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08/04/89 James Keller, v. Boatman's Bank

August 4, 1989





542 N.E.2d 1261, 186 Ill. App. 3d 448, 134 Ill. Dec. 754 1989.IL.1204

Appeal from the Circuit Court of Sangamon County; the Hon. Richard J. Cadagin, Judge, presiding.


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


Plaintiff's amended complaint alleged defendant breached statutory duties owed to plaintiff under the Uniform Commercial Code (Ill. Rev. Stat. 1987, ch. 26, par. 1-101 et seq.). Defendant argued section 13-205 of the Code of Civil Procedure (Code) (Ill. Rev. Stat. 1987, ch. 110, par. 13-205) barred the complaint because it was not timely filed and did not relate back to an earlier complaint. These are the issues raised on appeal. We reverse the decision of the trial court for the reasons specified herein.

On August 14, 1980, Juici-Rich Products, Inc., a Springfield-based company engaged in the production and sale of fresh fruit juices, entered a written lease agreement with L & L Financial Corporation to lease a "Form-Pak" filling/sealing machine. L & L purchased the machine from R.H. Packaging Systems, Inc., of Clearwater, Florida. Defendant bank financed L & L's purchase of the machine. As consideration, L & L issued three demand notes to defendant totaling $123,715.72. As security for the notes, L & L assigned its interest in the lease, among other things, to defendant. Juici-Rich claims it purchased a certificate of deposit for $20,000 from defendant on February 24, 1981, to be held on deposit at defendant bank. As additional security for the demand notes and lease, James R. Keller, president and shareholder of Juici-Rich, personally and as guarantor of the demand notes, assigned the certificate of deposit to the bank on March 31, 1981.

The assignment was made to secure payment and performance of the following: All notes issued by L & L showing advances by the bank in connection with the purchase of the machine, all obligations of Juici-Rich as lessee of the machine, and any additional sums subsequently advanced by the bank in connection with the purchase and lease of the equipment. Keller assigned all rights, title, and interest in the CD, to be held by the bank until the bank released it or until the expiration of the equipment lease. In the event of default by L & L or Juici-Rich under the equipment lease, the assignment gave the bank authority to liquidate or otherwise realize on the CD and apply the proceeds to the indebtedness, without notice or demand.

The machine delivered by R.H. Packaging was unacceptable to Juici-Rich. L & L defaulted on the demand notes. On January 26, 1982, the circuit court of Sangamon County filed its final order in a replevin action brought by the bank against Juici-Rich, case No. 81-LM-1425. The court found Juici-Rich wrongfully detained items of personal property the bank was entitled to possess. The court held Juici-Rich in default for refusing to surrender the property after demand and awarded the bank final judgment for possession. On July 28, 1982, the bank cashed the certificate of deposit then worth $23,253.32. The bank repossessed the machine and sold it on October 25, 1982, for $124,808.34. The bank distributed $33,191.66 of the proceeds from the CD and the sale of the machine to R.H. Packaging Company and retained the remainder.

Juici-Rich filed a lawsuit against defendant bank in Sangamon County on September 9, 1986. The complaint alleged Juici-Rich purchased a $20,000 CD from defendant bank on February 24, 1981, and never pledged or assigned any interest in the CD to defendant bank. Juici-Rich alleged defendant bank unlawfully converted the CD and applied the proceeds for its own benefit on July 28, 1982. Defendant bank refused to pay Juici-Rich and so Juici-Rich sought damages in excess of $23,253.32 plus interest.

Defendant bank filed its answer and motion to dismiss on October 20, 1986, denying Juici-Rich had standing to sue. Defendant claimed Juici-Rich did not purchase the CD and never owned it. A photocopy of the CD shows James Keller's name on the document as depositor of the $20,000. The CD was nonnegotiable and nontransferable. The bank's answer went on to state:

"Because of defaults by L & L Financial Corporation and because of default by [Juici-Rich] under the referenced equipment lease, as specifically authorized in the last paragraph of said Assignment, Defendant properly setoff, liquidated, and realized the proceeds of said to apply on obligations secured by said Assignment . . .."

Finally, the bank claimed the setoff of the CD was proper under the terms of the final judgment issued January 26, 1982.

On December 15, 1986, the trial court granted defendant's motion to dismiss with leave to amend. James Keller filed an amended complaint against defendant bank on December 2, 1987. He alleged the bank's distribution to R.H. Packaging violated section 9-504(1)(a) of the UCC (Ill. Rev. Stat. 1987, ch. 26, par. 9-504(1)(a)) and claimed the surplus funds should have been distributed to him pursuant to section 9-504(2). Defendant filed a motion on January 8, 1988, to transfer the case to St. Clair County, Illinois, or, alternatively, dismiss it. Defendant claimed it does not do business in Sangamon County and is not a resident of that county. None of the documents executed pursuant to the transactions described above were executed in Sangamon County. The CD was purchased and ...

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