author: JUSTICE HARTMAN

text:
      In re ESTATE OF HANS W. POLLEY, Deceased.—(Citizens and Southern National Bank of Macon, Georgia, Trustee under the Last Will of Gertrude Polley, Deceased, Petitioner-Appellee and Cross-Appellant, v. Krystyna Regina Stelmach Polley, Ex’r of the Estate of Hans W. Polley, Respondent-Appellant and Cross-Appellee.)
    First District (2nd Division)
    No. 81—3197
    Opinion filed December 28, 1982.

      Sidney Z. Karasik, of Chicago, for appellant.
    Roy M. Van Cleave, of Keck, Mahin & Cate, of Chicago, for appellee.
   JUSTICE HARTMAN

delivered the opinion of the court:

Decedent Hans Polley’s first wife, Gertrude Polley (Gertrude), died testate on October 9, 1963, a resident of Georgia. In her last will she named decedent executor and gave him one portion of her estate “absolutely and in fee simple.” He was also given a life estate in the second portion, with the remainder to Citizens and Southern National Bank of Macon, Georgia (Bank), as trustee under specified terms and conditions. Two years after Gertrude’s death, decedent married respondent, Krystyna Polley (Krystyna). Decedent died testate in July 1978, a resident of Cook County, naming Krystyna as executor and leaving her his residuary estate.

The Bank filed a petition in decedent’s estate to recover shares of stock or the proceeds of their sale, which decedent originally held as life tenant under Gertrude’s will, but had since reregistered in his own name. After an evidentiary hearing, the circuit court of Cook County entered judgment in the Bank’s favor and directed Krystyna to turn over to the Bank various shares of stock allegedly belonging to the remaindermen under Gertrude’s will. Both parties appeal.

The issues raised by Krystyna on appeal include whether: the circuit court misconstrued certain provisions of Gertrude’s will; the circuit court erred in precluding introduction of certain evidence pertaining to decedent’s illness and his need to encroach on the corpus of the life estate assets; the findings of the circuit court were against the manifest weight of the evidence; and the Bank should have disqualified itself as ancillary executor of decedent’s estate. The issue on cross-appeal by the Bank is whether the circuit court properly denied the Bank’s motion for attorney fees and costs.

Item II of Gertrude’s will dated May 4, 1961, divided her estate into two equal portions. Item III provided:

“The first portion divided as provided in Item II, I give, bequeath and devise unto my husband absolutely and in fee simple.
The second portion divided as provided in Item II, I give, bequeath and devise unto my husband for life with remainder to the Citizens and Southern National Bank, Macon, Georgia, as trustee under the terms and conditions and for purposes specified in paragraph 2, subparagraphs (a) through (f) of Item IV hereof. During his lifetime my husband as life tenant shall be entitled to receive all the income from this portion at such intervals as he may determine. My husband shall also have full power without the order of any court whatsoever to encroach upon the corpus of the property held by him as life tenant for his support in his accustomed manner of living, including the power to encroach upon it for medical, dental, hospital and nursing expenses and expenses of invalidism.”

Item IV of the will identified the remaindermen of decedent’s life estate trust to be distributed after his demise.

Item V of Gertrude’s will specified, in part:

“My executor, my husband, as life tenant, and my trustee shall each have full power and authority to manage and control my estate, any trust property, and any property held by my husband as life tenant in such manner as each respectively deems fit and proper with full power to sell, mortgage or dispose of all or any portion thereof, free of all limitations, publicly or privately, for cash or on credit, including the power in my husband as life tenant to sell, exchange or encumber the fee simple title to any property so held by him, all without the approval or order of any court or other authority whatsoever, the proceeds to stand in place of such property.”

Decedent became seriously ill and in 1976 he reregistered certain stock certificates held in his name as life tenant into his own name and he used the proceeds from the sale of other life tenancy stock to purchase stock, which was registered in his own name, the identities of which will be discussed later in this opinion. After a specific bequest to a Georgia church, in his will decedent left the remainder and residue of his estate to Krystyna. The original inventory filed in decedent’s estate listed, inter alia, a schedule of common stocks having an estimated value of $260,270.38.

At trial, the Bank endeavored to show that decedent’s estate inventoried specific items of property belonging to the estate of Gertrude. In particular, the Bank introduced into evidence two written ledgers which were assertedly maintained by decedent on a regular basis to record stock transactions in his own name and transactions in his name as life tenant under Gertrude’s will. The ledgers, Petitioner’s Exhibits Nos. 2 and 3, respectively, identify the certificates that decedent reregistered from his name as life tenant to his individual name:

100 Shares of Southern Company.

100 Shares of Timken Company.

500 Shares of American Electric Power Company.

500 Shares of Interstate Power Company.

300 Shares of Kansas Gas & Electric Company.

500 Shares of Louisville Gas & Electric Company.

The circuit court found that decedent transferred to himself in his own name certain shares of stock which had been held in his name as life tenant; and that in the same year he purchased certain shares of stock which were registered in his own name paid for from the proceeds of the sale of stock held in his name as life tenant. The court ordered Krystyna to deliver to the Bank as trustee, free and clear from liens or claims, the above-listed plus other specified shares of stock, together with dividends declared to stockholders of record of those stocks on and after July 10, 1978. This appeal and cross-appeal follows.

I

Krystyna contends that since, under Gertrude’s will, decedent was granted the power to encroach upon and dispose of life estate assets, the effect was to make an outright and absolute bequest which defeated the remaindermen rights, both under Georgia and Illinois law. This argument rests primarily on Krystyna’s assertion that the circuit court misconstrued the phrase “the proceeds to stand in place of such property” in Item V of Gertrude’s will, arguing that “such property” referred only to property held by decedent in “fee simple title”; that is, real property rather than personal property, i.e., stocks. Therefore, Krystyna concludes, Gertrude cast no restriction upon the proceeds which decedent might derive from the sale or disposition “of all or any portion” of the life tenancy personal property. The circuit court’s attempt to trace the proceeds in the instant case was therefore erroneous,' she claims. The Bank asserts that the provision, “the proceeds to stand in place of such property” refers to the property subject to the power to manage and control of the three parties named in that paragraph: “*** [m]y executor, my husband as life tenant, and my trustee.” The Bank maintains Krystyna’s construction emasculates the meaning of that paragraph and renders the power given to the executor and trustee substantially greater than that given the life tenant. The Bank also argues that even without the specific language that the “proceeds” of disposition were to “stand in place of such property,” decedent would be precluded from defeating the rights of the remaindermen by merely reregistering the shares of stock.

Construing the relevant provision as a whole, it appears that the phrase “such property” refers to the property subject to the power to manage and control. This construction is consistent with the provisions of Gertrude’s will in its entirety, which disposed of her estate by dividing it into two portions with the first part being an absolute bequest to decedent and the second part being a grant “unto *** [her] husband for life with remainder to the” Bank. Given this dichotomy and decedent’s limited power of encroachment, it is unlikely that Gertrude intended to allow him the right to defeat the interest of the remaindermen unless the specified conditions of encroachment were met.

The next contention made by Krytsyna is that where the life tenant is given the unlimited power of disposing of the property, the life tenant is deemed to have taken the property absolutely, and an attempted limitation over anything remaining undisposed of is to be held void. However true this asserted legal principle may or may not be, it is irrelevant to the case sub judice. Decedent was not given an unlimited power to dispose of the property in Item V of Gertrude’s will as noted above. Although decedent alone had the power to determine such portions of the corpus to encroach upon for his support and expenses, he cannot be said to have been given that power for the purpose of building up his separate estate. (See Rock Island Bank & Trust Co. v. Rhoads (1933), 353 Ill. 131, 142, 187 N.E. 139.) The cases relied upon by Krystyna are inapposite, therefore. See, e.g., Williams v. Jones (1963), 219 Ga. 45, 131 S.E.2d 553; Williams v. Bullock (1973), 231 Ga. 179, 200 S.E.2d 753; Nielsen v. Duyvejonck (1968), 94 Ill. App. 2d 224, 236 N.E.2d 743.

Next Krystyna urges that the circuit court’s interpretation of the phrase “the proceeds to stand in place of such property” is illogical; if all proceeds from the sale or disposition of life tenancy assets were to “stand in place” of the disposed property, the “proceeds” could not be used for any of the legal purposes designated in the will. This contention is without merit. The circuit court’s interpretation of the phrase in question is not inconsistent with other provisions in the will. The proceeds from the property so sold or disposed of would still retain its life estate character unless used by decedent for his support in “his accustomed manner of living,” including expenses for medical, dental, hospital, nursing and invalidism.

II

Krystyna maintains that the circuit court erred in precluding competent and relevant evidence that decedent’s serious illness and disability necessitated invasion of the corpus within the authorized purposes stated in Gertrude’s will. Krystyna testified that in 1976 her husband’s health was rapidly declining; he had “multiple arteriosclerosis, third degree” and, he was hospitalized several times during that year. That was the year in which decedent reregistered into his own name some of the life tenancy shares of stock received by him under Gertrude’s will, sold still others and purchased new securities. After Krystyna testified to decedent’s poor health, the Bank objected on the ground that this testimony was irrelevant. Krystyna’s trial attorney responded in part, “The relevancy is that we have a concentration of transactions by the petitioners. *** I have all I need in the record now, your Honor. I don’t need to pursue that line any further.” The court then sustained the objection.

Although such testimony was relevant to the issue of the extent to which decedent exercised his right to invade the corpus of the assets to pay for the medical, dental, hospital and nursing expenses, that right was waived, as the colloquy above demonstrates. There is no evidence in the record of any medical bills or indeed any evidence indicating payment of money for decedent’s support, nor was there any offer of proof as to these matters. Although a reviewing court bears a responsibility for effecting a just result which may sometimes override considerations of waiver, it cannot consider such issues where they are not answerable by evidence already in the record (Comet Casualty Co. v. Schneider (1981), 98 Ill. App. 3d 786, 793, 424 N.E.2d 911, appeal denied (1981), 85 Ill. 2d 577), or where, as here, proof might have been offered to refute or overcome such issues had they been presented at trial. (Hux v. Raben (1967), 38 Ill. 2d 223, 225, 230 N.E.2d 831.) Krystyna urges that this court take “judicial notice” that the hospitalization bills of a person in decedent’s condition were huge and in excess of the dividend income that he received from the stock. Although hospital and medical costs may be high, and even rising, as a matter of common knowledge, these are not appropriate facts of which the court can take judicial notice, particularly where specific comparisons, as here, are sought to be made.

Ill

The next issue raised is whether the Bank sustained its burden of establishing that decedent’s estate inventoried “specific, identifiable” items of property belonging to the estate of his first wife. Krystyna appears to concede that certain stocks were reregistered from Hans’ life estate to his personal name; however, she asserts that “*** only the 100 shares of Southern and 100 shares of Timken were traced to Gertrude’s holding at the time of her death.” Krystyna challenges the validity of the Bank’s evidence purportedly showing that decedent used the proceeds from the sale of the life tenancy stock to purchase stock registered in his own name. The Bank insists that the aforementioned ledgers maintained by decedent and certain brokerage statements demonstrate the link between his life estate assets and the stock inventoried in his estate. We agree. Trust proceeds, no matter what their form, clearly may be traced as was done in the present case. (Cales v. Dressler (1924), 315 Ill. 142, 146 N.E. 162; see In re Estate of Tognotti (1970), 128 Ill. App. 2d 120, 262 N.E.2d 803.) Our examination of the evidence relating to this issue reveals no basis upon which to find the circuit court’s conclusion to be against the manifest weight of the evidence m this case. In re Estate of Weisberg (1978), 62 Ill. App. 3d 578, 378 N.E.2d 1152.

IV

Krystyna’s next contention is that the Bank’s petition should have been barred under the doctrine of laches. The doctrine of laches is founded on the reluctance of a court to aid one who has knowingly slept on his rights for an unacceptable length of time, and applies where: (1) conduct on defendant’s part gives rise to the situation of which complaint is made and for which the complainant seeks a remedy; (2) delay occurs in asserting complainant’s rights, although complainant had notice or knowledge of defendant’s conduct and the opportunity to institute suit; (3) defendant lacks knowledge or notice that complainant would assert the right on which the suit is based; and (4) the existence or absence of injury or prejudice to defendant in the event relief is accorded complainant or the suit is held not to be barred. Pyle v. Ferrell (1958), 12 Ill. 2d 547, 553, 147 N.E.2d 341.

In the present case the Bank was informed of decedent’s death in a letter dated July 17, 1978, one week after his death, from the attorney for the estate, who wrote: “It is my understanding as of the present date that no other Life-Tenancy assets [other than a certain note dated May 27, 1965, in the face amount of $27,000] were held by Mr. Polley as of the date of his death.” Such an assertion can hardly be said to have alerted the Bank to the existence of life-tenancy assets. On October 27, 1978, the Bank wrote the attorney “there were substantial assets that should have been registered in Mr. Polley’s name as life tenant,” and asked for his assistance in trying to locate any additional life tenancy assets. On November 14, 1978, the attorney responded, “by 1976 the portfolio of Life-Tenancy stocks had been considerably changed, apparently with the intent to secure greater current income,” and stated that the “encroachments” were “effected through the stock brokerage firms,” which he identified. The attorney then stated, “If any additional details come to my attention as I examine Mr. Polley’s voluminous papers, I will alert you.” The Bank waited 10 months, until September 12, 1979, to file the instant petition. In consideration of the foregoing, we cannot agree that the Bank was guilty of laches.

Further, the question of whether this delay prejudiced the rights of Krystyna was not presented to the circuit court for consideration and cannot be considered for the first time on appeal. Kravis v. Smith Marine, Inc. (1975), 60 Ill. 2d 141, 324 N.E.2d 417; In re Marriage of Theeke (1981), 105 Ill. App. 3d 119, 433 N.E.2d 1311.

V

The final contention made by Krystyna is that the Bank should have disqualified itself as an ancillary executor of decedent’s estate before presenting the instant petition on behalf on decedent’s first wife. Absent such disqualification, she claims, petitioner was in an intolerable conflict of interest. The Bank denies that it was ever appointed ancillary executor and argues further that this argument is being raised for the first time on appeal. Under the circumstances presented, the issue has been waived. Kravis v. Smith Marine, Inc.; In re Marriage of Theeke.

VI

In its cross-appeal, the Bank maintains that it is entitled to reasonable attorney fees and costs under section 41 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 41), now section 2—611 of the Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, par. 2—611), because Krystyna made untrue allegations in her pleadings. In particular, the Bank objects to that portion of Krystyna’s answer to the petition which states that she was informed and believed that during his lifetime decedent encroached upon the corpus of the property received by him as life tenant pursuant to the will of Gertrude, except for the note described in paragraph 5 of the petition, and expended the same for his support, pursuant to the terms of the portion of Item III of Gertrude’s will so that she had in her possession no assets, or proceeds traceable to such assets, held by decedent as life tenant under Item III of Gertrude’s will.

The allegations contained in this pleading do not warrant an award of attorney fees to the Bank. The basis for a substantial part of what was pleaded in the answer is attributable to a misconception of law. In addition, some circumstantial evidence was introduced to show that decedent encroached upon the life estate assets to pay for his medical care. Furthermore, the circuit court could reasonably have inferred from the evidence that decedent held no job during his marriage to Krystyna and was forced to encroach on the corpus of the life estate for his support. Lastly, at trial, Krystyna stated that she was not “familiar with the details of her husband’s business affairs” and never looked into either one of decedent’s “ledgers” during his lifetime. Accordingly, the Bank’s cross-appeal argument must be rejected.

For the above reasons the judgment of the circuit court must be affirmed with respect both to the appeal and cross-appeal.

Affirmed.

STAMOS, P.J., and PERLIN, J., concur.


source: Caselaw Access Project

author: JUSTICE McGILLICUDDY

license: Public Domain

text:
    CERRO WIRE AND CABLE CO., Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellants.
    First District (3rd Division)
    No. 81—949
    Opinion filed December 30, 1982.

      Tyrone C. Fahner, Attorney General, of Chicago (Patricia Rosen, Assistant Attorney General, of counsel), for appellants.
    Hubachek & Kelly, Ltd., of Chicago (Roger L. Longtin and John J. Pembroke, of counsel), for appellee.
   JUSTICE McGILLICUDDY

delivered the opinion of the court:

This administrative review action was brought by Cerro Wire and Cable Company (Cerro) against the Illinois Department of Revenue and Robert M. Whitler, its director (hereinafter collectively referred to as the Department), to contest the Department’s final assessment of $21,390.85 in taxes, penalties and interest due under the Retailers’ Occupation Tax Act (the Act) (Ill. Rev. Stat. 1973 & 1975, ch. 120, pars. 440 to 453, hereinafter cited to Ill. Rev. Stat. 1975) and the Municipal Retailers’ Occupation Tax Act (Ill. Rev. Stat. 1973 & 1975, ch. 24, par. 8—11—1) for the period January 1973 through December 1975. The circuit court reversed the Department’s determination of tax liability. The Department appeals.

The issues presented by the parties on appeal are: whether the provisions of the Act apply to a portion of Cerro’s sales; whether Cerro’s noncompliance with section 2c of the Act (Ill. Rev. Stat. 1975, ch. 120, par. 441c) transforms a portion of its wholesale sales transactions into retail sales transactions subject to taxation; v/hether section 2c of the Act violates the Illinois Constitutions of 1870 and 1970; and whether Cerro is entitled to a refund for use taxes collected by the Department when Cerro’s products subsequently were resold.

The retailers’ occupation tax is imposed upon persons engaged in the business of selling tangible personal property at retail. (Ill. Rev. Stat. 1975, ch. 120, par. 440.) A sale at retail is defined as “any transfer of the ownership of or title to tangible personal property to a purchaser, for the purpose of use or consumption, and not for the purpose of resale ***.” The Act further provides that the term “sale at retail” includes “any transfer of the ownership of or title to tangible personal property *** for- resale in any form as tangible personal property unless made in compliance with Section 2c of this Act.” (Ill. Rev. Stat. 1975, ch. 120, par. 440.) Section 2c states that with certain exceptions:

“no sale shall be made tax-free on the ground of being a sale for resale unless the purchaser has an active registration number or resale number from the Department and furnishes that number to the seller in connection with certifying to the seller that any sale to such purchaser is nontaxable because of being a sale for resale.” Ill. Rev. Stat. 1975, ch. 120, par. 441c.

Cerro manufactures and sells wire and cable products at wholesale and retail. In 1977, the Department audited Cerro’s books and records for the calendar years 1973, 1974 and 1975. During this period, Cerro paid retailers’ occupation taxes in the amount of $3,033.67 based on retail sales of $75,841.75 and gross receipts of $4,907,714.47. Cerro and the Department signed an agreement authorizing the test check audit and specifying that the average monthly margin of error arrived at by the test check audit would be applied against the entire audit period. The audit was based on a test check of Cerro’s sales records for the months of August 1973, October 1974 and April 1975. The auditor determined that Cerro improperly treated five sales, totaling $24,136.33, as wholesale sales. These sales were made to: Freeman Coal Mining ($718.13); Fife Florida Electric Supply Company ($1,834.96); and Nelson Electric Supply ($21,583.24). Although Cerro had claimed the sales were not subject to the retailers’ occupation tax because they were sales for resale, the auditor rejected this argument because Cerro did not obtain the purchasers’ registration or resale numbers as required by section 2c of the Act.

Cerro protested the assessed deficiency, and a hearing was held pursuant to section 4 of the Act (Ill. Rev. Stat. 1975, ch. 120, par. 443). At the hearing, Cerro presented statements signed by officials of Fife Florida Electric Supply Company and Nelson Electric Supply stating that the materials purchased during the questioned transactions were purchased for resale. The Department’s hearing examiner rejected these statements and recommended issuance of the tax assessment because Cerro had not obtained resale numbers in compliance with section 2c of the Act.

In connection with the administrative review action in the circuit court of Cook County, Cerro submitted an opening memorandum which stated that neither Fife Florida Electric Supply Company nor Nelson Electric Supply had Illinois registration numbers; that Fife had mistakenly paid a 4% use tax to the State of Florida on its resale; and that a use tax had been paid to the Illinois Department of Revenue by Northern Petrochemical, an Illinois corporation which purchased Cerro’s products from Nelson. Cerro also admitted in this memorandum that the sale to Freeman Coal Mining was not a sale for resale so that Cerro was liable for the retail tax thereon.

Based upon the recently decided Illinois Supreme Court case of Dearborn Wholesale Grocers, Inc. v. Whitler (1980), 82 Ill. 2d 471, 413 N.E.2d 370, the circuit court reversed the Department’s assessment and ordered the Department to repay to Cerro the amount of $21,390.85 plus interest from the date that amount had been paid. Specifically, the circuit court found that Cerro’s customers were not purchasers as defined and contemplated by the Act and that, therefore, Cerro was not required to comply with section 2c of the Act.

In Dearborn Wholesale Grocers, Inc. v. Whitler, the court held that the Retailers’ Occupation Tax Act did not apply to a seller of tangible personal property who was not engaged in the retail business. The taxpayer in that case had presented testimony that it made no sales at retail and that all of its sales, including those which were the subject of the assessment, had been made to retail grocery stores for the purpose of resale. On this basis, the court found that the taxpayer’s customers were not purchasers since they had not acquired the tangible personal property through a sale at retail (Ill. Rev. Stat. 1979, ch. 120, par. 440) and thus the taxpayer was not subject to the Act or its reporting requirements.

In the instant case, Cerro relies on Dearborn and contends that it, too, is a wholesaler and that its disputed sales were in fact sales for resale and that those sales should not have been taxed as sales at retail merely because of a technical noncompliance with section 2c of the Act. The facts in the instant case are distinguishable, however, since Cerro, unlike Dearborn Wholesale Grocers, Inc., did engage in retail sales. Cerro admitted this fact in its pleadings and actually paid the retailers’ occupation tax on sales totaling $75,841.75 during the tax years audited.

Furthermore, arguments similar to those made by Cerro were recently rejected in Illinois Cereal Mills, Inc. v. Department of Revenue (1982), 106 Ill. App. 3d 53, 435 N.E.2d 774, appeal allowed (1982), 91 Ill. 2d 569. In that case, the taxpayer sold its products almost entirely for resale but made a small amount of sales to ultimate consumers. The taxpayer had not complied with the documentation and verification requirements of section 2c of the Act but attempted to present other evidence that the disputed sales were for resale. This court held that section 2c applied to taxpayers who sell mainly for resale but who make some sales at retail and affirmed the Department’s tax assessment since the taxpayer had not complied with section 2c. For similar reasons, we hold that Cerro was required to comply with section 2c of the Act and that its failure to do so subjected it to the tax liability assessed by the Department.

As alternative support for the circuit court’s reversal of the tax assessment, Cerro contends that section 2c and section l’s reference to section 2c are unconstitutional. Cerro argues that these sections violate article IV, section 13 of the 1870 Illinois Constitution (Ill. Const. 1870, art. IV, sec. 13), which limited the contents of an act to the subject expressed in its title. Cerro also argues that sections 1 and 2 of the Act violate article IX, section 2 of the 1970 Illinois Constitution (Ill. Const. 1970, art. IX, sec. 2) because the exemption created by the Act for sales for resale is unreasonable.

Since the applicable provisions of sections 1 and 2c of the Act were enacted in 1965 and 1967, they are subject to the limitations of article IV, section 13 of the 1870 Constitution. (Dearborn Wholesale Grocers, Inc. v. Whitler.) As stated in Reif v. Barrett (1933), 355 Ill. 104, 188 N.E. 889, the purpose of article IV, section 13 of the 1870 Illinois Constitution was:

“to remedy the evil that was sometimes present in legislative enactments, of embracing more than one subject in the title, of the collation of divergent subjects of legislation having no interrelation, and of procuring the passage of the act as a whole when such legislation could not be passed if written in separate bills. The provisions of section 13 of the constitution are not intended to impede legislation but to protect the people against unwise legislation ***. However, it is not intended by this constitutional provision that the title of the act shall go into all the details of the proposed law, neither shall it be a table of its contents, but it is sufficient if the title correctly gives the subject matter of the act explicitly and clearly, so as to inform the members of the General Assembly and the public of the subject dealt with and matters inter-related with the subject, even though some of the provisions of the bill may be diverse, if such provisions go to make an effective and practical piece of legislation. [Citations.]” (355 Ill. 104, 124-25, 188 N.E. 889, 898; see also People v. Tibbitts (1973), 56 Ill. 2d 56, 305 N.E.2d 152.)

Illinois courts have uniformly given a liberal construction to the constitutional provisions of article IV, section 13 in favor of the validity of enactments. Winter v. Barrett (1933), 352 Ill. 441, 186 N.E. 113.

According to its title, the Retailers’ Occupation Tax Act imposes a tax upon persons engaged in the business of selling tangible personal property to purchasers for use or consumption. The tax is imposed on the privilege of selling at retail which is defined in section 1 of the Act to include any transfer for resale unless made in compliance with section 2c. (Ill. Rev. Stat. 1975, ch. 120, par. 440.) Section 2c requires the imposition of the tax upon sales for resale unless the taxpayer obtains the purchaser’s registration or resale number. Thus, it is true, as Cerro contends, that sales for resale can be taxed under the Act even though the purpose of the Act is to tax sales of products taken off the retail market (see Modern Dairy Co. v. Department of Revenue (1952), 413 Ill. 55, 108 N.E.2d 8).

We do not believe, however, that the resultant tax on sales for resale makes section 2c and section l’s reference thereto unconstitutional. The purpose of section 2c is to provide a means of verifying a claim made by a person subject to the Act as a retailer that a particular sale by him is exempt from taxation because the purchaser is not himself the ultimate user or consumer of the property. (Dearborn Wholesale Grocers, Inc. v. Whitler.) The stricter verification requirements of section 2c have been said to be justified for situations where a taxpayer engages in wholesale and retail sales because a sale erroneously may be claimed as a resale. (Illinois Cereal Mills, Inc. v. Department of Revenue.) Section 2c does not create a new tax on sales for resale; it merely denies an exemption from retail sales taxation where the seller has not proved by the required documentation that it is entitled to the exemption. Since the matters embraced in that section are germane and interrelated with the subject of the taxation of retail sales, we believe that section 2c and section l’s reference thereto do not expand the subject of the Act beyond the Act’s title and, therefore, article IV, section 13 of the 1870 Illinois Constitution is not violated.

Cerro also contends that section 2c and section l’s reference thereto violated article IX, section 2 of the 1970 Illinois Constitution which provides in pertinent part: “Exemptions, deductions, credits, refunds and other allowances shall be reasonable.” Cerro argues that the sales for resale exemption created by sections 1 and 2c of the Act is unreasonable because the exemption is limited to those transactions where the purchasers’ registration or resale numbers are supplied to the taxpayer. Cerro contends that the taxpayer should be able to qualify for the exemption by supplying proof based on any evidence that the sale was not a sale to a purchaser for use or consumption.

It generally has been stated that he who challenges the constitutionality of a legislative act has the burden of showing clearly wherein such act violates constitutional limitations. (Reif v. Barrett (1933), 355 Ill. 104, 188 N.E. 889; see Thorpe v. Mahin (1969), 43 Ill. 2d 36, 250 N.E.2d 633.) Moreover, in determining whether a statutory exemption applies, all reasonable doubts are to be resolved in favor of taxation. (Heller v. Fergus Ford, Inc. (1975), 59 Ill. 2d 576, 322 N.E.2d 441.) Article IX, section 2 of the 1970 Illinois Constitution was created to permit the legislature to enact tax laws which would exempt taxation on food and other necessities. The Constitutional Convention chose to give the General Assembly flexibility in choosing appropriate exemption methods (Ill. Ann. Stat., 1970 Const., art. IX, sec. 2, Constitutional Commentary, at 157 (Smith-Hurd, 1971)), and the only limitation on the legislature’s authority with regard to the creation of exemptions and other allowances was that they be reasonable (see Thorpe v. Mahin) Winter v. Barrett (retailers’ occupation tax exemption to class of taxpayers who sold farm products or produce or motor fuel at retail was unreasonable)).

In the case at bar, the legislature enacted the Retailers’ Occupation Tax Act to tax the business of selling at retail. Sections 1 and 2c of the Act exempt sales for resale to the extent that the statutory reporting requirements of section 2c are met. The burden is placed on the taxpayer who seeks the exemption to gather the purchaser’s registration or resale number at the time the sale is made to ensure that the products purchased are in fact being purchased for resale. We believe that the reporting requirements specified in the Act are reasonable as to the enforcement of the taxing scheme and that the plaintiff has not met its burden in proving a violation of article IX, section 2 of the Illinois Constitution of 1970.

Cerro’s final contention in this appeal is that in the event it is liable for the disputed retailers’ occupation tax, it should be given a credit for the use tax that was paid when Cerro’s products were subsequently sold at retail for use or consumption. Cerro states that Northern Petrochemical Company (Northern) purchased Cerro’s products from Nelson Electric Supply and that Northern had paid a self-assessed use tax to the Illinois Department of Revenue. Cerro relies on section 6 of the Retailers’ Occupation Tax Act, which states:

“If a retailer who has failed to pay retailers’ occupation tax on gross receipts from retail sales is required by the Department to pay such tax, such retailer, without filing any formal claim with the Department, shall be allowed to take credit against such retailers’ occupation tax liability to the extent, if any, to which such retailer has paid an amount equivalent to retailers’ occupation tax or has paid use tax in error to his vendor or vendors of the same tangible personal property which such retailer bought for resale and did not first use before selling it, and no penalty or interest shall be charged to such retailer on the amount of such credit.” (Emphasis added.) Ill. Rev. Stat. 1975, ch. 120, par. 445.

As stated above, the Retailers’ Occupation Tax Act imposes a tax upon the occupation of retail selling within the State. The use tax, however, is a tax upon the privilege of using personal property within the State and is collected by the retailer from the purchaser at the time the sale is made. (Ill. Rev. Stat. 1975, ch. 120, par. 439.3.) The latter tax was enacted to complement the former by preventing the evasion of tax on interstate purchases and to protect Illinois retailers from the competitive advantage of out-of-State retailers who are not required to collect a sales tax from Illinois purchasers. (Illinois Road Equipment Co. v. Department of Revenue (1965), 32 Ill. 2d 576, 207 N.E.2d 425.) The legislature intended that one tax and only one tax should reach the State treasurer with regard to each purchase of property for use within the State and it accomplished this goal by relieving the retailer who has paid the retailers’ occupation tax on the retail sale from collecting the use tax from the purchaser in the same retail sale. (Ill. Rev. Stat. 1975, ch. 120, par. 439.8.) Thus, a single retail sale gives rise to two tax obligations, but only one of the obligations must be paid to the Department of Revenue. Howard Worthington, Inc. v. Department of Revenue (1981), 96 Ill. App. 3d 1132, 421 N.E.2d 1030.

The portion of section 6 of the Act relied upon by Cerro allows the retailer a credit for use taxes it paid to its vendor when it purchased personal property intending to use that property but later sold it at retail without having used it. That provision is not applicable in the instant case since Cerro is not contending that it paid a use tax on the products that it sold to Nelson Electric Supply. The use tax that assumedly was paid was incurred during the subsequent retail sales transaction between Nelson and Northern. If Nelson had been required to pay the retailers’ occupation tax on this sale, Northern would have been exempt from paying the use tax under the exemption provisions of the Use Tax Act (Ill. Rev. Stat. 1975, ch. 120, par. 439.8). However, the sales transaction between Nelson and Northern was separate and distinct from the transaction between Cerro and Nelson; and payment of use taxes incurred by the latter transaction had no effect on Cerro’s obligation to pay the retailers’ occupation tax incurred as a result of the former transaction. (Cf. Howard Worthington, Inc. v. Department of Revenue (retailer not entitled to retailers’ occupation tax credit for its payment of use taxes on equipment it used and subsequently sold since original purchase and use was distinct transaction from subsequent sale and use).) Thus, we believe Cerro is not entitled to a credit for the use taxes paid by Northern Petrochemical Company to the Illinois Department of Revenue.

For the foregoing reasons, the judgment of the circuit court of Cook County is reversed and the cause is remanded for further proceedings consistent with the views expressed herein.

Reversed and remanded.

WHITE, P.J., and McNAMARA, J., concur.

      Cerro’s argument is based on testimony presented by its accountant at the departmental hearing that Northern Petrochemical Company orally informed Cerro that “they self-assessed themselves on any taxable purchases that they might have.” For purposes of discussion of this issue, we assume that the appropriate use taxes had been paid by Northern to the Department of Revenue.


author: JUSTICE LORENZ

text:
    BELL FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff-Appellant, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee.
    First District (5th Division)
    No. 81—2040
    Opinion filed December 30, 1982.

      John A. Kelly, Jr., and Richard A. Marsh, both of Schumacher, Jones, Vallely, Kelly & Olson, of Chicago, for appellant.
    Tyrone C. Fahner, Attorney General, of Springfield (Paul J. Bargiel and Fred H. Montgomery, Special Assistant Attorneys General, of counsel), for appellee.
   JUSTICE LORENZ

delivered the opinion of the court:

Bell Federal Savings and Loan Association (Bell) claims that Federal law prohibits Illinois from taxing certain funds which Bell received from the Federal Home Loan Bank of Chicago (FHLB) and the Federal Savings and Loan Insurance Corporation (FSLIC). The Department of Revenue disagreed, and Bell filed an action for administrative review. The circuit court entered judgment for the Department, and we hereby affirm.

Bell’s appeal presents the following issues of law:

(1) whether the Federal Home Loan Bank Act (12 U.S.C.S. sec. 1421 et seq. (1978)) prohibits Illinois from taxing the dividends received by a savings and loan association from the stock it owns in a Federal Home Loan Bank;

(2) whether title IV of the National Housing Act (12 U.S.C.S. sec. 1724 et seq. (1978)) prohibits Illinois from taxing the funds which a savings and loan institution received as a refund of its contributions to the “secondary reserve” of the Federal Savings and Loan Insurance Corporation.

Initially, Bell contends that section 1433 of title 12 of the United States Code (12 U.S.C.S. sec. 1433 (1978)) prohibits Illinois from taxing the dividends which Bell received from the stock it owns in the FHLB of Chicago. Section 1433 provides that, except for real estate taxes, each regional Federal Home Loan Bank, “including its franchise, its capital, reserves, and surplus, its advances, and its income, shall be exempt from all taxation now or hereafter imposed by *** any State ***.” 12 U.S.C.S. sec. 1433 (1978).

According to Bell, imposing a State tax on the dividends which a savings and loan association receives from its FHLB stock would impermissibly interfere with FHLB activities which are exempt from State taxation under section 1433. To justify this conclusion Bell relies on Laurens Federal Savings & Loan Association v. South Carolina Tax Com. (1961), 365 U.S. 517, 5 L. Ed. 2d 749, 81 S. Ct. 719.

In Laurens, the Supreme Court construed the portion of section 1433 which prohibits States from taxing FHLB “advances.” As used in section 1433, the term “advances” is synonymous with the word “loan” (365 U.S. 517, 521 n.9, 5 L. Ed. 2d 749, 751 n.9, 81 S. Ct. 719, 721 n.9), and South Carolina attempted to impose a documentary stamp tax on the promissory notes which a savings and loan association must issue as security for an FHLB loan. (See 12 U.S.C.S. sec. 1430(c) (1978).) The Supreme Court — noting that the promissory notes in question were “indispensable elements” of an FHLB loan (365 U.S. 517, 521, 5 L. Ed. 2d 749, 751, 81 S. Ct. 719, 721)-held that the exemption for FHLB “advances” had to be construed as prohibiting States from taxing an activity which is an “integral part” of an FHLB loan transaction. (365 U.S. 517, 522, 5 L. Ed. 2d 749, 752, 81 S. Ct. 719, 722.) And because the taxed transaction was, by statute, an indispensable and integral part of an activity which was exempt under section 1433, it was not significant that the State tax was nominally assessed against a savings and loan association rather than against the FHLB itself. 365 U.S. 517, 522, 5 L. Ed. 2d 749, 752, 81 S. Ct. 719, 721.

Based on its analysis of Laurens, Bell argues that State taxation of the dividends paid to a savings and loan association on its FHLB stock impermissibly interferes with the FHLB loan process which is exempt under section 1433.

Using the analysis adopted by the court in Laurens, the key question is whether FHLB dividends are an indispensable or integral part of the exempt “advance” procedure under which the FHLB lends money for use in purchasing homes. In other words, since the FHLB dividends received by savings and loan associations are not expressly exempted from State taxation under section 1433, States are prohibited from taxing these funds only if the process of paying FHLB dividends is an indispensable or integral part of an activity which is exempt under section 1433.

Bell points out that (1) the FHLB charges less interest to borrowing institutions which own FHLB stock; (2) payment of FHLB dividends reduces the need for FHLB loans; and (3) such dividends further the goals of the Federal Home Loan Bank Act by increasing the amount of money available to lending institutions for loans to home buyers. Thus, Bell concludes that taxation of FHLB dividends impermissibly interferes with the exempt “advance” procedure.

At most, however, Bell’s assertions would justify concluding that there is a remote economic relationship between FHLB advances and FHLB dividends. But we find no support for concluding that FHLB dividends are an indispensable or integral part of the exempt FHLB loan process. Consequently, State taxation of the dividends paid to a savings and loan association on FHLB stock is not prohibited by the section 1433 exemption for FHLB advances.

Next, Bell contends that the FHLB dividends paid to savings and loan associations are exempt from State taxation under the portion of section 1433 which prohibits States from taxing the “income” and “surplus” of regional Federal Home Loan Banks. However, Bell fails to recognize that once title to the funds in question passes from the FHLB to FHLB shareholders, these funds no longer constitute the “income” or “surplus” of the FHLB. We find nothing to indicate Congress intended that the funds in question should float through the economy exempt from State taxation merely because, at one time, they constituted the income or surplus of a Federal Home Loan Bank. In short, section 1433 exempts the income and surplus of the FHLB, not the income and surplus of savings and loan associations.

Bell also asserts that congressional intent to exempt FHLB dividends from State taxation can be discerned from the fact that the stock issued by Federal instrumentalities, such as the FHLB, is no longer exempt from Federal taxation. (See 31 U.S.C.S. sec. 742a (1979).) But, whether or not FHLB dividends are subject to Federal taxation as a result of section 742a is irrelevant to the present case. Our decision is based on the plain language of section 1433, and neither the legislative history of section 742a, nor administrative interpretations of that provision, changes the unambiguous language of section 1433.

The second issue presented by this appeal is whether Illinois is precluded from taxing the funds which Bell receives from the Federal Savings and Loan Insurance Corporation as a refund of Bell’s pro rata share of the FSLIC “secondary reserve.”

With certain exceptions which are immaterial to this case, States are prohibited from taxing the principal and interest of “All notes, bonds, debentures, or other such obligations issued by the [Federal Savings and Loan Insurance Corporation].” 12 U.S.C.S. sec. 1725(e) (1978).

The FSLIC is obligated to insure the accounts of Federal savings and loan associations. (12 U.S.C.S. sec. 1726 (1978).) Insured institutions are charged annual premiums (12 U.S.C.S. sec. 1727(b)(1) (1978)) and, at one time, insured institutions were also required to make contributions to the FSLIC “secondary reserve” (12 U.S.C.S. sec. 1727(a)(1) (1978)). But, since 1973, the FSLIC has been obligated, by statute, to make yearly refunds to insured institutions of their pro rata shares of the secondary reserve. See 12 U.S.C.S. secs. 1727(d)(B)(ii) and 1727(g) (1978).

Relying on the portion of section 1725(e) which prohibits States from taxing the principal or interest of “All notes, bonds, debentures, or other such obligations issued by the [FSLIC],” Bell argues that the statutory provisions which require the FSLIC to refund the contributions made to its secondary reserve constitute “obligations issued by the corporation.”

We are not persuaded by this argument. The exemption established by section 1725(e) only applies to certain obligations which are “issued” by the FSLIC, such as the notes, bonds, and debentures which are “issued” by the FSLIC when they are placed into circulation. Although, in a general sense, the statutory duty to refund the contributions made to the secondary reserve constitutes an “obligation,” this is not an obligation which was, in any sense, “issued” by the FSLIC. Instead, this obligation was issued or promulgated by Congress itself.

Since the “obligation” to repay contributions to the FSLIC secondary reserve was not “issued” by the FSLIC as contemplated by section 1725(e), Illinois is not prohibited from taxing these funds.

Finally, Bell asserts that the funds which it receives as its pro rata share of the secondary reserve are exempt from State taxation under the portion of section 1725(e) which (except for real estate taxation) prohibits States from taxing the FSLIC itself, “including its franchise, capital, reserves, surplus, and income.” 12 U.S.C.S. sec. 1725(e) (1978).

This argument is unpersuasive. The funds in question are only exempt when they constitute the “capital, reserves, surplus, and income” of the FSLIC. Once title to these funds passes to Bell, the money is no longer covered by the exemption for funds belonging to the FSLIC. We again find nothing to indicate Congress intended that the money in question should float through the economy exempt from State taxation merely because these funds were exempt when they belonged to a Federal instrumentality.

Based on all the preceding reasons, the judgment of the circuit court is affirmed.

Affirmed.

MEJDA and WILSON, JJ., concur.


author: PRESIDING JUSTICE SULLIVAN

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee, v. GEORGE J. SMITH, Defendant-Appellant.
    First District (5th Division)
    No. 81—2290
    Opinion filed December 30, 1982.

      Steven Clark and Edward J. Finn, both of Schiff, Hardin & Waite, of Chicago, for appellant.
    Richard M. Daley, State’s Attorney, of Chicago (Michael E. Shabat, Dean P. Karlos, and Harry John Devereux, of counsel), for the People.
   PRESIDING JUSTICE SULLIVAN

delivered the opinion of the court:

Following a jury trial, defendant was convicted of rape and sentenced to a term of eight years. On appeal, he contends that (1) admission of identification testimony tainted by an unnecessary and highly suggestive showup denied him due process of law; (2) the State’s failure to reveal evidence of the showup during discovery denied him due process; (3) the prosecutor’s improper comments during closing argument denied him a fair trial; and (4) he was not proved guilty beyond a reasonable doubt.

The victim testified that she left her home at approximately 6 a.m. and began walking down Shields Avenue toward 55th; that it was just between dark and daylight, and the street was illuminated by streetlights; that she noticed a man, whom she later identified as defendant, turn the corner and begin walking toward her along Shields; that when he was 10 to 15 feet away, she realized that about a week earlier she had seen him near 54th and Shields; that as they passed, she was able to look at his face and also noticed that he was carrying a newspaper under his right arm; that after passing her, defendant grabbed her around the neck from behind and threatened to kill her if she was not quiet; that she dropped her purse, which contained $11, and began screaming and struggling with him; that he put one arm around her neck, covered her mouth with his other hand, and pushed her into a nearby yard where he turned her around so that she was facing him, and then forced her to the ground; that she had a clear view of him until he placed his cap over her face, but thereafter she was still able to see him out of one eye; that he removed her clothing and raped her, with the entire incident taking approximately 20 minutes — during 15 of which she was able to see defendant’s face at extremely close range; that after defendant fled, she ran home where her brother called the police — to whom she described her assailant as a black male between 20 and 25 years of age, approximately five feet nine inches tall, weighing about 140 pounds, having large eyes, and wearing dark clothing; and that she was taken by the police to Englewood Hospital, and later she identified defendant in a lineup at the police station.

On cross-examination, the victim acknowledged that she had reviewed police reports which contained her impressions of defendant’s height, weight, and facial hair; that the police wrote her initial description on a piece of paper which she had not seen; that the light nearest to the area of the rape was approximately 15 feet away; that she noticed nothing unusual about defendant’s mouth other than his large lips; that while she was sitting in a police car at the hospital, a second car arrived with defendant in the back seat; that she was told the police had apprehended someone and was asked to look and see if he was her assailant, but she was not sure; that while at the hospital she had occasion to talk with police officers about the rape and subsequent viewing of defendant; and that the man she later identified in a lineup was the same man she saw in the car at the hospital. She further testified that, at the hospital, she and defendant remained in their respective cars with the windows raised; that there were several people between the cars; and that she did not see defendant standing and was not even sure the man in the car was defendant.

Officer Davis testified that when he talked to the victim at the hospital, she described her attacker as a black male, between 20 and 25, with dark complexion, large eyes and lips, short hairs on his face, and wearing a dark blue cap and a blue jacket; that he and his partners returned to 55th and Shields, where he stopped defendant because he matched the victim’s description and was wearing a dark blue cap, light blue jacket, and rust-colored pants; that he took defendant into custody and drove him to Englewood Hospital where the victim was seated in a car, then to the police station, but the only time she was asked to identify defendant was during a lineup at the station; and that defendant lived in one of the houses adjacent to the yard where the rape occurred. He admitted that defendant did not have a newspaper or purse when stopped; that the fact defendant was taken to the hospital before being transported to the station did not appear in the police report; that he drove to the hospital with his two partners and defendant in an unmarked car, but defendant was not viewed there by the victim; that his partner, Officer McGovern, got out of their car and walked to the car where she was seated and talked to someone in the car, but he could not hear what was said; that McGovern subsequently related the conversation to him.

Defendant’s sister testified that she saw defendant as he descended stairs in their home at 7:30 a.m. on September 24 and asked whether he had heard a woman screaming at approximately 4 a.m.; and that immediately after this conversation, defendant left the house.

Defendant testified that he was awakened by screams at 6:30 a.m. on September 24, 1980, and upon looking out of the window saw a man and woman who appeared to be struggling; that he went back to bed, but got up between 6:30 and 7 to get ready for school; that as he was leaving the building, he discussed with his sister the screams he heard and the struggle he witnessed, and when he reached the street he saw police officers who called him over and began questioning him; that the officers asked him to take a ride with them “to check something out,” and he was taken to a hospital where they pulled up next to another car, and one officer got out and approached that car; that he was told to slide over to the right side of the car, lower the window, and put his head out; that he sat with his head out the window for five or ten minutes; that the officer then returned from the other car and read him his rights before he was taken to the police station; that on September 24, 1980, he had a broken front tooth and had only 13 cents on his person when arrested; that the first time he ever saw the victim was in a car in front of the hospital; and that neither he nor she got out of their respective cars at the hospital.

Opinion

Defendant first contends that failure to suppress the victim’s identification testimony denied him due process of law. He asserts that her identification of him in the lineup and in court was tainted by the hospital showup, which he characterizes as “unnecessary and highly suggestive.” The State maintains that what occurred was not a showup; or, alternatively, that it was the type of police procedure recognized as proper in People v. Lippert (1982), 89 Ill. 2d 171, 432 N.E.2d 605. It also argues that, even if we find that the procedures followed were suggestive, there was a sufficient showing of an independent reliable source for the subsequent identifications.

The State relies on People v. Witherspoon (1975), 33 Ill. App. 3d 12, 337 N.E.2d 454, in arguing that no showup was conducted. There, the police arrived as a rape was taking place, and one officer pursued the assailant while another escorted the victim to a squad car. The defendant was apprehended, and as the police brought him past the car where the victim was seated, she saw him and told the police he was the man who attacked her. The defendant’s motion to suppress evidence of this identification was denied, and in affirming we noted that the encounter was unstaged and occurred by mere chance, rather than being arranged by the police for identification purposes. Similar “coincidental confrontations” were found not to constitute showups in People v White (1977), 48 Ill. App. 3d 907, 363 N.E.2d 408, and People v. Brown (1975), 32 Ill. App. 3d 182, 336 N.E.2d 523.

Nothing in the circumstances of this case indicates any element of coincidence in the confrontation at the hospital. In this respect, it is much closer to the circumstances in People v. Hatcher (1977), 45 Ill. App. 3d 374, 359 N.E.2d 1157, where defendant was arrested several weeks after an armed robbery. The victim was called by the police and asked to come to the station, purportedly to view photographs. When she arrived, the defendant was seated at a desk giving a statement to an officer. According to the victim, she was asked if she noticed the man seated in the outer office when she entered, and she stated that she could not be sure it was the robber, although she subsequently identified him in a lineup. We rejected the State’s assertion that this was a chance encounter, noting:

“The officer’s testimony that it had not occurred to him that the witnesses were likely to arrive while he was interviewing the defendant is entitled to little weight. *** [He] called the victims to the station and then proceeded to conduct an interview at a time and in a place where he should have known that the victims would see the accused upon their arrival.” 45 Ill. App. 3d 374, 390, 359 N.E.2d 1157, 1169.

Similarly, here, the facts do not suggest that the encounter at the hospital was by chance. Rather than transporting defendant directly to the police station, he was taken to a place where the police knew, or should have known, the victim would be and placed within her view for a period of time. She testified that she was told to look at defendant and see if he was her assailant. The only possible interpretation is that it was arranged for identification purposes, since no other explanation appears for holding defendant in a police car outside of a hospital. Therefore, what occurred here was not a coincidental confrontation, but a showup.

The State also maintains, however, that even if we find a showup took place, it was justified under the circumstances. Justification has been found where a witness had an excellent opportunity to observe the defendant during the commission of a crime (People v. Manion (1977), 67 Ill. 2d 564, 367 N.E.2d 1313), or where prompt identification of a suspect is made by a witness or victim near the scene of a crime (People v. McKinley (1977), 69 Ill. 2d 145, 370 N.E.2d 1040), since, at least in the latter case, such showups are “acceptable police procedure designed to aid police in determining whether to continue or to end the search for the culprits” (People v. Lippert (1982), 89 Ill. 2d 171, 188, 432 N.E.2d 605, 612). Either of these justifications would be applicable to the instant case, since the witness in question had an opportunity to view her assailant for 15 to 20 minutes at extremely close range, and the showup took place near the scene of the crime a very short time thereafter.

Furthermore, after weighing the factors identified in Manson v. Brathwaite (1977), 432 U.S. 98, 53 L. Ed. 2d 140, 97 S. Ct. 2243, i.e., the witness’ opportunity to observe the criminal at the time of the crime, her degree of attention, the accuracy of any prior description given by the witness, the level of certainty demonstrated at the confrontation, and the amount of time elapsed between the crime and the confrontation (People v. McKinley (1977), 69 Ill. 2d 145, 370 N.E.2d 1040), we find that the State proved by clear and convincing evidence (People v. Blumenshine (1969), 42 Ill. 2d 508, 250 N.E.2d 152) that the subsequent identifications have sufficient independent origin to establish separate reliability and are thus admissible whether or not the earlier confrontation was suggestive (People v. McTush (1980), 81 Ill. 2d 513, 410 N.E.2d 861).

Initially, we note that the victim had an excellent opportunity to view defendant during commission of the crime, since she was face to face with him in extremely close proximity for 15 to 20 minutes, during which her attention was naturally concentrated on her assailant. We note also that it was daybreak; that the street lights were still on and gave sufficient light for her to recognize defendant as someone she had seen before when he was 10 to 15 feet from her on the sidewalk; and that there was a light about 15 feet from the place of the crime.

We also note that the victim’s description of defendant was quite accurate as to age, height, and weight. Defendant maintains that her description was vague; however, it included such accurate, distinctive characteristics as large eyes and lips, unkempt hair, and strong body odor. Furthermore, we do not find it significant that she did not mention defendant’s chipped tooth and described defendant’s clothing as dark when, at the lineup, he was wearing rust-colored pants. She stated that she did not consider a chipped tooth unusual, and defendant had sufficient time — given the proximity of his home to the scene of the crime — to have changed his clothing.

In considering the victim’s level of certainty at the time of the confrontation, we note that while her identification of defendant was positive, both at the lineup and in court, she failed to make an identification at the hospital confrontation. Defendant insists that this factor outweighs all of the others and destroys the reliability of later identifications. Our courts, however, have held in a number of cases that a witness’ inability to identify a defendant during earlier and possibly suggestive procedures will not require suppression of subsequent, positive identifications where there was a good opportunity to observe the defendant at the time of the crime. (People v. McTush (1980), 81 Ill. 2d 513, 410 N.E.2d 861; People v. McCoy (1979), 78 Ill. App. 3d 157, 397 N.E.2d 79; People v. Allen (1978), 60 Ill. App. 3d 445, 376 N.E.2d 1042; People v. Hatcher (1977), 45 Ill. App. 3d 374, 359 N.E.2d 1157.) Furthermore, in the instant case, it appears that the victim’s inability to identify defendant at the hospital stemmed from the viewing conditions rather than any uncertainty on her part. She testified that she never saw defendant out of the car; that people were walking between the two cars; and that she was upset and frightened at that time.

Finally, we note that while the in-court identification took place almost one year after the crime, the victim’s identification of defendant in a lineup took place within a few hours of the crime. Therefore, based on all of the factors discussed, we find that, even if the initial confrontation was suggestive, the State has met its burden of establishing a reliable, independent origin for the subsequent identifications, so that failure to exclude them did not violate defendant’s right to due process of law.

Defendant next contends that he was denied due process of law by the State’s failure, during discovery, to reveal evidence of the hospital confrontation. He maintains that such information was material and exculpatory, and therefore subject to disclosure under Brady v. Maryland (1963), 373 U.S. 83, 10 L. Ed. 2d 215, 83 S. Ct. 1194. The State asserts that defendant has waived this issue, that it did comply with discovery, and furthermore, that defendant did not establish that he was prejudiced by the alleged failure to comply with discovery.

We first consider the State’s contention that the issue was waived, since failure to object or raise an issue in a post-trial motion, including an alleged discovery violation, may constitute waiver for purposes of review. (People v. Williams (1980), 91 Ill. App. 3d 631, 414 N.E.2d 1235.) Here, although the issue, as phrased, asserts only one violation, defendant’s brief actually complains of the failure to produce two police reports which allegedly contained the victim’s initial description of her assailant and evidence pertaining to the confrontation at the hospital.

The only reference in defendant’s initial brief to the State’s failure to produce the paper on which the police allegedly wrote the victim’s first description of her assailant appears in a footnote, wherein defendant states: “In addition to evidence concerning the improper show-up, it could reasonably be expected that the street files in this case may reveal other exculpatory evidence including possible discrepancies in Clark’s earlier description of Smith ***.” Nevertheless, and despite the State’s failure to address this passing reference, defendant argued extensively in his reply brief the allegedly prejudicial effect of failure to provide this evidence during discovery. However, we find no reference thereto in defendant’s post-trial motion, and the issue is therefore waived. Furthermore, even if the issue had not been waived, there has been no showing of prejudice to defendant. In People v. Holdman (1979), 76 Ill. App. 3d 518, 395 N.E.2d 72, there was testimony that a police officer had discarded notes made during his initial interview with the complainant, and we found no prejudice since “[njothing in the record suggested] that the notes *** would have supplied any different or additional information” (76 Ill. App. 3d 518, 523, 395 N.E.2d 72, 76), and the defendant could not state with certainty that the contents of the notes would have impeached the testimony of any witness. Similarly, here, nothing in the record indicates that there was any discrepancy between what the victim testified was her initial description of defendant and what was written down by the responding officers. Moreover, her testimony is consistent -with a later, reported description. Indeed, defendant does not assert that there were discrepancies — only that there might have been. Since this is unsupported by the record, we cannot find that defendant has been prejudiced.

However, the issue as to whether defendant was denied due process by the State’s failure to reveal evidence of the hospital showup has been preserved for review. At trial, one ground asserted for suppression of all identification testimony was the State’s failure to comply with discovery by producing information concerning the hospital showup. In addition, in his post-trial motion, defendant raised the trial court’s failure to grant his motion to suppress, and further argued that the evidence did not support the verdict on the grounds “[tjhat the complaining witness had a suggestive viewing of Defendant prior to the line up and at such time indicated that she was not sure as to identification. That this information was subsequently withheld from the Assistant State’s Attorney.” While the issue might have been phrased more clearly, we find that the court was adequately apprised of defendant’s grounds in seeking a new trial.

Furthermore, it appears from the record that the State did not comply with discovery, as it now maintains. It asserts that two instances on the record prove that it complied — defense counsel’s reference to the incident in opening argument, and his failure to refute the prosecutor’s statement that the State had turned over police reports referring to the confrontation. We agree that defense counsel obviously had knowledge about the hospital confrontation; but, as he explained in closing argument, this information came from defendant, who was present at the confrontation, and not from the State, and it appears defendant did not know that the victim was then unable to identify him. In addition, the following exchange between the court and counsel indicates that the police reports did not inform defendant of the results of the showup, which was the information of principal interest to defendant:

“DEFENSE COUNSEL: This information was not made available to me in any police reports or other reports, and it seems the first identification, the first viewing was in the back of a police car. Highly suggestive.
* * *
COURT: This is the first time the Court has been apprised of this other incident.
PROSECUTOR: Counsel had police reports which indicate—
DEFENSE COUNSEL: Its [sic] not in the police reports. I’m sorry, counsel. You didn’t interrupt me.
PROSECUTOR: It indicated the police were in their car with the victim and the offender was in a police car at the same time. We have police reports that indicate that. He knew that and this is no great surprise.
COURT: From what you tell me there’s nothing about the complaining witness having made this observation.”

It appears to be the State’s contention that, if defense counsel knew that the victim and defendant were in separate police cars at the same time, he would somehow know that these cars were parked next to each other. However, even if that were the case, there still would have been no revelation of the fact that the victim was unable to identify defendant at that time.

Since the State did not fulfill its duty to comply with discovery pursuant to Supreme Court Rule 412 (73 Ill. 2d R. 412) and does not contend that defendant failed to properly request this information, we must determine whether defendant was thereby denied due process.

The purpose of discovery is to eliminate surprise and unfairness, as well as to afford defendant an opportunity to investigate, and the usual sanction imposed is compelled compliance. (People v. Nelson (1980), 92 Ill. App. 3d 35, 415 N.E.2d 688.) Moreover, even where such evidence comes to light in the midst of trial, its late disclosure may give rise to a due process violation (People v. Post (1982), 109 Ill. App. 3d 482, 440 N.E.2d 631); however, on learning of the State’s failure to disclose requested information, defendant must take affirmative action (People v. Williams (1980), 91 Ill. App. 3d 631, 414 N.E.2d 1235), and his failure to seek a continuance in order to interview witnesses negates any claim of surprise or unfairness (People v. Ingram (1980), 91 Ill. App. 3d 1074, 415 N.E.2d 569). Finally, due process is only violated if the evidence suppressed is material; therefore, “the omission must be evaluated in the context of the entire record. If there is no reasonable doubt about guilt whether or not the additional evidence is considered, there is no justification for a new trial” (United States v. Agurs (1976), 427 U.S. 97, 112-13, 49 L. Ed. 2d 342, 355, 96 S. Ct. 2392, 2402), and if defendant is able to secure and use the information during trial, his “failure to secure this information prior to trial in no way create[s] a reasonable doubt that did not otherwise exist” (People v. Bivins (1981), 97 Ill. App. 3d 386, 392, 422 N.E.2d 1044, 1049).

In the instant case, defendant has failed to demonstrate any surprise or unfairness in the State’s failure to provide the information requested. He knew before trial that the confrontation took place, and failed either to ask the court to compel compliance or to seek a continuance at trial to interview witnesses, thus negating any possible claim of surprise or unfairness. Furthermore, defendant was able to make full and effective use of the evidence adduced at trial, since the victim admitted that she was unable to identify defendant at the hospital; therefore, we fail to see any way that defendant was prejudiced by the failure to reveal this evidence prior to trial.

Defendant also maintains that improper comments by the prosecutor denied him a fair trial. He asserts that these comments shifted the burden of proof to the defense, relied on facts not in evidence, and misstated the testimony.

A prosecutor is permitted great latitude in his closing argument (People v. Hine (1980), 88 Ill. App. 3d 671, 410 N.E.2d 1017), although statements made therein must be based on evidence presented at trial or reasonable inferences drawn therefrom (People v. Wallace (1981), 100 Ill. App. 3d 424, 426 N.E.2d 1017), but the prosecutor may not properly make comments which shift the burden of proof to the defendant, thus undermining the presumption of innocence (People v. Belvedere (1979), 72 Ill. App. 3d 998, 390 N.E.2d 1239), which generally would include comments upon a defendant’s failure to call witnesses (People v. Franklin (1981), 93 Ill. App. 3d 986, 418 N.E.2d 155). However, defense counsel may not invite or provoke a response and then claim that he was prejudiced thereby (People v. Dillard (1979), 68 Ill. App. 3d 941, 386 N.E.2d 416), a principle which applies equally to comments on a defendant’s failure to call certain witnesses (People v. Nash (1980), 90 Ill. App. 3d 612, 413 N.E.2d 16; People v. McCann (1979), 76 Ill. App. 3d 184, 394 N.E.2d 1055). Furthermore, an instruction that closing arguments are not evidence and any statements made in argument not based on evidence should be disregarded “tends to cure possible prejudice from improper remarks” (People v. Spann (1981), 97 Ill. App. 3d 670, 678, 422 N.E.2d 1051, 1058), and even improper remarks generally do not constitute reversible error unless they result in substantial prejudice (People v. Baptist (1979), 76 Ill. 2d 19, 389 N.E.2d 1200); that is, if they were a material factor in defendant’s conviction (People v. Clark (1972), 52 Ill. 2d 374, 288 N.E.2d 363), such that the verdict would have been different had the comments not been made (People v. Singletary (1979), 73 Ill. App. 3d 239, 391 N.E.2d 440).

Defendant complains of two statements made by the prosecutor during rebuttal closing argument, both made with reference to the confrontation between the victim and defendant at the hospital. In the first, the prosecutor argued that defense counsel “had the same police reports that I had, he knew what witnesses were available as well as I did ***, and he has the right to call any witnesses that he so desires.” Defendant maintains that this assertion shifted the burden of proof, relied on reports not in evidence, and misstated the contents thereof.

In his closing argument, defense counsel commented on the State’s failure to call the officer who had a conversation with the victim at the hospital, with the implication that his testimony would have been favorable to defendant. This statement can be seen as inviting the response that if defendant wished to call this witness, he could have done so; therefore, the comment in question was not improper. Of course, since the police records alluded to were not in evidence, they should not have been mentioned. However, we cannot see any substantial prejudice to defendant. The prosecutor could have inferred from the evidence presented that defense counsel had this information, since defendant was present at the confrontation and knew who else was there, and Officer Davis testified to the name of his partner who approached the car in which the victim was seated. Finally, although no reports were received in evidence, the record does contain three police documents, including an arrest report, which bear the names of the three arresting officers. Assuming these were among the reports to which the prosecutor made reference, we see no misstatement. Defendant knew he was in the custody of the arresting officers, and these records provided their names.

Turning to the second allegedly improper comment, we consider the following arguments made by the prosecutor:

“Now [defense counsel] tells you that there was a lack of identification at the hospital. *** [T]hat was not the testimony.
* * *
No one got out of cars. No one asked Minnie Clark [the victim] to identify anyone at the hospital ***.
•fc sfc
She didn’t identify him, but they arrested him. That doesn’t make any sense. There was no identification at the scene because no one asked Minnie Clark to look at him.”

Defendant contends that each of these statements is contrary to the evidence. The first, he argues, gives the erroneous impression that he was identified by the victim at the hospital. However, read in context, it is clearly an assertion that this was not a case of failure to identify anyone, because no identification was asked for; thus, it is related to the rest of the statement, which defendant asserts is also contrary to the victim’s testimony. We agree; but it is not contrary to the testimony of Officer Davis, another State’s witness, who testified that defendant was not viewed by the victim at the hospital and that the only identification she was ever asked to make was at the lineup. While Davis’ testimony was in direct contradiction to the victim’s, it was in evidence, and we therefore cannot agree with defendant that there is no evidence to support the prosecutor’s description of what occurred at the hospital. Finally, we note that the statement “no one got out of cars” is contrary to the evidence, since even Davis acknowledged that one of his partners approached the car in which the victim was seated. However, we find no substantial prejudice therein, since we doubt that it was a material factor in defendant’s conviction such that, had it not been made, the verdict would have been different. Indeed, even if we had found other comments improper, we still would not see any substantial prejudice in the light of the victim’s excellent opportunity to view the defendant, her detailed description of him, and subsequent identifications which we have found reliable.

Furthermore, the jury was admonished as closing arguments began and later in an instruction that closing arguments were not evidence and the jury should disregard any statement by either attorney which was inconsistent with the evidence. Both defense counsel and the prosecutor reminded the jury of this admonition at some time during their closing arguments.

Defendant’s final contention is that he was not proved guilty beyond a reasonable doubt. He argues that the victim’s identification testimony (1) was not shown to have arisen from a source independent of the showup, and (2) was not clear and convincing. Since we have already decided the issue of independent reliability, we need only consider defendant’s second argument.

While it is true that, in rape cases, this court will examine the evidence carefully (People v. Brown (1977), 50 Ill. App. 3d 348, 365 N.E.2d 907), a positive identification by a single witness who had an adequate opportunity to observe the offender is sufficient to support a conviction (People v. Berry (1980), 86 Ill. App. 3d 755, 408 N.E.2d 466) so long as the testimony of the witness is clear and convincing (People v. Cornes (1980), 80 Ill. App. 3d 166, 399 N.E.2d 1346), and we will not assume the function of the trier of fact by weighing the credibility of that testimony (People v. Baseer (1980), 90 Ill. App. 3d 866, 414 N.E.2d 5) since “[t]he weight to be given testimony regarding identification is a question for the trier of fact. [Citations.] That determination will not be upset unless it is so contrary to the evidence that it cannot be justified.” People v. Smith (1977), 52 Ill. App. 3d 53, 58, 367 N.E.2d 84, 88.

Here, the victim testified that she had a good view of defendant for 15 to 20 minute's while in close proximity to him. The lighting was sufficient for her to initially recognize him on the sidewalk at a distance of 10 to 15 feet, and there was a light only about 15 feet from the scene of the offense. Furthermore, she gave an accurate, detailed description of defendant’s physical appearance and clothes immediately after the rape. Thereafter, she identified defendant at a lineup and in court. We find this testimony to be clear and convincing.

Defendant points to her inability to identify him at the hospital and contends that this raises a reasonable doubt as to his guilt. However, since she did later identify him and he matched the description shé gave, the weight to be given her testimony was for the jury as the trier of fact. They found her identification credible, and we cannot say this finding was unjustified. They reasonably could have found that the circumstances at the hospital were not conducive to making a proper identification, since both the victim and defendant remained inside their cars, with the windows raised and people walking between them. Furthermore, the victim testified that she was frightened and upset at that time, which the jury could have found interfered with her perceptions.

For the reasons stated, defendant’s conviction is affirmed.

Affirmed.

MEJDA and WILSON, JJ., concur.


author: JUSTICE PERLIN

text:
    MARGUERITE SUSEN, Plaintiff-Appellant, v. CITIZENS BANK & TRUST COMPANY, Defendant-Appellee.
    First District (2nd Division)
    No. 81—3180
    Opinion filed December 28, 1982.

      Stitt, Moore & Lennon, of Rolling Meadows (James K. Lennon, of counsel), for appellant.
    Burke, Griffin, Chomicz & Wienke, P.C., of Chicago (Jeffrey D. Warren and William J. Raleigh, of counsel), for appellee.
   JUSTICE PERLIN

delivered the opinion of the court:

Marguerite Susen filed a two-count complaint against Citizens Bank & Trust Company of Park Ridge claiming $8,000 for a loss that occurred when Citizens allegedly breached its obligations under the Uniform Commercial Code and under the parties’ checking account agreement. The trial court granted Citizens’ motion to dismiss.

On appeal, Susen contends that the trial court erred in finding that a check bearing a forged indorsement effectively transferred funds into plaintiff’s checking account; that defendant had not breached its checking account agreement with plaintiff; that the bank used “reasonable commercial standards” in cashing certain checks; and that there was sufficient evidence of affirmative matters alleged by defendant so as to defeat plaintiff’s claim.

Plaintiff, Marguerite Susen (Susen) and her daughter, Jacqueline Herrick (Herrick), had a joint checking account at Citizens Bank & Trust Company of Park Ridge (Citizens). Susen and Herrick were the only two authorized signatories for the checking account. Citizens kept specimen signatures for each of them. The parties also had a “joint survivorship checking agreement” which stated:

“That all deposits *** made in this account by or for any one or more of us, may be paid to us jointly or severally and may also be paid upon our joint and several orders ***
* * *
That checks, drafts, notes, bills of exchange and orders for the payment of money sent to or received by you [Citizens] for the account of any one or more of us may be credited to this account.
That any one or more of us may endorse *** for deposit and deposit in this account, checks *** payable to any one or more of us ***.”

On June 6, 1979, Bell Federal Savings and Loan, as drawer, issued a $5,000 check payable to the order of Susen (Bell check). The drawee of the check was Harris Trust and Savings Bank. Two days later an unidentified person entered Citizens and presented the Bell check for deposit into Susen’s checking account. The check bore the indorsement “Marguerite Susen” but Susen alleged that the indorsement was a forgery. Citizens credited the proceeds to Susen’s checking account but according to Susen, she did not receive notice of the deposit nor did she authorize such deposit. Her checking account balance before the deposit was $3,800.

Herrick had signed two blank checks on her joint account with Susen at Citizens, but these checks were allegedly stolen by a woman who worked for Susen. The record does not reflect when these checks were stolen. On June 12, 1979, one of the stolen checks was completed in the amount of $5,000 and made payable to that employee. This check was cashed at the First State Bank of Chicago. The check went through the normal check clearing process and was presented for payment at Citizens. Citizens had no notice that the check had been stolen or altered and, pursuant to Herrick’s authorized signature, Citizens honored the check and debited Susen’s account for the proceeds. On June 20, 1979, the other stolen check was completed for $3,000 and again made payable to Susen’s employee. This check was apparently cashed also at the First State Bank of Chicago and was thereafter presented for payment at Citizens through the check clearing process. Citizens again paid the proceeds pursuant to Herrick’s signature because it had no notice that the check had been stolen or altered.

Susen first received notice of the deposit and payment of the $5,000 and $3,000 checks in her July 1, 1979, monthly bank statement. She notified Citizens that none of these transactions was authorized by her and demanded that her account be credited so that the account would not reflect the deposit or the payment of the $5,000 and $3,000 checks. The bank, however, refused to adjust her account.

In the instant case, Susen seeks to recover the funds paid on the $5,000 and $3,000 checks because these checks were materially altered (i.e., words and figures were inserted in the spaces Herrick left blank). Citizens, however, seeks to bar Susen’s action on the ground that Susen’s joint tenant, Herrick, was negligent in signing the blank checks.

Section 3 — 406 of the Uniform Commercial Code (UCC) (Ill. Rev. Stat. 1979, ch. 26, par. 3—406) provides:

“Any person who by his negligence substantially contributes to a material alteration of the instrument *** is precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee’s or payor’s business.”

The Code does not define negligence. The official UCC comment to this section, however, states: “Negligence usually has been found where spaces are left in the body of the instrument in which words or figures may be inserted.” (Ill. Ann. Stat., ch. 26, par. 3—406, Uniform Commercial Code Comment, at 247 (Smith-Hurd 1963).) A similar holding in Merritt v. A. W. Boyden & Son (1901), 191 Ill. 136, 60 N.E. 907, has been codified in Illinois (Ill. Ann. Stat., ch. 26, par. 3—406, Illinois Code Comment, at 244 (Smith-Hurd 1963).) In Merritt, the maker executed and delivered a note with a blank space before the word “hundred.” The payee, instead of inserting the word “one” as the maker intended, inserted the word “thirteen.” The Illinois Supreme Court held that the maker was liable to a holder in due course for $1300. Merritt v. A. W. Boyden & Son (1901), 191 Ill. 136, 142.

A similar situation occurred in the case at bar when Herrick signed the two checks but left the remaining spaces blank. Citizens claims that Herrick’s negligence contributed to the alteration of the $5,000 and $3,000 checks and contends that Susen, as the other joint tenant of the checking account, is thereby barred from maintaining her action.

A bank, it should be noted, may raise the defense of its customer’s negligence only if the bank acted in accordance with reasonable commercial standards. (Empire Moving & Warehouse Corp. v. Hyde Park Bank & Trust Co. (1976), 43 Ill. App. 3d 991, 997, 357 N.E.2d 1196.) Susen contends that Citizens did not act pursuant to reasonable commercial standards when Citizens deposited the “Bell” check into Susen’s account without her authority. According to Susen, such authority would exist only if the “Bell” check contained her genuine indorsement. Since, without that deposit, there would have been insufficient funds in the account to pay the first altered check, Susen concludes that Citizens’ actions constituted a failure to follow reasonable commercial standards, thus contributing to her loss. She argues that Citizens is precluded from raising Herrick’s negligence as a defense.

Neither the UCC nor Illinois case law establishes whether it is reasonable commercial practice for a bank to accept for deposit into a payee’s account a check which, unknown to the bank, contains his forged indorsement. We note that generally, when money is deposited in a bank, a debtor-creditor relationship exists between the bank and the depositor and the rules governing their relationship are determined by the contract which exists between them. (Menicocci v. Archer National Bank (1978), 67 Ill. App. 3d 388, 391, 385 N.E.2d 63.) If a third party deposits money into the checking account of another without his knowledge or consent and without authority, it could be argued that the relationship of debtor and creditor does not exist with reference to such funds. (Michie on Banks and Banking, ch. 9, sec. 8 (4th ed. 1973).) On the other hand, if the bank in fact is authorized to accept the deposit, title to the funds passes to the bank and it becomes a debtor to its customer. (Mid-City National Bank v. Mar Building Corp. (1975), 33 Ill. App. 3d 1083, 1089, 339 N.E.2d 497.) Thus, the characterizations of Citizens’ actions in this instance depend on whether such actions were expressly or impliedly authorized by Susen.

In the instant case, Susen appears to have authorized Citizens to deposit the “Bell” check without her knowledge. The checking account agreement between the parties provides that any check sent to or received by Citizens for the account of Susen may be credited to her account. While the agreement also provides that either Susen or Herrick may indorse for deposit any check made payable to one or both of them, nothing therein requires that all deposits must bear Susen’s (or Herrick’s) genuine signature. Since we conclude that the agreement between Susen and Citizens permits Citizens to deposit proceeds into Susen’s account without her knowledge, this agreement controls their relationship and is not violative of the UCC. Ill. Rev. Stat. 1979, ch. 26, par. 1—102(3).

In light of the parties’ agreement, we conclude that the bank acted in accordance with reasonable commercial standards. Moreover, since the deposit was authorized, it follows that legal title to the proceeds passed to Citizens and that the bank was a debtor to Susen for the proceeds of the “Bell” check. Citizens could then pay out the proceeds only upon Susen’s or Herrick’s order. When Citizens received the two checks here in question, it had no notice that the checks were stolen or altered and it appeared that Herrick had authorized payment of the proceeds from the account. In our opinion, none of Citizens’ actions have contributed to the wrongful payment of the altered checks. The bank, therefore, could properly assert Herrick’s negligence to bar Susen’s action.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.

Affirmed.

STAMOS, P.J., and HARTMAN, J., concur.