APPEAL from the Circuit Court of Kane County; the Hon. JOHN A.
KRAUSE, Judge, presiding.
MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:
On June 12, 1970, plaintiff, First National Bank of Elgin, confessed judgment for $17,450.00 against defendants Ruth Achilli, Howard Achilli and "Highland Motor Sales" on a promissory note which was signed in the lower right hand corner:
HIGHLAND MOTOR SALES /S/ RUTH ACHILLI (SEAL) /S/ HOWARD ACHILLI (SEAL)
The defendants, Ruth and Howard Achilli, moved to reopen the judgment, alleging that no consideration was paid to them for the note; and that the note was not executed by them individually but solely as heirs at law and representatives of the estate of Sam Achilli, deceased, who prior to his death operated Highland Motor Sales as a sole proprietorship. In her affidavit, Ruth Achilli averred that she was the widow of Sam Achilli; that Sam Achilli, d/b/a Highland Motor Sales, a sole proprietorship, was indebted to the bank on a note upon which he owed $15,000, plus interest; that the bank insisted upon a renewal; and at the time when the note was signed she had not yet been appointed executor of her husband's estate and was unable to sign the note as executor. She further averred that the note was never intended to obligate defendants individually but merely intended to acknowledge an indebtedness to the bank owed by the Highland Motor Sales.
Subsequently Howard Achilli filed an additional affidavit in which he stated that at the time of the execution of the renewal note it was represented to defendants by the bank that the note was to be the note of Highland Motor Sales and was merely to show to bank examiners; that as soon as an estate was opened for Sam Achilli, the bank would file a claim against it; that the note was never intended to be their personal note; and that thereafter the bank did, in fact, file a claim against Sam Achilli's estate on the note in the sum of $15,433.98.
The bank filed a counter-affidavit averring that defendants actively managed Highland Motor Sales after the death of Sam Achilli and paid interest due on the note of Sam Achilli up to the date of the renewal note; that the bank did intend to hold defendants personally liable on the note; and that defendants signed the renewal note in consideration for the note of Sam Achilli which plaintiff surrendered to defendants, thereby abandoning its claim against the estate of Sam Achilli on the original note.
On February 3, 1972, the trial court denied defendants' motion seeking to reopen and confirmed the judgment by confession.
On appeal the defendants argue that the motion and affidavits establish three defenses: (1) that the note was that of Highland Motor Sales and not the individual defendants because it was signed in a representative capacity; (2) that no consideration was given for the note; and (3) that the defendants' signatures were fraudulently obtained. Plaintiff counters that the defendants failed to raise a prima facie meritorious defense and were not diligent in presenting their motion to open the judgment.
Plaintiff claims that the delay until more than five months after judgment was entered and a writ of execution served shows that the defendants had not exercised due diligence in moving to open the judgment. However, defendants alleged in their motion that they were diligent, which was not contradicted or denied in plaintiff's counter-affidavit. (See Stranak v. Tomasovic (1941), 309 Ill. App. 177, 180-181.) At no time thereafter did plaintiff raise the defendants' alleged lack of diligence before the trial court. Under these circumstances, we will not consider the issue here.
• 1-3 On a motion to open a judgment by confession, the court is to determine only whether the motion and affidavits disclose a prima facie defense. No inquiry into the controverted facts of the case is to be conducted; rather, all of the allegations of fact and defendants' affidavits are to be taken as true and the motion is addressed to the sound legal discretion of the court. While earlier cases stated that the affidavits are to be strictly construed against the party presenting them (e.g., Mandel Bros. v. Cohen (1928), 248 Ill. App. 188, 190), it is now established that the motion is to be considered under liberal equitable principles, with the right to present a defense considered an exercise of the conscience of the court. National Boulevard Bank v. Corydon Travel Bureau (1968), 95 Ill. App.2d 281, 285.
Defendants claim a meritorious defense in that the note was signed in a representative rather than an individual capacity. It is clear from the pleadings that at the time the renewal note was executed by defendants, they lacked legal authority to obligate Highland Motor Sales. However, defendants argue that since the pleadings allege that both parties intended the defendants to sign in a representative capacity, they should be treated as representatives under the provisions of subsection 3-403(2) of the Uniform Commercial Code. *fn1 Plaintiffs respond that UCC 3-403(2) applies only to authorized agents and may not be applied to defendants since they lacked authority to sign for Highland Motor Sales at the time the note was executed.
We are of the opinion that a further section of the Uniform Commercial Code should be considered in dealing with the issue. UCC § 3-404(1) dealing with unauthorized signatures provides:
"Any unauthorized signature is wholly inoperative as that of the person whose name is signed unless he ratifies it or is precluded from denying it; but it operates as the signature of the unauthorized signer in favor of any person who in good faith pays the instrument or takes it for value."
Official Comment 2 thereto states that the final clause of subsection 3-404(1) is "limited to parties who take or pay the instrument in good faith; and one who knows that the signature is unauthorized cannot recover from the signer ...