Appeal from the Circuit Court of Cook County; the Hon. William
R. Quinlan, Judge, presiding.
JUSTICE LORENZ DELIVERED THE OPINION OF THE COURT:
Plaintiff, Arco Petroleum Products Company (Arco), filed suit for breach of contract against defendants, R & D Automotive, Inc. (R & D), a corporation, and its president E.L. Watts (Watts), alleging, inter alia, that plaintiff was holding a $50,000 certificate of deposit pledged by Watts as collateral for defendants' indebtedness under a security agreement between the parties. Watts filed a counterclaim seeking the return of the certificate or judgment for the value thereof. Subsequently, judgment by agreement was entered against defendant (R & D) and both parties moved for summary judgment on the issue of entitlement to the certificate of deposit. The trial court entered summary judgment for plaintiff, and Watts appealed.
The issues on appeal are: (1) whether the trial court properly granted summary judgment in favor of plaintiff; and (2) whether genuine issues of material fact remain as to either the formation or duration of the contract of pledge between the parties.
The following facts are pertinent to our decision.
In May or June of 1980, plaintiff agreed to supply defendants with AC Delco automotive parts for wholesale distribution in accordance with a TBA Reseller Agreement. Pursuant to the terms of a financing statement and security agreement between the parties, plaintiff extended a $75,000 line of credit to defendants and acquired a security interest in defendants' inventory, accounts receivable, and the proceeds thereof.
By October of 1980, however, plaintiff had extended approximately $125,000 of credit to R & D. Plaintiff thereupon advised Watts that additional security in the form of a letter of credit or a pledge would be required before credit in excess of $75,000 would be extended to him.
After discussing plaintiff's request for additional security with R & D's major customer, Watts and the customer agreed to pledge $50,000 and $100,000 certificates of deposits to plaintiff respectively.
Subsequently, plaintiff sent a blank pledge of certificate and power of attorney to Watts which provided, inter alia, that the $50,000 certificate of deposit was to be delivered as collateral security for the full performance of the TBA Reseller Agreement and "for the payment of any amount for which R & D Automotive, Inc. may be indebted to [Arco] * * *." The power of attorney assigned Watts' certificate of deposit to Arco. Both instruments were executed by Watts on October 11, 1980, and were returned to plaintiff with a typewritten memorandum dated October 6, 1980, which provided in pertinent part: "Per our phone conversation I am clarifying our agreement. We are giving you a $100,000 C.D. as a guarantee for extending credit to R & D Automotive, Inc. in excess of $125,000. We hereby authorize the sale of said C.D. subsequent to our receiving a 15 day written notice at our place of business * * * [of R & D] being delinquent in payments to [Arco] in excess of $125,000 under normal terms per the TBA Reseller agreement * * *. Our liability shall be restricted to the amount owed and past due that is in excess of $125,000.00. We have absolutely no liability on the 1st $125,000.00 of indebtedness of [R & D] to [Arco]. This agreement shall be for a term of six months from October 6th, 1980 to April 5th, 1981."
Watts had signed this memorandum and left blank a space for plaintiff's signature.
Upon receipt of these documents plaintiff informed Watts that the pledge as submitted was acceptable although the six-month-term limitation imposed by Watts was "under review."
During October 1980 through April 5, 1981, plaintiff shipped additional goods to defendants on credit in excess of $125,000. Throughout this time, Watts requested that plaintiff return his pledge and certificate. Plaintiff offered to return the certificate in exchange for a substitute form of security from Watts, e.g., a letter of credit, in an amount equal to the certificate, but Watts declined to do so.
On April 24, 1981, Watts met with plaintiff's Field Credit Manager, R.F. Boeke, and requested that plaintiff cancel his pledge and return the certificate to him. Although Boeke offered to return the certificate upon condition that Watts provide a substitute form of security, Watts again told him to retain it as security for the credit previously extended to R & D.
Defendants subsequently defaulted in their obligations under the security agreement and, on June 11, 1981, plaintiff filed a complaint in replevin. This was later nonsuited. Plaintiff then brought suit for breach of contract against defendants, and Watts filed a counterclaim seeking the return of his certificate or judgment for the value thereof. By agreement, judgment was entered against defendant in the amount of $194,731.86, and both parties moved for summary judgment on the issue of entitlement to the certificate.
Following a hearing, the trial court denied Watts' motion and granted plaintiff's motion for summary ...