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Comprehensive Accounting Service v. Shifo

OPINION FILED JUNE 27, 1980.

COMPREHENSIVE ACCOUNTING SERVICE COMPANY, PLAINTIFF-APPELLANT,

v.

SAMUEL J. SHIFO ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. REGINALD J. HOLZER, Judge, presiding.

MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied November 20, 1980.

Plaintiff appeals from an interlocutory order requiring the return of certain accounts it had repossessed from defendants, and the sole issue presented concerns the propriety of that order.

It appears that plaintiff is in the business of obtaining clients for its accountant customers as well as providing those customers with various forms, training, electronic data processing services, and consultation in the marketing and management of an accounting practice. Between 1973 and 1978, defendant Shifo (an accountant) signed several installment notes payable to plaintiff for the purchase of various "accounts." (An account is described in the purchase agreement as "a contract right to payment not yet earned by performance of bookkeeping and related services, for a client, and the accounts receivable growing out of said right, together with the client's books and records, and the accountant's work papers, plus the intangible rights that flow from the existence of the account, such as future accounts that are obtained thereby.") The purchase agreement also provided that plaintiff would retain a security interest in the accounts to secure payment and that, in the event of default:

"[T]he Seller, at its option, may declare all of the Obligations to be immediately due and payable, and then shall have the remedies of a secured party under the Uniform Commercial Code of Illinois, including, without limitation thereto, the right to take immediate and exclusive possession of the Accounts, and for that purpose the Seller may, so far as the Purchaser can give authority therefore [sic], enter upon any premises on which the Account may be situated, and remove the same therefrom, if this can be done without breach of the peace * * *."

Further, the installment notes contained a statement that "[a]ll present and future accounts shall stand as security for all present and future loans," and the financing statement filed with the Secretary of State described the collateral as "[a]ll contract and other rights, including the right to payments for services rendered to such accounts, to existing and after-acquired accounting clients and right to possession of clients' books and records and debtor's work product, as purchase money security interest for payment of debtor's obligations present and future."

Under this arrangement, a number of accounts were transferred to Shifo from June 1973 to January 1978. By 1979, however, Shifo had defaulted on the notes in the amount of $340,972.96. On October 24, 1979, plaintiff confessed judgment on the notes and, on October 29, it entered Shifo's offices and repossessed all of the account files and brought them to the offices of Russell Dusak, one of plaintiff's franchisees. A written agreement was then entered into on October 30 between plaintiff and Shifo, providing essentially that Shifo would be allowed to continue working on 30 to 40 "priority" accounts at Dusak's office; that Shifo would receive a salary of $3,600 per month from plaintiff in lieu of client billings; that Shifo would be allowed to remove the priority accounts from Dusak's office when he (Shifo) made certain timely payments to plaintiff on the notes; and that ultimately plaintiff would return to Shifo the difference between the value of his practice and any amount of the debt remaining unpaid.

Also on October 30, plaintiff filed a "complaint for injunction in aid of repossession of property," alleging that it had a legitimate interest and property right to be protected in its service name and reputation in the community, the uniformity and quality of services rendered to clients in its debtor-creditor relationship with defendants, and in the need for information regarding the status of the practice entrusted to defendants; and that unless defendants are enjoined from servicing or otherwise interfering with the accounts repossessed by plaintiff, it will suffer immediate and irreparable harm to these interests and property rights. The complaint requested the issuance of a preliminary injunction as well as final injunctive relief. On October 31, plaintiff's motion for a temporary restraining order on the basis of the above allegations was granted.

Defendants' answer included an affirmative defense, asserting that plaintiff's repossession of the accounts was not sanctioned by any court and was a wrongful interference with defendants' client relationships; that Shifo would not be able to maintain an accounting practice without the records taken by plaintiff; and that Shifo's client relationships may be irreparably harmed. Defendants requested that the relief prayed for by plaintiff be denied; that preliminary and permanent injunctions issue restraining plaintiff from interfering with defendants' client relationships; and that defendants be granted leave to file a counterclaim. In its reply, plaintiff denied all pertinent allegations. Neither a counterclaim nor an order granting defendants leave to file one appear in the record.

During the course of the hearing on plaintiff's request for a preliminary injunction, the trial court asked Shifo to prepare a list of clients not purchased or procured from plaintiff and also asked plaintiff to review the list and "make ready to return to the defendant those items that you do not challenge, that is those items which you acknowledge are his, those customers which you acknowledge were neither bought nor paid for or agreed to pay for from your company." In response thereto, defendants presented a list of 63 clients and orally moved that the trial court find "the status quo between these parties was that date prior to October 29, 1979, when the officers and certain employees and agents of Comprehensive went in and cleaned out Sam Shifo's accounting office," and that plaintiff be required to "turn over to Sam Shifo these 63 accounts, all of the files in connection with these 63 accounts." Defendants stated that a written motion would be filed the next day, and the trial court immediately entertained arguments thereon, during which it was informed of the existence of the agreement whereby Shifo was to work at Dusak's office on 30 of the 63 repossessed accounts until he made certain payments on the outstanding debt. The trial court then orally ordered these 30 files to "be physically turned over to the defendant until at least this preliminary hearing is concluded or further order of Court, whichever comes first." On November 28, a written order to that effect was entered which also required Shifo to post a $5,000 bond. On November 29, defendants filed their written motion, entitled "motion for turn over order and restoration of status quo." An answer was filed thereto by plaintiff, who then moved to vacate the order. This appeal followed the denial of the motion to vacate.

OPINION

Initially, we note that although defendants do not contest the appealability of the trial court's order in their brief, when the question was raised at the oral arguments here, defendants asserted that the order was merely a non-appealable "interim" order entered by the court in the course of the proceedings; whereas, plaintiff argued that the order was a preliminary injunction and thus appealable under Supreme Court Rule 307 (Ill. Rev. Stat. 1977, ch. 110A, par. 307), which provides in pertinent part:

"(a) * * * An appeal may be taken to the Appellate Court from an interlocutory order of court

(1) granting, modifying, refusing, dissolving, or refusing to dissolve or ...


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