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Int'l Harvester Cr. Corp. v. Helland





Appeal from the Circuit Court of Kendall County; the Hon. James W. Cadwell, Judge, presiding.


Rehearing denied February 18, 1987.

International Harvester Credit Corporation (IHCC) appeals from a judgment of the circuit court of Kendall County ordering IHCC to return certain replevied property to defendants, Benny H. Helland (Helland) and Alvin C. Helland, d/b/a Newark Truck & Tractor, and awarding damages to defendants in the amount of $142,230. On appeal, IHCC contends that certain findings of the trial court are against the manifest weight of the evidence and that the trial court made certain errors in its damage award. Because our review of the evidence does not establish that a security agreement existed between IHCC and Leaders Equipment Company, Inc. (Leaders), we affirm that portion of the judgment directing return of the property to Helland. We reverse the damage award in favor of Helland as predicated on an erroneous theory, and we remand this cause for a new trial on damages.

IHCC is the wholly owned financing subsidiary of International Harvester Company (IH), a manufacturer of farm equipment. IHCC works closely with IH to provide floor-plan and retail financing to IH dealers and their retail customers pursuant to standardized terms and agreements.

The partnership known as Newark Truck & Tractor in Newark, Illinois, has been engaged in buying and selling new and used farm equipment, trucks, and construction equipment for over 23 years. The Hellands presently have a Ford dealership and also conduct farm-equipment auctions every two or three months. Benny Holland operated an International Harvester dealership for more than 10 years, between October 1964 and February 1975, before his dealer agreement was terminated.

Leaders Equipment Company, Inc., not a party herein, operated an International Harvester dealership located in Dunlap, Iowa, until February 25, 1983. Under paragraph 11 of its dealer agreement with IH, Leaders were prohibited from selling any new IH equipment prior to paying IH the full purchase price, unless the sale was made in the ordinary course of retail trade for the reasonable retail value of the items sold and Leaders secured full settlement from the retail customers on or before the delivery date. Leaders' dealer agreement also gave IH an unqualified right to terminate in the event Leaders "sells or makes an attempted sale or other disposition of any goods purchased under the agreement, upon which any part of the purchase price is unpaid, other than in the ordinary course of retail trade."

In May and June of 1982, Leaders purchased from IH five new tractors and one new disc harrow. Wholesale notes payable to IH were executed to cover the purchase price of the tractors and the disc harrow. IH executed the notes by typing Leaders' name on the notes as payor.

Prior to February 3, 1983, Leaders and Helland made an oral agreement over the telephone for the sale of the above-described new tractors and disc from Leaders to Helland in exchange for cash and trade-ins. During the first week of February, Helland's employee drove to Dunlap, Iowa, picked up the new equipment, and signed an IH "Retail Order Form" regarding the transaction. Helland agreed to pay $98,000 cash and to trade in three used tractors having a wholesale value of $9,650 in exchange for the new IH equipment.

Helland testified at trial that he agreed also to include as a trade-in a Steiger Panther II tractor with a wholesale value of $24,500. Leaders thereafter personally picked up all of the trade-in equipment except for the Steiger tractor, which could not be transported together with any other tractor. The Steiger tractor remained on Helland's lot at the time of appellate oral argument.

On February 18, 1983, Helland conducted an auction of farm equipment at its business premises in Newark, Illinois. Four of the tractors sold by Leaders to Helland were purchased at the auction. Only three of the four tractors were removed from Helland's place of business prior to March 11, 1983, when IHCC filed a complaint for replevin. On that day, an IHCC representative arrived at Helland's place of business and identified two tractors there as those which Leaders purchased from IH in May-June 1982. The IH representative then secured an order for writ of replevin dated March 11, 1983, in which the court waived the statutory notice requirement. The order recited that IHCC had established a prima facie superior right to possess the two tractors and disc and had demonstrated that it would ultimately prevail upon the underlying claim to possession. IHCC took possession of the two tractors and the disc on March 11, 1983, and currently retains possession of this equipment. A bench trial was held on August 24 and 26, 1983, to determine the parties' respective rights to the property. By written opinion dated December 8, 1983, the trial court granted Helland's motion for a directed finding made pursuant to section 2-1110 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1110), concluding that the sale from Leaders to Helland was in the ordinary course of business. On January 3, 1984, the trial court entered a judgment order granting Helland's motion for judgment.

On February 2, 1984, IHCC filed a notice of appeal from the trial court's judgment, and defendants filed a cross-appeal from evidentiary rulings made by the trial court admitting certain documentary evidence. On February 7, 1985, this court filed its opinion dismissing the appeals because the record failed to show the entry of a final and appealable order and because none of the interlocutory appeal provisions was applicable. International Harvester Credit Corp. v. Helland (1985), 130 Ill. App.3d 836, 474 N.E.2d 882.

On remand, the trial court conducted a hearing on damages on June 12, 1985. Following presentation of the evidence, the trial court entered a written opinion dated August 14, 1985, in which it awarded Helland $142,230 as damages for the fair value of the use of the two tractors and the disc during the 26 months of wrongful detention. The trial court judgment order dated August 20, 1985, provided that "Defendants be awarded damages for the wrongful detention and loss of use of the use of the property taken by the Plaintiff from the Defendants from the time it was taken through the date of this order in the amount of $142,230.00." The trial court denied IHCC's motion for reconsideration and reversal on September 4, 1985, and IHCC filed a timely notice of appeal on September 17, 1985.

• 1 Plaintiff's first contention is that it held fully protected security interests in the equipment. IHCC looks to two different sources to establish its security interest in the equipment: the five wholesale notes covering the tractors and the disc and the IH-Leaders dealer agreement. Section 9-203(1)(a) of the Uniform Commercial Code states that a security interest will not be enforceable against a debtor or third parties unless the debtor has signed a security agreement which contains a description of the collateral. Ill. Rev. Stat. 1983, ch. 26, par. 9-203(1)(a).

To satisfy the signature requirement regarding the notes, IHCC contends the trial court erred in excluding from evidence the plaintiff's Exhibit 2 (PX-2) consisting of the minutes of a special meeting of the directors of Leaders held on July 23, 1981, which authorized certain employees of IH to execute notes payable to IH in the amount of goods shipped to Leaders by IH. The second document in PX-2, denoted a signatory authorization dated July 23, 1981, gave IH authority to sign ...

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