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National Blvd. Bank v. Corydon Travel Bureau

APRIL 15, 1968.




Appeal from the Circuit Court of Cook County; the Hon. EDWARD G. SCHULTZ, Judge, presiding. Judgment reversed and cause remanded with directions.


On October 1, 1965, a judgment by confession on a series of ten promissory notes was entered against Corydon Travel Bureau, Inc., and Alan R. Rosenberg in favor of plaintiff, National Boulevard Bank of Chicago, for the amount of $243,870.86. At the same time judgment by confession was entered against Sam Silver and Melvin E. Levinson in the amount of $138,570.37, pursuant to their guaranty on five of the aforementioned notes. Defendants Melvin E. Levinson and Sam Silver separately petitioned the court to "vacate and reopen" the judgment by confession, each movant attaching an affidavit in support of his motion. After a hearing, each of the motions to "vacate and reopen" the judgment was denied and the judgment by confession was confirmed. Only Levinson prosecutes this appeal.

The procedure for opening a judgment by confession is governed by Supreme Court Rule 23, (Ill Rev Stats 1965, c 110, § 101.23) now Supreme Court Rule 276 (Ill Rev Stats 1967, c 110A, § 276). The Rule provides:

"A motion to open a judgment by confession shall be supported by affidavit in the manner provided by Rule 15 for summary judgments, and shall be accompanied by a verified answer which defendant proposes to file. If the motion and affidavit disclose a prima facie defense on the merits to the whole or a part of the plaintiff's demand, the court shall set the motion for hearing. The plaintiff may file counteraffidavits. If, at the hearing upon the motion, it appears that the defendant has a defense on the merits to the whole or a part of the plaintiff's demand and that he has been diligent in presenting his motion to open the judgment, the court shall sustain the motion either as to the whole of the judgment or as to any part thereof as to which a good defense has been shown, and the case shall thereafter proceed to trial upon the complaint, answer, and any further pleadings which are required or permitted. If an order is entered opening the judgment, defendant may assert any counterclaim, and plaintiff may amend his complaint so as to assert any other claims, including claims which have accrued subsequent to the entry of the original judgment. The issues of the case shall be tried by the court without a jury unless the defendant or the plaintiff demand a jury and pay the proper fee (if one is required by law) to the clerk at the time of the entry of the order opening the judgment. The original judgment stands as security, and all further proceedings thereon are stayed until the further order of the court, but if the defense is to a part only of the original judgment, the judgment stands as to the balance and execution may issue thereon. If a defendant files a motion supported by affidavit which does not disclose a defense to the merits but discloses a counterclaim against the plaintiff, and defendant has been diligent in presenting his motion, the trial court may permit the filing of the counterclaim and stay all proceedings on the judgment by confession until the counterclaim is disposed of."

Appellant's theory is that he complied with the requirements of Supreme Court Rule 23 in that he presented his motion with due diligence and the affidavit set forth a meritorious defense to the cognovit judgment. No issue is raised by plaintiff-appellee with respect to whether defendant acted with due diligence. Plaintiff asserts only that "Levinson has failed to set forth a meritorious defense, and that the trial court properly refused to vacate the cognovit judgment." Although the parties are quite lax in the use of the terms "open" and "vacate" (See Farmers Bank of North Henderson v. Stenfeldt, 258 Ill. App. 428 (1930)), we consider the motion filed by appellant, in the trial court, as a motion to open a judgment by confession pursuant to the Supreme Court Rule.

[1-5] Considering the scope of Rule 23, we note initially that the court is to determine only whether or not the motion and affidavit in support thereof disclose a prima facie defense. Barrick v. Barnes, 46 Ill. App.2d 172, 196 N.E.2d 526 (1964). No inquiry into the facts of the cause is to be conducted. Walrus Mfg. Co. v. Wilcox, 303 Ill. App. 286, 25 N.E.2d 132 (1940). All the allegations by defendant are to be accepted as true. Scheinfeld v. Muntz TV, Inc., 67 Ill. App.2d 8, 214 N.E.2d 506 (1966). The only question for the court to decide is whether from the motion to open the judgment it appears that defendant has a defense which entitles him to a trial on the merits. Lietz v. Ankrom, 350 Ill. App. 437, 113 N.E.2d 184 (1953). The motion is addressed to the sound legal discretion of the court. Keller v. Hyland Builders Corp., 38 Ill. App.2d 209, 186 N.E.2d 787 (1962). It is to be considered under liberal, equitable principles, Alter & Associates, Inc. v. Zylvitis, 36 Ill. App.2d 195, 183 N.E.2d 750 (1962), and the right to present a defense is considered an exercise of the conscience of the court. Larsh v. Green Gold Farms, Inc., 68 Ill. App.2d 113, 214 N.E.2d 924 (1966). Therefore, it is essential that we carefully examine defendant's motion and affidavit to determine if a prima facie defense is pleaded. Further, we must examine the nature of the evidence set forth in the affidavit to determine if such evidence would be admissible at a trial on the merits. Sharp v. Kennedy, 12 Ill. App.2d 353, 139 N.E.2d 594 (1957).

The affidavit in support of the motion to open the judgment entered by confession alleges that Corydon Travel Bureau, Inc., (Corydon) and plaintiff orally entered into a financing agreement. Plaintiff lent money to Corydon for which promissory notes were executed. Plaintiff received an assignment of Corydon's accounts receivable and was to collect the accounts, using the receipts to pay off the notes. Defendant further alleges that plaintiff requested him to guarantee five of the notes executed by Corydon. In order to induce defendant to execute the guaranty, it is asserted that plaintiff agreed to take certain steps as a condition precedent to its use. These conditions were that plaintiff would obtain a credit report on Corydon and Alan R. Rosenberg, a principal of the corporation; audit Corydon's accounts; collect the accounts receivable; notify defendant of any irregularities in the agreement with Corydon, and in particular with respect to the accounts receivable; determine if proper corporate resolutions were passed to authorize Rosenberg to borrow on behalf of Corydon; cause Corydon to transfer its lock box and bank account to the plaintiff's bank; notify Corydon's old bank to transfer all monies collected to plaintiff's bank; and no loans would be made to Corydon until the bank accounts had been transferred and plaintiff had access to Corydon's lock box.

Defendant's motion then alleged that, relying on plaintiff's promises, he executed the guaranty, but plaintiff failed to perform any of the aforementioned acts. As a consequence, plaintiff never had control of the Corydon bank accounts, lock box, or accounts receivable and these assets have been misappropriated and dissipated.

Defendant argues that his affidavit establishes the defense of lack of delivery because a delivery subject to a condition precedent is not a complete delivery until such condition is fulfilled. Bell v. McDonald, 308 Ill. 329, 139 N.E. 613 (1923); Jordan v. Davis, 108 Ill. 336 (1883). The allegations of the affidavit set forth acts which plaintiff agreed to perform prior to the guaranty becoming effective and the failure to perform such acts. We agree that these allegations show a conditional delivery.

No issue is raised as to the sufficiency of the pleading, nor does plaintiff take issue with the law of conditional delivery. Instead it argues that such a rule is inapplicable here, because defendant's affidavit offers only oral parol evidence which may not be used to establish a conditional delivery of a written instrument if such evidence will expressly contradict the clear and unambiguous terms of that same instrument. In its brief, plaintiff states:

"Defendant alleges that the parties entered into an oral agreement requiring plaintiff to audit and collect the accounts receivable of Corydon, to cause Corydon to transfer its lock box and bank account from the Hartford National Bank to the plaintiff, and to notify the Hartford National Bank that all monies collected on behalf of Corydon should be transferred to plaintiff. Each of these allegations refers solely to the collection and preservation of the accounts receivable of Corydon, the collateral for the loans. The written instruments, however, expressly provide that defendant `consent(s) that the security . . . may be . . . surrendered . . . without notice to the undersigned,' that it may be `release(d) . . . without notice,' and that plaintiff `is released from all obligation to collect or in any way protect said property.' It would be difficult to conceive of language more clear or explicit than this in stating the intent of the parties that plaintiff should have no duties or obligations at all toward the collateral. Defendant also alleges that the oral agreement called for plaintiff to give notice to defendant of any irregularities in the performance of the agreement, especially with respect to the collection of the accounts receivable. But the written instruments specifically provide that defendant waived all notice of any such default."

As to the defendant's allegations that plaintiff was to obtain a credit report on Corydon and to determine if proper corporate resolutions were passed, plaintiff argues that there is no allegation that Corydon's credit was bad or that the resolutions were not passed.

Proceeding as we are, under Supreme Court Rule 23, the singular issue is whether defendant's affidavit sets forth a meritorious defense. Under the theory of the Sharp case, supra, this, in turn, requires us to decide if the facts alleged in the affidavit could be testified to at a trial on the merits. Determination of this question depends upon application of the parol evidence rule. "`Few things,' write Professor Thayer, `are darker than this, or fuller of subtle difficulties'; and this condition of the law ...

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