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Interstate Steel Co. v. Ramm Mfg.

OPINION FILED AUGUST 3, 1982.

INTERSTATE STEEL COMPANY, PLAINTIFF-APPELLANT,

v.

RAMM MANUFACTURING CORPORATION, DEFENDANT. — (MANCHESTER BANK OF ST. LOUIS ET AL., CLAIMANTS-APPELLEES.) — INTERSTATE STEEL COMPANY, PLAINTIFF,

v.

RAMM MANUFACTURING CORPORATION, DEFENDANT. — (CITIZENS NATIONAL BANK OF PARIS, CLAIMANT-APPELLEE; MANCHESTER BANK OF ST. LOUIS, A/K/A COMMERCE MANCHESTER BANK, CLAIMANT-APPELLANT.)



Appeal from the Circuit Court of Edgar County; the Hon. Carl A. Lund, Judge, presiding.

PRESIDING JUSTICE GREEN DELIVERED THE OPINION OF THE COURT:

These consolidated appeals are taken by plaintiff, Interstate Steel Company, an Illinois corporation (Interstate), and claimant, Manchester Bank of St. Louis (Manchester), from orders of the circuit court of Edgar County, the final one of which was entered December 28, 1981. The case arises from proceedings ancillary to a judgment obtained by plaintiff against defendant, Ramm Manufacturing Corporation (Ramm), on September 15, 1976, in the sum of $984,966.

On April 20, 1979, execution was ordered to issue against certain sums held as the proceeds from the sale of various personal assets of Ramm by claimant, Citizens National Bank of Paris, Illinois (Citizens). On the same day Citizens filed a claim alleging it was entitled to the proceeds. Subsequently, Manchester also filed a claim. Various hearings were held trying the rights of the claimants to the property. The circuit court ultimately ruled that Citizens was entitled to $11,556.74 and Manchester to $20,795.30. Interstate was granted no recovery.

Most of the significant facts are not disputed. Ramm was a corporation engaged in the manufacture and sale of grain bins in Paris, Illinois. Some of the components of the bins were manufactured by Ramm using equipment located at its plant near Paris and other components and accessories were purchased by Ramm. The grain bin components and accessories were sold by Ramm as a disassembled package, to be assembled by others at the location selected by the customer.

On June 10, 1974, Ramm and Manchester entered into a security agreement granting Manchester a security interest in certain property. Subsequently, on September 11, 1974, Ramm entered into a security agreement with Citizens granting Citizens a security interest. Both security interests were perfected within a few days of execution by the filing of a financing statement. By early 1976, Ramm had defaulted on the underlying obligations of both security interest, owing Manchester $649,289.21 and Citizens $717,000. Manchester and Citizens agreed that chattels held by Citizens as collateral be sold with the proceeds standing in lieu of the chattels. The trials of right of property concerned these proceeds.

Clearly, whatever security interest Manchester had perfected had first priority because it had filed its financing statement first. Citizens was entitled only to the security interest it had perfected in proceeds from the sale of items not covered by Manchester's interest. Interstate, whose judgment lien was latest in perfection, was only entitled to proceeds from the sale of items not covered by either of the foregoing interests. The trial court awarded Manchester the proceeds from the sale of items of Ramm's steel inventory and awarded the rest of the proceeds to Citizens.

Interstate maintains on appeal that the court erred in awarding to Citizens the proceeds from certain items of inventory and equipment because these items were not properly described in Citizens' financing agreement with Ramm. Interstate also asserts error in the trial court's determination Manchester was entitled to proceeds from the sale of some sheet steel. Manchester argues its claim to the proceeds of items of "merchandise" was perfected prior to Citizens' claim thereto. Manchester also sets forth its entitlement to $3,507.34, which was obtained by the sale of products of Ramm's raw steel.

Citizens' security agreement states in part:

"The undersigned, for value received, hereby mortgages to THE CITIZENS NATIONAL BANK OF PARIS, Paris, Illinois (hereinafter called the `bank'), and hereby grants to the Bank a security interest in, the following property and all accessories, parts and equipment now or hereafter affixed thereto or used in connection therewith (hereinafter collectively called the `Goods')."

In the blank section following the above language was typed the following language:

"All merchandise, Furniture and Fixtures now or hereafter obtained and located at R.R. #6, Paris, Illinois 61944."

Interstate contends that under the language of the above agreement, the only equipment covered are those items used in connection with and subservient to merchandise, furniture, and fixtures, and not items of equipment used generally in the production of merchandise. The basis for Interstate's contention is that the word "equipment" is used in the same phrase with "accessories" and "parts" and is joined to those words with the word "and." Interstate claims "equipment" must be given a meaning restrictd by the words preceding it. Interstate's argument is similar to the rule of ejusdem generis which provides that often when general words follow particular words in a document, the general words are construed to include only things of the same kind as the particular words. (Bullman v. City of Chicago (1937), 367 Ill. 217, 10 N.E.2d 961.) However, the rule is not applicable when a contrary interest is evident. See Farley v. Marion Power Shovel Co. (1975), 60 Ill.2d 432, 328 N.E.2d 318.

• 1 Here, all the equiipment, whose proceeds are in dispute, was used in the production of merchandise and, in that way, was connected with the merchandise. The equipment had no connection with the merchandise except for being used to produce it. It is hard to conceive what would have been intended by the word "equipment" if its meaning was to be restricted to the type of objects that are similar to accessories or parts. We conclude that equipment used to produce the merchandise was sufficiently described in the security agreement (Ill. Rev. Stat. 1979, ch. 26, par. 9-110), and the trial court correctly so ruled. Accordingly, we need neither decide whether the equipment in question would, as a matter of law, be fixtures within the meaning of the agreement nor remand for a trial court finding on that question.

Interstate also contends Ramm's inventory was not encompassed by the term "merchandise" in Citizens' security agreement, claiming "merchandise" refers only to finished products held for resale and not parts sold as components of bins. However, according to the evidence, the items in dispute were to be sold as parts for unassembled bins to be put ...


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