author: JUSTICE McCULLOUGH

text:
    BOB PIERCE, Plaintiff-Appellant, v. TEE-PAK, INC., Defendant-Appellee.-NORMA STEPHENSON, Plaintiff-Appellant, v. GENERAL ELECTRIC COMPANY, Defendant-Appellee.
    Fourth District
    Nos. 4—89—0562, 4—89—0669 cons.
    Opinion filed April 5, 1990.
    Rehearing denied May 24, 1990.
    Serkland & Muelhausen, of Chicago (James C. Serkland, of counsel), for appellants.
    Cohn, Lambert, Ryan, Schneider & Harman, of Chicago (Michael R. Schneider, of counsel), for appellee Tee-Pak, Inc.
    Dukes, Martin, Helm & Ryan, Ltd., of Danville (John F. Martin, of counsel), for appellee General Electric Co.
   JUSTICE McCULLOUGH

delivered the opinion of the court:

This consolidated appeal concerns applications for judgment pursuant to section 19(g) of the Workers’ Compensation Act (Act) (Ill. Rev. Stat. 1987, ch. 48, par. 138.19(g)). Plaintiffs’ applications were dismissed on the basis that at the time checks were tendered by the employers and accepted by the plaintiffs, case law did not permit the award of additional interest pursuant to section 2 — 1303 of the Civil Practice Law (Ill. Rev. Stat. 1987, ch. 110, par. 2—1303). Further, the circuit court determined that retroactive application of current case law was not permitted. On appeal, plaintiffs argue the recent decisions on this matter apply retroactively to their claims for interest, and sanctions under section 19(g) are appropriate in their actions. For the reasons that follow, we reverse the trial court but deny plaintiffs’ request for sanctions.

The facts of each case will be cited separately. On June 20, 1982, plaintiff Norma Stephenson was found totally disabled by the arbitrator as a result of a work-related injury on July 23, 1980, and awarded $180 per week for life. On review, the Industrial Commission (Commission) affirmed the arbitrator. On further review to the circuit court of Vermilion County and to this court, the decision was affirmed. (General Electric Co. v. Industrial Comm’n (4th Dist. 1985), No. 4—84—0654WC (unpublished order under Supreme Court Rule 23).) The appellate court mandate issued on January 16,1986.

In her section 19(g) application filed on January 19, 1989, Stephenson alleged the compensation accrued to June 20, 1982, was $2,605.93; and interest of $564.13 on this amount pursuant to section 19(n) of the Act (Ill. Rev. Stat. 1987, ch. 48, par. 138.19(n)) was calculated from June 21, 1982, to January 28, 1986, the date Stephenson’s employer, General Electric, tendered a check to Stephenson in the total amount of $37,547.25. The application alleged the compensation accrued from June 21, 1982, to January 28, 1986, was $33,865.69. Stephenson asked for interest on $33,865.69 pursuant to section 2— 1303 and calculated this interest to be $5,355.88. Stephenson alleged the check tendered by General Electric on January 28, 1986, included $36,471.62 for compensation and $1,075.63 in interest. Stephenson also asked for $14,668.43 in sanctions against General Electric pursuant to section 19(g).

On January 29, 1982, Bob Pierce was found totally disabled by the arbitrator from a work-related injury on April 20, 1978, and awarded $213.72 per week for specified periods before the arbitrator’s decision up to April 1, 1980, and from April 23, 1980, for life. On review, the Commission affirmed the arbitrator. On further review to the circuit court of Vermilion County and to this court, the decision was affirmed. (Tee-Pak, Inc. v. Industrial Comm’n (1986), 141 Ill. App. 3d 520, 490 N.E.2d 170.) The appellate court mandate issued on April 4,1986.

In his section 19(g) application filed on January 19, 1989, Pierce alleged the compensation accrued to January 29, 1982, was $24,272.48. Pierce stated interest on this amount pursuant to section 19(n) is $6,192.43, calculated from January 29, 1982, to May 1, 1986, the date Pierce’s employer, Tee-Pak, tendered a check to Pierce in the total amount of $75,058.39. In the application, Pierce alleged the compensation accrued from January 29, 1982, to May 1, 1986, was $47,384.77. Pierce asked for interest on $47,384.77 pursuant to section 2 — 1303 and calculated this interest to be $9,071.45. Pierce stated the check tendered on May 1, 1986, included $71,657.25 for compensation and $3,401.14 for interest. Pierce also asked for $17,880.22 in sanctions against Tee-Pak pursuant to section 19(g).

Both General Electric and Tee-Pak filed motions to dismiss the respective applications. Tee-Pak alleged the interest issue was only recently decided by the courts and these recent cases have no retroactive application to this appeal. General Electric alleged the application was without merit and had no basis in law.

On June 16, 1989, the trial court dismissed Pierce’s application. The trial court reasoned that court decisions addressing interest under section 2 — 1303 were not rendered until after the time of tender on May 1, 1986, and further that these decisions could not be applied retroactively.

Similarly, on July 31, 1989, the trial court dismissed Stephenson’s application. The trial court found Stephenson recalculated the interest due her after Ballard v. Industrial Comm’n (1988), 172 Ill. App. 3d 41, 526 N.E.2d 675, was issued in 1988. The trial court found Ballard could not be applied retroactively and sanctions were precluded because there was a genuine dispute as to whether any amounts were owing from General Electric after January 28, 1986. The cases were consolidated on October 5, 1989, by order of this court.

Plaintiffs argue the trial court erred in determining that recent case law addressing the interest issue may not be applied retroactively to plaintiffs’ cases. Both argue their acceptance of checks in 1986 does not bar their right to apply for additional interest in 1989 under section 19(g) and the trial court’s reliance on their acceptance is misplaced. Pierce argues that between May 1, 1986, and December 1988, he demanded further interest, which Tee-Pak refused to pay.

Courts have inherent power to determine whether their decision should be prospectively or retroactively applied. (Larrance v. Human Rights Comm’n (1988), 166 Ill. App. 3d 224, 230, 519 N.E.2d 1203, 1207-08.) Whether a rule will be applied prospectively will depend on whether the decision establishes a new principle of law,

“ ‘either by overruling clear past precedent on which litigants may have relied [citation], or by deciding an issue of first impression whose resolution was not clearly foreshadowed.’ (Board of Commissioners of Wood Dale Public Library District v. County of Du Page (1984), 103 Ill. 2d 422, 426-27 [, 469 N.E.2d 1370, 1372.]” (Elg v. Whittington (1987), 119 Ill. 2d 344, 357, 518 N.E.2d 1232, 1238.)

As a general rule, a decision will be applied retrospectively unless the court expressly declares that its decision is a clear break with past precedent or practice. (Larrance, 166 Ill. App. 3d at 230, 519 N.E.2d at 1208.) It has been held that judicial interpretation of a statute does not necessarily constitute a change in the law. People v. Crete (1986), 113 Ill. 2d 156, 497 N.E.2d 751 (language in section 5 — 8—1(c) of the Unified Code of Corrections (Ill. Rev. Stat. 1983, ch. 38, par. 1005—8—1(c)) regarding reduction or modification of sentences by the trial court is mandatory, not permissive, and is applied retroactively).

In the present case, the cases which the plaintiffs argue should be applied retroactively are Ballard, 172 Ill. App. 3d 41, 526 N.E.2d 675, Kuhl v. Industrial Comm’n (1986), 147 Ill. App. 3d 519, 498 N.E.2d 240, Aper v. National Union Electric Corp. (1988), 165 Ill. App. 3d 482, 519 N.E.2d 117, and Bray v. Industrial Comm’n (1987), 161 Ill. App. 3d 87, 513 N.E.2d 1045. The Kuhl case addressed matters not presented in this appeal. In Bray, the court discussed section 19(n) and section 2 — 1303 and concluded each provision allowed for interest under separate circumstances. Namely, the Interest Act provisions (now section 2 — 1303) still applied to judgments entered by court on an award of the Industrial Commission, despite the enactment in 1975 of section 19(n). In Bray, the court held an employee who brought a section 19(h) proceeding directly to the Commission was entitled to interest under section 2 — 1303. That court noted sections 19(n) and 2 — 1303 are in pari materia and should be construed together as though they were one statute.

In Aper, an arbitrator’s award was reduced on review by the Commission and, thus, not eligible for interest under the then existing version of section 19(n). The court relied in part on language in Bray in determining that the claimant was entitled to interest under section 2 — 1303. The Aper court also noted the supreme court’s decision in Proctor Community Hospital v. Industrial Comm’n (1971), 50 Ill. 2d 7, 276 N.E.2d 342. In Proctor, a pre-section 19(n) case, the court held the Interest Act allowed recipients of workers’ compensation awards to receive interest from the date of the arbitrator’s award. According to the Aper court, the enactment of section 19(n) did not overrule Proctor, but narrowed its applicability to those cases not within the purview of section 19(n).

Finally, in Ballard, the court again discussed the applicability of sections 19(n) and 2 — 1303. The claimant in Ballard received an increased award on second review by the Commission, 41/2 years after the arbitrator’s award. The employer paid the Commission award to the employee two years later. The court determined the employee was entitled to interest under section 19(n) on the benefits accrued to the date of the arbitrator’s award if any benefits paid up to that date were found by the trial court to be insufficient to cover all benefits due. The court also determined the employee was entitled to interest under section 2 — 1303 on benefits accruing after the arbitrator’s award. The court stated the two sections must be considered in pari materia and noted the purpose of assessing interest was to encourage prompt payment of awards. This purpose applies equally to awards accruing before and after arbitrators’ awards.

We conclude these cases apply retroactively. The rule announced in these cases did not overrule past precedent but explained the applicability of two statutes, substantially unchanged between 1986 and 1988. The current provisions of section 19(n) were in effect in 1986 when the plaintiffs received their checks. Likewise, the current provisions of section 2 — 1303 were in effect in 1986, with minor exceptions not relevant to this case. No explanation for the delay in seeking judgment under section 19(g) appears in the records or in the parties’ briefs. There is no time period in section 19(g) within which an employee must file for judgment. However, had these claimants filed for judgment in 1986, Ballard makes clear the statutes then in force would have allowed them to recover interest under section 2— 1303 for compensation accrued after the arbitrator’s award and unpaid for almost four years. Therefore, we reverse the trial court and remand this cause to that court for calculation of interest due plaintiffs.

Plaintiffs also contend that under present authority, they are entitled to sanctions under section 19(g) for their employers’ refusal to pay benefits immediately after the arbitrator’s award. Specifically, plaintiffs rely on Ballard, where sanctions under section 19(g) were awarded because of the employer’s refusal to pay benefits for two years after the Commission’s award for permanent disability. Ballard is distinguishable from the matters presented by this appeal. There, the employer paid the underlying award of the Commission after the completion of all appeals, which occurred two years later. However, the employer refused to pay any benefits which accrued after the initial award; thus, sanctions were appropriate. Here, there is no dispute that the employers paid all the compensation due as of the date of payment. Sanctions under section 19(g) are not authorized where all compensation has been paid.

The orders of the trial court are reversed, and this cause is remanded for the calculation of interest due the employees under section 19(n) and section 2 — 1303.

Reversed and remanded with directions.

KNECHT, P.J, and STEIGMANN, J., concur.


source: Caselaw Access Project

author: JUSTICE LORENZ

license: Public Domain

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellant, v. KEITH GARMON, Defendant-Appellee.
    First District (5th Division)
    No. 1—87—2819
    Opinion filed March 30, 1990.

      Cecil A. Partee, State’s Attorney, of Chicago (Inge Fryklund, Catharine M. Forest, and Eileen Rubin, Assistant State’s Attorneys, of counsel), for the People.
    Randolph N. Stone, Public Defender, of Chicago (Edwin A. Burnette, Assistant Public Defender, of counsel), for appellee.
   JUSTICE LORENZ

delivered the opinion of the court:

Defendant was indicted for theft (Ill. Rev. Stat. 1985, ch. 38, par. 16 — 1(a)(1)) and burglary (Ill. Rev. Stat. 1985, ch. 38, par. 19 — 1(a)) and his motion to quash his arrest and suppress evidence was granted. The State appeals from that order under Supreme Court Rule 604(a)(1) (107 Ill. 2d R. 604(a)(1)). We address the issue of whether the trial court’s ruling that the police did not have probable cause to arrest defendant was against- the manifest weight of the evidence. We affirm.

The only witness at the hearing on defendant’s motion to quash and suppress was Officer Sam Cozzo, who testified that on April 23, 1987, at approximately 1 p.m., he and Officer Paul O’Donnell responded separately to a call at Northwestern Memorial Hospital. When Cozzo arrived, defendant was in a hospital security room with Frank Ramos and several other people, all of whom were hospital security guards. Ramos told Cozzo that defendant approached him on hospital property and offered to sell him camera equipment for $100. Ramos contacted the police. Based on his previous experience as a photographer, Cozzo estimated that the equipment was worth $1,500. The equipment was not packaged but appeared brand new. Cozzo advised defendant of his Miranda rights and then questioned him. Defendant told Cozzo that he bought the equipment from another person for $50 two weeks earlier and he did not have a receipt for it. Defendant stated he was attempting to sell the equipment to support his drug habit. At some point, Cozzo telephoned the police department from the hospital with the serial numbers from the equipment and learned that the equipment was not reported stolen. On direct examination, Cozzo testified that after he arrested defendant, he questioned him, but on cross-examination, he testified that he arrested defendant after he questioned him. The trial judge did not make a finding on when defendant was arrested.

The trial court granted defendant’s motion to quash the arrest and suppress evidence for lack of probable cause, and the State now appeals.

Opinion

Defendant was indicted for theft under section 16 — 1(a)(1), which provides that “[a] person commits theft when he knowingly *** [ojbtains or exerts unauthorized control over property of the owner *** and *** [ijntends to deprive the owner permanently of the use or benefit of the property])]” (Ill. Rev. Stat. 1985, ch. 38, par. 16— 1(a)(1).) Defendant was also indicted for burglary under section 19— 1(a), which provides that “[a] person commits burglary when without authority he knowingly enters or without authority remains within a building *** with intent to commit therein a felony or theft.” Ill. Rev. Stat. 1985, ch. 38, par. 19 — 1(a).

Section 107 — 2(l)(c) of the Code of Criminal Procedure of 1963 allows a police officer to make a warrantless arrest when “[h]e has reasonable grounds to believe that the person is committing or has committed an offense.” (Ill. Rev. Stat. 1985, ch. 38, par. 107— 2(l)(c).) “Reasonable grounds” is synonymous with the term “probable cause.” (People v. Wright (1985), 111 Ill. 2d 128, 490 N.E.2d 640.) Probable cause is present when “the police ‘have knowledge of facts which would lead a reasonable man to believe that a crime has occurred and that it has been committed by the defendant.’ ” (Wright, 111 Ill. 2d at 145, 490 N.E.2d at 646, quoting People v. Eddmonds (1984), 101 Ill. 2d 44, 60, 461 N.E.2d 347.) Probable cause must be more than mere suspicion but does not need to rise to the level of proof beyond a reasonable doubt. (People v. Lippert (1982), 89 Ill. 2d 171, 432 N.E.2d 605.) A reviewing court will not disturb a trial court’s finding on a motion to quash arrest and suppress evidence unless it was against the manifest weight of the evidence. Wright, 111 Ill. 2d 128, 490 N.E.2d 640.

We note that from the record there is some question as to when defendant was arrested. Cozzo testified he arrested defendant and then “talked” to him, but he also testified that defendant was first questioned and then arrested. It is clear that defendant was placed in a security room with two police officers, read his Miranda rights, and then questioned. An arrest occurs when the circumstances are such that a reasonable person would conclude he was not free to leave. (Wright, 111 Ill. 2d 128, 490 N.E.2d 640.) The testimony arguably established that defendant was arrested prior to questioning, which would render testimony as to what occurred subsequently irrelevant. However, defendant did not object to Cozzo’s testimony concerning Cozzo’s questioning of defendant. We will therefore consider this testimony in determining whether the trial court’s ruling was against the manifest weight of the evidence.

Based on Cozzo’s testimony, the police knew that defendant attempted to sell camera equipment valued at $1,500 for $100. The equipment appeared new but it was not packaged and defendant did not have a receipt for it. Defendant admitted that he purchased the equipment from another person for $50 and he wanted to sell it to support his drug habit. Also, the police knew that, based on the serial numbers of the equipment, it was not reported to the police as stolen.

The State relies on People v. Struhart (1981), 93 Ill. App. 3d 534, 417 N.E.2d 676, for its argument that probable cause existed to arrest defendant. In Struhart, an assistant terminal manager was informed by two dock foremen that a trailer was “overloaded” with seven cartons of merchandise and the police were contacted. (Struhart, 93 Ill. App. 3d at 535, 417 N.E.2d at 677.) The police obtained the number of the trailer and its manifest, which showed the trailer’s scheduled deliveries. The police followed the trailer, and it made an unscheduled stop. The defendant driver left the trailer, looked up and down a nearby street, and flagged down a truck driven by defendants. The truck backed up to the trailer and some boxes from the trailer were put on the truck. Defendants were arrested for theft, and they moved to quash their arrest and suppress evidence. The trial court granted their motion, and the State appealed, arguing there was probable cause to arrest defendants. The appellate court noted that the officers were justified in relying on the information from ordinary citizens who had no reason to lie. The court found that, based on the surveillance of defendants’ activities, the police had probable cause to believe they were committing a theft.

The facts of Struhart are clearly distinguishable from the case at bar. Most significantly, the police in Struhart observed defendants in the act of committing a theft. While we agree that here, as in Struhart, the police were justified in relying on Ramos’ information that defendant offered to sell him the equipment for $100, the information that the police had at the time of defendant’s arrest was not as strong as in Struhart. In this case, defendant attempted to sell camera equipment for much less than its value to support his drug habit. He did not have a receipt and stated that he purchased the equipment from another person for $50. However, the equipment was not reported as stolen and there was no information that defendant actually stole the equipment. While the testimony may have warranted the suspicion that the equipment defendant attempted to sell was stolen, probable cause is more than mere suspicion. The testimony did not support a finding that probable cause existed for the offenses of theft and burglary. Therefore, we cannot find that the trial court’s ruling was against the manifest weight of the evidence.

Affirmed.

COCCIA, P.J., and GORDON, J., concur.

      Justice R. Eugene Pincham participated in this case prior to his resignation. Since that time, Justice Joseph Gordon was designated the third member of the panel and has read the record and briefs and has listened to the oral argument tape.


text:
    RICHARD S. KRILICH et al., Plaintiffs-Appellants, v. MILLIKIN MORTGAGE COMPANY, Defendant-Appellee (The Mortgage Factory, Inc., Defendant).
    First District (5th Division)
    No. 1—88—0985
    Opinion filed March 30, 1990.

      Allen Weissman, of Chicago, for appellants.
    Propp & Schultz, of Chicago, for appellee.
   JUSTICE LORENZ

delivered the opinion of the court:

Plaintiffs, Richard S. Krilich and Sandra Krilich, appeal from the entry of summary judgment under section 2 — 1005 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 1005) in favor of defendant, Millikin Mortgage Company (Millikin Mortgage). We address the following two issues: whether the trial court properly struck plaintiffs’ affidavits filed in opposition to the motion for summary judgment and whether there was a genuine issue of material fact that Millikin Mortgage was a holder in due course. We reverse and remand. The following facts are relevant to our decision.

On June 28, 1985, plaintiffs filed a one-count complaint alleging that they entered into an adjustable rate mortgage with the Mortgage Factory, Inc. (Mortgage Factory), on March 22, 1984. The mortgage amount was $75,000 and the interest for the first year was 9.75%. Interest for each subsequent year was adjusted by adding a 1.0% margin to a current index figure which was based on United States Treasury securities. The adjustable rate note was attached to the complaint and reflected that the initial interest rate was 9.75% and the margin was 1.0%. Plaintiffs alleged that in March 1985, when the interest rate was scheduled to change, they received a notice from Millikin Mortgage that their monthly mortgage payment had increased. The notice which was attached to plaintiffs’ complaint reflected that the initial interest rate was 9.75% and the margin was 1.5% rather than 1.0%.

Plaintiffs alleged that after they executed the note and mortgage, the note was altered, without their consent or knowledge, to reflect a margin of 1.5%. They alleged that either the Mortgage Factory or Millikin Mortgage altered the note or that Millikin Mortgage had notice that the note was altered. As a remedy, plaintiffs sought to be completely discharged from their obligations under the note.

Millikin Mortgage answered the complaint denying that the terms of the adjustable rate note were as alleged in plaintiffs’ complaint and denying that it had knowledge or notice of an alteration of the note. As an affirmative defense, Millikin Mortgage asserted that it was a holder in due course because it paid value for the note, in good faith, and without notice of any defenses against the note. It also alleged that it did not alter the note. Attached to its answer was a copy of the adjustable rate note, which was also attached as an exhibit to plaintiffs’ complaint. However, Millikin Mortgage’s copy of the adjustable rate note reflected an interest rate of 9.75% and a margin of “1.000” with a line drawn through it and above it was “1.50” with the initials “RSK” and “SK” next to it.

No appearance or answer was filed on behalf of the Mortgage Factory. There was an indication in the record that Mortgage Factory had filed for bankruptcy.

On October 23, 1987, Millikin Mortgage moved for summary judgment on the basis that it was a holder in due course. Attached to its motion was the affidavit of Eugene Pankner, who was the vice-president of Magna Mortgage, formerly known as Millikin Mortgage. On plaintiffs’ motion, the affidavit was stricken because Pankner was not employed by Millikin Mortgage at the time the note was purchased and did not have personal knowledge of the facts stated within that affidavit. Millikin Mortgage filed Pankner’s modified affidavit, which stated that in 1984, Millikin Mortgage was in the business of originating residential mortgages and purchasing mortgages from other lending institutions in the secondary market. In his capacity as vice-president, Pankner was the custodian of the files and records of mortgages originated or purchased by Millikin Mortgage. He reviewed the file concerning plaintiffs’ mortgage and found Millikin Mortgage purchased the note and mortgage on March 28, 1984. He then stated:

“I certify that at the time [plaintiffs’] note and mortgage were negotiated to Millikin Mortgage Co., Millikin Mortgage Co. had received no notice of any irregularity relating to the genuineness of any signatures or initials appearing thereon; if Millikin Mortgage Co. had received any such notice, the notice itself or an entry reflecting same would routinely have been found in the subject file.”

Attached to Millikin Mortgage’s motion for summary judgment were the altered adjustable rate note, which was also attached to its answer, reflecting an initial interest rate of 9.75% and a change in the margin from 1.0% to 1.5%, the mortgage agreement, the assignment agreement between Millikin Mortgage and the Mortgage Factory dated March 22, 1984, and a copy of a check from Millikin Mortgage to the Mortgage Factory for $76,218.75, dated March 28,1984.

Also on October 23, 1987, plaintiffs moved for summary judgment on the basis that there was no question of fact that the document was fraudulently and materially altered, which served to discharge plaintiffs from the obligations of the note. Plaintiffs apparently abandoned their allegation that Millikin Mortgage altered the note and, rather, argued that Millikin Mortgage purchased the note with notice of a fraudulent and material alteration.

Plaintiffs relied on certain documents which were attached to a memorandum in support of their motion for summary judgment. The first two of these documents were the mortgage agreement and the adjustable rate rider which were recorded with the Cook County recorder of deeds on March 30, 1984. The recorded adjustable rate rider reflected an initial interest rate of 11.75% and a margin of 1.0%. A third document was the altered adjustable rate note, which showed an initial interest rate of 9.75% and a change in the margin from 1.0% to 1.5%. The fourth document attached to plaintiffs’ motion was an adjustable rate rider which showed an initial interest rate of 9.75% and a margin of 1.5%. Also attached were plaintiffs’ affidavits which stated that on March 22, 1984, they executed an adjustable rate note, a mortgage agreement, and an adjustable rate rider with the Mortgage Factory. Plaintiffs did not attach copies of these documents to their affidavits. Plaintiffs stated that after the closing date they did not sign or initial any changes in the note and did not authorize anyone to sign or initial changes in the documents.

Plaintiffs also filed Pankner’s deposition for consideration but did not direct the court’s attention to any specific testimony. From our review of the deposition, Pankner testified that he began working for Magna Mortgage in February of 1986. Certain exhibits were identified and marked, and Pankner testified, without objection from Millikin Mortgage, that the following documents, exhibits F, G, and H, were transferred under the assignment agreement between Mortgage Factory and Millikin Mortgage: the adjustable rate note with an initial interest rate of 9.75% and a margin of 1.0% which was changed to 1.5%, the adjustable rate rider with an initial interest rate of 11.75% and a margin of 1.0%, and the mortgage agreement. Pankner also testified:

“Q. You really don’t have any personal knowledge pertaining to the purchase of this note and mortgage do you?
A. No.
Q. All you know is what you saw from this file?
A. That’s right.
Q. After you came to work for Magna?
A. Yes ***. I haven’t even really looked at the file.”

Pankner neither signed the deposition nor waived his right to sign it. Millikin Mortgage did not object to the filing of the deposition in consideration for the motion for summary judgment.

On February 5, 1988, the trial judge granted plaintiffs seven days to file an amended brief in support of their motion for summary judgment, and the hearing was scheduled for February 26, 1988. Plaintiffs did not file the amended brief until February 18, 1988, and attached, among other exhibits, the supplemental affidavits of plaintiffs and the affidavit of Janice Buerkett, a former employee of Millikin Mortgage.

Plaintiffs in their supplemental affidavits stated they did not initial the change on the altered adjustable rate note and the adjustable rate rider and they did not authorize anyone to initial the documents for them.

In Buerkett’s affidavit she stated she worked for Millikin Mortgage from 1982 until 1987. She was a servicing manager at the time Millikin Mortgage purchased plaintiffs’ note and mortgage in March 1984. She stated that “[w]hile [she] was employed by [Millikin Mortgage, plaintiffs’ mortgage] came to [her] attention.” She stated the “original” adjustable rate rider had an interest rate of 11.75% and a margin of 1.0%. Millikin Mortgage then returned the “original documents” to the Mortgage Factory “[b]ecause [the Federal National Mortgage Association] requires a [sic] 1.5000 percentage points. Millikin Mortgage then received the changed documents with a 9.75% yearly interest rate and a 1.5000 percentage points rate calculation. The changes were initialed.” Then she stated, “[t]he most significant problem was that the recorded adjustable rate rider did not match the rate on the note.”

On February 25, 1988, plaintiffs moved for leave to file the amended brief. Millikin Mortgage moved to strike it and the attached affidavits of plaintiffs and Buerkett because they were filed late. The motion was granted, and the order stated, “[i]t is hereby ordered that all pleadings filed by Plaintiffs on February 18, 1988, shall not be considered by this court in hearing the pending motions for summary judgment.” In arguing the motions for summary judgment, plaintiffs relied on their original and supplemental affidavits and Buerkett’s affidavit. Millikin Mortgage stated that the only proper evidentiary materials were plaintiffs’ original and supplemental affidavits and Pankner’s affidavit and deposition. In ruling on the motions for summary judgment, the trial judge did not state on the record what evidentiary materials he considered.

The judge denied plaintiffs’ motion for summary judgment and granted Millikin Mortgage’s motion, finding it was1 a holder in due course. The trial judge also stated that it would grant plaintiffs leave to amend their complaint to allege a cause of action for reformation of the contract, if plaintiffs chose to do so. Plaintiffs apparently declined as the order was entered without such leave granted. Plaintiffs filed a timely notice of appeal.

Opinion

Plaintiffs’ first argument on appeal is that the trial judge improperly struck their amended motion for summary judgment, their supplemental affidavits, and Buerkett’s affidavit, which were filed on February 18, 1988. By court order, however, the amended motion was due on February 16. On Millikin Mortgage’s motion, the judge struck all pleadings filed on February 18, apparently also striking the affidavits.

Under Supreme Court Rule 183 (107 Ill. 2d R. 183), the trial court may extend the time to file any pleading on a showing of good cause. The trial judge, however, denied plaintiffs’ motion to extend the time for filing their amended motion for summary judgment. Striking the brief because it was filed late was a discretionary matter, and from our review of the record, the trial judge did not abuse his discretion. However, the trial judge also struck from consideration the affidavits which were attached to plaintiffs’ motion for summary judgment. Section 2 — 1005(c) of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 1005(c)) allows the party opposing the motion for summary judgment to file counteraffidavits prior to or at the time of the hearing. Although the affidavits appear to have been filed in support of plaintiffs’ motion for summary judgment, they can be construed as counteraffidavits because their substance also attacks the basis of Millikin Mortgage’s motion for summary judgment. Under the rule, plaintiffs’ filing of the affidavits several days prior to the hearing was proper. Therefore, plaintiffs' supplemental affidavits and Buerkett’s affidavit should have been considered in ruling on Millikin Mortgage’s motion for summary judgment.

On appeal Millikin Mortgage argues Buerkett’s affidavit does not meet the requirements of Supreme Court Rule 191(a) (107 Ill. 2d R. 191(a)); however, in the trial court, Millikin Mortgage only attacked the affidavit on the basis that it was not timely filed. Millikin Mortgage has, therefore, waived this argument on appeal. Kolakowski v. Voris (1980), 83 Ill. 2d 388, 415 N.E.2d 397.

The second issue plaintiffs raise on appeal is whether the trial judge properly entered summary judgment in Millikin Mortgage’s favor based on his finding that it was a holder in due course.

Summary judgment should be granted if the pleadings, depositions, and affidavits show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 1005(c).) In ruling on a motion for summary judgment, the court must construe pleadings, depositions, and affidavits strictly against the movant and liberally in favor of the opponent. (Kolakowski, 83 Ill. 2d 388, 415 N.E.2d 397.) Summary judgment “is a drastic means of disposing of litigation” and should only be granted when the movant’s right to summary judgment is “clear and free from doubt.” Purtill v. Hess (1986), 111 Ill. 2d 229, 240, 489 N.E.2d 867, 871.

In seeking discharge from their obligation under the altered adjustable rate note, plaintiffs rely on section 3 — 407 of the Uniform Commercial Code (Ill. Rev. Stat. 1987, ch. 26, par. 3 — 407), which states in relevant part:

“§3—407. Alteration.
* * *
(2) As against any person other than a subsequent holder in due course
(a) alteration by the holder which is both fraudulent and material discharges any party whose contract is thereby changed unless that party assents or is precluded from asserting the defense;
(b) no other alteration discharges any party and the instrument may be enforced according to its original tenor, or as to incomplete instruments according to the authority given.
(3) A subsequent holder in due course may in all cases enforce the instrument according to its original tenor, and when an incomplete instrument has been completed, he may enforce it as completed.” (Emphasis added.)

Under section 3 — 407(2)(a), if the alteration by the holder was fraudulent and material, plaintiffs could only obtain a discharge from the note against Millikin Mortgage if it was not a holder in due course. Ill. Rev. Stat. 1987, ch. 26, par. 3 — 407(2)(a).

A holder in due course takes an instrument for value, in good faith, and without notice that it is overdue, has been dishonored, or of any defense against or claim to it on the part of any person. (Ill. Rev. Stat. 1987, ch. 26, par. 3 — 302.) Although the question of whether one is a holder in due course is one of fact (Atlanta National Bank v. Johnson Tractor Sales (1971), 130 Ill. App. 2d 793, 267 N.E.2d 358), it can be decided on summary judgment if the evidence presented does not reveal a genuine issue of material fact (Hatton v. Money Lenders & Associates, Ltd. (1984), 127 Ill. App. 3d 577, 469 N.E.2d 360).

The only disputed issue between the parties is whether Millikin Mortgage was a holder in due course. Plaintiffs argue that Millikin Mortgage had notice of the fraudulent and material alteration of the note and, therefore, it cannot be a holder in due course. Millikin Mortgage argues that plaintiffs did not present any facts to support their claim that it had notice.

According to the Uniform Commercial Code, a person has notice when he has actual knowledge, he has received notice, or he has reason to know from all the facts and circumstances known to him at the time. (Ill. Rev. Stat. 1987, ch. 26, par. 1 — 201(25).) A purchaser of a note has notice of a claim or defense if

“the instrument is so incomplete, bears such visible evidence of forgery or alteration, or is otherwise so irregular as to call into question its validity, terms or ownership or to create an ambiguity as to the party to pay[.]” (Emphasis added.) (Ill. Rev. Stat. 1987, ch. 26, par. 3 — 304(l)(a).)

When a negotiable instrument is executed at the same time as another writing, they must be read together as a single agreement. (Main Bank v. Baker (1981), 86 Ill. 2d 188, 427 N.E.2d 94; Ill. Ann. Stat., ch. 26, par. 3 — 119, Uniform Commercial Code Comment 3, at 85 (SmithHurd 1963).) The holder of a note must have had notice of a claim or defense at the time the note was negotiated. (Hatton, 127 Ill. App. 3d 577, 469 N.E.2d 360.) We must therefore focus on the circumstances at the time Millikin Mortgage purchased the note based on the evidence presented in support of and in opposition to the motion for summary judgment.

Pankner stated in his affidavit that he reviewed Millikin Mortgage’s file and found it purchased the adjustable rate note on March 28, 1984. Millikin Mortgage’s copy of the note it purchased, which was attached to its answer, showed an initial interest rate of 9.75% with a margin of “1.000” with a line drawn through it and above it was “1.50” with initials next to it. Also, Pankner stated that from his review of the file Millikin Mortgage did not receive actual notice of any irregularity of the note.

In his deposition, Pankner testified that the documents which were the subject of the assignment agreement, dated March 22, 1984, were the adjustable rate note which had an initial interest rate of 9.75% and a change in the margin from 1.0% to 1.5%, the adjustable rate rider which had an initial interest rate of 11.75% and a margin of 1.0%, and the mortgage agreement. Pankner testified that he was not employed by Millikin Mortgage at the time the note was purchased. He testified his information came from the company’s file and that he had not “even really looked at the file.” Millikin Mortgage did not object to this testimony or move to strike the deposition. Also, Pankner did not sign and did not waive his right to sign the deposition, but Millikin Mortgage did not raise an objection. Any objection to Pankner’s competency to testify or to any irregularity of the deposition is waived. 107 Ill. 2d Rules 211(c)(1), (d); Urban v. Village of Inverness (1988), 176 Ill. App. 3d 1, 530 N.E.2d 976.

Buerkett stated in her affidavit that prior to the purchase, Millikin Mortgage rejected certain “original” documents because the margin was not 1.5%. Subsequently, Millikin Mortgage received “changed” documents which had an interest rate of 9.75% and a margin of 1.5%. The documents, whether original or changed, were not attached to the affidavit and were not specifically identified in the affidavit. Plaintiffs relied on Buerkett’s affidavit as raising a question of fact as to whether Millikin Mortgage had notice. However, Buerkett did not specify which documents were involved. Further, under the facts of this case, the fact that Millikin Mortgage may have seen the documents in their original form does not raise a question of fact that it had notice. It was apparent from the face of the note that it was altered.

A purchaser of a note has notice of a fraudulent and material alteration when the note has such visible evidence of alteration “as to call into question its validity, terms or ownership.” (Ill. Rev. Stat. 1987, ch. 26, par. 3 — 304(l)(a).) Millikin Mortgage purchased the adjustable rate note with knowledge that it was visibly altered. However, in this case the mere fact that the note was altered did not call into question its validity, terms, or ownership. Nevertheless, the adjustable rate note stated that it was subject to a mortgage agreement and an adjustable rate rider. The terms of the adjustable rate note and the adjustable rate rider were different. The note stated that the interest rate was 9.75% and the margin was 1.0%, and the rider stated that the interest rate was 11.75% and the margin was 1.5%. The note was the negotiable instrument, and its terms would' control the agreement of the parties despite the conflict. (5 R. Anderson, Uniform Commercial Code §3 — 119:3, at 367, §3 — 119:6, at 369 (3d ed. 1984).) However, the note and rider, because they were executed at the same time, must be read as a single agreement. (Main Bank, 86 Ill. 2d 188, 427 N.E.2d 94.) Further, Pankner testified at his deposition that the note, the adjustable rate rider, and the mortgage agreement were subject to the assignment agreement. At the time Millikin Mortgage purchased the note, it was visibly altered and the rider contained different terms than the note. The discrepancy called into question the validity and the terms of the note. Therefore, a question of fact existed as to whether Millikin Mortgage had notice of a claim or defense to the note under section 3 — 304. For this reason, the entry of summary judgment in Millikin Mortgage’s favor on the basis that it was a holder in -due course was improper.

Reversed and remanded.

COCCIA, P.J., and GORDON, J., concur.

      Justice R. Eugene Pincham participated in this case prior to his resignation. Since that time, Justice Joseph Gordon was designated the third member of the panel and has read the record and briefs and has listened to the oral argument tape.


text:
    THE VILLAGE OF DOLTON ex rel. L.M. WINTER, Plaintiff-Appellee, v. CSX TRANSPORTATION, INC., et al., Defendants-Appellants.
    First District (5th Division)
    No. 1—88—1153
    Opinion filed March 30, 1990.

      Lewis, Overbeck & Furman, of Chicago (James R. Gannon and Paul V. Esposito, of counsel), for appellants.
    Timothy J. Szwed, of Gasperec & Szwed, Ltd., of Homewood (Don A. Moore and Nancy A. Halas, of counsel), for appellee.
    Neil F. Hartigan, Attorney General, of Springfield (James E. Weging, Special Assistant Attorney General, of Chicago, of counsel), for amicus curiae.

   JUSTICE LORENZ

delivered the opinion of the court:

This appeal arises from judgments in consolidated actions against railroad carriers CSX Transportation, Inc., and The Baltimore & Ohio Chicago Terminal Railroad Company for obstructing railroad-highway grade crossings located in the Village of Dolton (Village) in violation of a Village ordinance.

We reverse.

In separate quasi-criminal complaints, CSX Transportation, Inc. (CSX), and The Baltimore & Ohio Chicago Terminal Railroad Company (B&OCT) were charged with violations of section 3(a) of the Village’s municipal code, prohibiting certain obstructions by trains at railroad-highway grade crossings. Section 3(a) was . enacted pursuant to the Village’s authority as a home rule unit and specifically provides:

“It is unlawful for a railroad corporation to permit any train, railroad car or engine to obstruct public travel at a railroad-highway grade crossing for a period in excess of t,en (10) minutes, except when such train, railroad car or engine cannot be moved by reason of circumstances of which the railroad corporation has no control.” (Dolton, Ill., Municipal Code ch. 146, §3(a) (1971).)

B&OCT was charged for an obstruction of 13 minutes on November 23, 1986. CSX was charged for obstruction of 13 and 14 minutes on January 8, 1987, as well as for an obstruction occurring on January 4, 1986, lasting 16 minutes.

Defendants filed several motions to dismiss pursuant to sections 2 — 615 and 2 — 619 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, pars. 2 — 615, 2 — 619). All motions were denied, and the matter proceeded to trial. Following trial, judgments were entered in favor of the Village for three violations. Fines of $1,000 were levelled for each violation.

This appeal followed.

Opinion

Although defendants raise numerous challenges to the validity of the ordinance and also challenge the sufficiency of the evidence adduced at trial, we find reason to address only whether the ordinance constitutes an unconstitutional exercise of the Village's home rule authority because we find section 3(a) invalid on that basis.

Article VII, section 6(a), of our constitution empowers home rule units to “exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare[.]” (Ill. Const. 1970, art. VII, §6(a).) The main substantive restrictions on the exercise of local governmental power have come from the various constructions of the “pertaining to its government and affairs” clause and, as such, that phrase is considered one of art. (Peoples Gas Light & Coke Co. v. City of Chicago (1984), 125 Ill. App. 3d 95, 465 N.E.2d 603.) In People ex rel. Bernardi v. City of Highland Park (1988), 121 Ill. 2d 1, 520 N.E.2d 316, the supreme court noted, most recently, regarding home rule authority:

“The limited grant of power to home rule units in section 6(a) legitimizes only those assertions of authority that address problems faced by the regulating home rule unit, not those faced by the State or Federal governments. [Citation.] ‘Whether a particular problem is of statewide rather than local dimension must be decided not on the basis of a specific formula or listing set forth in the [constitution but with regard for the nature and extent of the problem, the units of government which have the most vital interest in its solution, and the role traditionally played by local and statewide authorities in dealing with it.’ [Citafcion.]” (Bernardi, 121 Ill. 2d at 12-13, 520 N.E.2d at 321.)

Those considerations have led the court to apply a three-prong analysis to determine the validity of the exercise of home rule authority. (Bernardi, 121 Ill. 2d at 13, 520 N.E.2d at 321.) The analysis consists of an examination of: (1) the extent to which the conduct in question affects matters outside the municipality; (2) the traditional role of municipal verses State regulation in the field; and (3) which level of government has the more vital interest in that regulation. Bernardi, 121 Ill. 2d at 13, 520 N.E.2d at 321.

Considering section 3(a) of the Village’s municipal code in light of the first prong of the Bernardi analysis, we conclude the subject conduct, with some exception, would not appear to affect matters outside the Village. Here, the ordinance reaches only to the obstruction of railroad-highway grade crossings located within the Village’s boundaries. Section 3(a) might affect matters beyond those boundaries only to the extent that, because trains operate over a limited set of rail lines, railroad companies may not easily avoid being subject to the Village’s ordinance.

However, examination of the second and third prongs of the Bernardi analysis indicate section 3(a) constitutes an ultra vires exercise of the Village’s home rule authority in violation of the limited grant of power allowed in article VII, section 6(a), of the constitution.

Regarding the second prong, we conclude regulation of railroad operations, including the specific conduct involved here, traditionally has been placed outside the scope of municipal power. Beginning January 1, 1914, the effective date of “An Act to provide for the regulation of public utilities” (1913 Ill. Laws 459), the General Assembly indicated the intention to vest regulation over railroad operations with State, as opposed to local, government. (See Northern Trust Co. v. Chicago Rys. Co. (1925), 318 Ill. 402, 149 N.E. 422; Village of Atwood v. Cincinnati, Indianapolis & Western R.R. Co. (1925), 316 Ill. 425, 147 N.E. 449.) Moreover, since July 1, 1921, the effective date of “An Act concerning public utilities” (1921 Ill. Laws 702), that power is enjoyed exclusively by the Illinois Commerce Commission (Commission). (City of Witt v. Cleveland, Cincinnati, Chicago & St. Louis Ry. Co. (1927), 324 Ill. 494, 155 N.E. 325.) The plenary nature of the Commission’s power to regulate railroad-highway grade crossings and to make provision for the safety of the public at such crossings has been long recognized by Illinois courts. (City of Chicago v. Illinois Commerce Comm’n (1980), 79 Ill. 2d 213, 402 N.E.2d 595.) Further, on January 1, 1986, the Commission’s authority to regulate the field was continued under the Illinois Commercial Transportation Law (ICTL) (Ill. Rev. Stat. 1985, ch. 951/2, par. 18c-1101 et seq.), the comprehensive recodification of the then existing transportation regulatory schemes (see Ill. Rev. Stat. 1985, ch. OSVa, par. 18c — 1102(a)).

The Commission’s authority to regulate railroad-highway grade crossings is outlined in section 18c — 7401(3) of the ICTL. (Ill. Rev. Stat. 1985, ch. 95V2, par. 18c — 7401(3).) Significantly, the ICTL also addresses the subject of the obstruction by trains at railroad-highway grade crossings. Section 18c — 7402(l)(b) of the ICTL provides:

“It is unlawful for a rail carrier to permit any train, railroad car or engine to obstruct public travel at a railroad-highway grade crossing for a period in excess of 10 minutes, except where such train, railroad or car is continuously moving or cannot be moved by reasons of circumstances over which the rail carrier has no reasonable control.” (Ill. Rev. Stat. 1985, ch. 95V2, par. 18c-7402(l)(b).)

Further, section 18c — 7402(l)(a) imposes upon train crews a duty, upon notification, to take “immediate action” to remove an obstruction of an emergency vehicle (Ill. Rev. Stat. 1985, ch. 951k, par. 18c— 7402(l)(a)) and, under section 18c — 7402(l)(c) (Ill. Rev. Stat. 1985, ch. 951/2, par. 7402(l)(c)), a graduated fine schedule based upon the length of each violation is imposed. Violations of section 18c — 7402 are enforceable pursuant to section 18c — 7403. Ill. Rev. Stat. 1985, ch. 951k, par. 18c — 7403.

• 4, 5 Examination of the enforcement provision contained in section 18c — 7403 leads us to address, at this point in analysis of the traditional role of municipal versus State regulation in the field, the validity of concurrent exercise by the Village regarding obstruction of railroad-highway grade crossings. We note that the constitution permits home rule units to exercise concurrent powers with the State where the General Assembly has not specifically limited such exercise or declared the State’s exercise to be exclusive. (Ill. Const. 1970, art. VII, §6(i).) We conclude, however, after considering the language of the enforcement provisions contained in section 18c — 7403, the General Assembly intended not to disturb the established role exercised by the State, through exercise of the exclusive authority of the Commission, regarding regulation of railroad-highway grade crossings.

Section 18c — 7403, provides, in pertinent part:

“Except with regard to grade crossing obstructions under Section 18c — 7402 *** jurisdiction to initiate actions to enforce provisions of this Chapter is vested exclusively with the Commission.” (Emphasis added.) (Ill. Rev. Stat. 1985, ch. 951/2, par. 18c — 7403.)

We note that, although the Commission has enjoyed exclusive authority to regulate railroad-highway grade crossings, municipalities have been permitted to enforce the Commission’s regulations. (See, e.g., People v. Indiana Harbor Belt R.R. Co. (1981), 102 Ill. App. 3d 811, 430 N.E.2d 104 (enforcement by the village of section 14 of “An Act in regard to the dangers incident to railroad crossings on the same level” (Ill. Rev. Stat. 1979, ch. 114, par. 70), the predecessor to section 18c — 4702 of the ICTL).) Thus, although we acknowledge home rule units may exercise concurrent power with the State in certain instances, we are persuaded the permissive grant of power to municipalities to enforce the Commission’s regulations pertaining to railroad-highway grade crossing obstructions indicates the General Assembly’s intent to preserve the limited role traditionally practiced by municipalities in the field.

At last concerning the traditional role of municipality verses State regulation in the field, we point out that, in addition to the ICTL, chapter 114 of Illinois Revised Statutes contains acts regulating virtually every aspect of the organization and operation of a railroad in this State. See Ill. Rev. Stat. 1985, ch. 114, pars. 1 — 29, 29a through 29e, 30 through 34, 35 through 38, 39 through 42.1, 43 through 45.1, 46 through 46.1, 47 through 47.1, 48 through 49, 49a through 49a. 1, 49b through 49b.l, 49c through 49d, 52 through 52.1, 98 through 100, 100a through lOOd, lOOe through lOOh, 101 through 104, 104.1 through 104.3, 105 through 110, 229 through 232, 361 through 389, 601.

Regarding the third prong of the Bernardi analysis, we need only look to the stated public policy underlying codification of the ICTL to conclude the State, rather than the Village, has the more vital interest in regulating rail transportation, in general, and railroad-highway grade crossing, in particular. In section 18c — 1103 of the ICTL, the General Assembly expressly recognized the State’s interest in “actively supervispng] and regulatpng] commercial transportation of persons and property within this state,” as the policy foundation for recodification of then existing transportation schemes into the ICTL. (Ill. Rev. Stat. 1985, ch. 95%, par. 18c — 1103.) To the extent municipalities across the State might, through home rule authority, pass ordinances affecting railroad operations, the goals enumerated in section 18c — 1103, including “insurpng] a stable and well-coordinated transportation system for shippers, carriers and the public,” would be jeopardized. (Ill. Rev. Stat. 1985, ch. 95%, par. 18c — 1103.) To permit municipalities to exercise concurrent regulation in the field of railroad operations would certainly subject carriers to multiple, and possibly conflicting, governmental requirements and disturb the existing comprehensive regulatory scheme.

Based on our analysis above, in light of the considerations set forth by the supreme court in Bernardi, we conclude section 3(a) of the Village’s municipal code does not “pertain to its government and affairs” and therefore is in violation of the limited grant of power afforded home rule units by article VII, section 6(a), of our constitution.

Reversed.

COCCIA, P.J., and MURRAY, J., concur.


text:
    CITICORP SAVINGS OF ILLINOIS et al., Plaintiffs-Appellants, v. WALTER ASCHER et al., Defendants-Appellees.
    First District (5th Division)
    No. 1—88—1856
    Opinion filed March 30, 1990.

      Liebling & Hauselman, of Chicago, for appellants.
    Tobin M. Richter, of Chicago, for appellees.
   JUSTICE LORENZ

delivered the opinion of the court:

Plaintiffs appeal from an order dismissing count III of their complaint pursuant to section 2 — 615 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615). We address the issue of whether defendants can be liable under their guaranty for a deficiency judgment resulting from a foreclosure sale. For the following reasons, we affirm.

On May 5, 1986, plaintiffs filed a complaint against defendants for foreclosure of an installment agreement in count I, for an accounting in count II, and for enforcement of defendants’ personal guaranty in count III. Count III was directed against defendants Walter Ascher, Donald S. Schak, and Edgar J. Kasanders and alleged that plaintiff, First National Bank of Lake Forest as trustee under trust number 3377 (Lake Forest Trust), owned 11 condominium units in the Willow Creek Commons Condominiums located in Palatine, Illinois. Plaintiff, Bank of Lyons as trustee under trust number 1384 (Lyons Trust), owned three condominium units in the same complex. Defendants were beneficial owners of the Lake Forest Trust and the Lyons Trust.

In an installment agreement dated April 1, 1980, the Lake Forest Trust and the Lyons Trust sold their interest in the condominium units to First Bank of Oak Park as trustee under trust number 11944 (Oak Park Trust). The installment agreement, which was attached as an exhibit to plaintiff’s complaint, required Oak Park Trust to make periodic payments beginning on June 1, 1980, and to pay the remaining balance in full on April 1, 1985. Paragraph 11 of the agreement provided that if the purchaser failed to make any of the payments when due, the sellers could, at their option, forfeit the agreement and retain the payments made “in full satisfaction and as liquidated damages.” The installment agreement also provided in paragraph 15 that “[t]he remedy of forfeiture herein given to Seller shall be exclusive of any other remedy[.]”

In an assignment agreement dated February 27, 1981, defendants sold their interest in three contracts to plaintiff, 1st Financial Savings & Loan Association (1st Financial Savings), now known as Citicorp. One of the three contracts sold in the assignment agreement was the installment agreement. The assignment agreement, which was attached as an exhibit to plaintiffs’ complaint, contained a guaranty clause where defendants guaranteed Oak Park Trust’s obligation under the installment agreement. On the same day, defendants sold their beneficial interest in the Lake Forest Trust and the Lyons Trust to 1st Financial Savings.

Oak Park Trust failed to pay 1st Financial Savings the balance in full on April 1, 1985, as required under the installment agreement, and defendants did not pay the balance due as required under the guaranty contained in the assignment agreement.

In count III of their complaint, plaintiffs alleged that under their guaranty, defendants were liable for any deficiency that could result between the sale price of the condominiums at a foreclosure sale and the amount due under the installment agreement.

On November 25, 1986, defendants were found in default for their failure to file an appearance and a judgment of foreclosure and sale was entered on count I. The judgment found Oak Park Trust owed approximately $595,500 under the installment agreement, which included principal and interest to that date. The judgment contained a finding pursuant to Supreme Court Rule 304(a) (107 Ill. 2d R. 304(a)) that there was no just reason to delay enforcement or appeal from the order. The judgment also provided that if the proceeds from the sheriff’s sale were not sufficient to pay plaintiffs the amount due, Oak Park Trust would be liable for the deficiency. Plaintiffs purchased the property at the sheriff’s sale for $413,000, leaving a deficiency of approximately $190,500.

On February 9, 1987, with leave of court subsequently granted on March 3, 1987, defendants filed an appearance and a counterclaim against plaintiffs. Defendants also moved to dismiss count III of the complaint pursuant to section 2 — 615 (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615). On June 30, 1987, the trial judge dismissed count III, and within 30 days, plaintiffs filed a motion to reconsider the order. On May 17, 1988, the trial judge denied the motion and, because count II remained pending, found that there was no just reason to delay enforcement or appeal pursuant to Supreme Court Rule 304(a). Plaintiffs filed a timely notice of appeal from the orders entered May 17,1988, and June 30, 1987.

Opinion

In reviewing the dismissal of an action under section 2 — 615, the court must accept all well-pled facts and reasonable inferences from plaintiff’s complaint as true. (Logsdon v. Shelter Mutual Insurance Co. (1986), 143 Ill. App. 3d 957, 493 N.E.2d 748.) A cause of action should not be dismissed unless it appears from the pleadings that no set of facts could be proven that would entitle plaintiff to recovery. (Fitzgerald v. Chicago Title & Trust Co. (1978), 72 Ill. 2d 179, 380 N.E.2d 790.) In count III of their complaint, plaintiffs sought to enforce defendants’ guaranty to the extent of the deficiency after the foreclosure sale of the condominiums.

Initially, plaintiffs argue that under the doctrine of res judicata, the judgment of foreclosure and sale entered on count I of their complaint bound defendants to the deficiency judgment sought in count III. Plaintiffs claim “[hjaving failed to object to said [jjudgment, the defendants *** are bound under the doctrine of res judicata by the relief provided for therein, including the foreclosure and sale of the subject property, and a decree for the deficiency.” According to the doctrine of res judicata, an adjudication on the merits is conclusive as to the rights of the parties and is an absolute bar to a subsequent action against them involving the same claim, demand, or cause of action. (Towns v. Yellow Cab Co. (1978), 73 Ill. 2d 113, 382 N.E.2d 1217.) The judgment of foreclosure was entered on count I of plaintiffs’ complaint and provided that if there was a deficiency, plaintiffs would be entitled to a deficiency judgment against Oak Park Trust. The judgment, however, did not address defendants’ liability for a deficiency based on their guaranty and, for this reason, the doctrine of res judicata is inapplicable to the resolution of the issue in this case.

A guaranty must be construed as any other contract to determine the intent of the parties. (Blackhawk Hotel Associates v. Kaufman (1981), 85 Ill. 2d 59, 421 N.E.2d 166.) Where the language is not ambiguous, it must be construed according to its terms. (McLean County Bank v. Brokaw (1988), 119 Ill. 2d 405, 519 N.E.2d 453.) A guaranty must be strictly construed without varying or extending its liability beyond its terms and the guarantor “is bound only to the extent and in the matter and under the circumstances pointed out in his obligation.” Exchange National Bank v. Bergman (1987), 153 Ill. App. 3d 470, 473, 505 N.E.2d 1236, 1238.

The guaranty stated, in relevant part:

“5. PERSONAL GUARANTIES OF SELLERS. DONALD S. SCHAK, EDGAR J. KASANDERS and WALTER ASCHER jointly and severally guaranty the full and prompt payment to Purchaser, when due, whether by acceleration or otherwise, and at all times thereafter, of any and all kind, indebtedness, obligations and liabilities of every kind and nature under said contracts. This guaranty shall be a continuing, absolute non-conditional guaranty and shall remain in full force and effect until any and all said indebtedness, obligations and liabilities under said contracts shall be paid to Purchaser. No release or discharge shall be made of any one or more of the guarantors, unless and until all of said indebtedness, obligations and liabilities shall have been fully paid and discharged.” (Emphasis added.)

It is clear from the language used throughout the assignment agreement that the words “under said contracts” in the guaranty referred to the three contracts which were the subject of the agreement. One of those three contracts was the installment agreement. Therefore, when the guaranty used the words “under said contracts” it was referring to the installment agreement.

Plaintiffs argue that the guaranty must be construed as a separate contract from the installment agreement because they were executed on different dates. However, the guaranty states that defendants guaranteed Oak Park Trust’s “indebtedness, obligations and liabilities” under the installment agreement and, therefore, in determining the scope of the guaranty, we must consider the extent of Oak Park Trust’s obligation under the installment agreement.

Under the installment agreement, Oak Park Trust was required to make certain payments including the payment of the balance in full on April 1, 1985. Oak Park Trust failed to make that last payment. The installment agreement provided that in the case of default, plaintiffs’ only remedy was forfeiture, by which they would retain all of Oak Park Trust’s payments made under the installment agreement “in full satisfaction and as liquidated damages.” Under the remedy of forfeiture, the contract is terminated and unpaid installments cannot be recovered. (Cala v. Gerami (1985), 137 Ill. App. 3d 936, 484 N.E.2d 1199.) Rather than declare a forfeiture, which was the exclusive remedy under the agreement, plaintiffs obtained a judgment for foreclosure and attempted to enforce defendants’ guaranty for the deficiency.

The scope of defendants’ guaranty was limited by Oak Park Trust’s obligation under the installment agreement which gave plaintiffs the exclusive remedy of forfeiture in the case of a default. The parties did not agree to the remedy of foreclosure. Defendants’ guaranty, therefore, would not extend beyond forfeiture.

Plaintiffs rely on Illini Federal Savings & Loan Association v. Childers (1980), 88 Ill. App. 3d 1124, 411 N.E.2d 110, where the appellate court found defendants’ guaranty survived a forfeiture. In Mini, the parties signed an agreement which contained a provision stating that defendants’ liability “shall remain notwithstanding any forfeiture.” (Illini, 88 Ill. App. 3d at 1126, 411 N.E.2d at 112.) Although conceding that the guaranty in the present case did not contain similar language, plaintiffs argue that here, as in Mini, defendants’ guaranty survived forfeiture. We believe, however, that the absence of similar language in the present guaranty renders Mini inapplicable to the present case.

Because defendants guaranteed Oak Park Trust’s obligation under the installment agreement and because plaintiffs’ only remedy under the installment contract was forfeiture, defendants’ guaranty cannot encompass liability for a deficiency judgment resulting from a foreclosure as alleged under count III of the complaint.

Affirmed.

MURRAY and GORDON, JJ., concur.

      Although a notice of appeal and a brief was filed on behalf of Ascher, Schak, Kasanders, and Willow Creek Commons, count III of the complaint, which is at issue on appeal, was not directed against Willow Creek Commons.

      Justice R. Eugene Pincham participated in this case prior to his resignation. Since that time, Justice Joseph Gordon was designated the third member of the panel and has read the record and briefs and has listened to the oral argument tape.


author: JUSTICE MURRAY

text:
    ILLINOIS NURSES ASSOCIATION, Petitioner-Appellant, v. ILLINOIS STATE LABOR RELATIONS BOARD et al., Respondents-Appellees (Correctional Medical Systems, Inc., Intervenor-Appellee).
    First District (5th Division)
    No. 1—88—2514
    Opinion filed March 30, 1990.

      Sally A. Stix, of Chicago, for petitioner.
    Neil P. Hartigan, Attorney General, of Springfield (Robert J. Ruiz, Solicitor General, and Valerie J. Peiler, Assistant Attorney General, of Chicago, of counsel), for respondents.
    Melbourne A. Noel, Jr., of Laser, Schostok, Kolman & Frank, of Chicago, and David W. Miller, of Baker & Daniels, of Indianapolis, Indiana, for intervenor.
   JUSTICE MURRAY

delivered the opinion of the court:

This is an appeal by plaintiff, Illinois Nurses Association (INA), from a decision of defendant, Illinois State Labor Relations Board (Board), which refused to take jurisdiction of an unfair labor practice charge made by the INA. Additional defendants include the State of Illinois, its Department of Central Management Services, Department of Corrections (DOC). Correctional Medical Systems (Systems) intervened for the limited purpose of contesting the Board’s jurisdiction. Jurisdiction to hear this cause on direct appeal from the Board is provided by the Illinois Public Labor Relations Act (Act) (Ill. Rev. Stat. 1985, ch. 48, par. 1611). Even though the case involves nurses at the downstate Shawnee Correction Center, near Vienna, the Act authorizes an appeal to the appellate court of a judicial district in which the appellant resides or transacts business. Ill. Rev. Stat. 1985, ch. 48, par. 1611(e).

This is the second time this case has been before this court. In Illinois Nurses Association v. The State Labor Relations Board (1987), 156 Ill. App. 3d 841, in which Systems was not a party, the Board dismissed INA’s unfair labor practice charges for lack of jurisdiction. This court vacated the Board’s dismissal order and remanded the matter for further evidentiary proceedings pertaining to the determination of the Board’s jurisdiction. Upon remand, an evidentiary hearing was held in September 1987. The hearing officer’s recommended order issued in April 1988. He concluded that, although the State and Systems were joint employers, Systems was not a public employer within the meaning of section 3(o) of the Act. Section 3(o) defines “public employer” as including the State of Illinois and its political subdivisions, units of local governments or school districts, agencies of these entities, “and any person acting within the scope of his or her authority, express or implied, on behalf of such entities in dealing with its employees.” (Ill. Rev. Stat. 1985, ch. 48, par. 1603(o).) The term “person” includes associations and corporations. Ill. Rev. Stat. 1985, ch. 48, par. 1603(1).

The hearing officer determined that the Board lacked jurisdiction because Systems was not an agent of the State and, thus, could not be a public employer. INA excepted to the finding of no agency, and Systems excepted to the joint employer finding. The Board, based on its own findings of fact, held that since DOC did not exercise any meaningful control over any significant aspects of the nurses’ employment, it was not a joint employer with Systems. The Board also held that, pursuant to the Act, a private employer was subject to the Board’s jurisdiction only if it was acting as an agent of a public employer and concluded that Systems, as the sole employer, could only be an agent if the nurses were State employees, which they were not. Accordingly, the Board upheld the hearing officer’s dismissal of INA’s unfair labor practice charge because of a lack of jurisdiction.

It is undisputed that INA is the exclusive bargaining representative for nurses employed by the State, including nurses employed by the State to work at its correctional centers. In 1985, DOC entered into a non-bid contract with Systems, a private corporation licensed to do business in Illinois and based in St. Louis, Missouri. Systems, described in the contract as an independent contractor, has contracts to provide health services to correctional facilities in 16 States, including contracts with nine Illinois correctional facilities. Between April 1985 and June 1986, Systems was compensated on a cost-plus plan and provided all health care staff at Shawnee except for the Health Care Unit Administrator, who was a DOC employee. (Since July 1987, this position has been staffed by a Systems employee.) Included among Systems’ staff are doctors, nurses, a dentist, psychiatrist and psychologist, a pharmacist, technicians, and clerical staff. Since July 1986, the contracts have provided that Systems is to be compensated on the basis of the number of inmates at Shawnee. Quarterly performance level adjustments may be made, as determined by DOC and Systems and approved by the warden, if there are any deficiencies in the agreed-upon staffing level. All health equipment costing over $100 is owned by the State.

Systems’ staff is required to represent DOC with local groups. Systems solicits, interviews, and hires the nurses. DOC has the right to approve the “initial and continued employment” of nurses and sets the minimum qualifications for them, e.g., Illinois license, one-year experience, CPR certification with correctional nursing experience preferred. The contract also states certain details that the interviewer should focus on when questioning job applicants. Prior to starting work, each person hired by Systems must pass a DOC background check (for security purposes). The final hiring selection is subject to DOC’s approval. (The Board found that DOC did not exercise this right but rather limited its involvement to overseeing security and professional licensing matters.)

The contract also gives DOC complete discretion to remove a nurse from Shawnee, although only Systems can terminate a staff member. If Systems does not remove the nurse from Shawnee at DOC’s request, DOC can lock her out. In one case, Systems terminated a nurse after DOC conducted an investigation which resulted in the assistant warden requesting her termination. Nurses’ personnel files must be kept at Shawnee; Systems keeps duplicate files in its St. Louis office.

DOC sets the minimum staffing and scheduling requirements, and specifies how many hours a week a nurse may work, approves all hours that have been worked, and the length of the meal period. DOC provides the meals on site (for security reasons). Requests for all absences and overtime must be processed according to DOC requirements and procedures. DOC requires that all nurses must be evaluated annually in accordance with applicable State rules. Although, in fact, Systems conducts the evaluations, DOC must verify them. DOC must approve all hours worked, which must be kept on DOC timekeeping forms. DOC requires all nurses to wear white uniforms and its identification badges which identify them as contractual employees. New nurses must attend 40 hours of orientation given by DOC at the State of Illinois Training Academy in Springfield. Further, each year DOC requires all nurses to complete 40 hours of in-service training.

The contract states that nurses must comply with Administrative Regulations and Administrative Directives, as well as policies and procedures of DOC and Shawnee. The directives for the health care unit were written by the DOC Medical Director and approved by the Director of Corrections. From these directives, each institution develops its own institutional directives; at Shawnee, these were mostly written by a DOC employee and approved by the warden. Pursuant to these directives, the contract provides for a “Health Care Services Review Committee,” which is made up of both DOC and Systems administrators. Its function is to review inmate complaints, infirmary care, mental health responses, health records, etc. Meeting minutes are given to the warden. The Shawnee nurses manual “is the how-to guide for organizing, planning and administering” health care, and incorporates applicable directives in addition to other details as to how the work is to be performed. The manual was written by a Systems employee, but after DOC’s approval, became the property of DOC.

Nurses are hired as Systems employees. Systems determines their pay rate and issues the checks from St. Louis. It provides all benefits, e.g., health insurance, retirement plan. Vacation time, sick leave, etc., are established by Systems. Only Systems can transfer, promote, discipline, and terminate a nurse. Systems pays unemployment and workers’ compensation insurance premiums and all required employee taxes. However, the contract provides that Systems has a right to “seek representation and indemnification from the Attorney General’s Office.”

The findings of facts by the hearing officer and the Board were similar for the most part, although the hearing officer’s findings were considerably more comprehensive. However, the differences between the two opinions lie in the application of law to these facts. The question of subject matter jurisdiction is not a factual question but a legal issue. (Schalz v. McHenry County Sheriff’s Department (1986), 113 Ill. 2d 198.) Jurisdiction of an administrative agency is determined by provisions of the statute creating the agency and conferring powers on it. (Bio-Medical Laboratories, Inc. v. Trainor (1977), 68 Ill. 2d 540.) After examining the relevant statutes and applying the law to the facts of this case, we conclude that Systems is an agent of DOC.

The standard used by the Board to determine employer status was established in DuPage County Board, 1 Pub. Employee Rep. (Ill.) par. 2003, Nos. S-RC-9, S-RC-17 (ISLRB April 26, 1985). In cases involving several potential employers, the crucial inquiry is the extent to which the entity is necessary to create an effective bargaining agent (degree of control test). The Board determined that DOC exerted little control over the nurses and thus was not a necessary party to any bargaining agreement. As a result, the Board concluded that the nurses could not be State employees.

However, we believe the initial task is to define the employer before applying the degree of control test. The Act defines a public employer as, among other things, any person with authority to act on behalf of the State or its departments. (Ill. Rev. Stat. 1985, ch. 48, par. 1603(g).) And, “person” includes corporations. (Ill. Rev. Stat. 1985, ch. 48, par. 1603(1).) The Unified Code of Corrections sets forth DOC’s duties. (Ill. Rev. Stat. 1985, ch. 38, par. 1001 — 1—1 et seq.) DOC is required to provide medical and dental care to the inmates. (Ill. Rev. Stat. 1985, ch. 38, par. 1003 — 7—2(d).) Moreover, the chief administrative officer shall administer DOC programs for the custody and treatment of inmates. (Ill. Rev. Stat. 1985, ch. 38, par. 1003 — 6— 2(a).) DOC shall train its own personnel. (Ill. Rev. Stat. 1985, ch. 38, par. 1003 — 2—7.) The comments to the section which delineates DOC’s duties note that DOC is given broad discretion in determining standards and procedures and rules for day-to-day operations. Ill. Ann. Stat., ch. 38, par. 1003 — 2—7, Council Commentary, at 136 (SmithHurd 1982).

Thus, it is apparent that a State has an affirmative duty to provide persons in its custody with a medical care system that meets minimum standards of adequacy. (See Wellman v. Faulkner (7th Cir. 1983), 715 F.2d 269.) It has further been held that a public body may not delegate a discretionary public responsibility with which it is charged. (Peters v. Health & Hospitals Governing Comm’n (1981), 88 Ill. 2d 316.) Our Federal district court in Henderson v. Harris (N.D. Ill. 1987), 672 F. Supp. 1054, considered the claims of a Stateville inmate who allegedly received substandard medical care while waiting in the Federal Metropolitan Correctional Center in Chicago to testify in a Federal case. The Henderson court rejected the argument of the United States that the court lacked jurisdiction to hear plaintiff’s complaint against the United States because of the alleged negligence of a private corporation which had contracted as an independent contractor with the government to provide health services at the jail. Relying on Estelle v. Gamble (1976), 429 U.S. 97, 50 L. Ed. 2d 251, 97 S. Ct. 285, the Henderson court found that providing sufficient health care to inmates is a constitutional duty. The court stated, “[cjontracting with private health services agencies will not relieve the federal government from its constitutional obligation. The non-delegability of this duty applies to both state and federal governments.” (Emphasis added.) Henderson, 672 E Supp. at 1063.

Without deciding the delegability issue, we must conclude that any corporation performing duties which are statutorily (and constitutionally) mandated as government duties must, at the very least, be acting on behalf of the State and is, thus, an agent of the State. Further, an agent may be an independent contractor. Protective Insurance Co. v. Coleman (1986), 144 Ill. App. 3d 682, 494 N.E.2d 1241.

Finally, in this case, both the hearing officer and Board used a “degree of control” test to determine the existence of the relationship between the State and Systems. The findings of both the hearing officer and Board as to the fact of control are supported by the manifest weight of the evidence and, thus, this court cannot reverse those findings. (Wapella Education Association IEA-NEA v. Illinois Educational Labor Relations Board (1988), 177 Ill. App. 3d 153, 531 N.E.2d 1371.) Although the facts do show control by Systems over the nurses at Shawnee, the right to control is by the agreement and law in the DOC, not Systems. The test of the agency is the existence of the right to control manner of accomplishing task by alleged agent as well as the agent’s ability to subject principal to. personal liability To put it in another light, the relationship of principal and agent exists if the principal has the right or duty to supervise and control and to terminate the relationship at any time even though the right is not exercised. Reith v. General Telephone Co. (1974), 22 Ill. App. 3d 337, 317 N.E.2d 369.

Even though DOC permitted Systems to control the Shawnee nurses, the contract vested initial and continued employment of the Shawnee staff subject to the approval of DOC. The contract vested overall supervision in a medical director, and the director had to be approved by the agency’s (DOC’s) medical director’s chief or his designee. Next, the contract provides for indemnification of Systems under the Illinois indemnification act (Ill. Rev. Stat. 1987, ch. 127, par. 1254). The term “employee” under that act includes individuals or organizations who contract with DOC for services. Ill. Rev. Stat. 1987, ch. 127, par. 1301.

Finally, Systems’ contract is, by its terms, subject to termination if sufficient funds are not appropriated or otherwise made available to cover DOC’s obligations.

Based on the above, we conclude that as a matter of law and fact Systems, despite its control over the Shawmee nurses, is in fact a true agent of DOC in the rendering of medical service at the Shawnee Correctional Center and that the Board’s conclusion that it is neither agent nor co-employer is in error.

Accordingly, we reverse the Board’s decision and remand the case to the agency for a determination of the substance of INA’s complaint.

Reversed and remanded.

COCCIA, P.J., and LORENZ, J., concur.