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06/26/87 David G. Nelson Et Al., v. Fire Insurance Exchange

June 26, 1987

DAVID G. NELSON ET AL., PLAINTIFFS-APPELLANTS

v.

FIRE INSURANCE EXCHANGE, ERRONEOUSLY SUED AS THE FARMERS INSURANCE GROUP OF COMPANIES, DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

510 N.E.2d 137, 156 Ill. App. 3d 1017, 109 Ill. Dec. 516 1987.IL.900

Appeal from the Circuit Court of Kane County; the Hon. Richard Wiler, and the Hon. Michael O'Brien, Judges, presiding.

APPELLATE Judges:

JUSTICE HOPF delivered the opinion of the court. WOODWARD and NASH, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HOPF

Plaintiffs, David G. and Terri M. Nelson, appeal from the orders granting summary judgment in favor of defendant, Fire Insurance Exchange, erroneously sued as The Farmers Insurance Group of Companies, and denying plaintiffs' motion to reconsider. Plaintiffs argue that the trial court erred in finding an accord and satisfaction because section 1-207 of the Uniform Commercial Code (Ill. Rev. Stat. 1985, ch. 26, par. 1-207) was applicable, and that the trial court erred in granting summary judgment because there was a genuine issue of material fact.

Plaintiffs brought a complaint against defendant, alleging that defendant only paid a portion of the loss claimed by plaintiffs under a homeowner's insurance policy. Defendant raised an affirmative defense of accord and satisfaction in that plaintiffs cashed a $6,652.50 check which included terms releasing the defendant from liability beyond the amount of the check. The copy of the check attached to the complaint included in part the following printed language: "Endorsement of this draft constitutes a release or covenant not to sue of all claims, known or unknown, the undersigned has or may have against the payor . . .." Signatures of plaintiffs appeared, but the printed language was covered with a large loop, in an apparent attempt to cross out the language. Plaintiffs' answer to the affirmative defense denied that the check was a settlement of their claim against defendant.

Defendant filed a motion for summary judgment, arguing that an accord and satisfaction of plaintiffs' claim had been made as plaintiffs had endorsed the check. Attached to the motion was a copy of the letter which accompanied the check, and it read in part that "[we] enclose our draft for this amount less your deductible for full settlement of your claim." Also supporting the motion were excerpts from the depositions of plaintiffs, who admitted that they had read the release language and that they had cashed the check.

Plaintiffs filed affidavits which stated that they crossed out the release language of the check after consulting with their attorney, and then they cashed the check. Plaintiffs argued that material alteration of a negotiable instrument permits a nonassenting party to avoid legal liability for the instrument and that payment of the altered note constitutes ratification of the alteration.

The trial court granted defendant's motion for summary judgment, and plaintiffs filed a motion to reconsider. Plaintiffs argued that no accord and satisfaction had been reached and that section 1-207 of the Uniform Commercial Code (Ill. Rev. Stat. 1985, ch. 26, par. 1-207), which relates to explicit reservation of rights, allowed plaintiffs to accept the check as partial payment of their claim against defendant. Defendant filed a motion to strike plaintiffs' motion to reconsider, arguing in part that plaintiffs had had an opportunity to raise a Uniform Commercial Code argument prior to the entry of summary judgment. Plaintiffs' motion to reconsider and defendant's motion to strike were denied.

Defendant notes that plaintiffs did not raise the Uniform Commercial Code issue before they filed their motion to reconsider, hinting that the issue was waived. However, the court apparently considered the Uniform Commercial Code issue, as it denied defendant's motion to strike that portion of the motion to reconsider which raised the new issue. In any event, new issues may be raised for the first time in a section 2-1203 motion. Ill. Rev. Stat. 1985, ch. 110, par. 2-1203; Rahill v. Urbanski (1984), 123 Ill. App. 3d 769, 776, 463 N.E.2d 765, 770.

Plaintiffs argue on appeal that the trial court erred in failing to apply section 1-207 of the Uniform Commercial Code (Ill. Rev. Stat. 1985, ch. 26, par. 1-207) and, in the alternative, that the trial court erred in granting the motion for summary judgment because there was a factual issue as to whether the parties understood that the check was an accord and satisfaction.

We first address the second issue, because if there is no accord and satisfaction, then the issue of the applicability of the Uniform Commercial Code in modifying that common law doctrine need not be reached.

If there is an honest dispute between the parties, a tender by the debtor with the explicit understanding of both parties that it is full payment of all demands, and an acceptance by the creditor, there is an accord and satisfaction. (Amoco Oil Co. v. Segall (1983), 118 Ill. App. 3d 1002, 1012, 455 N.E.2d 876, 883.) If there is a bona fide dispute as to the amount due, it makes no difference that the creditor protests that he does not accept the amount in full satisfaction. The creditor must either accept the payment with the condition or refuse. (Quaintance Associates, Inc. v. PLM, Inc. (1981), 95 Ill. App. 3d 818, 822, 420 N.E.2d 567, 570.) Cashing a check offered with the condition that it is in full payment of claims of the creditor, ...


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