Appeal from the Circuit Court of Cook County; the Hon. Walter
Kowalski, Judge, presiding.
JUSTICE MCGILLICUDDY DELIVERED THE OPINION OF THE COURT:
Rehearing denied November 14, 1986.
La Grange State Bank (La Grange) brought a third-party complaint in the circuit court of Cook County against Leo Parent, Jr. (Parent), Allan Levine (Levine), Philip R. Stringer (Stringer) and Linda L. Stringer for payment on a promissory note executed in connection with a letter of credit security agreement. The third-party defendants had executed the promissory note, an application for letter of credit, an individual guaranty and a security agreement in order to secure credit for Stringer Construction Company (Stringer Construction). The trial court denied La Grange's motion for summary judgment against Parent and Levine and granted Parent's and Levine's cross-motions for summary judgment against La Grange. La Grange appeals. The issue presented for review is whether the trial court erred in entering summary judgment in favor of Parent and Levine.
On August 3, 1977, Stringer Construction applied to La Grange for a $150,000 irrevocable letter of credit to be issued to American Insurance Company (American). The letter of credit was required by American as a prerequisite to the award of a construction contract to Stringer Construction. The application provided: "[S]aid Irrevocable Letter of Credit is drawn under and subject to all the terms of said Commercial Letter of Credit and Security Agreement." The application was signed by Stringer Construction's attorney, Levine, its president, Philip Stringer, and Leon Parent. *fn1
Parent, Levine and Stringer signed three additional documents on August 3, 1977. They executed a promissory note in the amount of $150,000 payable on demand to La Grange. They pledged an individual guaranty. Linda L. Stringer also signed the promissory note and individual guaranty. Finally, they executed a security agreement setting forth the terms and conditions of the letter of credit. The security agreement was a standard form agreement provided by La Grange. It stated, in pertinent part, as follows:
"16. A change in the original time limit or in any other terms originally specified in the Credit may, at your [La Grange's] sole option, upon the application of any one of us [Levine, Parent or Stringer], be granted by you or any of your correspondents, whereupon all terms hereof shall continue in full force and effect in accordance with such change without releasing any party to the Credit or hereto or any party upon acceptance made hereunder.
19. We represent that this agreement is without limitation as to duration or amount and you may continue to act on the faith thereof until such time as you shall receive written notice of its withdrawal, which notice or any refusal on your part to grant further credits, extensions or indulgences of any kind, will not in anywise affect any Credits theretofore made or obligations or liabilities theretofore incurred, whether then due and payable or thereafter to become due and payable."
La Grange issued the letter of credit on August 3, 1977. The typewritten letter, entitled "Irrevocable Letter of Credit #688," was sent to American by Kenneth A. Armour, vice-president of La Grange. Its expiration date was August 3, 1978. The letter authorized American to draw on La Grange up to $150,000 upon presentation of a draft and a signed statement that the amount was required to cover liability, loss, cost or expense caused by Stringer's breach of a certain contract dated August 2, 1977, between Stringer Construction and American. It further authorized American to request an extension of the expiration date for "an additional period of up to one (1) year." Finally, the letter stated that the credit would be subject to the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication Number 290 (1974).
The letter of credit was extended from August 3, 1978, to August 3, 1979, at Stringer Construction's request. On June 20, 1979, La Grange informed Stringer that the National Surety Corporation had requested an additional one-year extension of the letter of credit to August 3, 1980. Stringer responded with a request that La Grange extend the letter of credit for one year. La Grange agreed to do so on June 30, 1979, extending the letter of credit from August 3, 1979, to August 3, 1980.
On April 11, 1980, American demanded payment from La Grange by presenting a letter, affidavit and sight draft in the amount of $150,000. Levine directed La Grange not to honor the sight draft. On April 17, 1980, Stringer brought an action in the circuit court of Cook County to enjoin La Grange from paying out on the letter of credit to American. The trial court issued a preliminary injunction enjoining such action on the part of La Grange. In the interlocutory appeal which followed, this court reversed the trial court's order. See Stringer Construction Co. v. American Insurance Co. (1981), 102 Ill. App.3d 919, 430 N.E.2d 1.
La Grange sent letters to the Stringers and Levine on April 17, 1980, demanding payment on the promissory note as well as immediate conveyance of collateral to secure payment. The Stringers and Levine refused the demand.
On July 24, 1980, La Grange filed this third-party action against the Stringers and Levine. The complaint sought payment of $150,000 or, in the alternative, conveyance of collateral sufficient to protect La Grange, and damages, attorney fees and costs.
On March 5, 1981, La Grange demanded payment on the promissory note from Parent. On May 6, 1981, La Grange filed an amended third-party complaint which joined Parent as a third-party defendant and alleged that he had applied for the letter of credit, signed the security agreement, signed an individual guaranty, and refused demands for payment and collateral.
On July 9, 1981, La Grange filed a motion for summary judgment against the Stringers and Levine. On November 25, 1981, La Grange filed a motion for summary judgment against Parent which incorporated the prior motion ...