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03/07/89 Melrose Park National Bank v. Capitol Bank & Trust

March 7, 1989





536 N.E.2d 104, 180 Ill. App. 3d 662, 129 Ill. Dec. 420 1989.IL.279

Appeal from the Circuit Court of Du Page County; the Hon. Edward R. Duncan, Judge, presiding.


JUSTICE WOODWARD delivered the opinion of the court. LINDBERG and McLAREN, JJ., concur.


Machinery and materials in which defendant, Capitol Bank & Trust, held a security interest were left on the plaintiff's property by tenant National Renovations, Inc. (National), which declared bankruptcy. Plaintiff, Melrose Park National Bank, as trustee, sued defendant to recover rental charges, cleanup costs, utilities, and fixtures allegedly wrongfully removed from the property. The trial court awarded plaintiff $21,403.06 in damages. This appeal followed. We reverse and remand for further proceedings.

On July 31, 1986, in the circuit court of Cook County, plaintiff, as trustee under trust No. 282, and the holder of legal title to the commercial property at 742 Factory Road, Addison, Illinois (property), was granted an order of possession in a forcible proceeding against the tenant, National, a concern that renovated auditorium seats. This order of possession was stayed until August 14, 1986. On August 12, 1986, National filed a bankruptcy petition under chapter 7 of the United States Bankruptcy Code (11 U.S.C.A. § 101 et seq. (West 1979)). Said filing immediately invoked the automatic stay provision of the Bankruptcy Code. (11 U.S.C.A. § 362(a)(3) (West 1979).) National had borrowed money from defendant during 1985 and had signed security agreements in favor of said defendant covering all of National's equipment, inventory, and accounts receivable. Defendant had perfected its security interests in National's accounts receivable, goods, equipment, furniture, fixtures, etc., by filing Uniform Commercial Code financial statements with the Secretary of State and the recorder of Du Page County in June 1985. National ultimately defaulted on its loan payments to defendant, as well as its rent payments to plaintiff.

Plaintiff never sought to modify the automatic stay imposed by National's bankruptcy petition. On September 10, 1986, defendant filed a motion to modify the bankruptcy stay. The bankruptcy court granted said motion on October 10, 1986. The modification order permitted defendant to foreclose on its security interest in National's "accounts receivable, notes, goods, inventory, equipment, furniture, fixtures, general intangibles, jigs, tools, dyes and molds." Later in October 1986, an order was entered by the bankruptcy court allowing the bankruptcy trustee to abandon its interests in National's assets. Defendant conducted a UCC sale on November 25, 1986, selling reusable equipment and inventory to bidders at the sale. Those items not purchased at the sale were then sold the following week to National's president, Shirley Gardner. No rent was paid to plaintiff by any party from August 1986 through the end of the year.

In the plaintiff's case, George Guerine (George) testified that he was a semiretired attorney who is a beneficiary of Melrose Park National Bank trust No. 282, which holds title to the disputed property. The remaining beneficial owner of the property is the Guerine Trust. National took possession of the property two or three days before the scheduled beginning of the lease term, i.e., January 1, 1985, and continued in possession until sometime in July 1986, when George caused a five-day notice to be served upon it for the nonpayment of overdue rent. In a phone call to George, National's attorney stated that National was unable to pay rent and that he was about to file a bankruptcy proceeding on its behalf. In the circuit court of Cook County, George filed a forcible entry and detainer suit in July, and he obtained an order for possession of the property dated July 31, 1986. This order was stayed until August 14, 1986.

On August 14, 1986, George and his nephew, Guy Guerine (Guy), entered the property and took possession of it. Guy (an employee of both Guerine & Company, which owns and operates a mobile home park, and the Guerine Trust, one of the beneficiaries of plaintiff trust No. 282) was responsible for maintaining and overseeing the Addison property. Upon entering the property, George observed both refuse and machinery in the building and a truck tractor and trailer outside the building. George next returned to the property sometime in November 1986, when he met with defendant's representatives. He told them that defendant would have to pay rent if it wanted "to stay there." One of defendant's representatives stated, "Yes, we have to pay rent." Further, George told them that defendant should pay what the prior tenant had paid, i.e., $5,000 a month. Defendants never made any rent payments, and George sent a letter of notice to defendant sometime in November, demanding that it vacate the property.

On cross-examination, George admitted that he did not know who brought onto the property the material which he had observed when taking possession of the building in August 1986. He obtained copies of National's bankruptcy petition after he had filed his forcible proceeding against the company. He did not know when the bankruptcy petition was filed. George had been told by the bankruptcy trustee that the latter's interest in the property would be abandoned. George did not know exactly when the trustee abandoned the property. He never moved to modify the automatic stay imposed by the Bankruptcy Code. None of the defendant's representatives ever agreed to pay any specific amount of rent.

Guy Guerine then testified that he was employed by the Guerine Trust to manage its properties, including the Addison property; that he had negotiated the lease with National; and that prior to National moving in, the property had been cleaned and was in good condition. National moved out of the building in July 1986. At or about the end of July 1986, Guy drilled the locks out of the building, entered it, and changed the locks "with the permission of the court." On entering the building, Guy observed a baking oven, a conveyor system, an air compressor, a paint spray booth, portable tools, and drills. He also noted large numbers of auditorium seats in various states of reconditioning. Outside the building stood a semitractor and trailer. Guy was in charge of cleaning the premises after the tenant left; he hired employees from Guerine & Company to perform various janitorial tasks. Most of the refuse was hauled away in dumpsters by Browning-Ferris Industries. A representative of defendant asked Guy to provide electricity to the building during the UCC sale. He complied and received bills for the electricity used.

Guy recalled a late October 1986 meeting at which George and he met with defendant's representatives, Joel Stein and Robert Jones. Stein agreed that if defendant were to leave the security items on the property, it would have to pay rent. No specific dollar amount was established.

Subsequent to that meeting, the overhead oven, conveyor system, air compressor, paint spray booth, and other items were sold and removed from the premises by the buyers. Plaintiff had nothing to do with this sale, but plaintiff, commencing in December ...

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