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09/28/87 General Electric Credit v. Ronald Jovani Allegretti

September 28, 1987

GENERAL ELECTRIC CREDIT CORPORATION, PLAINTIFF-APPELLANT

v.

RONALD JOVANI ALLEGRETTI, A/K/A RONALD ALLEGRETTI, DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION

515 N.E.2d 721, 161 Ill. App. 3d 853, 113 Ill. Dec. 736

Appeal from the Circuit Court of Cook County; the Hon. John J. O'Toole, Judge, presiding. 1987.IL.1439

APPELLATE Judges:

PRESIDING JUSTICE QUINLAN delivered the opinion of the court. CAMPBELL and MANNING, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE QUINLAN

Plaintiff General Electric Credit Corporation appeals from the order of the trial court granting summary judgment to defendant Ronald Jovani Allegretti (Allegretti) and denying plaintiff's motion for summary judgment.

Allegretti had purchased a bedroom set valued at $900 and a television set valued at $350 from Goldblatt Brothers, Inc. (Goldblatt's), on a revolving credit account with Goldblatt's. Under the terms of the revolving credit agreement and the credit slip which was signed at the time of each purchase, Goldblatt's reserved a security interest in all goods sold on credit to Allegretti. Goldblatt's then assigned its interest in the executed credit agreement with Allegretti to plaintiff GECC. Allegretti filed a voluntary petition in bankruptcy on March 16, 1981, and was later discharged on his personal debts, including $1,483.29 listed as a debt owed Goldblatt's for exempt property.

After Allegretti refused to voluntarily relinquish possession of the bedroom set and television set he had purchased from Goldblatt's, GECC filed suit in the circuit court of Cook County seeking repossession of the goods or, in the alternative, recovery of its $1,250 value plus $250 attorney fees and costs which Allegretti had agreed to pay under the terms of his revolving credit account with Goldblatt's. Cross-motions for summary judgment were filed. Following a hearing at which arguments from both parties were heard, the trial Judge granted the defendant's motion for summary judgment and denied the plaintiff's motion for summary judgment. GECC has appealed the trial court's ruling to this court on the grounds that the trial court erred in finding the property exempt. On appeal GECC contends, as it did in the trial court, that it has a non-possessory purchase money security interest which was unaffected by Allegretti's discharge in bankruptcy.

The Federal Bankruptcy Code permits a debtor to declare his outstanding debts, stay creditor collection techniques, devise a schedule to pay those debts from his available assets, and to exempt certain business and personal property from attachment and sale as is necessary for the debtor to make a fresh start. (See H. R. Rep. No. 595, 95th Cong., 2d Sess. 126 (1978), reprinted in 1978 U.S. Code Cong. & Adm. News 5963, 6087; 11 U.S.C. sec. 522 (1982).) Additionally, the majority of States have enacted "opt-out" statutes which have attempted to preclude resident debtors from using the Federal bankruptcy exemptions and, instead, authorize exemptions as provided by the State statute. (See In re Vaughn (C.D. Ill. 1986), 67 Bankr. 140.) Under the Illinois statute in effect at the time Allegretti filed his bankruptcy petition, the State opt-out law would have permitted him to exempt his "equity interest, not to exceed $2,000 in value, in [personal] property" if such property was subject to a non-possessory nonpurchase money security interest. (Emphasis added.) (Ill. Rev. Stat. 1981, ch. 52, pars. 13(b), 101.)1 The Illinois exemption statute followed the legislative scheme of the Federal Bankruptcy Code, which expressly authorizes State exemptions under the Bankruptcy Code only to the extent the claims are based on nonpurchase money security interests. The Federal statute provides in pertinent part:

"(f) Notwithstanding any waiver of exemptions, the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section [applicable State law], if such lien is --

(2) a nonpossessory, nonpurchase-money security interest in any --

household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, or jewelry that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor . . .." 11 U.S.C. sec. 522(f)(2)(1982).

Thus, if Allegretti was correct in his assertion that GECC, contrary to GECC's contention, only had a non-possessory nonpurchase money security interest, the trial court properly granted his motion for summary judgment. However, we believe such a Conclusion is contrary to the evidence here, is inconsistent with the principles established by the relevant cases from other jurisdictions that have considered similar situations, and is inconsistent with the congressional intent reflected in the Bankruptcy Reform Act of 1978. Based upon our review of the record, we conclude that GECC did have a purchase money security interest in Allegretti's bedroom set and television that is not avoidable under section 522(f) of the Federal Bankruptcy Code. 11 U.S.C. sec. 522(f) (1982).

Under the Federal Bankruptcy Code the determination of whether a security interest is a purchase money security interest is based on State law because the Federal statute does not include a definition. (In re Vaughn (C.D. Ill. 1986), 67 Bankr. 140.) In Illinois, a purchase money security interest is automatically created when a security interest is "taken or retained by the seller of the collateral to secure all or part of its price." (Ill. Rev. Stat. 1985, ch. 26, par. 9-107.) The seller is not required to file a financing statement to perfect a purchase money security interest in consumer goods. (Ill. Rev. Stat. 1985, ch. 26, par. 9-302(1)(d).) The Illinois law protecting purchase money security interests, like those statutes found in other ...


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