 N.E.2d 1016, 226 Ill. Dec. 20 (1st Dist. 1997).

Facts: Two business partners conveyed property to a bank under a trust agreement. The agreement provided that, in order to be valid, any direction to the bank regarding the trust would be signed by both partners. One of the partners delivered a letter to the bank directing the bank to provide a third party with a note and a mortgage securing the note from the trust assets. The proceeds from the note were used to secure a loan to the partners from the third party. The letter of direction bore the signatures of both of the partners. The partner who did not deliver the letter claimed that his signature was forged and that the bank breached one of its fiduciary duties by encumbering the trust property pursuant to a forged letter of direction. Subsequently, the partners agreed to divide the partnership assets, with the plaintiff-partner retaining the trust property. The trial court entered summary judgment for the bank based on its findings that the plaintiff's signature was forged. As a result, the note and mortgage created were void ab initio. Thus, the plaintiff incurred no damage by reason of the bank's acceptance of the forged letter of direction.

Holding: The appellate court affirmed on different grounds. A plaintiff cannot as a matter of law support a claim of damages where he or she benefited from the forgery that is the basis of the claim. Here, the plaintiff benefited from the conveyance of the letter and then divided partnership assets with knowledge of the encumbrance. The division of the partnership assets left the plaintiff with an undivided interest in the trust property. The plaintiff's act of accepting the trust property, subject to indebtedness, operates as a ratification of the letter of direction.

© ATG atgc0798vol22

 

Print this page