Eric M. Schmitz v. Firstar Bank Milwaukee

Annotate this Case

Download PDF

2003 WI 21 SUPREME COURT CASE NO.: OF WISCONSIN 01-2139 COMPLETE TITLE: Eric M. Schmitz, Plaintiff-Appellant-Petitioner, v. Firstar Bank Milwaukee, Defendant-Respondent, Putnam Mutual Funds Corporation, Putnam Investments, Northern Trust Company, Fortis Investors, Inc., and Putnam Fiduciary Trust Company, Defendants. REVIEW OF A DECISION OF THE COURT OF APPEALS 2002 WI App 123 Reported at: 254 Wis. 2d 732, 647 N.W.2d 379 (Ct. App. 2002-Published) OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: January 16, 2003 SOURCE OF APPEAL: COURT: COUNTY: JUDGE: Circuit Ozaukee Walter J. Swietlik JUSTICES: CONCURRED: DISSENTED: NOT PARTICIPATING: BABLITCH and WILCOX, J.J., did not participate. March 25, 2003 ATTORNEYS: For the plaintiff-appellant-petitioner there were briefs by Joseph G. Doherty and Doherty Law Offices, S.C., West Bend, and oral argument by Joseph G. Doherty. For the defendant-respondent there was a brief by Gary P. Lantzy and Kohner, Mann & Kailas, S.C., Milwaukee, and oral argument by Gary P. Lantzy. 2003 WI 21 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 01-2139 (L.C. No. 99 CV 209) STATE OF WISCONSIN : IN SUPREME COURT Eric M. Schmitz, Plaintiff-Appellant-Petitioner, v. FILED Firstar Bank Milwaukee, MAR 25, 2003 Defendant-Respondent, Cornelia G. Clark Clerk of Supreme Court Putnam Mutual Funds Corporation, Putnam Investments, Northern Trust Company, Fortis Investors, Inc., and Putnam Fiduciary Trust Company, Defendants. REVIEW of a decision of the Court of Appeals. Reversed and remanded. ¶1 SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE. This is a review of a published decision of the court of appeals, Schmitz v. Firstar Bank Milwaukee, 2002 WI App 123, 254 Wis. 2d 732, 647 N.W.2d 379, affirming the judgment of the Ozaukee County, Walter J. Swietlik, Judge. Circuit Court for The circuit court granted summary judgment to one of the defendants, Firstar Bank No. 01-2139 Milwaukee, dismissing Eric M. Schmitz's claims against Firstar Bank.1 The court of appeals affirmed the judgment of the circuit court. We reverse the decision of the court of appeals. ¶2 Eric M. Schmitz, the plaintiff-payee, sued Firstar Bank Milwaukee for negligence and conversion for depositing two checks (in the amounts of $58,599.19 and $6,173.21), issued by Putnam Investments and payable to his order, into the account of Georgetown Financial Corporation. The first check, in the larger amount, did not have the plaintiff-payee's endorsement. The second bearing check, in the the smaller plaintiff-payee's name alleges is a forged signature. only" and Georgetown amount, Financial that had the an endorsement plaintiff-payee Each check had "for deposit stamped on the back. The plaintiff-payee claimed monetary damages equal to the face value of the two Putnam checks. ¶3 The plaintiff-payee moved for partial summary judgment against Firstar Bank with respect to the larger check. The plaintiff-payee argued that because Georgetown Financial did not have authority to endorse the check, Firstar Bank was liable as a matter of law for making payment on this check, which was presented by Georgetown Financial without his actual or purported signature. ¶4 both Firstar Bank then moved for summary judgment as to checks, contending that two 1 limited powers of attorney The plaintiff-payee's complaint names other entities as defendants, but only Firstar Bank is involved in the present review. 2 No. executed by the plaintiff-payee authority to endorse and receive gave Georgetown payment on the 01-2139 Financial two Putnam checks at issue in this case. ¶5 The circuit court granted Firstar Bank's motion for summary judgment. The circuit court held that the two limited powers of attorney authorized Georgetown Financial to endorse and deposit the two checks, thereby rendering unnecessary any consideration of the reasonableness of Firstar Bank's conduct. The court of appeals affirmed the judgment of the circuit court granting summary judgment to Firstar Bank. ¶6 We review a circuit court order granting summary judgment by applying the same methodology as that used by the circuit court.2 satisfied that Summary judgment will be entered when a court is the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law.3 Thus, an appellate court will reverse a summary judgment if the record reveals that material facts are in dispute or if the circuit court misapplied the law.4 ¶7 Bank The ultimate issue in this case is whether Firstar is liable depositing 2 Grams (1980). 3 the v. to two the plaintiff-payee checks, Boss, 97 one without Wis. 2d 332, for the conversion for plaintiff-payee's 338-39, 294 N.W.2d 473 Wis. Stat. § 802.08(2) (1999-2000). 4 Jankee v. Clark County, 2000 WI 64, ¶48, 235 Wis. 2d 700, 612 N.W.2d 297. 3 No. 01-2139 endorsement and one with a forged endorsement of the plaintiffpayee, into Georgetown Financial's account. The only issue properly before this court, however, is whether the two limited powers of attorney authorize Georgetown Financial to endorse the two Putnam checks on behalf of the plaintiff-payee. ¶8 We hold that the limited powers of attorney in the present case did not authorize Georgetown Financial to endorse the two Putnam checks plaintiff-payee. made payable to the order of the Accordingly, the court of appeals' decision affirming summary judgment in favor of Firstar Bank is reversed. The cause is remanded to the circuit court for further proceedings on whether Firstar Bank is liable for the value of either or both checks in light of our conclusion that Georgetown Financial did not have the authority to endorse the checks on behalf of the plaintiff-payee. I ¶9 other The following facts are derived from the complaint and documents Wisconsin in company the that financial services. executive officer record. Georgetown provided Financial investment, was insurance, a and James O'Hearn was the sole owner and chief of Georgetown Financial and the plaintiff- payee was one of his clients. ¶10 In 1992, the plaintiff-payee executed two Power of Attorney" forms with Georgetown Financial. contained typewritten, boilerplate text and "Limited Both forms included a blank space for the client to insert his or her name, a blank space for the client to identify a "company name," a series of blank 4 No. 01-2139 lines in which the client could list "policy names and numbers," and lines for the client's signature, the date, and a witness's signature. ¶11 The first limited power of attorney was signed by the plaintiff-payee on July 10, 1992.5 text provided Georgetown The typewritten boilerplate Financial with the authority to "accomplish the surrender" of certain life insurance policies "identified below" and "negotiations of their cash values." It further provided that "Power of Attorney also applies to stocks, bonds and other securities."6 "American Funds" was written in by 5 The limited power of attorney was also signed by Katreena Schmitz, who is apparently the wife of the plaintiff-payee. 6 The full text of the July 1992 limited power of attorney is as follows: I, Eric M. Schmitz, as owner of the life insurance policies identified below, do hereby designate Georgetown Financial Corporation as my attorney to act in my name, place and stead to do everything that is required, as fully as if done by me personally, to register and obtain acknowledgement of the Assignment of Life Insurance Policy form(s), and accomplish the surrender of the life insurance polic(ies) identified below and negotiation of their cash values, and including any other requested information. Answers to questions may be provided by telephone or fax [number omitted here]. Power of Attorney also applies to stocks, bonds and other securities. Company Name Policy Name and Number _______________________ _______________________ _______________________ _______________________ 5 No. 01-2139 hand under "company name" and four different account names and numbers were similarly written in by hand on the lines under "policy name and number." Three of the accounts have been identified as securities accounts; the fourth was an insurance policy. ¶12 The second limited power of attorney was signed in August 1992. the first, "Power of annuities, The typewritten text of the form was identical to except that Attorney savings the also last line applies accounts, was to and expanded other read, bonds, stocks, to CD's, securities." "The American Funds" was typed in on the line under "company name," and only the number "57263159," identifying one document, was typed in under "policy name and number." This number was identical to a number written next to one of the securities accounts on the July limited power of attorney. accounts listed on either of the powers of None of the attorney was identified as a Putnam Investment account. ¶13 In July 1994, O'Hearn's securities license was revoked by the State of Wisconsin. The plaintiff-payee was not aware that license, O'Hearn had lost his and the plaintiff-payee continued as a client of Georgetown Financial. ¶14 In May 1995, Georgetown Financial opened an investment account for the plaintiff-payee with Putnam Investments. The account and the plaintiff-payee was identified as the owner of the account. The application was for an individual account mailing address listed on the application was "Eric M. Schmitz c/o Georgetown Financial Corp., 10134 N. Port Washington Rd., 6 No. Mequon, WI, registered 53092." The investment application advisor for the also stated account 01-2139 that the "C Lynn was O'Hearn" of the investment firm "Ogilvie & Taylor." Telephone redemptions act were authorized allowing Putnam to upon instructions received from the plaintiff-payee or "any person claiming to act as [his] representative" who could provide specific information. ¶15 Mutual telephone funds redemption were in sold July from 1996 and the Putnam March account 1998. On by each occasion, Putnam issued a check and mailed it to the plaintiffpayee, in care of Georgetown Financial, as designated in the account application. The first check, dated July 12, 1996, was in the amount of $58,599.19. It was issued as follows: Pay to the order of: Eric M. Schmitz c/o Georgetown Financial 10134 North Port Washington Road Mequon, Wisconsin 53092 The second check, dated March 5, 1998, was in the amount of $6,173.21. ¶16 It was issued in an identical manner. O'Hearn presented both checks to deposit into a Georgetown Financial account. Firstar Bank for The larger check, presented on July 19, 1996, did not include an endorsement by or on behalf of the plaintiff-payee. The smaller check included an endorsement bearing the name of the plaintiff-payee that was alleged in the complaint to be a forged signature. were stamped with a Georgetown marked "for deposit only." 7 Financial deposit Both checks stamp and No. ¶17 01-2139 Firstar Bank deposited the face value of both checks into a Georgetown Financial account. At the time, Firstar Bank was unaware of the existence of either of the limited powers of attorney and admits that it did not rely on the limited powers of attorney when it deposited the two Putnam checks into the Georgetown Financial account. ¶18 into The plaintiff-payee never received the funds deposited the Georgetown Financial account. O'Hearn has been convicted of criminal fraud, and Georgetown Financial has ceased to operate. II ¶19 The question presented by this case is whether Georgetown Financial had authority to endorse and deposit the two Putnam checks to its own account. The answer to this question turns on an interpretation of the two limited powers of attorney. ¶20 and According court of to appeals the plaintiff-payee, misconstrued the the circuit language of court the two limited powers of attorney when they failed to read the last sentence relating to investments narrowly, limited by the particular grant of authority regarding insurance policies in the first sentence. Moreover, asserts the plaintiff-payee, even if attorney the powers of did grant Georgetown Financial authority to endorse the two Putnam checks, the limited powers of attorney ceased to operate as a matter of law when O'Hearn, the chief executive officer of Georgetown Financial, lost his 8 No. securities license and began to act against the 01-2139 plaintiff- payee's interest. ¶21 Firstar Bank responds that the circuit court and court of appeals properly construed the limited powers of attorney. It argues that the final sentence of the limited powers of attorney, providing that power of attorney "also applies" to securities and other investments, expressly granted Georgetown Financial broad authority to act on the plaintiff-payee's behalf with respect to the plaintiff-payee's financial affairs and included the power to do everything necessary to buy and sell any security or investment as fully as if done by the plaintiffpayee himself. Firstar Bank asserts that Georgetown Financial was thus authorized to endorse the two Putnam checks at issue in this case on behalf of the plaintiff-payee. ¶22 rules Agency agreements are generally subject to the same of interpretation as other contracts.7 Like the interpretation of a contract, the interpretation of a power of attorney ordinarily presents a question of law that this court determines independently of the circuit court and court of appeals but with the benefit of their analyses.8 ¶23 Both the circuit court and the court of appeals construed the limited powers of attorney at issue in the present 7 Restatement (Second) of Agency § 32, at 114 (1958). See, e.g., Estate of Smith v. United States, 979 F.Supp. 279, 282 (D. Vt. 1997); Burlington No. & Santa Fe Ry. Co. v. Burlington Res. Oil & Gas Co., 590 N.W.2d 433, 437, 439 (N.D. 1999). 8 RTE Corp. v. Maryland Cas. Co., 74 Wis. 2d 614, 621, 247 N.W.2d 171 (1976). 9 No. 01-2139 case to grant authority to Georgetown Financial to endorse the two Putnam checks. According to the court of appeals, the limited powers of attorney authorized Georgetown Financial to liquidate specific life insurance policies, but the final sentence in each power of attorney granted power of attorney over the plaintiff-payee's other investments and accounts without any limitations on scope. ¶24 We conclude that the expansive interpretation given the limited powers of attorney by the circuit court and court of appeals is not supported Rather, the language and by the language structure of the of the limited documents. powers of attorney supports a narrow construction of the authority granted to Georgetown include Financial. the authority to A narrow endorse and construction deposit the would two not Putnam checks. ¶25 With the exception of the single final sentence in each power of attorney applying Georgetown Financial's power of attorney to investments a in variety of types of financial accounts addition to insurance policies, every or other aspect of each limited power of attorney is narrowly crafted. The documents are styled "limited" powers of attorney. The identical first sentence of each power of attorney the line providing the greatest detail authorizes Georgetown Financial to act in regard to life insurance policies "identified below." The printed text of both powers of attorney is followed by space for inserting the company name and the policy name and number. 10 No. ¶26 Thus, in order to read the final sentence 01-2139 of the limited powers of attorney broadly enough to encompass any other investments and accounts of the plaintiff-payee, sentence has to be wrestled free from its context. the final Indeed, that is precisely what the circuit court and court of appeals did. The court of appeals explained: "[T]he limited powers of attorney in this case went on to separately grant Georgetown Financial the power of attorney with respect to 'stocks, bonds, CD's, annuities, savings accounts, and other securities.' This additional grant of authority was not limited in scope."9 ¶27 attorney The more natural reading of the two limited powers of is to keep the final sentence confines of the rest of the document.10 within the narrow That is, in context, the final sentence serves to modify the first sentence, explaining simply that the listed items "identified below" may also include securities and other financial accounts in addition to insurance policies. the Only the insurance policies and investments listed in limited powers of attorney are therefore covered by the document. ¶28 Our reading of the limited supported by several factors. powers of attorney is First, the very title of the 9 Schmitz v. Firstar Bank Milwaukee, 2002 WI App 123, ¶16, 254 Wis. 2d 732, 647 N.W.2d 379 (emphasis added). 10 See, e.g., Fort Dearborn Life Ins. Co. v. Holcomb, 736 N.E.2d 578, 589 (Ill. App. 2000) ("No matter how the power is characterized, a 'catchall' provision will not operate to expand powers expressly limited in other portions of the same instrument."). 11 No. documents, "Limited Power of Attorney," reading of the powers granted. points to 01-2139 a narrow Second, the general rule of interpretation is that powers of attorney are to be strictly construed and interpreted to grant only those powers that are clearly delineated attorney in the or specified.11 present case do The not limited powers explicitly of authorize Georgetown Financial to endorse checks payable to the plaintiffpayee arising from a Putnam investment account. ¶29 Third, the limited power of attorney form requires that the life insurance policies to be included within the grant of authority be listed in the document. The requirement that the insurance policies be listed extends to requiring that the other investments Indeed the policies insurance included plaintiff-payee but specific policies and in the listed securities. investments final not sentence only Requiring indicates life a that be listed. insurance listing of Georgetown Financial has authority only over assets listed on the powers of attorney. It simply does not make sense to say that a document that requires a list of individual policy names and numbers and then applies the power of attorney to other investments grants 11 Praefke v. Am. Enter. Life Ins. Co., 2002 WI App 235, ¶9, 257 Wis. 2d 637, 655 N.W.2d 456; First Nat'l Bank of Omro v. Winnebago County Agr. & Horticultural Ass'n, 141 Wis. 476, 480, 124 N.W.2d 656 (1910); see also Texas Soil Recycling, Inc. v. Intercargo Ins. Co., 273 F.3d 644, 651 (5th Cir. 2001) (applying Texas law); O'Neal v. United States, 258 F.3d 1265, 1275 (11th Cir. 2001) (applying Alabama law). 12 No. 01-2139 broad authority over all investment accounts, whether listed or not. ¶30 In short, the clear implication is that both of these limited powers of attorney grant Georgetown Financial authority over only (stocks, those bonds, securities) attorney. lists a insurance CDs, policies annuities, specifically listed and savings on other investments accounts, the limited and other powers of Since neither limited power of attorney in the record Putnam account, it is equally clear that Georgetown Financial did not have the authority to endorse either of the checks at issue in this case on behalf of the plaintiff-payee.12 III ¶31 have the Having determined authority to that endorse Georgetown the two Financial Putnam did not checks, the 12 Firstar Bank suggested at oral argument that an additional power of attorney was likely signed giving Georgetown Financial authority over the Putnam accounts, even though it was not discovered and is not in the record. Firstar Bank asserted that discovery was complicated in this case because of the federal government's investigation of O'Hearn on criminal fraud charges. Firstar Bank pointed to the Putnam account application as evidence that the plaintiff-payee had an ongoing relationship with Georgetown Financial and argued that the plaintiff-payee would have given Georgetown Financial authority, in the same manner as he previously did with the discovered powers of attorney, over the Putnam account. Firstar Bank's suggestion does nothing to bolster its position in this case. First, to imply that another power of attorney might exist specifically listing the Putnam account supports the plaintiff-payee's claim that the limited powers of attorney currently in the record only extend to those accounts explicitly identified on the power of attorney. Second, a motion for summary judgment will not be granted on the basis of pure conjecture. 13 No. 01-2139 remaining issue in this case is whether Firstar Bank is liable to the plaintiff-payee for the value of the two Putnam checks it deposited into a Georgetown Financial account, one without the plaintiff-payee's endorsement and endorsement of the plaintiff-payee. the other with a forged We do not reach a decision on Firstar Bank's liability here, however, as the parties have not adequately briefed and argued the issues. ¶32 Firstar The Bank negligence. plaintiff-payee's in the present underlying action are for claims against conversion and Conversion is committed when a person takes the property of another, without the consent of the owner, in such a way that it seriously interferes with the right of the owner to control the property.13 ¶33 The plaintiff-payee's brief in this court asserted that Firstar Bank was never a holder or owner of the larger Putnam check but merely a transferee, and as a transferee, it has no greater rights to the check than Georgetown Financial.14 Firstar Bank did not brief the conversion issue in this court. Firstar Bank addressed only the issue of whether the limited powers of attorney authorized Georgetown Financial to endorse the Putnam checks. ¶34 Firstar Bank did argue before the circuit court, however, in its response in opposition to the plaintiff's motion 13 Prod. Credit Ass'n v. Nowatzski, 90 Wis. 2d 344, 353, 280 N.W.2d 118 (1979). 14 See Wis. Stat. §§ 403.201, 403.202, 403.301 (1993-94). 14 No. 01-2139 for summary judgment, that if the plaintiff-payee prevailed on his argument that Georgetown Financial did not have the authority under the limited powers of attorney to endorse the checks in the present case, the question whether Firstar acted in good faith or in accordance with reasonable commercial standards under Wis. Stat. § 403.419(3) (1993-94) was a question of fact that would Wisconsin Stat. § 403.419(3) depositary bank will not need to (1993-94) be liable be provides for tried. that conversion of a a negotiable instrument if it has acted "in good faith and in accordance with the reasonable commercial standards" applicable to the respective business, here banking.15 15 The plaintiff-payee's amended complaint asserted a claim for conversion under Wis. Stat. § 403.420 (1996-97). Firstar Bank responded in its memorandum response in opposition to the plaintiff's motion for summary judgment before the circuit court that the plaintiff-payee's claim for conversion with regard to the larger check is actually governed by Wis. Stat. § 403.419(3) (1993-94). Section 403.419(3) stated the law on conversion of negotiable instruments applicable in Wisconsin in July 1996. Effective August 1, 1996, Wisconsin adopted revised Article III of the Uniform Commercial Code and the law on conversion of negotiable instruments was renumbered § 403.420. Thus, it appears that the first, larger check would be governed by § 403.419(3) (1993-94) while the second, smaller check is governed by § 403.420 (1996-97). Wisconsin Stat. § 403.419(3) (1993-94) reads: (3) Subject to the provisions of chs. 401 to 411 concerning restrictive endorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true 15 No. ¶35 01-2139 While it appears clear that accepting a check when the payee's endorsement is missing is not in accordance with the reasonable commercial standards of banking and that the acceptance by a depositary bank of such a check for deposit is commercially unreasonable as a matter of law,16 there is far less case law addressing who constitutes the payee when a check is made out to an individual in the care of an investment company.17 Accordingly, we remand the issue of liability on the larger Putnam check to the circuit court for further proceedings. ¶36 A determination of liability on the smaller Putnam check is similarly inappropriate for summary judgment given the posture of the case. In short, neither party briefed or argued whether it was appropriate to grant summary judgment on this claim if Georgetown was determined not to have authority to endorse and deposit the Putnam checks. ¶37 The plaintiff-payee has not moved for summary judgment on the $6,173.21 check (with the forged signature), asserting that a trial is required because liability depends on whether owner beyond the amount of any proceeds remaining in his or her hands. 16 See, e.g., Mid-Atl. Tennis Courts, Inc. v. Citizens Bank & Trust Co. of Maryland, 658 F. Supp. 140, 142-43 (D. Md. 1987); Great Am. Ins. Co. v. Am. State Bank, 385 N.W.2d 460, 463 (N.D. 1986); see also 6A Ronald A. Anderson, Uniform Commercial Code § 3-419:72, at 95 (1998); William D. Hawkland & Lary Lawrence, 4 Uniform Commercial Code Series § 3-419:5, at Art. 3-912-16 (1999). 17 But see Geraldo v. First Dominican Mut. Life Ins. Co., 2002 WL 31002770, ¶41 (Ohio App. 2002) (unpublished opinion). 16 No. Firstar Bank was negligent, a question of fact. 01-2139 Firstar Bank moved for summary judgment on the claim regarding the smaller check but argued only that Georgetown Financial had authority under the powers of attorney to endorse and deposit the check. Firstar Bank offers no defense to support the conclusion that it was not liable for making payment on the smaller check once it has been determined that Georgetown Financial authority to endorse the Putnam checks. case for defense summary which defendant does judgment, would not a defeat make out a not defendant must plaintiff-payee. prima have "To make a prima facie moving the did facie case show If for a the summary judgment we need go no further."18 ¶38 We therefore remand the issue of Firstar Bank's liability on the smaller check to the circuit court as well. IV ¶39 For the foregoing reasons, we hold that the language of the limited powers of attorney, properly construed, did not grant Georgetown Financial the authority checks at issue in this case. to endorse the two The circuit court's decision granting summary judgment to Firstar Bank is therefore reversed. The cause is remanded to the circuit court for further proceedings consistent with this opinion. By the Court. The decision of the court of appeals is reversed and the cause is remanded. 18 Kraemer Bros. v. U.S. Fire Ins. Co., 89 Wis. 2d 555, 56667, 278 N.W.2d 857 (1979). 17 No. ¶40 01-2139 WILLIAM A. BABLITCH and JON P. WILCOX, JJ., did not participate. 18 No. 1 01-2139

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.