{ "id": 5449306, "name": "WILLIAM H. CHRISTINSON, Trustee, Plaintiff-Appellee, v. VENTURI CONSTRUCTION COMPANY et al., Defendants-Appellants", "name_abbreviation": "Christinson v. Venturi Construction Co.", "decision_date": "1982-08-23", "docket_number": "No. 81-581", "first_page": "34", "last_page": "41", "citations": [ { "type": "official", "cite": "109 Ill. App. 3d 34" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "258 Ill. 615", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 4724003 ], "pin_cites": [ { "page": "617" } ], "opinion_index": 0, "case_paths": [ "/ill/258/0615-01" ] }, { "cite": "426 N.E.2d 604", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "100 Ill. App. 3d 116", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5499364 ], "weight": 2, "pin_cites": [ { "page": "122" }, { "page": "122" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/100/0116-01" ] }, { "cite": "425 F.2d 81", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 3681771 ], "pin_cites": [ { "page": "85" } ], "opinion_index": 0, "case_paths": [ "/f2d/425/0081-01" ] }, { "cite": "350 N.E.2d 781", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "39 Ill. App. 3d 695", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5378884 ], "pin_cites": [ { "page": "700" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/39/0695-01" ] }, { "cite": "412 N.E.2d 1378", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1976, "opinion_index": 0 }, { "cite": "90 Ill. App. 3d 507", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3159138 ], "weight": 3, "year": 1976, "pin_cites": [ { "page": "520" }, { "page": "520" }, { "page": "520" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/90/0507-01" ] }, { "cite": "232 A.2d 405", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1972, "pin_cites": [ { "page": "417" } ], "opinion_index": 0 }, { "cite": "50 N.J. 101", "category": "reporters:state", "reporter": "N.J.", "case_ids": [ 1939538 ], "year": 1972, "pin_cites": [ { "page": "122-23" } ], "opinion_index": 0, "case_paths": [ "/nj/50/0101-01" ] }, { "cite": "436 N.E.2d 29", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "31" } ], "opinion_index": 0 }, { "cite": "106 Ill. App. 3d 386", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3034550 ], "pin_cites": [ { "page": "389" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/106/0386-01" ] }, { "cite": "269 Ala. 190", "category": "reporters:state", "reporter": "Ala.", "case_ids": [ 5280746 ], "weight": 4, "pin_cites": [ { "page": "192" }, { "page": "332-33" }, { "page": "192" }, { "page": "333" } ], "opinion_index": 0, "case_paths": [ "/ala/269/0190-01" ] } ], "analysis": { "cardinality": 739, "char_count": 15125, "ocr_confidence": 0.756, "pagerank": { "raw": 8.020259980661266e-08, "percentile": 0.46463538993972237 }, "sha256": "30dc6a09808ddf850ef0c5382c95946ae82d7d32e887f062c9f50b192073ef57", "simhash": "1:08a3a37e6024d87f", "word_count": 2478 }, "last_updated": "2023-07-14T21:00:34.731811+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "WILLIAM H. CHRISTINSON, Trustee, Plaintiff-Appellee, v. VENTURI CONSTRUCTION COMPANY et al., Defendants-Appellants." ], "opinions": [ { "text": "JUSTICE HARRISON\ndelivered the opinion of the court:\nThe defendants, Venturi Construction Company and Robert W. Venturi (hereinafter both defendants are referred to collectively as \u201cVenturi\u201d), appeal from a final judgment of the circuit court of Wayne County for $33,725.57 plus costs of suit, in favor of the plaintiff, William H. Christinson as trustee in bankruptcy in re Illinois Valley Acceptance Corporation (hereinafter referred to as \u201cIVAC\u201d). The plaintiff sued on two negotiable instruments which had been executed by Venturi. This appeal raises two issues. First, Venturi contends that the plaintiff is not a holder in due course because IVAC and the seller of the instruments in question, the Moody Manufacturing Company (hereinafter referred to as \u201cMoody\u201d), were so closely connected with one another that Moody\u2019s lack of good faith and its notice of Venturi\u2019s personal defenses should legally be imputed to the plaintiff. Second, Venturi asserts that the evidence at trial sufficiently established the defense of fraud in the factum under Section 3 \u2014 305(2)(c) of the Uniform Commercial Code (Ill. Rev. Stat. 1979, ch. 26, par. 3 \u2014 305(2)(c>). For the reasons which follow, we affirm the judgment of the circuit court.\nVenturi first purchased products from Moody in 1968. In May of that year, Venturi signed a trade acceptance for the first time, after being assured that the document was of no legal effect and would only be used to obtain financing for Moody. A Moody salesman provided Venturi with the names of two persons whom Venturi could contact to confirm the representations. Venturi did telephone these people and was assured that the statements were true. On this basis, Venturi signed the trade acceptance. About a year later, Venturi signed two more trade acceptances after the Moody salesman told him that the previous trade acceptance had been torn up. Venturi testified that he believed that he was not ordering goods, but rather was merely indicating his potential requirements for the coming year in order to facilitate bank loans for Moody and to insure better delivery of possible future orders to Venturi. Venturi testified on cross-examination that, although he had an opportunity to telephone his bank to determine the nature of the instrument which he was signing, he did not do so.\nRobert W. Martin, Jr., testified for the plaintiff that he was an officer of I VAC and that he had received the two trade acceptances from Moody, paying for them by check. Martin further testified that each trade acceptance was acquired before its maturity date, that at the time of purchase he lacked notice of any defenses to the instruments, and that Venturi had not paid the trade acceptances. On cross-examination, Martin testified that Moody assigned all of its accounts receivable to IVAC pursuant to a written financing agreement and that some trade acceptances were accompanied by invoices and some were not.\nThe plaintiff brought suit on two instruments which were denominated as \u201ctrade acceptances.\u201d\n\u201cA trade acceptance is a draft or bill of exchange drawn by a seller on the purchaser of goods sold, and accepted by the purchaser. Its purpose is to make the book account liquid and permit the seller to raise money on it before it is due under the terms of the sale. [Citations.] When properly drawn, it is negotiable paper and its use results in advantages to both the purchaser and the seller. Properly used, it represents current merchandise transactions only, and in this respect, it is different from an ordinary promissory note which may be given for a past due account, borrowed money or for any other consideration. The principal function of a trade acceptance is to take the place of selling goods on an open account.\u201d (Gilliland & Echols Farm Supply & Hatchery v. Credit Equipment Corp. (1959), 269 Ala. 190, 192, 112 So. 2d 331, 332-33.)\nVenturi does not question the formal negotiability of the instant trade acceptances, nor plaintiff\u2019s status as a holder, and he has admitted his signature to both instruments. \u201cWhen signatures [on commercial paper] are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense.\u201d (Ill. Rev. Stat. 1979, ch. 26, par. 3 \u2014 307(2); Leopold v. Halleck (1982), 106 Ill. App. 3d 386, 389, 436 N.E.2d 29, 31.) Venturi seeks to raise several defenses. First, he contends that the plaintiff is not a holder in due course (see Ill. Rev. Stat. 1979, ch. 26, par. 3 \u2014 302), which status would preclude Venturi from asserting most of his defenses (Ill. Rev. Stat. 1979, ch. 26, par. 3 \u2014 305), because TVAC and Moody were so closely connected with one another, that Moody\u2019s lack of good faith and its knowledge of Venturi\u2019s personal defenses may legally be imputed to the plaintiff.\nUnder the close connection doctrine, a purchaser of negotiable paper cannot be a holder in due course if his relationship with the transferor of such paper is too intimate. (See Unico v. Owen (1967), 50 N.J. 101, 122-23, 232 A.2d 405, 417; J. White and R. Summers, Uniform Commercial Code sec. 14 \u2014 8, at 479 (1972).) Unico treated a close connection between business entities as a separate bar to establishing holder in due course status, apparently distinct from the Uniform Commercial Code requirements of good faith (Ill. Rev. Stat. 1979, ch. 26, par. 3 \u2014 302(b)), and lack of notice of claims or defenses (Ill. Rev. Stat. 1979, ch. 26, par. 3 \u2014 302(c)). Although the doctrine has been discussed by the appellate court (Schranz v. I. L. Grossman, Inc. (1980), 90 Ill. App. 3d 507, 520, 412 N.E.2d 1378; Personal Finance Co. v. Meredith (1976), 39 Ill. App. 3d 695, 700, 350 N.E.2d 781), Meredith, like Unico, arose from consumer financing transactions and was decided under section 17 of the Retail Installment Sales Act (Ill. Rev. Stat. 1975, ch. 121\u00bd, par. 517) and Schranz, in language which we find significant, discussed closely connected entities in terms of a \u201cmore stringent analysis of the good faith element conducted by courts when examining consumer financing transactions.\u201d (Emphasis added.) (Schranz v. I. L. Grossman, Inc. (1980), 90 Ill. App. 3d 507, 520.) \u201cA consumer who executes a note often has no way of investigating the honesty of the person with whom he deals and his only realistic remedy in the event of breach is to withhold payment.\u201d (Bowling Green, Inc. v. State Street Bank & Trust Co. (1st Cir. 1970), 425 F.2d 81, 85.) The close connection doctrine was apparently fashioned to preserve this remedy for the consumer: where two entities are interrelated, and one of the entities breaches an executory contract with a consumer, allowing the consumer to raise the seller\u2019s default as a defense against the financing entity provides realistic protection for the consumer. However, a commercial obligor typically does not share the defenselessness which characterizes the consumer debtor. Therefore, where a transaction does not involve a consumer as a party, this need for protection is absent, and in such a case, the bald conclusion that two entities are closely connected, without more, provides no reason for denying the holder of an instrument the favored status of the holder in due course.\nThe statutory concepts of good faith and notice, however, provide an adequate analytical framework for judicial scrutiny of the facts underlying the alleged close connection. Therefore, we, like the court in Schranz, will not analyze the evidence of the Moody-FVAC interrelationship under the rubric of \u201cclose connection,\u201d but rather will consider such evidence as a factor in determining the existence of good faith and the absence of notice.\nSection 1 \u2014 201(19) defines good faith subjectively as \u201chonesty in fact in the conduct or transaction concerned.\u201d (Ill. Rev. Stat. 1979, ch. 26, par. 1 \u2014 201(19).) The issue of good faith \u201cis a question of fact to be left to the trier of fact.\u201d (Schranz v. I. L. Grossman, Inc. (1980), 90 Ill. App. 3d 507, 520.) Although Venturi argues that many facts point to IVAC\u2019s lack of good faith, most of these facts evidence only that IVAC provided all, or nearly all, of Moody\u2019s financing and was therefore accorded certain collateral powers to protect its investment. These powers were granted by the financing agreement and included the power to open mail and to endorse Moody\u2019s signature to invoices and drafts against debtors, and the right to inspect Moody\u2019s books and records for the purpose of monitoring Moody\u2019s financial condition. None of these powers indicates that IVAC was less than \u201chonest in fact\u201d with regard to the two transactions in question. Considering all of these facts as a whole, as Venturi urges us to do, we cannot conclude that IVAC\u2019s purchase of the instant trade acceptances was necessarily fraught with bad faith by the existence of the IVACMoody interrelationship. Consequently, the trial court\u2019s decision was not against the manifest weight of the evidence. See Dutton v. Roo-Mac, Inc. (1981), 100 Ill. App. 3d 116, 122, 426 N.E.2d 604.\nSection 1 \u2014 201(25)(c) provides that a person has notice of a fact when \u201cfrom all the facts and circumstances known to him at the time in question he has reason to know it exists.\u201d (Ill. Rev. Stat. 1979, ch. 26, par. 1 \u2014 201(25)(c).) The first issue concerning notice is whether the relationship between I VAC and Moody constituted reason for IVAC to know that Moody was breaching the contracts underlying the negotiable instruments which IVAC was purchasing. Under this test, Venturi had to show that IVAC should have known, from all the facts and circumstances, that the trade acceptances in question had not generated corresponding shipments of merchandise. IVAC\u2019s powers under the financing agreement pertained to keeping itself informed of Moody\u2019s financial condition by enabling it to verify Moody\u2019s accounts receivable. IVAC\u2019s power to open mail and sign drafts was apparently designed to protect IVAC in the event of Moody\u2019s insolvency. Because these facts do not involve Moody\u2019s shipping procedures, we cannot conclude that IVAC should have been aware of Moody\u2019s breach of the underlying contracts.\nVenturi contends, however, that because no invoices were attached to the trade acceptances, even though other trade acceptances had invoices attached, and because the due date of each instrument was nearly a year after the date the documents were executed, IVAC was put on notice that Venturi had not received any merchandise from Moody. On cross-examination Martin testified that some documents purchased from Moody were accompanied by invoices describing what was being purchased from Moody and that other documents had no such invoices. Apparently the trade acceptances in question were not the only instruments purchased without accompanying invoices. There was no evidence showing that, at the time of purchase, the absence of invoices was unusual. Under the circumstances, we cannot say that these facts constituted notice to IVAC. We note too that this argument has overtones as to the negotiability of trade acceptances. The purchaser of a purportedly negotiable instrument need only look to the instrument itself to determine its negotiability. (Ill. Ann. Stat., ch. 26, par. 3 \u2014 105, Official Comment 8, at 11 (Smith-Hurd 1981 Supp.); Equitable Trust Co. v. Harger (1913), 258 Ill. 615, 617, 102 N.E.209.) Therefore, an argument which would require the purchaser of otherwise negotiable paper to look to a separate instrument in order to determine the negotiability of the purchased paper must be rejected.\nThe second part of Venturi\u2019s argument is that because the due date was nearly a year after the documents\u2019 date of execution, IVAC had notice of the irregularity of the underlying transaction. The Alabama Supreme Court in Gilliland indicated that the purpose of a trade acceptance \u201cis to make the book account liquid and permit the seller to raise money on it before it is due under the terms of the sale.\u201d (Emphasis added.) (269 Ala. 190, 192, 112 So. 2d 331, 333.) In view of this purpose, the fact that an instrument is payable at a future time cannot be considered a circumstance under section 1\u2014 201(25)(c) from which the purchaser would have reason to know that the underlying transaction was of an irregular nature. We conclude that I VAC had no notice of any fact which would preclude the status of a holder in due course.\nVenturi\u2019s final contention is that I VAC may not recover on the instruments because the evidence at trial established that Venturi\u2019s signature was procured by representations amounting to fraud in the factum. Under section 3 \u2014 305 of the Uniform Commercial Code, a holder in due course takes a negotiable instrument subject only to certain defenses, including \u201csuch misrepresentation as has induced the party to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms.\u201d (Emphasis added.) (Ill. Rev. Stat. 1979, ch. 26, par. 3\u2014 305(2)(c).) As Uniform Commercial Code Comment 7 to section 3 \u2014 305 indicates:\n\u201cThe test of the defense here stated is that of excusable ignorance of the contents of the writing signed. The party must *** also have had no reasonable opportunity to obtain knowledge. In determining what is \u00e1 reasonable opportunity all relevant factors are to be taken into account, including the age and sex of the party, his intelligence, education and business experience; his ability to read or understand English, the representations made to him and his reason to rely on them or to have confidence in the person making them; the presence or absence of any third' person who might read or explain the instrument to him, or any other possibility of obtaining independent information; and the apparent necessity, or lack of it, for acting without delay.\nUnless the misrepresentation meets this test, the defense is cut off by a holder in due course.\u201d (Ill. Ann. Stat., ch. 26, par. 3 \u2014 305, Uniform Commercial Code Comment 7, at 184-85 (Smith-Hurd 1963).)\nAlthough Venturi established that he signed the trade acceptances without actual knowledge of their nature, he also testified that he called two people to confirm the salesman\u2019s representations and that he had the opportunity to call his bank to determine the nature of the instrument which he was signing. Under these circumstances we can- \u25a0 not say that Venturi had no reasonable opportunity to obtain knowledge of the instruments\u2019 character and essential terms. The trial court\u2019s judgment against Venturi is therefore not against the manifest weight of the evidence. Dutton v. Roo-Mac, Inc. (1981), 100 Ill. App. 3d 116, 122.\nWe therefore affirm the judgment of the circuit court of Wayne County.\nAffirmed.\nJONES and KASSERMAN, JJ\u201e concur.", "type": "majority", "author": "JUSTICE HARRISON" } ], "attorneys": [ "John J. Flood, of Musick & Mitchell, P. C., of Mt. Vernon, for appellants.", "Alice M. Jordan, of Richard C. Cochran Law Office, of Fairfield, for appellee." ], "corrections": "", "head_matter": "WILLIAM H. CHRISTINSON, Trustee, Plaintiff-Appellee, v. VENTURI CONSTRUCTION COMPANY et al., Defendants-Appellants.\nFifth District\nNo. 81\u2014581\nOpinion filed August 23, 1982.\nJohn J. Flood, of Musick & Mitchell, P. C., of Mt. Vernon, for appellants.\nAlice M. Jordan, of Richard C. Cochran Law Office, of Fairfield, for appellee." }, "file_name": "0034-01", "first_page_order": 56, "last_page_order": 63 }