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12/07/88 the Millikin National Bank v. Peter Schwabe Corporation

December 7, 1988





531 N.E.2d 1074, 177 Ill. App. 3d 66, 126 Ill. Dec. 447 1988.IL.1773

Appeal from the Circuit Court of Macon County; the Hon. John L. Davis, Judge, presiding.


JUSTICE KNECHT delivered the opinion of the court. McCULLOUGH, P.J., and GREEN, J., concur.


Plaintiff Millikin National Bank of Decatur brings this appeal following the September 17, 1987, ruling of the circuit court of Macon County, granting summary judgment in favor of defendant Peter Schwabe Corporation. We are asked to decide whether acknowledgment of an assignment by defendant's employee was sufficient notice to defendant under section 1-201(27) of the Uniform Commercial Code (Code) (Ill. Rev. Stat. 1985, ch. 26, par. 1-201(27)). As certain issues of fact are raised by this record, we reverse.

The events leading up to this lawsuit involved three parties: the plaintiff bank, defendant general contractor, and the subcontractor, Binge and Sodowsky Construction Company, Inc. (Binge and Sodowsky). Defendant's third-party indemnification action against Binge and Sodowsky's owners is not involved in this appeal.

The two-count complaint filed September 4, 1986, alleged that on December 11, 1985, plaintiff made two loans to Binge and Sodowsky in the sums of $14,000 and $5,700. As security for the loans, plaintiff requested Binge and Sodowsky to assign to plaintiff the proceeds of two subcontracts entered into between defendant and Binge and Sodowsky. Under the subcontracts, dated October 16, 1985, and November 18, 1985, Binge and Sodowsky was to furnish carpentry work for two McDonald's restaurants in Tuscola and Champaign, Illinois. Binge and Sodowsky assigned the proceeds of these subcontracts to plaintiff.

The complaint alleged Michael Sodowsky, president of Binge and Sodowsky, met with Pat Colby, defendant's construction superintendent at the Tuscola jobsite, who had "apparent authority" to accept assignments for defendant. Colby signed two acknowledgments, one for each subcontract. In count I, plaintiff alleged defendant received notice of the assignment through notice given to Colby. Count II alleged plaintiff requested the assignment be acknowledged by defendant. Both counts alleged defendant failed to pay the subcontract proceeds to plaintiff.

The two assignment forms used are identical and appear in the record. All the headings referred to are centered, underscored, and appear in capital letters. At the top of the page is the word "Assignment." The form identifies the date of the contract whose proceeds are to be assigned and states all disbursements should be made payable to the plaintiff and Binge and Sodowsky. The assignment is signed by Michael Sodowsky as president of Binge and Sodowsky. Immediately underneath Sodowsky's signature appears a heading which reads "Acceptance of Assignment." This section contains an acceptance of the assignment signed by James P. Walker as assistant vice-president of plaintiff. Underneath Walker's signature appears "Acknowledgment of Assignment." Below it appears the following: "Peter Schwabe Corp., hereby acknowledges receipt of a copy of the above and foregoing Assignment." Pat Colby's signature appears on the signature line. All three signatures are dated December 9, 1985.

Defendant's answer, filed February 3, 1987, essentially admitted Binge and Sodowsky assigned the proceeds of the contracts, that Sodowsky met with Colby, and that the amounts to be paid under the contracts were paid directly to Binge and Sodowsky. Defendant denied either it or Colby accepted the assignment or that Colby had apparent authority to accept the assignment. Defendant's answer to count I further denied defendant had notice of the acceptance. The answer to count II also denied plaintiff directly asked defendant to acknowledge the assignments.

Defendant's June 26, 1987, motion for summary judgment claimed the record showed defendant did not receive notice of the assignments and was entitled to judgment as a matter of law. Attached to the motion were excerpts from the depositions of Pat Colby, Peter Odinsoff, Jr., and Michael Sodowsky. Apparently, the full depositions of Colby, Odinsoff, and Sodowsky were also submitted to the court. Although the briefs refer to deposition testimony by James P. Walker, assistant vice-president of plaintiff, Walker's deposition is not included in the record on appeal.

Colby's deposition testimony indicated he worked as job superintendent with defendant, which operated a business office in Valparaiso, Indiana. Sodowsky approached Colby at the Tuscola jobsite, stated he was taking out a loan, and said he needed confirmation he had a contract with defendant. Colby stated he asked Sodowsky if he could sign as a superintendent. He later testified he asked Sodowsky if his signature would "work." Sodowsky replied he just needed confirmation he had the contracts. Colby stated he did not read the sheets of paper Sodowsky handed him to sign because Sodowsky had always been trustworthy. Sodowsky did not prevent Colby from reading the documents and did not conceal the contents. Colby "chose to believe" Sodowsky and signed the documents, one for the Tuscola contract, and one for the Champaign contract. Colby stated he knew Sodowsky had the subcontracts for the carpentry work at both sites. Sodowsky left copies with Colby, but Colby did not know where they were or what happened to them. He stated he did not think it was that important. He subsequently said he did not remember if he was given copies or what he did with them. He did not know if Sodowsky or the bank were ever paid.

Colby stated his job required him to lay out work for subcontractors. He was not authorized to make changes from the subcontract without a work order from the office. He was not authorized to disburse funds or discharge a subcontractor for nonperformance. When asked "Have you signed documents for other subcontractors acknowledging that they did have a contract with your company?" Colby replied "Only if it is released from the office." Although during his deposition he stated he signed documents if ...

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