Epstein v. Bochko , 2017 IL App (1st) 160641 ( 2017 )

2017 IL App (1st) 160641FOURTH DIVISION
May 11, 2017
No. 1-16-0641
______________________________________________________________________________
IN THE APPELLATE COURT
OF ILLINOIS
FIRST JUDICIAL DISTRICT
______________________________________________________________________________
DAVID A. EPSTEIN, Cook County Public Administrator, )
for the Estate of Anna Polchanin, Deceased, ) Appeal from the
) Circuit Court of
Petitioner-Appellant, ) Cook County.
)
v. )
)
IRENE BOCHKO, KATERYNA SZCZUDLO, )
STEPHEN A. KUBIATOWSKI, and ) No. 11P3154
SELFRELIANCE UKRAINIAN AMERICAN )
FEDERAL CREDIT UNION, )
)
)
Respondents, ) Honorable
) Mary Ellen Coghlan,
(Selfreliance Ukrainian American Federal Credit ) Judge Presiding
Union, )
)
Respondent-Appellee.) )
______________________________________________________________________________
JUSTICE BURKE delivered the judgment of the court, with opinion.
Justices McBride and Howse concurred in the judgment and opinion.
OPINION
¶1 Irene Bochko (Bochko) and Kateryna Shchudlo 1 were employed as caregivers for an
elderly woman, Anna Polachanin (Anna). In April 2008, Shchudlo and Bochko obtained power
of attorney for property and health care for Anna. Shortly after obtaining power of attorney,
1
Shchudlo is occasionally identified in the record as Kateryna Szczudlo or Lateryna Szczudlo.
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Shchudlo took Anna to Selfreliance Ukrainian American Federal Credit Union (“respondent” or
“Selfreliance”) and opened a joint bank account, with Anna as the primary account holder. Over
the next few months, Shchudlo and Bochko deposited much of Anna’s life savings into this joint
account from her other bank accounts. Shchudlo then wired the money from the joint account at
Selfreliance to bank accounts in Ukraine. In October 2008, a licensed psychiatrist evaluated
Anna and concluded that she had dementia and that her dementia had been present for several
years. The public guardian petitioned the Cook County circuit court for a citation to recover
assets from Bochko, Shchudlo, respondent, and others. Shortly thereafter, Anna died, and the
Cook County public administrator (petitioner) was appointed to supervise her estate and
continued to pursue the petition. Respondent moved for summary judgment, and after a hearing,
the court granted that motion finding that there was no evidence respondent knew or should have
known of Anna’s mental incapacity at the time she opened the joint bank account. We find the
circuit court properly granted respondent’s motion for summary judgment where there were no
issues of material fact and respondent was not liable for the fraudulently converted funds.
¶2 I. BACKGROUND
¶3 According to petitioner’s amended petition, Anna, a 95-year-old woman, lived alone until
2008 when she required live-in care while she recovered from surgery. A handyman who worked
in Anna’s building, Volodymyr Bochko (Volodymyr) told Anna that his daughter, Bochko,
would be willing to work as a caregiver for her. Shortly thereafter, Shchudlo began working with
Bochko as Anna’s caregiver. In April 2008, Bochko and Shchudlo took Anna to attorney
Stephen Kubiatowski’s office to prepare and execute a power of attorney for Anna.
¶4 On May 31, 2008, Shchudlo took Anna to Selfreliance to open a joint bank account. As
identification to open the account, Shchudlo presented an expired foreign passport. Valentina
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Sidelnik, the manager at Selfreliance, testified that she did not require further identification from
Shchudlo because she already had an account with Selfreliance. Sidelnik further testified that
neither Anna nor Shchudlo presented her with the power of attorney form because it was not
necessary to open the account. Sidelnik testified that Anna was present, she asked to have the
account opened, and she signed her own name on the account agreement. Sidelnik also noted that
Anna walked into Selfreliance without assistance and spoke Ukrainian. Sidelnik testified that
Anna told her that she wanted to open an account with Selfreliance because it was a Ukrainian
institution. The joint account was opened with a check for more than $50,000 from Anna’s
account at Hoyne Savings Bank. Sidelnik testified that this was not an unusual amount to be
deposited into a new account.
¶5 Between May and June 2008, more than $300,000 was transferred or deposited into the
joint account at Selfreliance from Anna’s accounts at other financial institutions. In July 2008,
Bochko and Shchudlo began to wire money from the joint account at Selfreliance to accounts in
Ukraine. Between July and October 2008, more than $250,000 was transferred from the joint
account at Selfreliance to bank accounts in Ukraine.
¶6 Dr. Geoffrey Shaw, a licensed psychiatrist, evaluated Anna on October 30, 2008. After
meeting with her, Dr. Shaw concluded that Anna was disabled by dementia and later opined that
her dementia had been present for at least several years. Dr. Shaw testified that when Anna went
to Selfreliance on May 31, 2008, she was suffering from dementia, but he could not offer an
opinion regarding how she presented herself to respondent’s employees on that date. Based on
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Dr. Shaw’s report, the circuit court declared Anna a disabled person and appointed the public
guardian as plenary guardian of Anna’s estate and person. 2
¶7 On February 19, 2010, the Public Guardian filed an amended petition for a citation to
recover assets from Bochko, Volodymyr, Shchudlo, Kubiatowski, and Selfreliance. Counts V
and VI of the eight-count petition were directed at Selfreliance. In count V, the public guardian
alleged that respondent breached a duty of care owed to Anna. The allegation stated that “Banks,
Savings and Loans, and Credit Unions generally owe their customers a duty of ordinary care to
maintain and guard a customer’s accounts, and protect the account holder from fraud, abuse and
waste.” In count VI, the public guardian alleged that the account agreement between Anna and
Selfreliance was “a nullity” because Anna was incapable of entering into contracts at the time
she signed the account agreement with Selfreliance on May 31, 2008. The public guardian
requested that the court rescind the May 31, 2008, account agreement and order Selfreliance to
reconvey all of the funds from the fraudulent wire transfers. Anna died on May 7, 2011, and the
court appointed the Cook County public administrator as the supervised administrator of her
estate.
¶8 On September 25, 2015, respondent filed a motion for summary judgment on counts V
and VI of the amended petition. Respondent contended that it did not owe a duty of ordinary care
to maintain and guard a customer’s accounts and protect the account holder from fraud, abuse,
and waste. Respondent further contended that there was no evidence suggesting that it knew or
should have known that Anna was disabled when she came to Selfreliance to open the joint
account. In regard to count V, the circuit court found that neither the Uniform Commercial Code
nor any Illinois authority imposed a tort duty of ordinary care between a depositor and a bank,
2
Bochko was convicted of elder abuse and financial exploitation and was incarcerated. Shchudlo fled the
country.
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except with regard to negotiable instruments. The court determined that since wire transfers are
not negotiable instruments, Selfreliance did not breach any duty owed to Anna.
¶9 With regard to count VI, seeking rescission of the May 31, 2008, account agreement, the
court found that there were no material facts to establish that Selfreliance either knew or should
have known of Anna’s condition at the time she opened the joint account. The court noted that
the only facts presented concerning Anna’s mental condition on the date the account was opened
were contained in Sidelnik’s deposition testimony because Dr. Shaw testified that he could not
offer an opinion regarding how Anna appeared on that date. Accordingly, the court found that
there was no genuine issue of material fact and that respondent was entitled to judgment as a
matter of law on counts V and VI. Petitioner now solely appeals the court’s dismissal of count
VI.
¶ 10 III. ANALYSIS
¶ 11 On appeal, petitioner contends that the circuit court erred in granting respondent’s motion
for summary judgment where there was a question of material fact as to whether Anna was
mentally competent at the time she opened the joint account and it was irrelevant whether
respondent knew or should have known about her incompetency. Petitioner asserts that because
Anna lacked the capacity to enter into an account agreement with Selfreliance, the contract
should be rescinded and Selfreliance should reimburse her for the loss of her life savings.
¶ 12 Summary judgment is proper where the pleadings, depositions, admissions, and affidavits
on file, when viewed in a light most favorable to the nonmoving party, reveal that there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter
of law. General Casualty Insurance Co. v. Lacey, 199 Ill. 2d 281, 284 (2002). “A genuine issue
of material fact precluding summary judgment exists where the material facts are disputed, or, if
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the material facts are undisputed, reasonable persons might draw different inferences from the
undisputed facts.” Adames v. Sheahan, 233 Ill. 2d 276, 296 (2009) (citing Adams v. Northern
Illinois Gas Co., 211 Ill. 2d 32, 43 (2004)). We review de novo the circuit court’s entry of
summary judgment. Ragan v. Columbia Mutual Insurance Co., 183 Ill. 2d 342, 349 (1998).
¶ 13 A. No Genuine Issue of Material Fact
¶ 14 Petitioner first contends that the medical records and deposition testimony created a
question of fact regarding whether Anna was mentally competent when she opened the joint
account with Selfreliance. In so contending, petitioner relies on the medical opinion of Dr. Shaw,
who examined Anna in October 2008, five months after she opened the joint account at
Selfreliance. Dr. Shaw testified that, in his opinion, Anna suffered from dementia and had severe
problems with memory recall. In his report, Dr. Shaw noted that Anna could not recall the day of
the week and had a limited understanding of finances. On November 9, 2008, Dr. Shaw issued an
addendum to his report, in which he stated that he believed Anna’s dementia had been present
for at least several years. In his deposition testimony, however, Dr. Shaw stated that he could not
offer an opinion regarding how Anna presented herself on May 31, 2008, when she went to
Selfreliance to open the joint account.
¶ 15 We observe that, despite contending that there was a genuine issue of material fact
regarding Anna’s competency at the time she opened the joint account, petitioner also asserts in
its brief that “the undisputed evidence in this case established that [Anna] was not competent to
enter into a contract with respondent to open a joint bank account on May 31, 2008.” (Emphasis
added.) In fact, respondent acknowledges that it does not dispute Anna’s incapacity at the time
she opened the joint account and did not contest her competency in its motion for summary
judgment. Rather, respondent asserts that its ignorance of her condition, as well as the fact that
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the credit union did not improperly convert her funds or otherwise defraud her, absolves it of any
liability.
¶ 16 Nonetheless, petitioner asserts that because the evidence of Anna’s competency was not
disputed, the court could properly void the joint account agreement and require Selfreliance to
return the improperly converted funds to Anna. As the trial court recognized, the only facts
presented regarding Anna’s competency on the day she opened the joint account came from
Sidelnik, who testified that Anna did most of talking, signed her own name, and walked without
assistance. Petitioner contends that Dr. Shaw’s report contradicts Sidelnik’s testimony, but Dr.
Shaw stated in his testimony that he could not offer an opinion regarding how Anna presented
herself at Selfreliance on May 31, 2008. The only person other than Sidelnik who could offer
testimony regarding Anna’s condition on that date is Shchudlo, who has left the country. 3
¶ 17 Thus, it is clear from Sidelnik’s testimony that Selfreliance had no knowledge of Anna’s
incompetency when she signed the account agreement. Contrary to petitioner’s contentions, the
trial court did not “entirely ignore[ ]” Dr. Shaw’s testimony regarding Anna’s competency, but
observed, correctly, that he did not observe her on the date she went to Selfreliance to open the
joint account and could not offer an opinion regarding how she presented herself on that date.
Thus, Dr. Shaw could not offer testimony regarding what respondent knew or should have
known regarding Anna’s mental condition.
¶ 18 As our supreme court has recognized “[a] contract made with a lunatic in good faith,
without any advantage taken of his position, and for his own benefit, is valid both in equity and
3
At the hearing, petitioner suggested that it could offer the testimony of Bochko, who would testify that
Anna regularly used a walker or a wheelchair to get around, to rebut Sidelnik’s testimony that Anna walked into the
bank unassisted. As the trial court recognized, however, the testimony of Bochko, a convicted felon, that Anna
regularly used a walker or wheelchair would do nothing to establish Anna’s lack of mental capacity on the date she
opened the joint account at Selfreliance, particularly where Bochko was not present at Selfreliance on the date in
question.
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at law, and where a conveyance or contract is made in ignorance of the insanity, with no
advantage taken and in perfect good faith, a court of equity will not set it aside if the parties
cannot be restored to their original position.” Walton v. Malcolm, 264 Ill. 389, 396 (1914). Here,
it is clear from the evidence presented that Selfreliance entered into the contract in good faith,
without taking advantage of its position and in ignorance of Anna’s mental incapacity.
Selfreliance was entitled to rely upon the legal presumption that every person is sane until the
contrary is proven. See, e.g., In re Estate of Elias, 408 Ill. App. 3d 301, 316 (2011).
¶ 19 Accordingly, we find that the circuit court correctly found that there was no question of
material fact regarding Anna’s competency on the date she opened the account at Selfreliance. In
addition, we find that the circuit court correctly held that the account agreement should not be
rescinded where there was no evidence in the record to show that respondent knew or should
have known of Anna’s incompetency.
¶ 20 B. Respondent’s Knowledge of Anna’s Competency Not Irrelevant
¶ 21 Petitioner next contends, however, that respondent’s knowledge of Anna’s competency is
irrelevant. Petitioner asserts that even though respondent lacked knowledge of Anna’s
incapacity, the loss of her life savings should fall on respondent because precedent dictates that
Anna, who was incapable of entering into the contract, should be protected. In so contending,
petitioner relies on two cases: Jordan v. Kirkpatrick, 251 Ill. 116 (1911), and In re Estate of
Trahey, 25 Ill. App. 3d 727 (1975).
¶ 22 In Jordan, a woman and her husband executed a $1000 note and mortgage payable to
W.A. Kirkpatrick. Jordan, 251 Ill. at 118-19. George Jordan, the conservator of the wife, filed an
action to cancel the note and mortgage alleging that the wife was a “distracted person and
incapable of executing the note and mortgage.” Id. at 118. The trial court found that the wife was
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“insane” at the time the note and mortgage were signed. Id. at 119. The trial court thus ordered
that the note and mortgage should be cancelled and set aside even though the court noted that
Kirkpatrick, the mortgagee, had no knowledge of the wife’s mental condition at the time. Id. at
119-20. The supreme court affirmed the trial court’s holding, finding that:
“The reason given in the cases for requiring the consideration to be
returned where the lunatic has received the benefit of it is, that to refuse to do
so would be allowing the lunacy to be the means of perpetrating a fraud.
Where the benefit of the consideration is not received by the lunatic the reason
upon which the rule is based does not exist, and in view of the difference in
circumstances and opportunities of the parties it would seem in harmony with
sound principles of justice that the lunatic, having no responsibility for the
transaction and receiving no benefit therefrom, should receive the protection
of the court of equity and the loss should be made to fall on the party dealing
with the lunatic.” Id. at 122.
The supreme court later distilled its holding in Jordan, noting that a contract may be rescinded in
cases where “the insane grantor receives no benefit from the consideration paid.” Williams v.
Williams, 265 Ill. 64, 77 (1914). The court noted that “[i]n such case the conveyance will be set
aside without requiring the return, or offer to return, of the consideration, although the grantee
did not know the grantor was insane when the deed was made.” Id.¶ 23 In Jordan, at contrast with this case, Kirkpatrick, the lender, was seeking the benefit of
the bargain he made with a person later found to be mentally incompetent. Here, respondent
made no such claim against Anna and is not seeking to recover anything from her. Moreover, in
Jordan the supreme court noted that Kirkpatrick did not meet with the wife before making the
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transaction where “it was within [Kirkpatrick’s] power to have seen [the wife] and ascertained
her mental condition before making the loan.” Jordan, 251 Ill. at 121. The court observed that
the evidence showed that the wife had just been released from the hospital and that both her
mental and physical conditions were “very bad.” Id. at 122.
¶ 24 Here, in contrast, Anna went to respondent’s offices and met with respondent’s
personnel. Sidelnik testified that Anna walked without assistance, did most of the talking while
opening the account, and signed her own name to the account agreement. Petitioner presented
nothing to rebut this evidence except Dr. Shaw’s testimony that Anna had suffered from
dementia for several years, but Dr. Shaw could not offer an opinion regarding how she presented
herself at Selfreliance on the date she opened the account. Accordingly, the case before us is thus
unlike Jordan where Selfreliance is not seeking to recover anything from Anna and bank
personnel dealt with her directly when opening the account.
¶ 25 We likewise find petitioner’s reliance on Trahey misplaced. In Trahey, Margaret
Fitzpatrick, a relative of Josephine Trahey, took her to a bank to open a joint account in their
names using funds from Trahey’s previous bank account. Trahey, 25 Ill. App. 3d at 729. Trahey
was subsequently adjudicated incompetent, and a citation was directed to Fitzpatrick to appear
before the court for information about and discovery of personal property belonging to Trahey’s
estate. Id. Fitzpatrick appeared before the court and turned over the joint account passbook. Id. at
729-30. Thereafter, the court granted the conservator’s petition to redeposit the funds from the
joint account back into Trahey’s original account. Id. at 729. Nearly a year later, Fitzpatrick filed
a motion asking that the order redepositing the funds be vacated. Id. at 730. The trial court found
that Trahey was incompetent at the time she opened the account with Fitzpatrick and declined to
vacate the original order. Id.
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¶ 26 On appeal, this court observed that the fact that Fitzpatrick “quickly surrendered” the
joint account passbook and never consulted a lawyer to defend her right could have led the trial
court to conclude that she had waived her interest in the account. Id. at 731. The court further
found that Fitzpatrick was in “no position to protest” because she did not appeal from the final
order transferring the funds from the joint account to Trahey’s original account. Id.
¶ 27 Initially, we observe that Trahey involved procedural issues not present in this case.
Moreover, and more importantly, Fitzpatrick, the joint tenant who improperly opened a joint
bank account with a mentally incompetent person, was found to be at fault for opening a joint
account with a mentally disabled person, not the bank. Nowhere in the court’s opinion is it
implied that the bank where the joint account was opened would have been liable for any
fraudulently converted funds as petitioner seems to suggest. Thus, consistent with Trahey, as the
trial court recognized in its order, any loss should be made to fall upon those who defrauded
Anna and not on Selfreliance.
¶ 28 Accordingly, we find no support for petitioner’s contention that respondent’s knowledge
of Anna’s incompetency is irrelevant. Furthermore, we find no support for petitioner’s
contention that Selfreliance should return the wrongfully converted funds. Rather, the weight of
the authority suggests that Shchudlo and Bochko, the parties who fraudulently converted the
funds, are liable for the amounts fraudulently transferred. We thus find that the circuit court
properly granted respondent’s motion for summary judgment where petitioner failed to show that
there was a genuine issue of material fact as to Anna’s incompetency and that respondent either
knew or should have known of her incompetency.
¶ 29 III. CONCLUSION
¶ 30 For the reasons stated, we affirm the judgment of the circuit court of Cook County.
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¶ 31 Affirmed.
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