Kedzie and 103rd Currency Exchange, Inc. v. Hodge

Decision Date26 August 1993
Docket NumberDocket No. 73855
Citation619 N.E.2d 732,189 Ill.Dec. 31,156 Ill.2d 112
Parties, 189 Ill.Dec. 31, 21 UCC Rep.Serv.2d 682 KEDZIE AND 103RD CURRENCY EXCHANGE, INC., Appellant, v. Beulah M. HODGE, Appellee.
CourtIllinois Supreme Court

Scott A. Slutsky, Roy P. Amatore, Chicago, Gerald R. Slutsky, Northbrook, for appellant.

Frank P. Auwarter, Kathleen M. Gorr and Anne K. Lewis, Mayer, Brown & Platt, Chicago, for appellee.

Justice FREEMAN delivered the opinion of the court:

We consider here whether a holder in due course of a check is precluded from payment as against the drawer where the check was given in exchange for contract services for which the provider was required to be, but was not, a licensed plumber. We conclude such a claim is not precluded.

BACKGROUND

Pursuant to a written "work order," Fred Fentress agreed to install a "flood control system" at the home of Eric and Beulah Hodge of Chicago for $900. In partial payment for the work, Beulah Hodge drafted a personal check payable to "Fred Fentress--A-OK Plumbing" for $500 from the Hodges' joint account at Citicorp Savings.

The system's components were not delivered to the Hodge's home as scheduled. And, when Fentress failed to appear on the date set for installation, Eric Hodge telephoned him to announce the contract "cancelled." Hodge also told Fentress that he would order Citicorp Savings not to pay the check Fentress had been given.

Records of Citicorp Savings confirm acknowledgment of a stop-payment order entered the same day.

Nevertheless, Fentress presented the check at the Kedzie & 103rd Street Currency Exchange (Currency Exchange), endorsing it as "sole owner" of A-OK Plumbing, and obtained payment. However, when the Currency Exchange later presented the check for payment at Citicorp Savings, payment was refused in accordance with the stop-payment order.

The Currency Exchange, alleging it was a holder in due course (see Ill.Rev.Stat.1989, ch. 26, par. 3-302), then sued Beulah Hodge, as drawer of the check, and Fentress for the amount stated. Hodge, in turn, filed a counterclaim against Fentress. Hodge also moved to dismiss the Currency Exchange's action against her (see Ill.Rev.Stat.1989, ch. 110, par. 2-619). The disposition of Hodge's motion gives rise to this appeal.

Hodge asserted a defense provided by section 3-305 of the Uniform Commercial Code (UCC) (Ill.Rev.Stat.1989, ch. 26, par. 3-305). Under that section, the claim of a holder in due course of a negotiable instrument may be barred based on "illegality of the transaction." (Ill.Rev.Stat.1989, ch. 26, par. 3-305(2)(b).) Hodge contended Fentress was not a licensed plumber as was required under the Illinois Plumbing License Law (see Ill.Rev.Stat.1989, ch. 111, pars. 1101 through 1140). The director of licensing and registration of the Chicago department of buildings and the keeper of plumbing licensing records of the Illinois Department of Public Health provided affidavits supporting that contention. Hodge asserted that, because Fentress was in violation The circuit court granted the motion and dismissed the Currency Exchange's action against Hodge. The appellate court, with one justice dissenting, affirmed. (234 Ill.App.3d 1017, 176 Ill.Dec. 105, 601 N.E.2d 803.) Pursuant to Supreme Court Rule 315(a) (134 Ill.2d R. 315(a)), we allowed the Currency Exchange's petition for leave to appeal.

[189 Ill.Dec. 34] of the Illinois Plumbing License Law, his promised performance under the contract gave rise to the requisite "illegality" to bar the Currency Exchange's claim for payment.

DISCUSSION

Section 2-619(a)(9)

Hodge moved for involuntary dismissal under section 2-619 of the Code of Civil Procedure. (Ill.Rev.Stat.1989, ch. 110, par. 2-619(a)(9).) Generally, section 2-619 affords a "means of obtaining * * * a summary disposition of issues of law or of easily proved issues of fact, with a reservation of jury trial as to disputed questions of fact." (Ill.Ann.Stat., ch. 110, par. 2-619, Historical & Practice Notes, at 662 (Smith-Hurd 1983); see Barber-Colman Co. v. A & K Midwest Insulation Co. (1992), 236 Ill.App.3d 1065, 1071, 177 Ill.Dec. 841, 603 N.E.2d 1215.) Subsection (a)(9), upon which Hodge's motion specifically was based, permits dismissal where "the claim asserted * * * is barred by other affirmative matter avoiding the legal effect of or defeating the claim." Ill.Rev.Stat.1989, ch. 110, par. 2-619(a)(9).

The phrase "affirmative matter" encompasses any defense other than a negation of the essential allegations of the plaintiff's cause of action. (See 4 R. Michael, Illinois Practice § 41.7 (1989).) For that reason, it is recognized that a section 2-619(a)(9) motion to dismiss admits the legal sufficiency of the plaintiff's cause of action much in the same way that a section 2-615 motion to dismiss admits a complaint's well-pleaded facts. Barber-Colman, 236 Ill.App.3d at 1073, 177 Ill.Dec. 841, 603 N.E.2d 1215.

If the "affirmative matter" asserted is not apparent on the face of the complaint, the motion must be supported by affidavit. (Ill.Rev.Stat.1989, ch. 110, par. 2-619(a); see also 4 R. Michael, Illinois Practice § 41.8, at 334 (1989) (observing that "materials of the same nature as are used to support motions for summary judgment" may serve as support for the motion), citing Sierens v. Clausen (1975), 60 Ill.2d 585, 588, 328 N.E.2d 559 (noting, in the absence of supporting affidavits, that answers to interrogatories may be used in evidence to the same extent as discovery depositions and that discovery depositions may be used for any purpose for which affidavits may be used).) By presenting adequate affidavits supporting the asserted defense (see 134 Ill.2d R. 191), the defendant satisfies the initial burden of going forward on the motion. The burden then shifts to the plaintiff.

The plaintiff must establish that the defense is unfounded or requires the resolution of an essential element of material fact before it is proven. The plaintiff may do so by "affidavit[ ] or other proof." (Ill.Rev.Stat.1989, ch. 110, par. 2-619(c).) A counteraffidavit is necessary, however, to refute evidentiary facts properly asserted by affidavit supporting the motion else the facts are deemed admitted. If, after considering the pleadings and affidavits, the trial judge finds that the plaintiff has failed to carry the shifted burden of going forward, the motion may be granted and the cause of action dismissed.

An appeal from such a dismissal is the same in nature as one following a grant of summary judgment and is likewise a matter given to de novo review (see Myers v. Health Specialists, S.C. (1992), 225 Ill.App.3d 68, 72, 167 Ill.Dec. 225, 587 N.E.2d 494 (stating the standard as it relates to summary judgment)). The appellate court must consider whether the existence of a genuine issue of material fact should have precluded the dismissal or, absent such an issue of fact, whether dismissal is proper as a matter of law. 4 R. Michael, Illinois Practice § 41.9 (1989).

Hodge's Motion

The legal sufficiency of the Currency Exchange's action, including the allegation that it possesses the check as a holder in due course, is admitted by Hodge's motion. The reason asserted for dismissal--"illegality" grounded upon noncompliance with a statutory licensure requirement--was raised properly as affirmative matter and supported by affidavit.

The Illinois Plumbing License Law requires that all plumbing, including "installation * * * or extension" of "drains," be performed by plumbers licensed under the Act. (Ill.Rev.Stat.1989, ch. 111, pars. 1102(5), (8), 1103.) The affidavits establish that Fentress was not licensed either by the City of Chicago or the State of Illinois. That failure is a violation of the Illinois Plumbing License Law and is punishable as a misdemeanor. Ill.Rev.Stat.1989, ch. 111, pars. 1103, 1128.

Hodge therefore carried the burden of going forward.

No counteraffidavit was supplied. For purposes of the motion, the fact that Fentress was not a licensed plumber is deemed admitted. No other matter was presented to refute the defense.

No material fact remains to be resolved. The question is simply whether Hodge is entitled, as a matter of law, to a judgment of dismissal in view of the defense asserted under UCC section 3-305.

"Illegality" under Section 3-305

Section 3-305 provides, in relevant part:

"[A] holder in due course * * * takes the instrument free from

* * * * * *

(2) all defenses of any party to the instrument with whom the holder has not dealt except

* * * * * *

(b) * * * illegality of the transaction, as renders the obligation of the party a nullity." (Ill.Rev.Stat.1989, ch. 26, par. 3-305.)

The concern is whether noncompliance by Fentress with the Illinois Plumbing License Law gives rise to "illegality of the transaction" with respect to the contract for plumbing services so as to bar the claim of the Currency Exchange, a holder in due course of the check initially given Fentress.

The issue of "illegality" arises "under a variety of statutes." (Ill.Ann.Stat., ch. 26, par. 3-305, Uniform Commercial Code Comment, at 66 (Smith-Hurd Supp.1992).) In view of the diverse constructions to which statutory enactments are given, "illegality" is, accordingly, a matter "left to the local law." (Ill.Ann.Stat., ch. 26, par. 3-305, Uniform Commercial Code Comment, at 66 (Smith-Hurd Supp.1992).) Even so, it is only when an obligation is made "entirely null and void" under "local law" that "illegality" exists as one of the "real defenses" under section 3-305 to defeat a claim of a holder in due course. (Ill.Ann.Stat., ch. 26, par. 3-305, Uniform Commercial Code Comment, at 66 (Smith-Hurd Supp.1992).) In effect, the obligation must be no obligation at all. If it is "merely voidable" at the election of the obligor, the defense is unavailable. Ill.Ann.Stat., ch. 26, par. 3-305, Uniform Commercial Code Comment, at 66 (Smith-Hurd Supp.1992).

Historically, this court has recognized...

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