APPELLATE COURT OF ILLINOIS, SECOND DISTRICT
540 N.E.2d 1023, 184 Ill. App. 3d 693, 133 Ill. Dec. 157 1989.IL.955
Appeal from the Circuit Court of Lake County; the Hon. Fred A. Geiger, Judge, presiding.
JUSTICE REINHARD delivered the opinion of the court. McLAREN and NASH, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE REINHARD
Defendant, Sun Bank/South Florida, appeals from an order of the circuit court of Lake County which granted summary judgment in favor of plaintiff, Continental Bank of Buffalo Grove, and denied defendant's own motion for summary judgment. On appeal, defendant contends that (1) the trial court erred in applying Florida law to determine whether plaintiff perfected a security interest in a vehicle, and (2) due to plaintiff's failure to perfect a security interest in the vehicle, defendant was entitled to the proceeds from the sale of that vehicle.
We briefly summarize the pertinent facts which are uncontroverted in the pleadings and affidavits. On September 28, 1985, Robert T. Krebs, an Illinois resident, signed a security agreement in which plaintiff agreed to lend Krebs $45,000 for the purchase of a used 1985 Mercedes Benz 500 SEL automobile. On October 3, 1985, Krebs executed a secured promissory note in the amount of $53,000 representing the $45,000 automobile loan and the renewal of an $8,000 note. As collateral for the October 3 promissory note Krebs listed the Mercedes along with four other cars and two trucks. Sometime thereafter, Krebs purchased the Mercedes with $41,769.25 from the funds lent by plaintiff.
Subsequent to the execution of the October 3 promissory note, Krebs advised plaintiff that he desired to have the title to the Mercedes held in the name of Multi-Fastener, a company wholly owned by him. Accordingly, on December 3, 1985, plaintiff and Multi-Fastener executed a security agreement granting plaintiff a security interest in the Mercedes to secure repayment of the October 3 note. Plaintiff then gave the documentation necessary to obtain title to Krebs, and on December 13, 1985, the Illinois Secretary of State issued a certificate of title for the Mercedes in the name of Multi-Fastener. The certificate of title did not list plaintiff as a lienholder.
On January 31, 1986, Krebs executed a promissory note in the amount of $26,000 in favor of defendant, a Florida bank. At this point, Krebs surrendered the Illinois certificate of title to defendant. Multi-Fastener signed a security agreement with defendant in which Multi-Fastener pledged the Mercedes as collateral for the January 31 note and for other existing loans from defendant to Krebs.
On April 18, 1986, after Krebs defaulted on his October 3 promissory note with plaintiff, plaintiff repossessed the Mercedes in Illinois. On May 29, 1986, plaintiff applied to the Illinois Secretary of State for a certificate of title to the Mercedes and filed an affidavit of repossession. On June 18, 1986, the Illinois Secretary of State issued a certificate of title for the Mercedes in plaintiff's name. On December 12, 1986, plaintiff sold the Mercedes for $31,000.
On January 26, 1986, defendant applied to the Florida Secretary of State for a certificate of title to the Mercedes. On July 14, 1986, the Florida Secretary of State issued a certificate of title in Multi-Fastener's name which listed defendant as the first and only lienholder.
On November 6, 1986, plaintiff brought suit against Krebs and Multi-Fastener on the October 3 promissory note and several other promissory notes. Plaintiff obtained a judgment against Krebs and Multi-Fastener in the amount of $110,008.66 on January 26, 1987. On May 21, 1987, plaintiff amended its complaint, adding a declaratory judgment count against defendant seeking a determination of its rights in the proceeds from the sale of the Mercedes.
Cross-motions for summary judgment were filed, and the circuit court determined that pursuant to section 9-103(2)(b) of the Uniform Commercial Code (Ill. Rev. Stat. 1987, ch. 26, par. 9-103(2)(b)), Florida law was controlling in deciding which party had a superior security interest in the Mercedes. The trial court concluded that under Florida law, plaintiff had a superior interest in the proceeds from the sale of the Mercedes and granted plaintiff's motion for summary judgment, denying defendant's motion.
On appeal, defendant contends that the trial court erred when it applied Florida law to determine the rights of the parties in the Mercedes. Defendant maintains that Illinois law should have been applied to determine the parties' rights because Krebs and Multi-Fastener resided in Illinois, the Mercedes was located in Illinois, the Mercedes was repossessed in Illinois, and plaintiff was an Illinois bank. Defendant asserts that under sections 3-202 and 3-203 of the Illinois Vehicle Code (Ill. Rev. Stat. 1987, ch. 95 1/2, pars. 3-202, 3-203), plaintiff failed to perfect its lien on the Mercedes. Defendant concludes that, under Illinois law, it had a right to rely on the clear Illinois certificate of title when it extended credit and took a security interest in the Mercedes Benz and therefore had a superior interest in the vehicle. We note that the ...