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Schmelzle v. Transportation Inv. Corp.

OPINION FILED OCTOBER 20, 1950

ROBERT J. SCHMELZLE, APPELLEE,

v.

TRANSPORTATION INVESTMENT CORPORATION, APPELLANT.



Appeal by defendant from the Circuit Court of Stephenson county; the Hon. HARRY E. WHEAT, Judge, presiding. Heard in this court at the May term, 1950. Judgment affirmed. Opinion filed October 20, 1950. Released for publication November 8, 1950.

MR. JUSTICE BRISTOW DELIVERED THE OPINION OF THE COURT.

This is an appeal from a summary judgment entered by the circuit court of Stephenson county ordering defendant, Transportation Investment Corporation, the maker of a check, to pay to plaintiff, Robert J. Schmelzle, the accommodation endorser for the payee, the sum of $13,500, the face amount of the instrument.

The primary inquiry is whether an accommodation endorser for the payee of a check, can recover from the maker the face amount of the check, which the endorser was called upon to pay the bank upon the maker's refusal to honor the instrument, notwithstanding an alleged failure of consideration for the check by the payee. There is, in addition, the issue of proper venue.

From the pleadings and affidavits upon which this appeal is predicated, it appears that on January 9, 1948, the defendant, Transportation Investment Corp., delivered a check for $13,500 to L.D. Bailey, an officer of the Twin City Transit Lines, Inc., the payee. On February 16, 1948, plaintiff, Robert J. Schmelzle, endorsed the check for the accommodation of the payee. The check was delivered to The Auto Mart, Inc., which cashed it at the First National Bank of Freeport. The check was not honored, and plaintiff was called upon to pay the First National Bank the $13,500, for which he is now suing the defendant.

As a defense to liability on the instrument, defendant alleges that in return for the check in controversy, and as the sole consideration therefor, defendant received from L.D. Bailey two checks totaling $13,500, dated February 13 and 14, respectively, made by The Auto Mart, Inc., of which Bailey was also an officer, and signed by him and Imelda Bailey. The affidavits of defendant's president attest that he was told by Bailey that defendant's check for $13,500 would not be deposited until the checks of The Auto Mart had cleared. Defendant further alleges that these checks were not paid, and, therefore, claims that there was a failure of consideration for the instrument involved herein, which precludes plaintiff from recovering in this proceeding.

Defendant moved for a change of venue on the grounds that no part of the transaction between plaintiff and defendant occurred in Stephenson county, but rather in Cook county, and that the defendant corporation does not maintain offices or have a registered agent in Stephenson county.

The court denied this motion, dismissed defendant's special defense of failure of consideration, and granted plaintiff's motion for a summary judgment against defendant for the amount of the check, from which judgment defendant has prosecuted this appeal.

This court will consider first the matter of proper venue, and then determine whether there was a failure of consideration for defendant's check, or a question of fact raised thereon, and if so, whether this defense could be validly asserted against the plaintiff.

The Illinois statute pertaining to venue provides, in substance, that every civil action shall be commenced in the county where one or more defendants reside, or in which the transaction, or some part thereof, occurred, out of which the cause of action arose. (Ch. 110, pars. 131, 132, Ill. Rev. Stat. 1949 [Jones Ill. Stats. Ann. 104.007, 104.008].) In La Ham v. Sterling Canning Co., Inc., 321 Ill. App. 32, it is stated that the word "transaction" in the statute is modified by the phrase "out of which the cause of action arose." Ordinarily, a cause of action includes "every fact necessary for plaintiff to prove to entitle him to succeed — every fact that defendant would have a right to traverse." (Walters v. City of Ottawa, 240 Ill. 259.)

In the instant case plaintiff and defendant had no personal or direct dealings in any county, however, certain acts, which were integral parts of plaintiff's cause of action, and which he would have to establish in order to assert any rights on the instrument, occurred in Freeport, in Stephenson county. It was there that plaintiff endorsed the check for the accommodation of the payee, Twin City Transit Lines, Inc., which had its principal office and registered agent there; that plaintiff paid the amount of the check to the First National Bank of Freeport, after the bank notified plaintiff that defendant had refused payment; and that plaintiff received the instrument itself from the bank. Under these circumstances, it would appear that a substantial part of the "transaction" out of which plaintiff's individual cause of action arose, did occur in Stephenson county, hence it was not error for the circuit court to deny the motion for change of venue.

Inasmuch as the purpose of a proceeding for summary judgment is to determine whether a defense exists (Diversey Liquidating Corp. v. Neunkirchen, 370 Ill. 523), and since such a judgment is proper only where no triable questions of fact are presented in the pleadings and affidavits (C.I.T. Corp. v. Smith, 318 Ill. App. 642), this court will consider the nature of the defense submitted by defendant.

In his answer, defendant alleges that there was a total failure of consideration for the check in controversy, since it was issued in exchange for two postdated checks, totaling $13,500, which were never paid. In the affidavits supporting defendant's motion for change of venue, and in opposition to plaintiff's motion for summary judgment, defendant further alleged that at the time the checks were exchanged between defendant and the payee, defendant was told by L.D. Bailey, on behalf of the payee, that defendant's check for $13,500 would not be deposited until the two checks given to defendant had cleared.

It is established that in an exchange of checks each is deemed a consideration for the other, and an independent obligation not conditioned upon the payment of the other, provided there is no restriction on use or negotiation. (Beutel's, Brannon, Negotiable Instruments Law, p. 508; 7 A.L.R. 1569.)

In the instant case it appears from defendant's pleadings and affidavits in support thereof, that, although cross checks were given by defendant and the payee, there is a question of fact presented as to whether there was a restriction on the negotiation of the instrument in controversy until the two checks given by the payee, as consideration had cleared. If such a restriction were established, then the fact that ...


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