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Ed Fanning Chevrolet v. Servleaseco





APPEAL from the Circuit Court of Kane County; the Hon. WILLIAM H. ELLSWORTH, Judge, presiding.


This is an appeal by the defendant from a default judgment entered against it in an action to rescind an equipment lease and to recover moneys paid by the plaintiff under such lease. We disregard two other parties originally involved in this litigation — Investment Control, Inc., original assignor of the equipment, and Detroit Bank and Trust, assignee of the lease between Fanning and Servleaseco since their rights have been adjudged and they are not involved in this appeal.

In 1973, Ed Fanning Chevrolet, Inc., leased certain computer equipment from Servleaseco, a Michigan corporation, and signed a lease agreement with Servleaseco, which among other things, provided as follows:

"19. This lease shall be deemed to have been made in Wayne County, Michigan regardless of the order in which the signatures of the parties shall be affixed hereto, and shall be interpreted, and the rights and liabilities here determined, in accordiance with the laws of the State of Michigan, and as part of the consideration for the lessor's executing this lease. Lessee hereby agrees that all actions or proceedings arising directly or indirectly from this lease shall be litigated only in courts> having situs within the State of Michigan and lessee hereby consents to the jurisdiction of any local, state or federal court located within the State of Michigan * * *."

In June of 1975, Ed Fanning Chevrolet, not being satisfied with the performance of the computer equipment, sued Servleaseco (as well as Investment Control, Inc. and Detroit Bank and Trust) to rescind the lease and for moneys paid to the defendants thereunder. The defendants, as well as other parties, being Michigan corporations, service was had on them in August 1975 through the Illinois "Long Arm" statute (Ill. Rev. Stat. 1975, ch. 110, par. 17), which reads in part as follows:

"Act submitting to jurisdiction — Process. (1) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his personal representative, to the jurisdiction of the courts> of this State as to any cause of action arising from the doing of any of such acts:

(a) The transaction of any business within this State."

Servleaseco, not having appeared or answered within the time required by statute, the plaintiff in December of 1975, after due notice to the defendant of such motion, moved for default judgment against Servleaseco. A default judgment pursuant to such motion was duly entered. The claims of the other parties, having been consolidated with the litigation between Fanning and Servleaseco, over a period of time, the trial court, on March 22, 1977, gave judgment by confession against Fanning and in favor of Detroit Bank and Trust, and against Servleaseco in favor of Fanning in the amount of $18,004.85. Fanning duly satisfied the judgment against it in favor of Detroit Bank and Trust.

In July 1977, attorneys appeared specially for Servleaseco for the purpose of objecting to the trial court's jurisdiction over that company and moved to quash the service of summons and return on which the default judgment was based. The defendant's motion cited the lease provision quoted above as the basis of the motion. Thereafter, the parties having briefed the question of jurisdiction and submitted their arguments to the trial court, that court denied the motion to quash the service.

In this appeal the defendant takes the position that the trial court's order of default against Servleaseco is void for lack of jurisdiction. This is apparently based on the reasoning that by virtue of the quoted paragraph of the equipment lease the courts> of Illinois were deprived of jurisdiction and the court of Michigan had jurisdiction of litigation arising out of the lease in question and such jurisdiction was exclusive. Thus, any order issued by an Illinois court was entirely without force and effect and void ab initio.

The defendant invokes section 1-105 of the Uniform Commercial Code (Ill. Rev. Stat. 1975, ch. 26, par. 1-105) to establish that agreements as to governing law and the situs of future litigation are not against the public policy of Illinois. Said section reads as follows:

"Territorial Application of the Act; Parties' Power to Choose Applicable Law.

(1) Except as provided hereafter in this Section, when a transaction bears a reasonable relation to this State and also to another state or nation the parties may agree that the law either of this State or of such other state or nation shall govern their rights and duties. Failing such agreement this Act applies to transactions bearing an appropriate relation to this State.

(2) Where one of the following provisions of this Act specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law ...

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