First Bank v. Unique Marble and Granite Corporation

CourtAppellate Court of Illinois
DecidedNovember 17, 2010
Docket2-09-1287 Rel
StatusPublished

This text of First Bank v. Unique Marble and Granite Corporation (First Bank v. Unique Marble and Granite Corporation) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Bank v. Unique Marble and Granite Corporation, (Ill. Ct. App. 2010).

Opinion

No. 2-09-1287 Filed: 11-17-10

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

FIRST BANK, ) Appeal from the Circuit Court of Lake ) County. Plaintiff-Appellee, ) ) v. ) No. 08--L--1066 ) UNIQUE MARBLE AND GRANITE ) CORPORATION and DANIEL M. HAHN, ) ) Defendants ) ) (James Gallo, as Assignee for the Benefit ) Honorable of Creditors of Unique Marble and Granite ) Michael J. Fusz, Corporation, Intervenor-Appellant). ) Judge, Presiding.

JUSTICE JORGENSEN delivered the opinion of the court:

I. INTRODUCTION

Plaintiff, First Bank, obtained a judgment against defendants, Unique Marble and Granite

Corporation and its corporate officer, Daniel M. Hahn, and moved to collect on that judgment. James

Gallo intervened, seeking fees and expenses for his duties as assignee for the benefit of Unique

Marble's creditors. First Bank moved for summary judgment against Gallo, asserting that, as a

perfected secured creditor under the Uniform Commercial Code (U.C.C.) (810 ILCS 5/1--101 et seq.

(West 2008)), it had priority over Gallo, who was a lien creditor. 810 ILCS 5/9--102(a)(52), 9--317,

9--322(a) (West 2008). The trial court granted First Bank summary judgment. Gallo appeals. We

reverse and remand. No. 2--09--1287

II. BACKGROUND

Unique Marble was a fabricator of granite and marble countertops. On November 18, 2008,

Unique Marble and Gallo entered into a trust agreement and assignment for the benefit of creditors.

The trust agreement stated that the assignee (Gallo) "shall receive reasonable compensation" at a

$250 hourly rate for his services and reimbursement of his expenses "from the Assets."

That same day, Gallo wrote to Unique Marble's creditors a letter stating that Unique Marble

executed the assignment due to the "financial difficulties from the housing slowdown." He stated that

an assignment is similar to a liquidation under Illinois law and very similar to a chapter 7 bankruptcy

in federal court. He informed the company's creditors that he, as assignee/trustee of Unique Marble's

assets, would liquidate the assets by winding down the company's operations and, at the conclusion

of the liquidation, would distribute the net proceeds to the company's creditors based on their priority

status. He did not expect that the company's operations would continue past January 2009. Gallo

also informed the creditors that First Bank had a "blanket lien" on the company's assets and that it

was not anticipated that the liquidation would yield a distribution to general unsecured creditors. The

estimated total value of the company's liquidated assets was $450,000, and its estimated total

liabilities were $1,180,000.

On November 21, 2008, Gallo personally delivered a notice of the assignment for the benefit

of creditors to Charles Kepner, a First Bank representative. Thus, First Bank first learned of the

assignment on this date.

On December 23, 2008, the trial court entered a $451,568.08 judgment (plus interest, $500

in attorney fees, and costs) against Unique Marble and Hahn and in favor of First Bank. The order

was based on First Bank's complaint and confession of judgment, filed the same day against Unique

-2- No. 2--09--1287

Marble and Hahn, wherein First Bank alleged that it owned several notes reflecting $451,568.08

owed by Unique Marble. First Bank attached to its complaint copies of the notes.

One of the notes, which is for a $250,000 loan, specifies that its collateral is a commercial

security agreement dated October 22, 2004, between Unique Marble and Northway State Bank.

Under the October 22, 2004, agreement, Unique Marble granted to Northway a security interest in

certain collateral to secure a $200,000 loan from Northway to Unique Marble. On February 15,

2005, Northway recorded a continuation statement/U.C.C. financing statement amendment (of a

March 28, 2000, security agreement and financing statement) between it and Unique Marble. On

October 31, 2005, First Bank succeeded to the interests of Northway.

On February 19, 2009, First Bank sought to enforce the judgment by way of citations to

discover assets. On February 24, 2009, a citation was served upon Unique Marble's registered agent.

Hahn was served on March 3, 2009. Unique Marble appeared in court on March 27, 2009, through

Hahn. After First Bank examined Unique Marble, the citations were dismissed with prejudice. On

April 8, 2009, the judgment against Unique Marble remained unsatisfied, and First Bank sought to

reinstate the citations. It sent notice to Unique Marble's registered agent and to Hahn. After no one

appeared on Unique Marble's behalf, the trial court reinstated the citation against Unique Marble.

Via a letter from his attorney, dated May 5, 2009, Gallo informed First Bank's counsel that

Gallo would undertake no further steps to liquidate Unique Marble's assets, because he had been

informed that, pursuant to the U.C.C., First Bank would assume responsibility for liquidating the

remaining assets that constituted the collateral that secured First Bank's loan to Unique Marble.

On May 22, 2009, Gallo, as assignee for the benefit of Unique Marble's creditors, petitioned

to intervene (735 ILCS 5/2--408 (West 2008)) in the collection proceedings, seeking $35,000 under

-3- No. 2--09--1287

the trust agreement and $40,000 from First Bank. In his petition, Gallo asserted that a notice of the

assignment was sent to the First Bank on or about November 20, 2008, and that a copy of the trust

agreement was hand-delivered to Kepner on November 21, 2008. Gallo further asserted that, on

April 10, 2009, he received notice that Hahn had been served with a citation to discover assets in

connection with the judgment against him personally. Gallo noted that, despite First Bank's

knowledge that he held title to Unique Marble's assets, the bank did not serve him with a citation to

discover Unique Marble's assets. Further, he asserted that, although First Bank obtained its judgment

in December 2008, it was not until April 13, 2009, that Gallo learned that Unique Marble had been

named as a defendant in this matter. Gallo also asserted that, although he had begun preparations for

the final liquidation of Unique Marble's assets, First Bank informed him on April 30, 2009, that it was

going to exercise its rights under the U.C.C. and conduct its own auction of the company's personal

property assets. Gallo claimed that he paid or directed to be paid to First Bank $40,000 against the

company's indebtedness and made five mortgage payments to First Bank totaling $24,625. He also

alleged that he had incurred $35,000 in outstanding fees and $841 in outstanding expenses. Gallo

was concerned that First Bank was attempting to reap the benefits of his liquidation efforts and to

prevent the payment of his outstanding fees and expenses out of the proceeds of the sale of the assets

for which he was the assignee. The citation against Unique Marble, he urged, adversely affected him

because, being unable to perform the final liquidation, he had to intervene to seek payment of his

outstanding fees and expenses.

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