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Marquette Nat'l Bk v. B.j. Dodge Fiat





Appeal from the Circuit Court of Kane County; the Hon. Paul W. Schnake, Judge, presiding.


Intervenor, Chrysler Credit Corporation (Chrysler Credit), appeals from the judgment of the trial court which awarded $45,202.97, held in two accounts on deposit with Aurora National Bank in the names of B.J. Dodge, Inc., and William W. Crafton, to Marquette National Bank (Marquette) in a garnishment action for sums due on a note executed by B.J. Dodge Fiat, Inc., and William W. Crafton and owned by Marquette. Chrysler Credit raises three issues on appeal: (1) whether the perfected security interest of Chrysler Credit is entitled to priority over the subsequent interest of Marquette, a judgment creditor by virtue of the garnishment action; (2) whether Marquette's judgment against "B.J. Dodge Fiat, Inc." allows it to obtain a turnover for an account held in the name of "B.J. Dodge, Inc."; and (3) whether the judgment of the Federal district court renders the issue of Chrysler Credit's interest in the subject account res judicata.

The events leading to the present action began on October 22, 1979, when William W. Crafton, on behalf of B.J. Dodge Fiat, Inc., executed and delivered a note, due on February 22, 1980, to Marquette National Bank for $84,000. On November 28, 1979, Chrysler Credit received from B.J. Dodge a corporation signature card, corporate resolution, corporate form signatory authorization, corporate acknowledgement, dealer payment authorization, vehicle financing and repurchase agreement, and financing statement, thus establishing a business relationship whereby Chrysler Credit would finance the purchase of motor vehicles by B.J. Dodge. The financing statement, filed with the Illinois Secretary of State on November 30, 1979, covered:

"1) New and used Motor Vehicles and Chattel Paper, whether now owned or hereafter acquired. 2) Accounts, Contract Rights, Documents, Instruments, General Intangibles, Consumer Goods, Equipment, Fixtures, Inventory of Automobile Parts and Accessories, Leasehold Improvements, whether now owned or hereafter acquired. 3) All proceeds of the property covered by the statement, including, but not limited to Money, Instruments, Accounts, General Intangibles, Chattel Paper, and Motor Vehicles received in trade."

On May 14, 1980, Chrysler Credit filed a complaint against B.J. Dodge in Federal district court seeking a temporary restraining order and preliminary injunction to prohibit B.J. Dodge from disposing of property listed on an attached schedule which consisted of a liquidated dealer inventory and items covered by the financing statement; a writ of replevin; and judgment against B.J. Dodge for possession of the property, value of property not delivered, and damages for detention. A temporary restraining order (TRO) was issued by the Federal district court on the same day.

On May 19, 1980, in the circuit court of Kane County, Marquette National Bank filed a complaint and confession on judgment note for $89,200 consisting of principal plus interest and fees due on the note executed by B.J. Dodge but not paid as promised on February 22, 1980, and a garnishment summons was served upon Aurora National Bank as garnishee. At the time the garnishment summons was served, Aurora National Bank had in its possession $44,882.95 in which B.J. Dodge had an interest, and $320.02 in which William W. Crafton had an interest. Five checks had been drawn on the B.J. Dodge account, two to Marquette (for $8,035 and $11,000), two to Chrysler Credit (for $5,076.99 and $6,438.87), and one to B.J. Dodge (for $10,000), the funds for which Aurora retained possession.

On May 20, 1980, the Federal district court entered a preliminary injunction prohibiting B.J. Dodge from transferring, selling, moving, or in any way disposing of any of the vehicles listed on the liquidated dealer inventory and any items covered by the financing statement and an order of replevin for those same vehicles and items.

On June 6, 1980, the Federal district court entered judgment in favor of Chrysler Credit, stating, inter alia, that Chrysler Credit had a fully perfected first lien against all of the motor vehicles, automotive parts, equipment, accessories, supplies, machinery, and equipment, furniture and fixtures replevied and that no intervening creditors had appeared in the cause or asserted a claim in any way as to the validity of the security interest and first lien asserted by Chrysler Credit, and ordering that the sole and exclusive possession of the property replevied was in Chrysler Credit and that damages were assessed in the amount of $526,906 plus interest for a total of 65 vehicles, diminution of present value of replevied motor vehicles, and expenses.

On July 10, 1980, Marquette moved for judgment in the amount of $45,202.97 against Aurora National Bank in the circuit court, and notice of the motion was sent to Chrysler Corporation. Chrysler Corporation responded by stating that after contacting Marquette's counsel to determine Chrysler's involvement in the proceedings, it believed it was entitled to the two checks drawn on B.J. Dodge's account and made payable to Chrysler Credit and requested notice of any hearing to determine the disbursement of B.J. Dodge's funds. On September 9, 1980, the trial court ordered Aurora National Bank to pay Marquette the balance of B.J. Dodge's account, minus the funds covered by the five checks, and the balance of William W. Crafton's account, a total of $4,652.11, and set hearing as to ownership of the remainder of the funds for a later time.

On October 29, 1981, Marquette sought a temporary restraining order to restrain Aurora from disbursing funds to Chrysler Credit, stating, inter alia, that it obtained a judgment for $89,200 against B.J. Dodge Fiat and William W. Crafton and a garnishment summons was served on Aurora; that Chrysler Credit obtained leave to intervene claiming priority as to funds held by Aurora; that without notice to Marquette, Chrysler Credit obtained an order from the Federal district court requiring Aurora to turn over the disputed funds; and that the district court subsequently vacated its order in part and a further proceeding to vacate the remainder of the order was pending. The record on appeal does not contain a copy of Chrysler Credit's motion to intervene or copies of these particular orders of the Federal district court. A TRO was entered that day but expired without the issuance of a preliminary injunction. At some point prior to November 24, 1981, the funds represented by the two checks made payable to Marquette, totaling $19,035, were apparently paid by Aurora to Marquette.

The parties agreed to present the issues to the trial court on the basis of briefs, affidavits, and arguments of counsel. Marquette submitted the affidavit of its attorney and a memorandum of law, in which it primarily argued that Chrysler Credit had to show that it had ownership rights in the disputed property and failed to show the source of the funds held by Aurora.

In its memorandum of law, Chrysler Credit argued that the rights of Marquette were not entitled to priority over Chrysler Credit's secured interest because the financing statement was filed before the garnishment action; that in his affidavit, Daniel Koester, the Arlington Heights branch manager of Chrysler Credit, stated the bank account "is part of the collateral security for the indebtedness due Chrysler Credit" and his affidavit was not controverted by any affidavit filed by Marquette; that Marquette's judgment was against "B.J. Dodge Fiat," which was different from "B.J. Dodge" and thus could not get a turnover of an account in the name of "B.J. Dodge"; and that the trial court should defer to the Federal district court.

In a letter to the parties, the trial court found in favor of Marquette, relying on C.O. Funk & Sons, Inc. v. Sullivan Equipment, Inc. (1982), 89 Ill.2d 27, 431 N.E.2d 370, and stating that the controlling factor was Chrysler Credit's inability to identify proceeds. The trial judge refused to defer to the Federal district court, believing that would be avoiding a decision that should be made in the State circuit court, and did not consider the variance in corporate designation to be of controlling significance. In a subsequent written order, the trial court awarded Marquette $45,202.97.

• 1 Chrysler Credit first argues that Marquette's lien was not entitled to priority over Chrysler Credit's perfected security interest. Chrysler Credit perfected its security interest by filing the financing statement (see Ill. Rev. Stat. 1979, ch. 26, par. 9-303, and other paragraphs cited therein) on November 30, 1979. Marquette became a lien creditor on May 19, 1980, since, under Illinois law, a creditor becomes a lien creditor within the meaning of section 9-301 of the Uniform Commercial Code (Ill. Rev. Stat. 1979, ch. 26, par. 9-301) when a writ of execution is placed in the hands ...

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