APPEAL from the Circuit Court of Cook County; the Hon. GEORGE
J. SCHALLER, Judge, presiding.
MR. JUSTICE LORENZ DELIVERED THE OPINION OF THE COURT:
After rebuilding a damaged automobile, plaintiffs brought an action to obtain payment from the proceeds of an insurance policy which covered the vehicle. The sole issue is whether, under the facts of this case, plaintiffs are entitled to this insurance money.
Plaintiffs are in the auto repair and rebuilding business. Joyce Williams sent her car to them in March of 1977, after it had been extensively damaged in a collision. The car was insured by Peerless Insurance Co. and, after obtaining approval from its claims adjuster, plaintiffs repaired the car.
A draft for $2,229.22, issued by Peerless as payment for the damage loss, was payable to Williams, Ford Motor Credit Co., and plaintiffs. Williams had purchased the car under an installment contract and Ford Credit was the seller's assignee. Ford Credit's security interest was recorded before plaintiffs obtained possession of the damaged vehicle.
The installment contract (1) required Buyer to obtain insurance on the vehicle; (2) assigned the insurance proceeds to Seller, and (3) provided that, "The proceeds from such insurance, by whomever obtained, shall be applied toward replacement of the property or payment of the indebtedness hereunder in the sole discretion of the seller."
When Williams endorsed and delivered the plaintiffs the insurance company draft, they released the rebuilt vehicle. Despite the fact that the insurance draft was payable to Williams, Ford Credit, and plaintiffs, jointly, plaintiffs do not claim that they notified Ford Credit before releasing the vehicle to Williams. Reciting the stipulated facts to the trial court, plaintiffs counsel said that,
"[O]ur records show that when we released the car to Joyce Williams back in 1977, May the 6th, 1977, our records show, and Mr. Miyata will testify that she promised to take the car over to Ford Credit to make sure she [sic] would sign the check, if there was any problem, and we had — we then, continued to call Ford Credit, practically continuously, to have them sign the check."
Ford Credit did not see the vehicle until it was recovered — completely wrecked — from a Chicago Police Department Auto Pound on November 17, 1977. Because Ford Credit refused to endorse the insurance draft, plaintiffs filed a "Complaint To Direct The Defendant To Sign A Check And For Damages For Defendant's Malicious Refusal To Do So." Count 2 of the amended verified complaint alleges that Peerless Insurance (1) authorized the repair work but failed to issue a draft payable only to Williams and plaintiffs; (2) failed to inform plaintiffs that Ford Credit should have been notified before the car was released to Williams; and (3) "induced plaintiffs, by issuance of the check, to release the repaired automobile and their lien thereon."
Despite these allegations, the insurance company was dismissed from the case, by agreed order, when it deposited with the court a draft for $2,229.22 payable to the clerk of the circuit court. The dismissal was with prejudice.
Relying on its prior perfected security interest, and its contractual claim to the proceeds, Ford Credit filed a counterclaim to obtain the insurance money. After considering the stipulated facts, the trial court dismissed the counterclaim and ordered the clerk to pay the proceeds to the plaintiffs.
Ford Credit argues that plaintiffs had no statutory lien, and that they waived their common-law artisan's possessory lien when they released the vehicle to Williams. Therefore, Ford Credit concludes that plaintiffs have no possible claim to either the vehicle or the insurance proceeds. In reply, plaintiffs state that the law of liens is irrelevant to their theory of the case:
"The argument of defendant-Appellant as to lien, concerns rights to possession of a vehicle. In this case, the question is not as to rights of [sic] a vehicle, but rights of a mechanic who deals with an insurance company, which directs that he make repairs and then issues its check to cover these repairs."
Accordingly, we decide only whether, under the facts of this case, plaintiffs have a right to be paid from insurance ...