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Douglass v. Wones

OPINION FILED DECEMBER 12, 1983.

ROBERT G. DOUGLASS, JR., ET AL., PLAINTIFFS-APPELLANTS,

v.

EDWARD WONES ET AL., DEFENDANTS-APPELLEES — (MICHAEL S. DOUGLAS ET AL., DEFENDANTS).



Appeal from the Circuit Court of Lake County; the Hon. Jack Hoogasian, Judge, presiding.

JUSTICE HOPF DELIVERED THE OPINION OF THE COURT:

Plaintiffs Robert Douglass, Jr. (Douglass), and Robert Douglass Development Company (Douglass Development) appeal from an order of the circuit court of Lake County dismissing with prejudice certain counts of their amended complaint against defendants Edward and Gwendolyn Wones (Woneses), Glenview Guaranty Savings and Loan Association (Glenview), First National Bank of Highland Park (First National), and the Citizens National Bank (Citizens) for failing to state a cause of action.

This action arose from a bad-check scheme which was perpetrated on plaintiffs by defendant Michael S. Douglas, who is unrelated to plaintiff Douglass and who is not a party to this appeal. The following facts were alleged in both the original and amended complaints as facts in common to all the dismissed counts.

On September 18, 1980, Michael Douglas requested and received from plaintiffs three checks drawn by Douglass on the in-State account of Douglass Development and payable to the following payees in the following amounts: R.C.G. Construction $3,100, Michael S. Douglas $1,000, and J.C.T. Consultants $30,000. In return Douglas gave plaintiff Douglass an out-of-State check totaling $34,100 made payable to Douglass Development, which plaintiff Douglass deposited. These checks are not involved in the instant appeal.

On September 23, 1980, a similar transaction occurred. On that date defendant Douglas again requested and received from plaintiff Douglass the following three checks drawn on Douglass Development's in-State account: $5,000 to Glenview, $6,600 to First National and $54,000 to Citizens. In exchange, Michael Douglas gave Douglass another out-of-State check for $65,600 made payable to Douglass Development, which Douglass deposited.

On each of these two occasions, defendant Douglas represented to plaintiffs that his two checks payable to Douglass Development represented good funds. Plaintiffs issued their checks in reliance upon Douglas' representations. All of the checks drawn by Douglass were paid to the payees named thereon. Defendant Douglas' two checks payable to Douglass Development were returned for insufficient funds.

In 1981 Michael S. Douglas pleaded guilty to criminal charges of theft by deception and deceptive practices based upon the foregoing facts. Plaintiffs' original complaint was based upon various theories of liability. As against the Woneses, the complaint proceeded on theories of conversion, conspiracy to defraud, and unjust enrichment. As against the three payee bank defendants, it proceeded on theories of conversion, rescission of negotiation and unjust enrichment. As against all of these defendants, plaintiffs alleged, in addition to the common facts, that "on information and belief * * * [each defendant] knew or had reason to know that Douglass had been fraudulently induced by defendant Michael S. Douglas * * *" to draw the checks. The original complaint contained no other facts in support of the allegation of knowledge.

Glenview responded to the original complaint by filing a demand for a bill of particulars, requesting that plaintiffs set forth the facts communicated to Glenview, along with the pertinent dates, from which it knew or had reason to know of the alleged fraudulent inducement. The request was granted by the trial court. However, rather than filing a bill of particulars, plaintiffs filed an amended complaint, realleging the facts in common and also alleging that Glenview, First National, and Citizens had no business or other relationship with plaintiff Douglass and that, "[a]ccordingly, [each defendant] knew or had reason to know that it had no right or authority to obtain payment * * *." The amended complaint also alleged that each of the payee defendants had a duty to inquire whether Douglass had been fraudulently induced to draw the check. In addition, plaintiffs alleged that Citizens and the Woneses knew of the fraud because the check was delivered to them in payment of another bad check of Michael Douglas which had previously been guaranteed by the Woneses and cashed by Citizens.

Defendants involved in this appeal each filed motions to dismiss alleging that the amended complaint consisted of conclusions and not statements of fact as required by section 33 of the Civil Practice Act (Ill. Rev. Stat. 1981, ch. 110, par. 33, now codified at Ill. Rev. Stat. 1981, ch. 110, par. 2-603). Additionally, Glenview's motion to dismiss, as well as a motion for summary judgment filed by First National, alleged that Glenview and First National were holders in due course which took the checks free of any defenses against them. The affidavits of two bank officers were attached to First National's motion for summary judgment. In the affidavits the officers alleged that they were aware that Michael Douglas had overdrawn an account, but they had no knowledge of the circumstances surrounding the issuance of the replacement check. The motions to dismiss were all granted. First National's motion for summary judgment was not ruled upon. No motion for leave to amend was filed by plaintiffs.

We first consider whether the trial court erred in dismissing the amended complaint against the Woneses for failure to state causes of action in conversion, conspiracy to defraud, and unjust enrichment. The Woneses maintain that because the complaint was based upon information and belief, it failed to place in issue the ultimate facts required to sustain the causes of action and placed in issue instead plaintiffs' beliefs regarding the Wones' knowledge of the fraudulent inducement. They also argue that the complaint contained a series of legal conclusions which are insufficient to state a cause of action against them.

In determining the sufficiency of the complaint, only those facts well pleaded, and not conclusions, are taken as true. (Mlade v. Finley (1983), 112 Ill. App.3d 914, 918, 445 N.E.2d 1240; Knox College v. Celotex Corp. (1981), 88 Ill.2d 407, 426-27, 430 N.E.2d 976.) Thus, in considering a motion to dismiss, the court must delete the conclusions of law or fact which are unsupported by allegations of specific facts on which the conclusions rest. (Knox.) If, after these deletions, there are not sufficient allegations of fact which state a cause of action against the defendant, the motion must be granted regardless of how many conclusions the count may contain and regardless of whether they inform the defendant in a general way of the nature of the claim against him. (88 Ill.2d 407, 426, 430 N.E.2d 976.) A complaint should not be dismissed unless it clearly appears that no set of facts can be proved which will justify recovery. (City of North Chicago v. North Chicago News, Inc. (1982), 106 Ill. App.3d 587, 435 N.E.2d 887.) However, when the trial court strikes a complaint and the plaintiff does not ask for leave to amend, the lawsuit stands or falls upon the contents of the stricken pleading. Mlade; Krachock v. Department of Revenue (1949), 403 Ill. 148, 153, 85 N.E.2d 682.

Count I of plaintiffs' amended complaint against the Woneses proceeded upon the theory of conversion and alleged, in addition to the common facts, that Michael Douglas delivered to the Woneses the check made payable to Citizens; that the Woneses delivered the check to Citizens with instructions to credit the proceeds to an indebtedness owed to Citizens by the Woneses; that the Wones' indebtedness arose out of their guarantee of payment of an earlier check of Douglas' which was cashed by Citizens but was returned unpaid because of insufficient funds; that "on information and belief," Douglas obtained the Wones' guarantee by means of untrue and fraudulent misrepresentations that the earlier check was covered by sufficient funds; that the Woneses became aware of Douglas' misrepresentations when the earlier check was returned unpaid; that "upon information and belief," the Woneses knew or had reason to know that plaintiff Douglass had been fraudulently induced by Douglas to draw the check and therefore that their instructions to Citizens were wrongful and unauthorized; that, alternatively, they had a duty to inquire whether Douglass had been fraudulently induced; that the Woneses converted the check to their own use; that they refused to return the proceeds despite plaintiffs' demand; and, that plaintiffs were damaged in the amount of $54,000.

• 1 To state a cause of action in conversion, a plaintiff must allege: an unauthorized and wrongful assumption of control; dominion or ownership by a person over the personalty of another; his right in the property; his right to the immediate possession of the property, absolute and unconditional; and, a demand for possession of the property. (Farns Associates, Inc. v. Sternback (1979), 77 Ill. App.3d 249, 252, 395 N.E.2d 1103.) Relief in an action for conversion may be had without establishing malice, culpability or conscious wrongdoing. (Landfield Finance Co. v. Feinerman (1972), 3 Ill. App.3d 487, 490, 279 N.E.2d 30.) Thus, knowledge is not an element of the cause of action. (3 Ill. App.3d 487, 490, 279 N.E.2d 30.) It is generally held that one cannot purchase and acquire a good title to stolen property, and where personal property is wrongfully taken from the owner, the owner has the right to retake possession whenever and wherever the property may be found. (Hobson's Truck Sales, Inc. v. Carroll Trucking, Inc. (1971), 2 Ill. App.3d 978, 276 N.E.2d 89; Harris v. Lipman (1918), 212 Ill. App. 499; Baldwin v. Smith (1908), 143 Ill. App. 56.) An exception to this general rule exists where the property taken is a negotiable instrument. Under these circumstances, if the instrument is taken by a holder in due course of business, then the holder takes the instrument free of all claims against it. (Ill. Rev. Stat. 1979, ch. 26, par. 3-305(1).) The language "all claims" under the Uniform Commercial Code includes not only claims of legal title, but also all liens, equities or claims of any other kind. (Ill. Ann. Stat., ch. 26, par. 3-305, Uniform Commercial Code Comment, at 183 (Smith-Hurd 1963).) Unless one has the rights of a holder in due course he takes the instrument subject to all valid claims and defenses to it on the part of any party. Ill. Rev. Stat. 1979, ch. 26, par. 3-306(a).

• 2 In light of the foregoing authorities, we believe plaintiffs' amended complaint adequately states a cause of action in conversion against the Woneses. The complaint alleges an unauthorized and wrongful assumption of control by the Woneses which was demonstrated by their taking of a check from defendant Douglas which was fraudulently obtained. The Wones' dominion over the check and its proceeds was pleaded and supported by the factual allegation that the Woneses directed Citizens to credit the proceeds to the Wones' indebtedness to Citizens. The pleadings also contained the allegation that plaintiff Douglass had an immediate right to the property based upon the fact that the property was fraudulently obtained from him. The perpetrator of the fraud was convicted of deceptive practices and theft by deception on the basis of his fraudulent inducement. Further, the drawer is the owner of a check until it is received by the payee, so that as between plaintiff and the Woneses, plaintiff was entitled to possession. (First National Bank v. ...


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