APPEAL from the Circuit Court of Du Page County; the Hon.
ROBERT NOLAN, Judge, presiding.
MR. PRESIDING JUSTICE RECHENMACHER DELIVERED THE OPINION OF THE COURT:
This appeal arises out of a garnishment action and involves a dispute as to who has prior claim to funds in a savings account the assignee of the account or the judgment creditor who garnished the account.
In February 1974, Ingran Construction Company (the debtor in the garnishment proceeding) executed a judgment note in favor of Iser Electric Company (the garnishing creditor here) for $50,000. The note was guaranteed by Anthony Jaconetti, Ingran's president. It was not paid when due and judgment by confession was entered on the note on November 4, 1974. On November 19, 1974, garnishment summons was served on the Bank of Oakbrook Terrace, where Jaconetti had a savings account in his own right as well as an account of which he was trustee. The bank filed an answer requesting more specific information as to the account garnisheed. Iser Electric Company then moved to have the garnisheed funds turned over to it and the defendant Jaconetti filed a motion (apparently oral) to open the judgment by confession. The trial court took both motions under advisement and in an order dated July 1, 1975, issued its memorandum decision sustaining and confirming the judgment by confession as to Jaconetti, appropriate order to be submitted within 14 days. On August 7, 1975, Ingran and Jaconetti filed notice of appeal (but failed to file a supersedeas bond). *fn1
On July 31, 1975, the trial court entered its order confirming the judgment by confession, denying the motion to open the judgment and directing the bank to turn over to Iser, the garnishing creditor, the amount of $22,503 (the amount in Jaconetti's savings account) immediately upon demand. Execution of this order was stayed for 14 days.
On September 9, 1975, the Bank of Oakbrook Terrace filed a petition to implead the garnished funds. In its petition the bank stated that on July 8, 1975, it had received a letter from Mercantile Financial Corporation together with a copy of a pledge and assignment of the savings account in question to Mercantile, which pledge and assignment indicated that it had been executed on October 25, 1974, as collateral to secure a loan of $50,000 to Ingran Construction Company, guaranteed by Jaconetti. The letter stated that Mercantile had physical possession of the passbooks in question as evidence of its security interest. A copy of Mercantile's letter of October 25, 1974, together with a copy of the pledge and assignment were attached to the bank's petition. The bank asked in its petition to be allowed to implead the funds in question by depositing them with the court and then that it be dismissed from the action. The petition to implead the funds was allowed and the sum in question was deposited with the clerk of the court.
Mercantile then filed its petition as adverse claimant to the garnished funds and following further pleadings by both Iser and Mercantile, the court issued its order, dated December 11, 1975, nunc pro tunc as of November 20, 1975, finding that the claim of Iser Electric Company as garnishing creditor was superior to the claim of Mercantile Financial Corporation as assignee of the savings account and ordering the clerk of the court to pay Iser Electric Company the amount on deposit with him. In its order the trial court found (1) that the assignment to Mercantile had no validity until notice of the assignment was given to the Bank of Oakbrook Terrace; (2) that the judgment debtor, Jaconetti, was free to withdraw the funds at the time of the garnishment, hence the funds were free of any right of Mercantile, "inasmuch as at the time the lien or assignment was secret and undisclosed." The court also found that the claimant had the burden of proving its claim by a preponderance of the evidence, which it had failed to do. After its motion to reconsider was denied, Mercantile filed this appeal.
The assignment in question assigned to Mercantile Financial Corporation all of Jaconetti's "right, title and interest in those certain Bank of Oakbrook Terrace * * * Savings Account Pass Books bearing Account Numbers 032-912 and 032-920 in the amounts of $20,000.00 and $25,000.00 respectively" and was assigned "for collateral purposes and is subject to all the terms of a Security Agreement under which the Savings Account Pass Books have been deposited with Mercantile to secure a Note in the amount of $50,000.00," constituting and appointing Mercantile his attorney in fact to collect said savings account books.
The passbooks in question contained a printed provision reading as follows:
"No assignment of any regular savings account nor any part thereof shall be valid unless written notice thereof has been given to the bank and accepted by said bank."
Iser invokes this provision in the passbook as invalidating any assignment between Jaconetti and Mercantile, without the consent of the bank, which was not sought or obtained as no notice was given of the assignment until after the garnishment proceeding.
In this appeal Mercantile contends that the assignment and pledge of the passbooks constituted it the equitable owner of the savings account in question and that the law of Illinois is that a prior assignment is not affected by a subsequent garnishment so long as the garnishee is notified of the assignment in time to avoid exposure by the garnishee to double payment. As to Iser's argument that its lien was not perfected because no valid assignment could be made without notice to the bank, Mercantile contends that the passbook provision in question was put there solely for the benefit of the bank as a security measure, that it can only be invoked by the bank and that the bank did not raise it in this instance, therefore it is irrelevant and has no bearing on the question of priorities as between Iser and Mercantile.
• 1-3 We believe Mercantile's contention with regard to the effect of the passbook provision is correct. The provision was manifestly inserted for the protection of the bank against a double payment. In this case the bank did not raise the provision and, indeed, in its petition indicated it had grave doubt as to who had the superior right to the fund in question, as between Mercantile's claimed prior assignment and Iser's judgment by confession. It never asserted that the assignment was not valid because of the passbook provision in question. We do not believe a third party, being a stranger to the transaction between the bank and its depositor, Jaconetti, can properly invoke this provision as against either the bank or its depositor. (See Nicholson v. Nicholson Coal Co. (1914), 190 Ill. App. 607; 17 Am.Jur.2d Contracts § 297 (1964).) The mere relationship of judgment creditor to one of the parties does not confer privity on a stranger to the contract, where the contract was obviously not made for his benefit. (12 Ill. L. & Prac. Contracts § 266 (1955); New York, Chicago & St. Louis R.R. Co. v. Erie R.R. Co. (1952), 346 Ill. App. 356.) In our opinion, the passbook regulation in question here does not affect the assignment as between Jaconetti and Mercantile.
Iser contends, however, that regardless of what construction is put upon the passbook regulation as to the assignment, Mercantile's claim is inferior to that of Iser because Mercantile failed to notify the bank of its assignment until after the garnishment summons had been issued and evidence heard and a preliminary finding made in the garnishor's favor. Iser asserts in its brief that "Notice of an Assignment Prior to the Service of a Writ of Garnishment by a Bona Fide Creditor of the Assignor is Indispensable to the Priority of the Assignment Over the Garnishment."
As we read the cases adduced in support of this proposition we find that most of them either do not support the plaintiff's contention or are not in point because they do not involve a ...