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06/27/95 ROBERT F. SMITH v. CRAIG T. HARAN AND JUDY

June 27, 1995

ROBERT F. SMITH, AS INDEPENDENT ADM'R OF THE ESTATE OF BARBARA A. SMITH, DECEASED, PLAINTIFF-APPELLANT,
v.
CRAIG T. HARAN AND JUDY M. HARAN, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. The Honorable Paddy McNamara, Judge Presiding.

Rehearing Denied July 28, 1995. Petition for Leave to Appeal Denied December 6, 1995.

The Honorable Justice DiVITO delivered the opinion of the court: McCORMICK, J., concurs. Hartman, J., concurs in part and dissents in part.

The opinion of the court was delivered by: Divito

JUSTICE DiVITO delivered the opinion of the court:

Robert F. Smith, as independent administrator of the estate of Barbara A. Smith, deceased (the Estate), brought this action against Craig Haran and Judy Haran (the Harans) to collect on an instrument (Instrument) signed by them. The circuit court found that the Instrument was not negotiable and that the Estate was not a holder in due course. Following a bench trial, the court ruled that the Instrument failed to create an enforceable contract because it contained no consideration.

The issues on appeal include whether (1) the circuit court erred in finding that the Instrument did not contain a "promise or order to pay" or words of equivalent import; (2) the provisions in Article 3 of the Uniform Commercial Code-Commercial Paper (UCC), (Ill. Rev. Stat. 1985, ch. 26, par. 3-101 et seq. (now, as amended, 810 ILCS 5/3-101 et seq. (West 1992))) create a rebuttable presumption that consideration was given in exchange for the Instrument; (3) the circuit court erred in excluding the testimony of the Harans pursuant to the Dead-Man's Act (Ill. Rev. Stat. 1985, ch. 110, par. 8-201 (now 735 ILCS 5/8-201 (West 1992))); and (4) the evidence rebuts the presumption of consideration. For reasons that follow, we reverse the judgment of the circuit court and remand the cause for a new trial.

Prior to trial, the circuit court ruled that the Instrument was not negotiable because it did not contain an unconditional promise to pay and it was not payable to order or to bearer. The trial proceeded under fundamental contract principles, not under the provisions of the UCC.

At trial, Robert Smith testified that his mother, Barbara Smith (decedent), died in December 1991. About one month after her death, Robert, as administrator of his mother's estate, found the Instrument in her wall safe. The Instrument provides:

"Nov 13,1986

Mrs. Barbarba [sic ] Smith

315 Kenilworth

Prospect Heights,Il

PROMISSORY NOTE

WE - Craig T. Haran & Judy M. Haran owners of the property and house located & described below,

1833 N. Hicks Road

Palatine,Il 60074

Legal Descriped [sic ] as --

The North 125 feet of the South 1690 Feet of the West 390 feet of the SouthEast quarter of Section 2, township 42 North, Range 10 East of the Third Principal Meridan [sic ], in Cook County,Illinois --

Also Described as Lot 13 in Kliens subdivision of Part of the SouthEast quarter of Section 2, Township 42 North, Range 10 East of the Third Principal Meridian, according to the Plat thereof recorded October 11,1949 as Doucment [sic ] No. 14651080, in Cook County Illinois.

We collaterize this note of $125,000 using our above property and house.

Note to be paid back within 12 months of above date with 10% interest.

/s/

Craig T. Haran

/s/

Judy M. Haran."

Other valuable items found in the safe included a deed to a home that she owned, insurance papers, and jewelry. At the time of the death of Robert's father in February 1985, decedent, who was very good about keeping records, had between $300,000 and $400,000 cash in her home.

Craig Haran testified that he first met decedent in 1976 when she hired his construction company to build an addition to her home. They became good friends, and Craig kept in contact with decedent up until a couple of weeks before her death.

Judy Haran prepared the Instrument, and she and Craig signed it. About 30 days after Craig delivered the Instrument to decedent, he brought her a land survey of the property described in the note. Craig denied ever transacting business with decedent and stated, "We were about to, but we didn't." He also testified that he never received a demand for payment of the Instrument until after decedent's death. The Instrument was not recorded until January 10, 1992, about a month after decedent passed away. Objections to the Harans' remaining testimony relating to their transaction with decedent were sustained pursuant to the Illinois Dead-Man's Act (Ill. Rev. Stat. 1985, ch. 110, par. 8-201 (now 735 ILCS 5/8-201 (West 1992))).

Gerald Rintz testified that he is a construction consultant and a good friend of Craig. Rintz attended two meetings with decedent and Craig in the summer of 1986 regarding the proposed development of industrial commercial condominiums. After the first meeting, Rintz looked at some potential sites for the development and presented this information in their second meeting. Decedent then appeared to have "cooled off on the idea." Rintz was not aware of any deal being consummated between decedent and Craig. He estimated that the cost to start up one of these ventures in 1986 would have been between $300,000 and $400,000. Rintz left Illinois and went to San Diego in early October 1986.

In a written opinion, the circuit court ruled that the Instrument failed to create an enforceable contract because it lacked any consideration. The court noted that there was no paper trail indicating an exchange of cash or deposit of funds, no evidence that the venture was ever started, and no testimony from bankers or ...


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