Boender v. Chicago North Clubhouse Ass'n, Inc.

• Decision Date: 15 December 1992
• Docket Number: No. 1-92-0738,1-92-0738
• Parties: , 181 Ill.Dec. 134, 20 UCC Rep.Serv.2d 687 Calvin BOENDER, Plaintiff and Counterdefendant-Appellee, v. CHICAGO NORTH CLUBHOUSE ASSOCIATION, INC., Defendant and Counterplaintiff-Appellant.
• Court: United States Appellate Court of Illinois

Page 207

608 N.E.2d 207

240 Ill.App.3d 622, 181 Ill.Dec. 134,

20 UCC Rep.Serv.2d 687

Calvin BOENDER, Plaintiff and Counterdefendant-Appellee, v. CHICAGO NORTH CLUBHOUSE ASSOCIATION, INC., Defendant and Counterplaintiff-Appellant.

No. 1-92-0738.

Appellate Court of Illinois First District, Second Division.

Dec. 15, 1992.

Barnett, Bornstein & Blazer, Ltd., Chicago (Michael S. Blazer, of counsel), for plaintiff and counterdefendant-appellee.

Mack P. Manning, Chicago, counsel for defendant and counterplaintiff-appellant.

Presiding Justice HARTMAN delivered the opinion of the court:

Counterplaintiff, Chicago North Clubhouse Association, Inc. (Clubhouse), an Illinois not-for-profit corporation, appeals the dismissal of its second amended counterclaim, which alleges that counterdefendant, Calvin Boender (Boender), violated section 9-504 of the Uniform Commercial Code (UCC) ( Ill.Rev.Stat.1991, ch. 26, par. 9-504 (section 9-504)) by selling collateral in a commercially unreasonable manner. No other cause of action remains between the parties. The issues raised on appeal include whether (1) the dismissal was procedurally and substantively proper; and (2), a secured creditor is liable to the debtor for the surplus after the sale of property under the facts of this case.

Clubhouse, in its second amended counterclaim count II (second amended counterclaim), pleaded that Boender, a commercial land developer, as purchaser, and Clubhouse, as seller, executed a real estate sale contract for the property located at 1925 West Thome Avenue in Chicago, at a price of $550,000. The parties never closed the deal, however, because of a contract dispute. Nevertheless, Boender assumed exclusive physical possession of the property before September of 1988 without Clubhouse's permission. On October 10, 1988, Boender allegedly executed a second real estate sale contract, agreeing to sell the property to Unity Church of Chicago (Unity Church) for $950,000.

Boender sued Clubhouse for specific performance of their contract on December 22, 1988. While Boender's suit was still pending, he acquired a collateral security interest in the property: For payment of $144,039.51, Uptown National Bank of Chicago assigned to Boender the collateral of 100% beneficial interest in a land trust and two notes evidencing Clubhouse's debt to the bank. The land trust corpus consisted of the clubhouse and realty on Thome.

Boender demanded payment of the notes from Clubhouse in a letter dated April 17, 1989. After Clubhouse failed to pay the $151,960.07, including interest, due under the notes, Boender mailed Clubhouse and its attorney a "Notice of Public Sale of Collateral Under the Uniform Commercial Code," dated April 25, 1989. Boender scheduled the sale for 10 a.m. on May 8, 1989, at his attorney's law office in Chicago.

Boender set the following terms of public sale: (1) public bidding, oral or written; (2) each bidder must have deposited a $50,000 cashier's check with Boender prior to bidding; (3) Boender, as seller, exempted himself from the $50,000 deposit requirement and (4) the successful bidder must pay the balance of the sale price within 24 hours. Boender published a notice to this effect in the Chicago Daily Law Bulletin, which ran on April 27 and 28, and from May 1 through May 5.

On May 5, 1989, Clubhouse moved for a temporary restraining order to enjoin Boender from proceeding with the sale because it would violate section 9-504. The circuit court denied the motion without prejudice to Clubhouse's right to challenge the commercial reasonableness of the sale.

At the public sale on May 8, 1989, Boender bid the debt owed him and took title to the property. Clubhouse did not appear at the sale because it did not have $50,000 to deposit prior to bidding. The day after he purchased the property at the UCC sale, Boender caused a trustee's deed to be delivered to Unity Church. Boender made approximately $800,000 in profit on the transaction.

Clubhouse filed an amended counterclaim against Boender charging a violation of section 9-504. Boender's motion to strike and dismiss the amended counterclaim was granted, but Clubhouse was given 28 days to refile.

Clubhouse filed its second amended counterclaim with leave of court on January 10, 1991. The second amended counterclaim, in addition to pleading the facts first noted, added the following allegations. First, the property involved was unique realty without a known market, and therefore the public notice that Boender provided of its sale was insufficient and violative of his fiduciary duties as a Clubhouse secured creditor. Second, the Chicago Daily Law Bulletin is circulated mainly to lawyers and does not have a known circulation among realtors, brokers or real estate investors; consequently, Boender was obligated to advertise the public sale more widely. Third, notice to a bona fide audience "might well have evoked" interest in the property because the beginning bid of $155,000 was so low. Fourth, because of Boender's real estate sale contract with Unity Church, he was unable to sell the property to a third party at the public sale without incurring a liability to Unity Church; therefore, Boender was unable to conform the public sale with the requirements of section 9-504. Fifth, Boender intentionally used the $50,000 deposit requirement to exclude Clubhouse (which he knew did not have $50,000), from attending the public sale "even as an observer."

Boender's motion to dismiss the second amended counterclaim was granted with prejudice, the court finding that Boender's subsequent sale of the property to Unity Church was separate from the UCC sale.

Clubhouse motioned for a rehearing, which was denied, the court finding the following: (1) Clubhouse could have requested a waiver of the $50,000 deposit requirement at the hearing on the motion for the temporary restraining order, but failed to do so; (2) the notice in the Chicago Daily Law Bulletin was adequate and published; (3) Boender's subsequent sale of the property was separate from the UCC sale; and (4) a low price obtained at the UCC sale does not in itself establish that the sale was commercially unreasonable.

Clubhouse appeals from the dismissal with prejudice its second amended counterclaim and the order denying its motion for a rehearing.

I.

Clubhouse initially argues that Boender's motion to dismiss does not identify its procedural basis; however, section 2-615 of the Code of Civil Procedure (Ill.Rev.Stat.1991, ch. 110, par. 2-615) is referenced in the motion, which Boender acknowledges in his brief. There was no error.

II.

Clubhouse next asserts that Boender's use of a motion to strike followed by a motion to dismiss is a hybrid motion, relying upon Janes v. First Federal Savings & Loan Association (1974), 57 Ill.2d 398, 312 N.E.2d 605; Bejda v. SGL Industries (1980), 82 Ill.2d 322, 45 Ill.Dec. 113, 412 N.E.2d 464; Eddings v. Dundee Town Highway Commissioner (1985), 135 Ill.App.3d 190, 88 Ill.Dec. 397, 478 N.E.2d 888; and Premier Electric Construction Co. v. LaSalle National Bank (1983), 115 Ill.App.3d 638, 71 Ill.Dec. 481, 450 N.E.2d 1360. These cases do not support Clubhouse's contention. The section 2-615 motion, although entitled a motion to dismiss, in reality contained both a motion to strike the pleading and a motion to dismiss, which section 2-615 contemplates within its terms, and was considered in two stages. (See R. Michael, Illinois Practice § 27.2, at 493 (1989).) The section 2-615 motion to dismiss was not an improper hybrid motion.

III.

The heart of Clubhouse's contentions is that the second amended counterclaim sufficiently states a cause of action for Boender's violation of section 9-504 of the UCC. The standard of review on appeal from a motion to dismiss a complaint is whether the complaint sufficiently states a cause of action; the merits of the case are not at issue. McCormick v. Kruk (1991), 220 Ill.App.3d 449, 451, 163 Ill.Dec. 122, 581 N.E.2d 73.

Clubhouse correctly notes that a section 2-615 motion to dismiss admits as true all well-pleaded facts (Aguilar v. Safeway Insurance Co. (1991), 221 Ill.App.3d 1095, 1100, 164 Ill.Dec. 418, 582 N.E.2d 1362; Willard v. Northwest National Bank (1985), 137 Ill.App.3d 255, 260, 92 Ill.Dec. 92, 484 N.E.2d 823) and inferences that reasonably could be drawn therefrom. (Duncan v. Rzonca (1985), 133 Ill.App.3d 184, 190, 88 Ill.Dec. 288, 478 N.E.2d 603.) Boender responds that a pleading is subject to dismissal if the underlying allegations are insufficient. It is true that a section 2-615 motion to dismiss does not admit conclusions of law or fact which are unsupported by allegations of specific facts warranting such conclusions (Groenings v. City of St. Charles (1991), 215 Ill.App.3d 295, 299, 158 Ill.Dec. 923, 574 N.E.2d 1316); however, each separate paragraph of a count need not state a cause of action. Only where the entire count fails to state a cause of action should it be dismissed pursuant to section 2-615. Austin View Civic Association v. City of Palos Heights (1980), 85 Ill.App.3d 89, 103, 40 Ill.Dec. 164, 405 N.E.2d 1256.

Section 9-504 provides the secured party the right to sell collateral after default. It imposes two requirements upon the selling secured party: first, "every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable"; and second, "reasonable notification" must be sent to the debtor. (See White & Summers, Uniform Commercial Code § 25-9, at 1214 (3d ed. 1988).) In Illinois, the secured creditor, here Boender, has the burden of proving commercial reasonableness. (Commercial Discount Corp. v. Bayer (1978), 57 Ill.App.3d 295, 301, 14 Ill.Dec. 647, 372 N.E.2d 926; General Foods Corp. v. Hall (1976), 39 Ill.App.3d 147, 153, 349 N.E.2d 573.) Commercial reasonableness is normally an issue of fact (Pioneer Bank & Trust Co. v. Mitchell (1984), 126 Ill.App.3d 870, 873-74, 81 Ill.Dec. 889...