Appeal from the Circuit Court of Du Page County. No. 98--L--0907 Honorable Stephen J. Culliton, Judge, Presiding.
The opinion of the court was delivered by: Justice McLAREN
Plaintiff, M&O Insulation Company (M&O), appeals the trial court's judgment in favor of defendant, Harris Bank Naperville (Harris Bank), after Harris Bank refused to honor a check issued to M&O from third-party defendant Quality Insulation Company, Inc. (Quality). We affirm.
The following facts are taken from the record. M&O is an insulation contractor that was subcontracted by Quality in July 1997 to install insulation at the Nabisco Chicago Bakery for a price of $76,000.
On May 5, 1995, Harris Bank extended a line of credit through a promissory note to Quality in the sum of $250,000. Pursuant to the promissory note, Harris Bank had a possessory security interest in the general deposit account opened by Quality at Harris Bank. The promissory note provided that, upon default, Harris Bank could declare the balance of the line of credit immediately due and payable and Harris Bank could exercise a setoff against Quality's general deposit account.
On June 14, 1995, Quality opened a checking account at Harris Bank and agreed to follow Harris Bank's terms and conditions governing the account, which, in part, gave Harris Bank the right to set off money on deposit against any matured indebtedness to Harris Bank.
On several occasions, Harris Bank granted Quality extensions. The last extension Harris Bank granted was on July 28, 1997, extending the maturity date of the loan to October 31, 1997, with the condition that Quality strictly comply with the payment schedule. However, Quality failed to honor the payment schedule, and on July 28, 1997, Quality and Harris Bank entered into a "Change in Terms Agreement." The agreement contained the same default provisions as the promissory note and reiterated Harris Bank's possessory security interest in Quality's bank accounts and Harris Bank's right to freeze Quality's accounts and exercise a setoff. The agreement contained a new payment schedule and provided that on the date of maturity, October 31, 1997, Quality would pay Harris Bank $238,000 plus interest.
On September 17, 1997, Quality deposited $77,200 into its Harris Bank checking account. The deposit was comprised of the funds Quality received for the M&O insulation work at Nabisco.
Quality failed to comply with the new payment schedule, and on September 18, 1997, Harris Bank deemed itself insecure, declared Quality in default, and declared the balance of the loan immediately due and payable.
Also on September 18, 1997, Arthur Gneuh, a Harris Bank loan officer, met with Kent and Barbara Duffy of Quality. According to Gneuh's notes, the Duffys agreed to pay down the debt and reduce the credit line by $10,000 by September 23, 1997, and another $10,000 by October 5, 1997, with the entire amount to be paid by October 31, 1997. This meeting resulted in a commercial loan workout and settlement agreement.
On September 23, 1997, Quality delivered a check to M&O for $76,000 as payment for M&O's work at Nabisco. On the same day, M&O deposited Quality's check into M&O's bank, LaSalle, N.A., of Chicago.
On September 24, 1997, Quality deposited $112,000 into its Harris Bank checking account. On the same day, Harris Bank placed an administrative hold or freeze on Quality's checking account and exercised a $10,000 setoff against Quality's account. According to Gneuh's notes, he left a message with Quality regarding the hold on the account. Later, on September 24, a $76,000 check issued to M&O was presented to Harris Bank for payment on Quality's account.
The following day, September 25, 1997, Quality's account statement showed a balance sufficient to pay the M&O check. However, before 11:59 p.m., Harris Bank returned the $76,000 check issued to M&O as dishonored for insufficient funds. Subsequently, Harris Bank honored two "forced" checks in the amounts of $10,000 and $2,276.04. In a forced check situation, Harris Bank reviews the check and decides whether to pay it.
On September 26, Harris Bank debited Quality's account as a setoff against the outstanding loan in the amount of $90,000. On September 26, 1997, Harris Bank again honored other "forced" checks in the amounts ...