2012 IL App (3d) 110008
Ill. App. Ct.2012Background
- On April 29, 2003, the Schafers borrowed $30,000 from UnionBank and signed a commercial security agreement (CSA) granting a security interest in inventory, equipment, and farm products, with the “All Debts” box checked.
- In 2005 the Bank foreclosed on 18 real estate mortgages; in December 2005 the Bank discovered the CSA and, relying on it, arranged for the Schafers’ farm equipment to be taken from their farm, seized December 27, 2005.
- In March 2006 the Schafers filed a complaint for declaratory judgment seeking return of the property and sought a preliminary injunction; the property was sold at auction shortly after the injunction denial.
- By 2009 the Schafers filed a second amended complaint for conversion; the Bank attached the CSA as an affirmative defense; Hunt’s affidavit contradicted a true copy claim, and the trial court struck Hunt’s affidavit and granted summary judgment for the Bank.
- The 2010 Bank summary judgment was challenged; the Schafers argued mutual mistake in the CSA and raised the Credit Agreements Act issue; appellate court ultimately reversed and remanded, allowing challenge to the CSA to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Schafers adequately pled mutual mistake to challenge the CSA | Schafer raised mutual mistake via Hunt’s affidavit/deposition showing error in the CSA | No proper pleading of reformation; need to plead reformation | Pleadings sufficient to raise mutual mistake; summary judgment improper |
| Whether the Credit Agreements Act bars challenge to the CSA in a conversion action | Act does not bar challenging the CSA when raised as a defense in conversion | Act precludes actions related to a credit agreement | Act does not preclude such challenge; issues of fact remain required; remand warranted |
| Whether summary judgment was proper given the CSA’s alleged lack of authority | There are genuine issues about whether CSA authorized taking of property | CSA authorized taking as written; no modification; no genuine issue | Not proper; reversal and remand for further proceedings |
Key Cases Cited
- Douglas s v. Wones, 120 Ill. App. 3d 36 (Ill. App. 1983) (elements of conversion require unauthorized control and right to possession)
- Briarcliffe Lakeside Townhouse Owners Ass’n v. City of Wheaton, 170 Ill. App. 3d 244 (Ill. App. 1988) (pleading mutual mistake requires facts answering who/when/where)
- All Brake & Drive Unit Service, Inc. v. Peterson, 69 Ill. App. 3d 594 (Ill. App. 1979) (mutual mistake can be pled by showing contract terms not in line with original agreement)
- IMC Global v. Continental Insurance Co., 378 Ill. App. 3d 797 (Ill. App. 2007) (reformation/claims distinguished; pleading sufficiency; evidence not a substitute for pleadings)
- Bank One, Springfield v. Roscetti, 309 Ill. App. 3d 1048 (Ill. App. 1999) (credit agreements act precludes actions related to a credit agreement)