North Shore Sign Co., Inc. v. Signature Design Group, Inc.

• Decision Date: 08 December 1992
• Docket Number: No. 2-91-1407,2-91-1407
• Citation: 604 N.E.2d 1157,178 Ill.Dec. 634,237 Ill.App.3d 782
• Parties: , 178 Ill.Dec. 634 NORTH SHORE SIGN COMPANY, INC., Plaintiff-Appellee, v. SIGNATURE DESIGN GROUP, INC., Defendant (Hwy, Ltd., d/b/a Yan's Hunan Inn Restaurant, Defendant-Appellant).
• Court: United States Appellate Court of Illinois

Page 1157

604 N.E.2d 1157

237 Ill.App.3d 782, 178 Ill.Dec. 634

NORTH SHORE SIGN COMPANY, INC., Plaintiff-Appellee, v. SIGNATURE DESIGN GROUP, INC., Defendant (Hwy, Ltd., d/b/a

Yan's Hunan Inn Restaurant, Defendant-Appellant).

No. 2-91-1407.

Appellate Court of Illinois,

Second District.

Dec. 8, 1992.

David Drenk, Donovan and Roberts, P.C., Wheaton, Drake James Leoris, Leoris & Cohen, P.C., Highland Park, for Hwy, Ltd.

Thomas L. Sbertoli, Graham, Graham & Sbertoli, Ltd., Libertyville, for North Shore Sign Co.

Justice GEIGER delivered the opinion of the court:

The defendant, Hwy, Ltd., d/b/a Yan's Hunan Inn Restaurant (Hwy or defendant), appeals from the trial court's order of October 24, 1991, denying sanctions sought pursuant to Supreme Court Rule 137 (134 Ill.2d R. 137) against the plaintiff, North Shore Sign Co., Inc. The court denied sanctions after hearing the arguments of the parties but apparently without the benefit of an evidentiary hearing. The appeal is before this court following a Rule 304(a) finding (134 Ill.2d R. 304(a)) that there is no just reason to delay enforcement or appeal of the order denying sanctions.

On appeal, the defendant contends that it was an abuse of discretion for the trial court to deny an award of attorney fees incurred when the defendant responded to the plaintiff's amended motion to vacate an order granting summary judgment to the defendant and denying the plaintiff's motion for summary judgment on the plaintiff's petition to remove signs which plaintiff had fabricated and installed at the defendant's restaurant. The defendant argues that the plaintiff's amended motion to vacate the summary judgment was not warranted by existing law because the plaintiff invoked certain provisions of the Mechanics Lien Act (Act) (Ill.Rev.Stat.1989, ch. 82, par. 1 et seq.) without reasonable inquiry into the law. The defendant asserts that the signs were not permanent, lienable fixtures under that act; rather, they were movable "trade" fixtures or goods whose removal was more properly governed by an action for replevin. We reverse the order of the trial court and remand the cause for further findings of fact and law sufficient to support its decision.

The record reveals that on December 1, 1988, the defendant, as tenant of the premises, entered into a contract with Signature Design Group, Inc. (Signature or contractor), an architectural and engineering design firm. According to the contract, Signature was to construct certain improvements on the premises located at 100 North Milwaukee Avenue in Libertyville, Illinois. Among other things, the contractor was to provide the defendant with two exterior signs. The plaintiff's contract to install the signs, dated May 23, 1989, had a contract price of $8,612 plus the cost of the permit fees.

On the verso of the contract was a provision which stated, in pertinent part:

"9. Title to all materials and property covered by this contract shall remain in Company [plaintiff] and shall not be deemed to constitute a part of the realty to which it may be attached until the purchase price is paid in full. Company is given an express security interest in said material and property both erected and unerected notwithstanding the manner in which such personal property shall be annexed or attached to the realty. In the event of default by Purchaser * * *, Company may at once (and without process of law) take possession and remove * * * all materials used or intended for use in this construction of said equipment * * * without being deemed guilty of trespass."

The contract further provided that the contractor was to pay on receipt of the invoice, and after 30 days an interest charge would be added. The defendant claims not to have been present during the contract negotiations and did not take part in the selection of plaintiff, but did submit information to the contractor regarding the logo, style and colors of the sign which the contractor passed on to the plaintiff.

The defendant submitted an affidavit in support of its cross-motion for summary judgment in which its president, Cheng Ysen Yan, states that, on March 17, 1989, Chris Nesbitt, the president of Signature, represented to the defendant that the two signs were ordered but he did not advise the defendant from whom the signs were ordered. The affidavit further states that the contractor had promised substantial completion of the improvements by May 15, 1989, but the contractor failed to perform within that time and thereafter represented that the work would be performed by June 30, 1989. By June 8, 1989, the defendant had made progress payments to the contractor totalling $204,375.18, whereas the total original contract price was $245,000.

On June 30, 1989, the plaintiff began installing the signs on the defendant's leasehold premises and completed the installation on July 7, 1989. The invoice for the signs was dated July 10, 1989. The defendant's affidavit states that, on or about July 28, 1989, the defendant's president and Chris Nesbitt of Signature, among others, had a meeting during which the defendant became aware that certain subcontractors had not been paid in full. Defendant was assured that payment would be made by Signature to various subcontractors, including the plaintiff, who had already performed work at the premises.

According to the plaintiff's answer to the defendant's interrogatories, beginning on July 30, 1989, the plaintiff's president, Victor Laska, made demands for payment on Signature. The plaintiff, however, did not record a notice of a claim of a mechanics' lien regarding the work on defendant's premises. On or about July 31, 1989, the defendant contemplated terminating Signature's services.

Signature never completed its performance, and the defendant claimed that it was not entitled to full payment of the $245,000 contract price after August 9, 1989. The defendant did pay other contractors and suppliers after August 12, 1989, to complete the project. On September 6, 1989, the defendant attempted to ascertain from Signature whether the two exterior signs had been paid for out of the $204,375.18 paid by the defendant. The plaintiff had not been paid.

On September 13, 1990, the plaintiff filed its verified complaint. Count I, sounding in contract or quantum meruit, claimed that the plaintiff had fabricated and installed the signs for the benefit of defendant, Yan's Hunan Inn Restaurant (Hwy), that demand for payment of $9,028.50 had been made upon the defendants, Hwy and Signature, and that the amount remained due. Count II sought payment in the amount of $435 for other work done at the request of Signature.

On December 20, the plaintiff filed a petition to remove the signs, stating that it had not been paid for the signs. It claimed it had made numerous demands on Signature and other parties to the action, and that it could remove the signs from the building without noticeable trace of that removal. The defendant (Hwy) filed a motion to dismiss the petition, arguing that it had become a judgment and a lien creditor of Signature in another case pending in the circuit court where it had filed a counterclaim alleging breach of contract by Signature and fraud by Nesbitt. (The record discloses that, in that other cause, on October 29, 1990, there was a judgment entered in favor of Hwy in the amount of $263,042.10 for compensatory damages against Signature and Nesbitt and $350,000 for punitive damages against Nesbitt.) The court denied the motion to dismiss the petition to remove on January 23, 1991.

The defendant's answer to the verified complaint and the petition to remove the signs admitted that the plaintiff had not been paid for signs, but denied that the plaintiff had a right to demand payment from the defendant or that the defendant had a duty to make payment. The defendant claimed that it had "paid value" for the signs to Signature. As an affirmative defense, the defendant claimed that it had made progress payments through June 8, 1989, and that it had no knowledge of the agreement between the plaintiff and Signature. The defendant further stated that Signature was not entitled to full payment of the contract price until it completed its performance and that it had never completed its performance. Defendant claimed that the plaintiff's reservation of title merely created a security interest in the signs when they were affixed to the defendant's leasehold premises (citing Ill.Rev.Stat.1989, ch. 26, par. 2-401). The defendant maintained that it was a good-faith purchaser for value and had title to the signs (citing Ill.Rev.Stat.1989, ch. 26, par. 2-403). Additionally, the defendant claimed that it became a lien creditor when Signature was served with a citation to discover assets on December 7, 1990.

On March 19, 1991, the plaintiff filed its motion for summary judgment on the petition to remove the signs. The plaintiff argued that the defendant was not a good-faith purchaser for value because its last payment to Signature was on June 8, 1989, before the signs were installed and before the invoice was sent; and that the amounts paid did not include funds for the signs. The plaintiff also asserted that the defendant had notice that the signs were not paid for. The plaintiff argued that it retained title or a security interest in the signs and that its interest was superior to that of the defendant. The plaintiff also maintained that, even if it had an unperfected security interest, it was a purchase money security interest which attached first in time and had priority. The affidavit of the plaintiff stated that the signs were anchored with two or more bolts and could be removed without noticeable damage.

In its memorandum in support of its cross-motion for summary judgment, the defendant essentially argued that its right in the signs was superior to the plaintiff's because the signs were movable goods, that it was a good-faith purchaser for value, and...