Sanwa Business Credit Corp. v. Continental Illinois Nat. Bank and Trust Co. of Chicago

• Decision Date: 18 May 1993
• Docket Number: No. 1-91-4084,1-91-4084
• Citation: 187 Ill.Dec. 45,617 N.E.2d 253,247 Ill.App.3d 155
• Parties: , 187 Ill.Dec. 45, 23 UCC Rep.Serv.2d 457 SANWA BUSINESS CREDIT CORPORATION, Plaintiff-Appellant, v. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 253

617 N.E.2d 253

247 Ill.App.3d 155, 187 Ill.Dec. 45,

23 UCC Rep.Serv.2d 457

SANWA BUSINESS CREDIT CORPORATION, Plaintiff-Appellant, v. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Defendant-Appellee.

No. 1-91-4084.

Appellate Court of Illinois First District, Second Division.

May 18, 1993.

Sachnoff & Weaver, Ltd., Chicago (Arnold A. Pagniucci, of counsel), for defendant-appellee.

Arnstein & Lehr, Chicago (Richard H. Ferri, of counsel), for plaintiff-appellant.

Justice DiVITO delivered the opinion of the court:

Plaintiff Sanwa Business Credit Corporation (Sanwa) wrote five checks to multiple payees on its account with defendant Continental Illinois National Bank (Continental) in connection with four transactions with Golf Car World and Golf Car Leasing (collectively, Golf). Continental debited Sanwa's account even though one of the co-payees had not endorsed the checks. When Sanwa demanded over a year later that Continental recredit its account, Continental refused. Sanwa then filed suit alleging that Continental had charged its account for items that were not "properly payable," in violation of section 4-401(1) of the Uniform Commercial Code (Ill.Rev.Stat.1985, ch. 26, par. 4-401(1)). The circuit court granted Sanwa's motion for partial summary judgment on liability, but it also granted Continental's subsequent motions for summary judgment on damages. We affirm.

Club Car (Club) manufactures golf cars; Golf Car World is a Club distributor. In 1986, Sanwa and Golf apparently contemplated that Golf, with financing from Sanwa, would purchase 317 golf cars from Club and sell them to Sanwa, which then would lease them back to Golf under equipment lease agreements (the Agreements). Golf in turn would sublet them to golf courses. To this end, Golf and Sanwa entered four separate transactions for the 317 cars. In transactions # 1 and # 3, Golf purchased 165 and 60 cars, respectively, and it leased them from Sanwa for sublet to golf courses for the season. In transaction # 2, Golf purchased 32 cars, which it leased from Sanwa to be used intermittently as a "tournament fleet." In transaction # 4, Golf purchased 60 cars that Sanwa leased directly to a country club. Nothing in the record, however, indicates that Golf sold the cars to Sanwa after purchasing them from Club.

To fund Golf's purchase of the cars, Sanwa wrote five checks, totaling over $800,000, on its account with Continental; each check was made to the order of Golf ¹ and Club as co-payees. Only Golf endorsed the checks, which it deposited at another bank. Golf purchased over 317 cars with checks to Club in amounts different from the Sanwa checks. Golf performed the Agreements for a while, but its owner later filed for bankruptcy. Sanwa recovered only $200,000 because it found only 100 of the cars, which had been scattered all over the country. Sanwa then noticed the missing endorsements, but Continental would not recredit its account for the face value of the checks.

The record contains no bills of sale or title documents, ² but it does include various other documents, such as the three Agreements between Golf and Sanwa; the agreement between Sanwa and the country club; invoices from Club to Golf and from Golf to Sanwa; the five checks; delivery and acceptance certificates from Golf and the golf courses; lease assignments from Golf to Sanwa for all the subleases; guarantees from Golf's owner and another person for the three Sanwa/Golf Agreements; and Sanwa's Uniform Commercial Code (UCC) filings to protect its security interest in the cars.

In its second amended complaint, Sanwa alleged that Continental had improperly paid the checks over the missing endorsement. It also alleged that (1) Continental knew the nature of Sanwa's transactions with Golf and that Sanwa had made the checks out to joint payees to verify the existence of the cars and their conveyance from Club to Golf; (2) Sanwa was relying on Continental to get the endorsement of Club for these reasons; and (3) Club had not received the proceeds of the checks. Were it not for Continental's breach of its statutory duty to Sanwa, Sanwa alleged, it would have been put on notice of the irregularities of Gulf's purchases and could have avoided its losses.

Continental responded that Sanwa suffered no damages because Club, the intended co-payee, had been paid for the 317 cars, the purpose of the checks. It also raised other affirmative defenses, including ratification and lack of causation. In reply, Sanwa denied that Club received the proceeds of the checks for the purposes intended.

Sanwa moved for partial summary judgment on the issue of liability on all five checks. It argued that Continental had paid the checks despite the missing endorsements and that by charging Sanwa's account for these checks, Continental violated section 4-401(1) of the UCC (Ill.Rev.Stat.1985, ch. 26, par. 4-401). The court granted Sanwa's motion.

Next, Continental moved for summary judgment on the issue of damages from the four checks for the first three transactions. It argued among other things that the undisputed facts showed that Club had received the proceeds of the checks for the purchase of the 257 cars in those transactions and that Sanwa's loss, if any, was not caused by Continental's improper payment. Sanwa countered that summary judgment would be improper in light of the remaining issues of material fact concerning whether Club received the proceeds of the checks, and even if Club had received the proceeds, whether the proceeds were applied for their intended purposes and what those purposes were. In reply, Continental claimed that it was undisputed that the proceeds of the checks for the first three transactions were used to purchase the cars as Sanwa intended, so Sanwa had suffered no damage. After a hearing, the circuit court granted Continental's motion, stating "[t]here is no genuine issue of material fact as to damages. Based on the exhibits, Sanwa sustained no damage as a direct result of the defendant's breach."

Sanwa moved for reconsideration or clarification, claiming (1) that Continental had not met its burden of proof; (2) material questions of fact existed as to whether Golf had purchased the 257 cars in the first three transactions; and (3) the intended purpose of the checks was at issue, stressing that questions of intent are particularly inappropriate for summary judgment disposition. At the same time, Continental filed a "supplemental" motion for summary judgment on the issue of damages from the check for the fourth transaction, based on evidence discovered after its earlier motion.

After a hearing, the court granted Continental's supplemental motion for summary judgment and denied Sanwa's motion for reconsideration.

I.

The standard of review for the grant or denial of a motion for summary judgment under section 2-1005 of the Code of Civil Procedure (Ill.Rev.Stat.1989, ch. 110, par. 2-1005) is a familiar one:

"Although the use of summary judgment is encouraged as an aid in expeditious disposition of a lawsuit, it is a drastic means of disposing of litigation and should only be allowed when the right of the moving party is free from doubt. [Citation.] 'In determining whether the moving party is entitled to summary judgment, the court must construe the pleadings, depositions, admissions and affidavits strictly against the movant and liberally in favor of the opponent.' [Citations.] In short, '[a] motion for summary judgment is to be decided on the basis of the record as it exists at the time the motion is heard.' [Citation.]

Furthermore, it is well established that in deciding a motion for summary judgment, the court may draw inferences from the undisputed facts. However, where reasonable persons could draw divergent inferences from the undisputed facts, the issue should be decided by the trier of fact and the motion should be denied. [Citation.] In light of the standard, the trial court does not have any discretion in deciding the matter." (Loyola Academy v. S & S Roof Maintenance, Inc. (1992), 146 Ill.2d 263, 272, 166 Ill.Dec. 882, 886, 586 N.E.2d 1211, 1215.)

Accordingly, the de novo standard of review is applied (In re Estate of Hoover (1992), 226 Ill.App.3d 422, 427, 168 Ill.Dec. 499, 589 N.E.2d 899, 903), and "the trial court's summary judgment may be affirmed on any basis appearing in the record whether or not the court relied on that basis or its reasoning was correct." Ray Dancer Inc. v. The DMC Corporation (1992), 230 Ill.App.3d 40, 50, 171 Ill.Dec. 824, 831, 594 N.E.2d 1344, 1351.

As for the quantum of evidence necessary to prevail on or defend against a motion for summary judgment,

"where a party moving for summary judgment files supporting affidavits containing well-pleaded facts and the party opposing the motion files no counteraffidavits, the material facts set forth in the movant's affidavits stand as admitted. If the opponent fails to controvert the proofs offered in support of the motion and the movant's showing of uncontradicted facts would entitle him to judgment as a matter of law, then summary judgment is proper." (East Side Fire Protection District v. Belleville (1991), 221 Ill.App.3d 654, 657, 164 Ill.Dec. 192, 195, 582 N.E.2d 755, 758.)

With these principles in mind, we turn to the merits.

II.

A checking account creates a contractual, debtor-creditor relationship between a bank (the drawee or payor bank) and its customer (the drawer); under this contract, a bank has an absolute duty to its customer to pay only the payee(s) named on a check. (National Bank of Monticello v. Quinn (1988), 126 Ill.2d 129, 134-35, 127 Ill.Dec. 764, 767, 533 N.E.2d 846, 849, quoting United States Cold Storage Co. v. Central Manufacturing District Bank (1931), 343 Ill. 503, 513, 175 N.E. 825, and Cosmopolitan State Bank v. Lake Shore Trust & Savings Bank (1931), 343 Ill. 347, 351-52, 175 N.E. 583.) In National Bank of Monticello, for...