APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION
525 N.E.2d 1123, 171 Ill. App. 3d 1000, 121 Ill. Dec. 816 1988.IL.948
Appeal from the Circuit Court of Cook County; the Hon. Lester D. Foreman, Judge, presiding.
PRESIDING JUSTICE LORENZ delivered the opinion of the court. PINCHAM and MURRAY, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LORENZ
This is an appeal from orders of the circuit court of Cook County granting the motion for summary judgment brought by plaintiff, The Northern Trust Company (Northern), dismissing the counterclaim of defendant Roy Burlew and awarding plaintiff attorney fees, costs, and interest.
Plaintiff sold collateral pledged by defendant to satisfy indebtedness on two notes and then brought this action to recover the remaining deficiency. Defendant counterclaimed for damages resulting from the sale of his collateral. On appeal defendant contends summary judgment should not have been granted because: (1) a question of fact remained as to whether a constructive trust was imposed on the collateral, imposing on plaintiff a duty to preserve those assets; (2) a question of fact remained as to the commercial reasonableness of the sale; (3) plaintiff was estopped from denying that notice to the defendant of the sale of the collateral was required; and (4) defendant's authorization of a future sale of the collateral was obtained by economic duress.
The following facts are undisputed. On November 24, 1981, defendant Burlew executed a promissory note for $175,000 to the order of plaintiff bank. Burlew offered as collateral 5,800 shares of the common stock of Houston Natural Gas and 500 shares of Mobil Corporation. On December 14, 1981, Burlew executed a second note for $325,000, offering 10,900 more shares of Houston Natural Gas as collateral.
Both notes gave the holder the option of making them immediately due and payable without demand if the maker, Burlew, failed to pay, when due, any amount payable on any of the obligations. In the event of a default Northern was given the right to set off Burlew's collateral by selling or otherwise disposing of it. It was also provided that upon a default Burlew agreed to pay on demand to Northern all expenses for enforcement of rights relating to the collateral, including reasonable attorney fees and legal expenses.
On March 30, 1982, Burlew failed to pay the first quarterly interest payment due on both notes. By April 30, 1982, the value of the pledged stock had declined to such an extent that the loans were short-margined by over $50,000. On several occasions after April 30 Dennis Biggerstaff, the Northern officer principally responsible for those loans, spoke to defendant about the past-due interest and the insufficiency of the collateral. Biggerstaff told defendant that the collateral would have to be sold unless the insufficiency was reduced. Defendant repeatedly promised to put up additional collateral or otherwise make interest payments.
The value of the Houston Natural Gas stock continued to fall and by June 25, 1982, the collateral was insufficient by over $100,000. Biggerstaff again advised defendant that the collateral would be sold. Between August 5 and August 10, 1982, defendant pledged as collateral an additional 1,921 shares of the common stock of Houston Natural Gas and 724 shares of the common stock of Natomas Corporation.
On August 10, 1982, an associate of Biggerstaff, H. David McMahon, delivered to defendant a letter informing him that the additional collateral would suffice as long as its market value remained "stable." However, the letter also stated: "If the market price of the collateral of Houston Natural Gas drops in value an amount of less than $27.00 per share, the Bank must sell all collateralized stock to pay the principle and interest due on your loan." Defendant signed an acknowledgement form on the letter which stated: "Acknowledged this date."
By August 13 the stock of Houston Natural Gas had closed at $24 7/8 per share and defendant's indebtedness was short-margined by over $160,000. A letter from Northern dated that same day, but mailed August 16, informed defendant that on August 17, 1982, Northern would begin selling his stock. However, defendant did not receive the letter until after the same was completed on ...