{
  "id": 2971614,
  "name": "CHARLES F. WOHLHUTER, Appellee, v. ST. CHARLES LUMBER & FUEL CO. et al.-(Ivan L. Anderson et al., Appellants.)",
  "name_abbreviation": "Wohlhuter v. St. Charles Lumber & Fuel Co.",
  "decision_date": "1975-11-17",
  "docket_number": "No. 47433",
  "first_page": "16",
  "last_page": "20",
  "citations": [
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      "cite": "62 Ill. 2d 16"
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  "court": {
    "name_abbreviation": "Ill.",
    "id": 8772,
    "name": "Illinois Supreme Court"
  },
  "jurisdiction": {
    "id": 29,
    "name_long": "Illinois",
    "name": "Ill."
  },
  "cites_to": [
    {
      "cite": "25 Ill. App. 3d 813",
      "category": "reporters:state",
      "reporter": "Ill. App. 3d",
      "pin_cites": [
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          "page": "816"
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      "opinion_index": 0
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    {
      "cite": "25 Ill. App. 3d 812",
      "category": "reporters:state",
      "reporter": "Ill. App. 3d",
      "case_ids": [
        2702273,
        2704527
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  "analysis": {
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  "last_updated": "2023-07-14T17:14:51.705881+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
  },
  "casebody": {
    "judges": [],
    "parties": [
      "CHARLES F. WOHLHUTER, Appellee, v. ST. CHARLES LUMBER & FUEL CO. et al.\u2014(Ivan L. Anderson et al., Appellants.)"
    ],
    "opinions": [
      {
        "text": "MR. JUSTICE GOLDENHERSH\ndelivered the opinion of the court:\nPlaintiff, Charles F. Wohlhuter, appealed from the judgment of the circuit court of Kane County entered in favor of defendants, Ivan L. Anderson, Annette Anderson, Stanley D. Lee and Anne P. Lee, in plaintiff\u2019s action to recover on a promissory note. The appellate court reversed (25 Ill. App. 3d 812) and we allowed defendants\u2019petition for leave to appeal. The opinion of the appellate court sets forth the facts and they are restated here only to the extent necessary to discuss the issues.\nDefendants were the owners of all of the outstanding shares of the capital stock of St. Charles Lumber & Fuel Co., an Illinois corporation. Defendants Ivan L. Anderson and Stanley D. Lee, who were also directors and officers of the corporation, negotiated with plaintiff for a loan in the amount of $50,000. The promissory note given plaintiff was executed in the following manner:\n\u201cIvan L. Anderson Stanley D. Lee\nAnn P. Lee Annette Anderson\nST. CHARLES LUMBER AND FUEL CO. By: Ivan L. Anderson (Seal)\nPresident\nAttest: Stanley D. Lee (Seal)\nSecretary\u201d\nThe note, inter alia, provided \u201cAll signers of this note are principals.\u201d The corporation also executed a security agreement which granted plaintiff a security interest in its inventory and provided that the inventory would be maintained so that the indebtedness owed plaintiff \u201cat all times should not exceed 80% of the value of the security.\u201d\nPlaintiff filed the security agreement in the office of the recorder of deeds of Kane County but did not file either a copy of the security agreement or a financing statement in the office of the Secretary of State. See Ill. Rev. Stat. 1971, ch. 26, par. 9 \u2014 401.\nDefendants Ivan L. Anderson and Stanley D. Lee entered into a written agreement with The Barrett Paper Corporation, Ltd., for the sale to it of all the capital stock of St. Charles Lumber & Fuel Co. Barrett agreed to \u201cindemnify and hold harmless Ivan L. Anderson and Stanley Lee from *** any personal obligations and liability which they might have on a certain note secured by a chattel mortgage in which the payee is one Charles Wohlhuter ***.\u201d Plaintiff was advised of the transaction and received from Barrett a payment on the principal indebtedness evidenced by the note. Subsequently, St. Charles Lumber & Fuel Co., having encountered financial difficulties, sold its inventory to another company. At that time the inventory was of value sufficient to satisfy plaintiff\u2019s security interest. The purchaser was unaware of plaintiff\u2019s security interest and the inventory was \u201cconsumed.\u201d\nThe promissory note given plaintiff contained a cognovit clause and plaintiff obtained judgment by confession for the balance due, interest, attorney fees and costs. Defendants\u2019 motion to open up the judgment was allowed. Following a bench trial the circuit court found that plaintiff had failed to properly file a financing statement to perfect his security interest in the inventory, that he had unjustifiably impaired the collateral and that under section 3 \u2014 606(1 )(b) of the Uniform Commercial Code (Ill. Rev. Stat. 1971, ch. 26, par. 3 \u2014 606(1)(b)) the defendants were discharged from liability.\nIn reversing the'judgment the appellate court held that the defense of unjustifiable impairment of collateral under section 3 \u2014 606 is available only to known sureties and did not serve to discharge principals or co-makers.\nSection 3 \u2014 606 of the Uniform Comercial Code, in pertinent part, provided:\n\u201c(1) The holder discharges any party to the .instrument to the extent that without such party\u2019s consent the holder\n* * *\n(b) unjustifiably impairs any collateral for the instrument given by or on behalf of the party or any person against whom he has a right of recourse.\u201d\nDefendants contend that the \u201cintent and literal meaning\u201d of section 3 \u2014 606 of the Uniform Commercial Code is that the unjustifiable impairment of collateral serves to discharge any party to the instrument from liability and that in limiting its application to \u201cknown sureties\u201d the appellate court erred. They argue further that the evidence shows that defendants were accommodation makers, in the position of sureties with a right of recourse against the corporate maker, and therefore, under the appellate court\u2019s construction of the statute, they were relieved of liability.\nWe agree with the appellate court that \u201cOn its face, UCC section 3 \u2014 606 would appear to apply to any party to the instrument.\u201d (25 Ill. App. 3d 813, 816.) We also agree that the defense of impairment of collateral under section 3 \u2014 606 was not available to defendants for the reason that they executed the note as co-makers.\nSection 191 of the Illinois Negotiable Instrument Law (Ill. Rev. Stat. 1959, ch. 98, par. 21 et seq.), repealed upon enactment of the Uniform Commercial Code (Ill. Rev. Stat. 1961, ch. 26, par. 10 \u2014 102), provided:\n\u201cThe person \u2018primarily\u2019 liable on an instrument is the person who, by the terms of the instrument, is absolutely required to pay the same. All other parties are \u2018secondarily\u2019 liable.\u201d Ill. Rev. Stat. 1959, ch. 98, par. 214.\nThe Uniform Negotiable Instruments Law (5 Uniform Laws Annotated 1943, sec. 192) contained the same provision. Section 120 of the Uniform Negotiable Instruments Law dealt with \u201cPersons Secondarily Liable \u2014 How Discharged.\u201d Paragraphs 4 and 5 of section 119 of the Illinois Negotiable Instrument Law contained substantially the language of paragraphs (5) and (6) of section 120 of the Uniform Law, with the exception that there was added to each paragraph the words \u201cor unless the principal debtor be an accommodating party.\u201d (Ill. Rev. Stat. 1959, ch. 98, par. 141.) Paragraphs (5) and (6) of section 120 of the Uniform Law made no mention of accommodation parties.\nPart 6 of article 3 of the Uniform Commercial Code (ch. 26, par. 3 \u2014 601) concerns \u201cDischarge of Parties\u201d and section 3 \u2014 606(l)(b) of the Uniform Commercial Code had no counterpart in the Negotiable Instrument Law. The Uniform Commercial Code Comment to section 3 \u2014 606 states:\n\u201cThe words \u2018any party to the instrument\u2019 remove an uncertainty arising under the original section. [Section 120 Uniform Negotiable Instruments Law.] The surety-ship defenses here provided are not limited to parties who are \u2018secondarily liable,\u2019 but are available to any party who is in the position of a surety, having a right of recourse either on the instrument or dehors. it, including an accomodation maker or acceptor known to the holder to be so.\n* * *\nParagraph (b) of subsection (1) is new. The surety-ship defense stated has been generally recognized as available to indorsers or accomodation parties. As to when a holder\u2019s actions in dealing with collateral may be \u2018unjustifiable\u2019, the section on rights and duties with respect to collateral in the possession of a secured party (Section 9 \u2014 207) should be consulted.\u201d Smith-Hurd Annotated Statutes, ch. 26, par. 3 \u2014 606, pages 411-12.\nIn our opinion the legislative history of the Uniform Commercial Code and its predecessor, the Negotiable Instrument Law, supports the conclusion that the term \u201cany party\u201d as used in section 3 \u2014 606 of the Uniform Commercial Code was intended to include parties who sign negotiable instruments ostensibly as makers but who are in fact sureties or accomodation makers, and that the provisions of section 3 \u2014 606(l)(b) do not apply to co-makers. The record here supports no conclusion other than that defendants were co-makers, and not sureties or accommodation makers, and the judgment of the appellate court is affirmed.\nJudgment affirmed.\nMR. JUSTICE CREES took no part in the consideration or decision of this case.",
        "type": "majority",
        "author": "MR. JUSTICE GOLDENHERSH"
      }
    ],
    "attorneys": [
      "Geister, Schnell, Richards 8c Brown, of Elgin (Donald J. Weaver, of counsel), for appellants.",
      "Shearer, O\u2019Brien, Blood, Agrella 8c Boose, of St. Charles (Richard D. Shearer, of counsel), for appellee."
    ],
    "corrections": "",
    "head_matter": "(No. 47433.\nCHARLES F. WOHLHUTER, Appellee, v. ST. CHARLES LUMBER & FUEL CO. et al.\u2014(Ivan L. Anderson et al., Appellants.)\nOpinion filed November 17, 1975.\nCREBS, J., took no part.\nGeister, Schnell, Richards 8c Brown, of Elgin (Donald J. Weaver, of counsel), for appellants.\nShearer, O\u2019Brien, Blood, Agrella 8c Boose, of St. Charles (Richard D. Shearer, of counsel), for appellee."
  },
  "file_name": "0016-01",
  "first_page_order": 30,
  "last_page_order": 34
}