APPEAL from the Circuit Court of Cook County; the Hon. DANIEL
J. COVELLI, Judge, presiding.
MR. PRESIDING JUSTICE MCGLOON DELIVERED THE OPINION OF THE COURT:
This is an interlocutory appeal from an order of the Circuit Court refusing to grant a temporary injunction upon the petition of plaintiffs. The injunction was sought to keep certain funds, located in Illinois and represented by a non-negotiable certificate of deposit, from passing out of this state to the First California Company, the out-of-state assignee of the certificate of deposit. Plaintiffs argue that under either the Uniform Commercial Code or the common law of Illinois they have asserted a prima facie claim or right to the funds in issue such as to justify the issuance of a temporary injunction until the rights of the parties can be litigated in full. Furthermore, plaintiffs assert that the trial court improperly excluded relevant testimony from the hearing below.
The facts adduced at the hearing are as follows: In the fall of 1969 an agent of the defendant, General American Development Corporation (hereinafter referred to as "G.A.D.C.") approached Daniel B. Nelsen, Jr. and inquired whether he would be interested in a sale and buy-back arrangement concerning certain property owned by G.A.D.C. Negotiations ensued from November, 1969, to March, 1970. It was agreed that Nelsen's company, D. Nelsen & Sons, Inc., would borrow $300,000 from defendant, Suburban Trust & Savings Bank (hereinafter referred to as "Suburban Trust"). This amount would represent a down payment on the land in question which was given a sale price of $2,000,000. Upon receiving a check for $300,000 from Suburban Trust, plaintiffs were to endorse it over to G.A.D.C.. G.A.D.C. was then to endorse it back to Suburban Trust which would issue a non-negotiable certificate of deposit to G.A.D.C. G.A.D.C. was to hold the certificate of deposit until such time as the buy-back portion of the agreement was to be executed in October of 1970. The funds represented by the certificate of deposit were to be used to discharge the loan of $300,000 owed Suburban Trust by Nelsen, Inc. Furthermore, Nelsen, Inc. was to receive a substantial profit from the sale-back of the property.
Matters did not materialize exactly as planned. Nelsen borrowed the $300,000, endorsed it to G.A.D.C., which in turn endorsed it back to Suburban Trust, which issued a non-negotiable certificate of deposit naming G.A.D.C. as payee. However, rather than holding the certificate of deposit until the buy-back was to take place, G.A.D.C. assigned it to defendant, First California Company (hereinafter referred to as "F.C.C."). This occurred on July 6, 1970. F.C.C. was in the bond and securities business, and the assignment of the certificate of deposit represented partial payment of a debt of $455,500 owed F.C.C. by G.A.D.C.
Mr. Mayrisch, Vice President and Manager of the Municipal Bond Department of F.C.C., testified that Mr. Andrade, an officer of G.A.D.C., informed him that G.A.D.C. had a moral obligation not to cash the certificate of deposit. When plaintiffs' attorney asked Mr. Mayrisch, "Mr. Andrade advised you that you had a moral obligation, is that correct?", Mr. Mayrisch replied, "Yes." F.C.C. took the instrument nevertheless feeling, in the words of Mayrisch, that "[A] half is a little bit better than none." This was evidently because F.C.C. had some doubt as to G.A.D.C.'s solvency. F.C.C. also requested and obtained separate written warranties from G.A.D.C. that there were no encumbrances upon the instrument, and F.C.C. agreed not to liquidate the instrument until January 1, 1971. Written notice of the assignment was made to Suburban Trust, but no acknowledgement was made until two months later.
When Nelsen learned of the assignment in late summer of 1970, he protested vigorously to officers of both the bank and G.A.D.C., but was assured by the latter that things were being done on Nelsen's behalf and not to worry about it.
F.C.C. held the certificate of deposit until December 1, 1970. On that day it assigned the certificate to Central National Bank of Chicago. It remained with that bank until April of 1971 when Central National Bank of Chicago reassigned the certificate to F.C.C. This reassignment occurred because a temporary restraining order issued upon the commencement of plaintiffs' action, and F.C.C. did not wish to have Central National Bank, one of its good customers, involved in a lawsuit.
Both parties agree that the Uniform Commercial Code is applicable to the issues before us. (See Ill. Rev. Stat. 1969, ch. 26, par. 3-101 et seq.) Section 3-805 of the Code states that:
"Instruments Not Payable to Order or to Bearer. This Article applies to any instrument whose terms do not preclude transfer and which is otherwise negotiable within this Article but which is not payable to order or to bearer, except that there can be no holder in due course of such an instrument."
The certificate of deposit in this case meets all of the requirements of negotiability except that it is not payable to order or to bearer. (Ill. Rev. Stat. 1969, ch. 26, par. 3-104(1)(d).) Thus, under the rule of par. 3-805, F.C.C. can be a holder (see Ill. Rev. Stat. 1969, ch. 26, par. 1-201(20)), but not a holder in due course. Ill Rev. Stat. 1969, ch. 26, par. 3-302.
The rights of one not a holder in due course are set out in Ill. Rev. Stat. 1969, ch. 26, par. 3-306, which reads in relevant part as follows:
"Rights of One Not Holder in Due Course.
Unless he has the rights of a holder in due course any person takes the ...