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All three cashier's checks were cashed by Parolin at defendantsMaywood Proviso State Bank (check No. 1), First Security Trust &Savings Bank (check No. 2), and Greater Illinois Title InsuranceCompany (check No. 3), respectively. When cashed, each checkbore the signatures of both Parolin and Kelly, the fictionalperson. Upon presentment, Albank made payment on the threechecks.

On May 24, 1996, plaintiffs filed a complaint againstAlbank, alleging that Albank breached a contract with plaintiffsby making payment on the cashier's checks without the endorsementof David L. Kelly. Plaintiffs alleged that the cashier's checkswere issued by Albank with the agreement that the checks had tobe endorsed by both Parolin and Kelly, as payees, before Albankwould make payment on the checks. Plaintiffs further allegedthat Kelly never endorsed the checks and that Parolin forged theendorsement of Kelly. Thus, plaintiffs contended that "thepayment of the checks without the endorsement of David L. Kellywas a breach of the contract between the Plaintiffs and" Albank.

On December 9, 1996, Albank filed a motion for summaryjudgment, asserting that it had paid the cashier's checks in theordinary course of business, in good faith and without knowledgethat Kelly was a fictitious payee. To its motion, Albankattached an affidavit from the personnel assistant at HUD in theChicago regional office, who attested that no one by the name ofDavid Kelly or David L. Kelly was employed by HUD in the entireUnited States during the time period 1994 through 1996. Albank contended, and the trial court agreed, that the fictitious payeerule completely absolves a bank from any liability for paymentover a forged indorsement.

On February 5, 1997, the trial court entered summaryjudgment in favor of Albank, finding that Albank was only thenominal drawer of the subject cashier's checks, that plaintiffswere the drawers of the checks, and that Albank properly paid thedisputed items pursuant to the Code (810 ILCS 5/3--404(b)(ii)(West 1994)). On August 4, 1997, the trial court deniedplaintiff's motion to reconsider the summary judgment for Albank.

On February 26, 1997, plaintiffs filed a complaint againstthe three defendant institutions that cashed the three cashier'schecks, alleging that defendant institutions failed to exerciseordinary care in paying or taking the instrument under section 3--404(d) of the Code (810 ILCS 5/3--404(d) (West 1994)). BothMaywood and First Security filed section 2--615 motions todismiss (735 ILCS 5/2--615 (West 1996)), for failure to statecauses of action based on the Code.

On August 6, 1997, the trial court dismissed plaintiffs'complaint with prejudice as to all three named defendants. Regarding the dismissal motions filed by Maywood and FirstSecurity, the trial court specifically found that plaintiffs'complaint failed to state a claim for breach of warranty underthe Code (810 ILCS 5/3--416, 3--417, 4--207, 4--208 (West 1994))and, even if ordinary care was not exercised, the failure couldnot have, as a matter law, "substantially contribute[d] to lossresulting from payment of the instrument" under section 3--404(d)of the Code (810 ILCS 5/3--404(d) (West 1994)). In addition, thetrial court found that the endorsement of Parolin alone sufficedto make the check negotiable because the cashier's check wasalternatively payable to Parolin or Kelly under section 3--110(d)of Code (810 ILCS 5/3--110(d) (West 1994)).

The first issue on appeal is whether the fictitious payeeprovision in the Code bars plaintiffs' breach of contract claimagainst the bank (Albank) that issued and subsequently paid thecashier's checks upon presentment. We apply a de novo standardof review to summary judgment rulings. Outboard Marine Corp. v.Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992). Moreover, where no factual issues are raised on appeal, the solequestion on review is whether the trial court's entry of summaryjudgment is proper as a matter of law. McNamee v. State ofIllinois, 173 Ill. 2d 433, 438 (1996).

Plaintiffs assert that the issuer of a cashier's check(i.e., Albank) is obligated under an implied contract to pay thepayees (Parolin and Kelly) named by the remitter (plaintiffs) onthe checks or to return the checks to the remitter. Plaintiffsargue that the Code does not effectively deal with the rights andobligations of the remitter of a cashier's check in relation tothe issuer.

We agree with plaintiffs that an enforceable contract ariseswhen a cashier's check is purchased and the contract calls forthe issuing bank to pay the instrument according to its terms. Lassen v. First Bank Eden Prairie, 514 N.W.2d 831, 836 (Minn. Ct.App. 1994) (and cases cited therein). The implied contract isthe issuing bank's promise to pay the cashier's check to thenamed payee only. Lewis v. Telephone Employees Credit Union, 87F.3d 1537, 1546 (9th Cir. 1996). The Code, in fact, authorizesthe use of contract or equity claims where the Code does notcover a particular topic or transaction. Section 1--103expressly provides that "[u]nless displaced by the particularprovisions of this Act, the principles of law and equity ***shall supplement its provisions." 810 ILCS 5/1--103 (West 1994).

Under the facts of the present case, however, we disagreewith plaintiffs' contention that the Code does not deal with therelationship between the issuing bank and the remitter of acashier's check. The dispositive fact in the present case isthat the cashier's checks bore the forged signature of afictitious payee, David Kelly. The Code specifically addressesthe situation involving such a payee.

Section 3--404 of the Code is entitled "Impostors-Fictitiouspayees." Section 3--404(b)(ii), in relevant part, is as follows:

"(b) If *** (ii) the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special indorsement:

(1) Any person in possession of the instrument is its holder.

(2) An indorsement by any person in the name of the payee stated in the instrument is effective as the indorsement of the payee in favor of a person who in good faith, pays the instrument or takes it for value or for collection." 810 ILCS 5/3--404(b) (West 1994).

This particular provision is the Illinois codification of thefictitious payee rule. It became effective in 1992, when it wasrevised and renumbered from section 3--405. 810 ILCS Ann. 5/3--404, Uniform Commercial Code Comment, at 209 (Smith-Hurd 1993).

As specifically stated in section 3--404(b)(ii) of the Code,where a named payee is a fictitious person, then the "indorsementby any person in the name of the payee *** is effective as theindorsement of the payee." 810 ILCS 5/3--404(b)(ii) (West 1994). A forged indorsement of a fictional payee is an exception to thegeneral rule that places liability on a bank that pays over aforged endorsement. See In re Ostrom-Martin, Inc., 188 B.R. 245,250 (Bankr. C.D. Ill. 1995).

The statutory fictitious payee rule relieves a bank fromliability for honoring a check bearing the forged indorsement ofa fictional payee by deeming the forged indorsement to beeffective. 810 ILCS 5/3--404 (West 1994). The drawer of thechecks in such a scenario suffers the loss because the drawer isin the best position to avoid the loss. The Uniform CommercialCode Comment to section 3--404 specifically explains thisrationale:

"If a check payable to an impostor, fictitious payee *** is paid, the effect of subsections (a) and (b) is to place that loss on the drawer of the check rather than on the drawee or the Depositary Bank that took the check for collection. ***[F]raud is almost always involved in cases governed by subsection (b). The drawer is in the best position to avoid the fraud and thus should take the loss." (810 ILCS Ann. 5/3-- 404, Uniform Commercial Code Comment, at 211 (Smith- Hurd 1993).

Plaintiffs direct attention to the Lassen case, which isfactually distinguishable from the instant case because Lassendid not involve a fictitious payee. The issuing bank in Lassenbreached its contract with the purchasers of the cashier's checksbecause it did not pay the cashier's checks in accordance withits terms, which provided that the checks were payable to twojoint copayees. The issuing bank erroneously honored the checkson the endorsement of only one copayee. Lassen, 514 N.W.2d at836. In contrast, the issuing bank in the present case (Albank)fulfilled its contract with plaintiffs because the cashier'schecks were made payable to two copayees and, indeed, containedthe endorsements of the two named copayees (Parolin and Kelly). In all other respects, the Lassen decision accords with ourfindings.

A case more on point is Lewis, which involved cashier'schecks and fictitious payees. Lewis, 87 F.3d 1537. In Lewis,two elderly women were separately swindled out of hundreds ofthousands of dollars by fraud artists who persuaded the victimsto write numerous checks for the alleged purpose of investment invaluable coins and gems. The victims prepared numerous checks inthe form of personal, teller's and cashier's checks. The victimssued various banks that had sold, collected or paid the checks. Lewis, 87 F.3d at 1542.

For the banks that had issued the cashier's check tofictitious payees, the Lewis court applied the fictitious payeerule, which was then codified under section 3--405, the formerimposter provision, and held that the complaint could not state aclaim upon which relief could be granted. Lewis, 87 F.3d at1545. The court found that banks that sell cashier's checks areboth the drawer and drawee of the checks. Lewis, 87 F.3d at1546; accord Lassen, 514 N.W.2d at 836. The purchasers of thecashier's checks are the drawers. Lewis, 87 F.3d at 1548. Underthe language and policy of the impostor provision, the forgedsignatures of the payees are considered effective and "the drawerbears the loss from the check because the drawer was the partymost directly duped by the imposter and the party in the bestposition to avoid the loss." Lewis, 87 F.3d at 1550.

We find the Lewis decision persuasive and in accord with thelanguage and policy of section 3--404(b)(ii) of the Code inIllinois. A forged indorsement of a fictional payee invokes thefictitious payee rule and places the loss on the drawer of acashier's check, not the issuing bank. Thus, we find thatsummary judgment in favor of Albank was proper.

We further observe that to the extent plaintiffs rely on the1931 case of United States Cold Storage Co. v. CentralManufacturing District Bank, 343 Ill. 503 (1931), such relianceis misplaced. As noted in two subsequent decisions, the holdingin Cold Storage Co. was rejected by the legislature when itamended the then-existing negotiable instrument law in 1931. SeePeople v. Dauphin, 53 Ill. App. 2d 433 (1964); Houghton MifflinCo. v. Continental Illinois National Bank & Trust Co., 293 Ill.App. 423 (1938).

Second, plaintiffs assert that there was no ambiguity toinvoke the alternative payee method of payment in the cashier'scheck that was made payable to Klaus Wieske who, in turn,specially indorsed the back of the check as follows:

"EARNEST MONEY FOR 712 DIVERSEY

Pay to the order of:

John F. Parolin

David L. Kelly

Klaus A. Wieske [signature]

David L. Kelly [signature]

John F. Parolin [signature]."

Plaintiffs argue that the form of this indorsement is notambiguous but rather requires that the cashier's check be paidjointly, not in the alternative, under section 3--110 of the Code(810 ILCS 5/3--110(d) (West 1994)). We disagree.

Section 3--110(d) of the Code governs how to identify theperson to whom an instrument is payable and provides for multiplepayees as follows:

"(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 of more persons is ambiguous as to whether it is payable to the persons alternatively, the instrument is payable to the persons alternatively." (Emphasis added.) 810 ILCS 5/3-- 110(d) (West 1994).

This multiple payee provision became effective in 1992 andreplaced former section 3--116 of the Code. 810 ILCS Ann. 5/3--110, Uniform Commercial Code Comment, at 53 (Smith-Hurd 1993). Under former section 3--116 of the Code, an instrument waspresumed to be payable jointly where the instrument did notdesignate payment in the alternative. 810 ILCS 5/3--116 (West1992). Contrary to the former provision, the current sectionshifts the presumption to pay on an instrument in the alternativerather than jointly.

We find, as a matter of law, that the designation of twopayees on a cashier's check is ambiguous where no directives arestated on the checks to determine the manner of payment. In thepresent case, the cashier's check at issue names two payees butdoes not include any directions regarding whether the check ispayable to the named persons alternatively or jointly. Thesubject cashier's check does not contain any language or markingsto instruct the method of payment, such as the word "and" or theword "or." Accordingly, section 3--110 provides that the checkis payable to the persons alternatively. Therefore, in thepresent case, one named payee was sufficient to negotiate thecashier's check at Maywood Proviso State Bank.

We further note that the special indorsement of Klaus Wieskedoes not change the validity or result of the negotiation of thesubject cashier's check. The Code expressly accommodates specialindorsements and applies the principles stated in section 3--110to special indorsements. 810 ILCS 5/3--205 (West 1994).

Third, we consider whether plaintiffs stated a negligenceclaim against the institutions that paid the cashier's checks,relying on section 3--404(d) of the Code (810 ILCS 5/3--404(d)(West 1994)).

Where, as here, the trial court dismisses a complaint undersection 2--615, this court applies a de novo standard of review. Brown Leasing, Inc. v. Stone, 284 Ill. App. 3d 1035, 1044 (1996). The question presented by a section 2-615 motion to dismiss forfailure to state a cause of action is whether sufficient factsare contained in the pleadings which, if established, wouldentitle the plaintiff to relief. Wright v. City of Danville, 174Ill. 2d 391, 398 (1996). A section 2--615 motion to dismiss"tests the legal sufficiency of a pleading and a court mustaccept all well-pleaded facts as true." Doe v. Calumet City, 161Ill. 2d 374, 381 (1994). Where "it clearly appears that no setof facts can be proved" that would entitle the plaintiffs torecover, the trial court's dismissal order will be affirmed. People ex rel. Daley v. Datacom Systems Corp., 146 Ill. 2d 1, 11(1991).

Section 3--404(d) of the Code provides as follows:

"(d) With respect to an instrument to which subsection (a) or (b) [fictitious payee rule] applies, if a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss." 810 ILCS 5/3-- 404(d) (West 1994).

Under the language of section 3--404(d) and the facts of thepresent case, we find that plaintiffs did not and, indeed, cannotdemonstrate in their complaint any failure to exercise ordinarycare on the part of the three institutions that accepted thecashier's checks. Plaintiffs, at oral arguments, suggested thatbanks should have a duty to question customers about the payeesin transactions involving cashier's checks, but conceded that,even if such inquiries had been made in the present case, theoutcome would not be affected. We believe that such a duty isnot required under the Code and that imposing such a dutycontravenes the very purpose of a cashier's check, which is meantto operate as cash. Furthermore, such a duty would infringe onthe rights of a customer to access his or her own funds for thepurpose of distributing them to his or her own designated payees.

The unfortunate facts of this case indisputably include ascam initiated by an attorney against his clients, a fictitiouspayee, forged check transactions, and the loss of hundreds ofthousands of dollars. Although the fact that plaintiffs wereduped by a scam is regrettable, their attempt to place blame onthe institutions that actually followed and honored their ordersis not supportable either under the Code or in common sense. Infact, the opening comments addressing the revised article 3 ofthe Code specifically state what benefits were expected to obtainfrom the 1992 revisions. One such stated benefit is theexpectation that the new sections 3--404, the fictitious payeeprovision, through 3--406 "should significantly reducelitigation." Another expected benefit directly addressedcashier's checks and the importance of honoring them as cashequivalents: "Section 3--411 and related provisions considerablyimprove the acceptability of bank obligations like cashier'schecks as cash equivalents by providing disincentives to wrongfuldishonor, such as possible recovery of consequential damages." 810 ILCS Ann. 5/3--101 et seq., Uniform Commercial Code Comment,at 7-8 (Smith-Hurd 1993).

For all of the foregoing reasons, we affirm both orders bythe trial court.

Affirmed.

HOURIHANE, P.J., and HARTMAN, J., concur.

1. ¹Greater Illinois Title Insurance Company did not appear orparticipate in the proceedings in the trial court and have notfiled any documents in the appellate court.