{ "id": 3600572, "name": "DEALER MANAGEMENT SYSTEMS, INC., Plaintiff-Appellant, v. DESIGN AUTOMOTIVE GROUP INC., Defendant-Appellee", "name_abbreviation": "Dealer Management Systems, Inc. v. Design Automotive Group Inc.", "decision_date": "2005-01-18", "docket_number": "No. 2\u201404\u20140410", "first_page": "416", "last_page": "422", "citations": [ { "type": "official", "cite": "355 Ill. App. 3d 416" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "171 F. Supp. 2d 1075", "category": "reporters:federal", "reporter": "F. Supp. 2d", "case_ids": [ 9471385 ], "year": 2001, "pin_cites": [ { "page": "1086" } ], "opinion_index": 0, "case_paths": [ "/f-supp-2d/171/1075-01" ] }, { "cite": "204 Ill. 2d 640", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 609713 ], "year": 2003, "pin_cites": [ { "page": "645" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/204/0640-01" ] }, { "cite": "929 F.2d 1147", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 10546787 ], "year": 1991, "pin_cites": [ { "page": "1151", "parenthetical": "noting decisions holding that contracts for software package development are for goods, not services" } ], "opinion_index": 0, "case_paths": [ "/f2d/929/1147-01" ] }, { "cite": "147 Wis. 2d 500", "category": "reporters:state", "reporter": "Wis. 2d", "case_ids": [ 8667793 ], "weight": 2, "year": 1988, "pin_cites": [ { "page": "505-07" }, { "page": "100" } ], "opinion_index": 0, "case_paths": [ "/wis-2d/147/0500-01" ] }, { "cite": "257 F. Supp. 2d 326", "category": "reporters:federal", "reporter": "F. Supp. 2d", "case_ids": [ 9114799 ], "year": 2003, "pin_cites": [ { "page": "353", "parenthetical": "developer's agreement to create software \"from scratch (concept to realization) for which it would be paid on a time and materials basis\" was a contract for services" } ], "opinion_index": 0, "case_paths": [ "/f-supp-2d/257/0326-01" ] }, { "cite": "793 N.E.2d 1063", "category": "reporters:state_regional", "reporter": "N.E.2d", "case_ids": [ 9106296 ], "weight": 2, "year": 2003, "pin_cites": [ { "page": "1071" }, { "page": "1071", "parenthetical": "Article 2 of UCC applied to contract for purchase of \"pre-existing, standardized\" software" } ], "opinion_index": 0, "case_paths": [ "/ne2d/793/1063-01" ] }, { "cite": "935 F. Supp. 425", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 7651396 ], "weight": 2, "year": 1996, "pin_cites": [ { "page": "432", "parenthetical": "applying New York law" }, { "page": "432" } ], "opinion_index": 0, "case_paths": [ "/f-supp/935/0425-01" ] }, { "cite": "63 F. Supp. 2d 772", "category": "reporters:federal", "reporter": "F. Supp. 2d", "case_ids": [ 11572413 ], "weight": 2, "year": 1999, "pin_cites": [ { "page": "775", "parenthetical": "applying Michigan law" }, { "page": "775" } ], "opinion_index": 0, "case_paths": [ "/f-supp-2d/63/0772-01" ] }, { "cite": "161 F. Supp. 2d 894", "category": "reporters:federal", "reporter": "F. Supp. 2d", "case_ids": [ 9478686 ], "year": 2001, "pin_cites": [ { "page": "897", "parenthetical": "applying Illinois law" } ], "opinion_index": 0, "case_paths": [ "/f-supp-2d/161/0894-01" ] }, { "cite": "190 F. Supp. 2d 159", "category": "reporters:federal", "reporter": "F. Supp. 2d", "case_ids": [ 9505713 ], "weight": 2, "year": 2002, "pin_cites": [ { "page": "163", "parenthetical": "applying California law" }, { "page": "163", "parenthetical": "\"As the Agreement's price terms make plain, the software programs themselves were the essence of the Agreement\"" } ], "opinion_index": 0, "case_paths": [ "/f-supp-2d/190/0159-01" ] }, { "cite": "925 F.2d 670", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1789386 ], "weight": 5, "year": 1991, "pin_cites": [ { "page": "675-76", "parenthetical": "applying Pennsylvania law" }, { "page": "675", "parenthetical": "\"The fact that some programs may be tailored for specific purposes need not alter their status as 'goods' because the [UCC] definition includes 'specially manufactured goods' \"" }, { "page": "676" }, { "page": "676" }, { "page": "676" } ], "opinion_index": 0, "case_paths": [ "/f2d/925/0670-01" ] }, { "cite": "148 F.3d 649", "category": "reporters:federal", "reporter": "F.3d", "case_ids": [ 287679 ], "weight": 4, "year": 1998, "pin_cites": [ { "page": "654", "parenthetical": "applying New Hampshire law" }, { "page": "654", "parenthetical": "\"we can think of no reason why the UCC is not suitable to govern disputes arising from the sale of custom software\"" }, { "page": "654", "parenthetical": "Article 2 applied to agreement to adapt proprietary software" }, { "page": "655" } ], "opinion_index": 0, "case_paths": [ "/f3d/148/0649-01" ] }, { "cite": "28 Ill. App. 3d 53", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5407238 ], "year": 1975, "pin_cites": [ { "page": "57", "parenthetical": "a section 2 - 1401 petition \"is proper for the correction of errors of law apparent on the face of the record\"" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/28/0053-01" ] }, { "cite": "236 Ill. App. 3d 75", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5782729 ], "year": 1992, "pin_cites": [ { "page": "81", "parenthetical": "\"[A] petition under section 2 - 1401 is not appropriate for review of errors of law\"" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/236/0075-01" ] }, { "cite": "99 Ill. 2d 389", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3164374 ], "year": 1984, "pin_cites": [ { "page": "391-92" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/99/0389-01" ] }, { "cite": "279 Ill. App. 3d 874", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 75298 ], "year": 1996, "pin_cites": [ { "page": "883" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/279/0874-01" ] }, { "cite": "31 Ill. App. 3d 870", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2710467 ], "year": 1975, "pin_cites": [ { "page": "873" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/31/0870-01" ] }, { "cite": "114 Ill. 2d 209", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5542740 ], "weight": 2, "year": 1986, "pin_cites": [ { "page": "220-21" }, { "page": "221" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/114/0209-01" ] } ], "analysis": { "cardinality": 802, "char_count": 15370, "ocr_confidence": 0.719, "pagerank": { "raw": 9.922650026626477e-08, "percentile": 0.5361237276767873 }, "sha256": "922be11b2e71d745ba90cb200792365cc89ee2a2953b4e8865f7d12e6de19ac2", "simhash": "1:bb0a5d972d4d53a8", "word_count": 2523 }, "last_updated": "2023-07-14T21:57:27.413698+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "DEALER MANAGEMENT SYSTEMS, INC., Plaintiff-Appellant, v. DESIGN AUTOMOTIVE GROUP INC., Defendant-Appellee." ], "opinions": [ { "text": "JUSTICE CALLUM\ndelivered the opinion of the court:\nPlaintiff, Dealer Management Systems, Inc., appeals from an order of the circuit court of Lake County denying its petition under section 2 \u2014 1401 of the Code of Civil Procedure (735 ILCS 5/2 \u2014 1401 (West 2002)) to vacate the dismissal of its complaint against defendant, Design Automotive Group, Inc. We affirm.\nPlaintiff filed a two-count complaint on June 5, 2002. Count I alleged that in 2000, defendant issued a purchase order to plaintiff for \u201ccomputer programs and other services.\u201d A copy of the purchase order attached to the complaint shows that plaintiff agreed to provide defendant with an \u201cAccounting Information Management\u201d system consisting of various separately priced software components. The price of the individual components totaled $24,000, but plaintiff agreed to provide them as a package for $20,000 plus an additional $795 for an item identified as \u201cRMCOBALRUNTIME SYSTEM FOR UNIX 16.\u201d The purchase order also contains the following language:\n\u201cSoftware changes to AIM System to provid [sic] the same or better function as compared with current system. Develop a MRP subsystem to meet manufaturing [sic] needs[.] Also includes data file conversion progr [sic] from our current system and load prgrams [sic] in the AIM system. Also includes user training and support for 1 year.\n@[$]15000.00\nIncludes source code license for internal use only and not for resale to anyone or company.\u201d\nPlaintiff alleged that defendant had breached the contract by failing to pay the $20,000 purchase price for the software. Count II sought recovery in quantum meruit for other computer programs that plaintiff allegedly wrote for defendant.\nOn July 10, 2002, defendant moved to dismiss count I pursuant to section 2 \u2014 619(a)(7) of the Code of Civil Procedure (Code) (735 ILCS 5/2 \u2014 619(a)(7) (West 2002)). Defendant argued that, because it had not signed the purchase order, the agreement was unenforceable under section 2 \u2014 201(1) of the Uniform Commercial Code \u2014 Sales (UCC) \u2014 the statute of frauds \u2014 which provides, in pertinent part:\n\u201c[A] contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought ***.\u201d 810 ILCS 5/2 \u2014 201(1) (West 2000).\nOn that same date, defendant also filed a demand for a bill of particulars as to count II. Defendant subsequently moved to strike count II on the basis that plaintiff failed to file and serve a bill of particulars in response to the demand. See 735 ILCS 5/2 \u2014 607(b) (West 2002). On August 27, 2002, the trial court granted the motion to strike, but gave plaintiff seven days to file a bill of particulars and seek leave to reinstate count II. The court also gave plaintiff 21 days to respond to the motion to dismiss count I and continued the case to October 8, 2002, for a hearing on the motion to dismiss. Plaintiff filed neither a bill of particulars nor a response to the motion to dismiss. On October 8, 2002, the court granted the motion to dismiss count I and dismissed the entire complaint with prejudice.\nOn March 15, 2004, plaintiff filed a petition to vacate the dismissal of the complaint. Plaintiff alleged that due to illness, its attorney neglected to respond to the motion to dismiss. Plaintiff further alleged that because of a record-keeping error, its attorney did not learn of the dismissal until February 2004. Plaintiff set the petition for a hearing on April 6, 2004. Defendant neither answered the petition nor moved to strike it, but on April 6, 2004, the trial court entered an order denying the petition. This appeal followed.\nTo obtain relief under section 2 \u2014 1401, a litigant \u201cmust affirmatively set forth specific factual allegations supporting each of the following elements: (1) the existence of a meritorious defense or claim; (2) due diligence in presenting this defense or claim to the circuit court in the original action; and (3) due diligence in filing the section 2 \u2014 1401 petition for relief.\u201d Smith v. Airoom, Inc., 114 Ill. 2d 209, 220-21 (1986). Whether to award relief under section 2 \u2014 1401 lies within the sound discretion of the trial court depending on the facts and equities presented, and a reviewing court will not disturb that decision unless it represents an abuse of discretion. Airoom, 114 Ill. 2d at 221.\nPlaintiff frames the question on appeal as whether its petition was sufficient to establish grounds for relief under section 2 \u2014 1401. Plaintiff contends that because defendant did not answer the petition or move to strike it, its allegations must be taken as true, and the only question presented is whether the petition was legally sufficient. See Windmon v. Banks, 31 Ill. App. 3d 870, 873 (1975). We disagree. Under Supreme Court Rules 104 and 105 (134 Ill. 2d Rs. 104, 105), a party is entitled to notice that it must answer or otherwise respond to a section 2 \u2014 1401 petition within 30 days after service of the petition. Here, the petition was filed on March 15, 2004, along with a notice of \u201cmotion\u201d indicating that the petition would be heard 22 days later on April 6, 2004. The record does not indicate when the petition was served; thus we cannot determine if defendant\u2019s answer was not yet due on the hearing date. Moreover, the notice of \u201cmotion\u201d did not advise defendant that it was required to file an answer to the petition. Under these circumstances, plaintiff must be deemed to have waived the requirement that defendant answer or otherwise respond to the petition.\nPlaintiff also argues that because the trial court \u201cdismissed\u201d the petition, the factual allegations must be taken as true. See Cartwright v. Goodyear Tire & Rubber Co., 279 Ill. App. 3d 874, 883 (1996). However, the trial court\u2019s order recites that the petition was \u201cdenied,\u201d not that it was \u201cdismissed.\u201d Unfortunately, plaintiff has not supplied a report of proceedings of the April 6, 2004, hearing at which that order was entered, so we cannot be certain of the precise basis of the trial court\u2019s ruling. It is possible that the trial court concluded that the petition was legally insufficient, but it is also possible that the court gave plaintiff the opportunity to prove its case and found the proof wanting. It is well established that \u201can appellant has the burden to present a sufficiently complete record of the proceedings at trial to support a claim of error, and in the absence of such a record on appeal, it will be presumed that the order entered by the trial court was in conformity with law and had a sufficient factual basis.\u201d Foutch v. O\u2019Bryant, 99 Ill. 2d 389, 391-92 (1984).\nWe need not rest our decision entirely on the inadequacy of the record, however. Even if we were to accept plaintiffs argument that the only issue before us is the legal sufficiency of the petition, we would resolve that issue against plaintiff. We conclude that the petition fails to satisfy the first requirement for relief under section 2 \u2014 1401: the existence of a meritorious defense or claim. In its appellate brief, plaintiff addresses only the dismissal of its breach of contract claim. As previously discussed, defendant moved for dismissal on the basis that the contract did not comply with the UCC\u2019s statute of frauds for the sale of goods. Plaintiff contends that it has a meritorious claim because the underlying contract was not for a sale of goods subject to the statute of frauds. According to plaintiff, the contract was wholly or predominantly for the provision of services and thus not subject to the statute of frauds. We disagree.\nBefore proceeding, we note that plaintiffs petition did not offer any new facts bearing on the applicability of the statute of frauds. Rather, in its petition plaintiff essentially seeks to raise an error of law. There is conflicting authority on whether a section 2 \u2014 1401 petition may be predicated on legal error. Compare Universal Outdoor, Inc. v. City of Des Plaines, 236 Ill. App. 3d 75, 81 (1992) (\u201c[A] petition under section 2 \u2014 1401 is not appropriate for review of errors of law\u201d), with Hoopingarner v. Peric, 28 Ill. App. 3d 53, 57 (1975) (a section 2 \u2014 1401 petition \u201cis proper for the correction of errors of law apparent on the face of the record\u201d). For purposes of our analysis, we will assume, without deciding, that an error of law may be raised in a section 2 \u2014 1401 petition.\nThe UCC\u2019s statute of frauds for the sale of goods appears in Article 2, which applies to \u201ctransactions in goods.\u201d 810 ILCS 5/2 \u2014 102 (West 2002). \u201cGoods\u201d is defined, in pertinent part, as \u201call things, including specially manufactured goods, which are moveable at the time of identification to the contract for sale.\u201d 810 ILCS 5/2 \u2014 105(1) (West 2002). A sampling of decisions from various jurisdictions shows that courts have generally recognized that computer software qualifies as a \u201cgood\u201d for purposes of the UCC. See, e.g., Micro Data Base Systems, Inc. v. Dharma Systems, Inc., 148 F.3d 649, 654 (7th Cir. 1998) (applying New Hampshire law); Advent Systems Ltd. v. Unisys Corp., 925 F.2d 670, 675-76 (3d Cir. 1991) (applying Pennsylvania law); ePresence, Inc. v. Evolve Software, Inc., 190 F. Supp. 2d 159, 163 (D. Mass. 2002) (applying California law); Newcourt Financial USA, Inc. v. FT Mortgage Cos., 161 F. Supp. 2d 894, 897 (N.D. Ill. 2001) (applying Illinois law); Dahlmann v. Sulcus Hospitality Technologies Corp., 63 F. Supp. 2d 772, 775 (E.D. Mich. 1999) (applying Michigan law); Architectronics, Inc. v. Control Systems, Inc., 935 F. Supp. 425, 432 (S.D.N.Y. 1996) (applying New York law); Olcott International & Co. v. Micro Data Base Systems, Inc., 793 N.E.2d 1063, 1071 (Ind. App. 2003). However, whether a particular transaction involving computer software constitutes a \u201ctransaction in goods\u201d depends on various considerations. Most courts would probably agree that an ordinary sale of \u201coff-the-rack\u201d software is a transaction in goods. See, e.g., Olcott International & Co., 793 N.E.2d at 1071 (Article 2 of UCC applied to contract for purchase of \u201cpre-existing, standardized\u201d software). In contrast, a transaction predominantly involving the intellectual property rights to the software is outside the scope of Article 2. See Architectronics, Inc., 935 F. Supp. at 432.\nSome courts have concluded that a contract to develop entirely new software is one for services rather than goods. Pearl Investments, LLC v. Standard I/O, Inc., 257 F. Supp. 2d 326, 353 (D. Me. 2003) (developer\u2019s agreement to create software \u201cfrom scratch (concept to realization) for which it would be paid on a time and materials basis\u201d was a contract for services); see also Micro-Managers, Inc. v. Gregory, 147 Wis. 2d 500, 505-07, 434 N.W.2d 97, 100 (App. 1988). But see Dharma Systems, Inc., 148 F.3d at 654 (\u201cwe can think of no reason why the UCC is not suitable to govern disputes arising from the sale of custom software\u201d); Downriver Internists v. Harris Corp., 929 F.2d 1147, 1151 (6th Cir. 1991) (noting decisions holding that contracts for software package development are for goods, not services). On the other hand, a contract that calls for the modification or customization of existing software may still be a transaction in goods. See Dharma Systems, Inc., 148 F.3d at 654 (Article 2 applied to agreement to adapt proprietary software); Advent Systems Ltd., 925 F.2d at 675 (\u201cThe fact that some programs may be tailored for specific purposes need not alter their status as \u2018goods\u2019 because the [UCC] definition includes \u2018specially manufactured goods\u2019 \u201d).\nContracts for the sale of software often also involve the provision of services. \u201cWhere there is a mixed contract for goods and services, there is a \u2018transaction in goods\u2019 only if the contract is predominantly for goods and incidentally for services.\u201d Brandt v. Boston Scientific Corp., 204 Ill. 2d 640, 645 (2003). Article 2 applies to software transactions where the services provided \u201care not substantially different from those generally accompanying package sales of computer systems consisting of hardware and software.\u201d Advent Systems Ltd., 925 F.2d at 676. Such ancillary services include installation, training, and technical support. Dahlmann, 63 F. Supp. 2d at 775. Comparing the relative costs of materials and labor may be helpful in the analysis, but is not dispositive. Advent Systems Ltd., 925 F.2d at 676; accord ePresence, Inc., 190 F. Supp. 2d at 163 (\u201cAs the Agreement\u2019s price terms make plain, the software programs themselves were the essence of the Agreement\u201d).\nFinally, although the statute of frauds applies only to contracts for the \u201csale\u201d of goods, the labels used by the parties to describe a transaction are not controlling. Thus, a transaction that nominally involves a mere license to use software will be considered a sale under the UCC if it \u201c \u2018involves a single payment giving the buyer an unlimited period in which it has a right to possession.\u2019 \u201d Softman Products Co., LLC v. Adobe Systems, Inc., 171 F. Supp. 2d 1075, 1086 (C.D. Cal. 2001), quoting R. Nimmer, The Law of Computer Technology \u00a7 1.18[1], at 1 \u2014 103 (1992).\nApplying these principles here, we conclude, as a matter of law, that the contract was predominantly for goods and only incidentally for services, and that it amounted to \u201ca sale of goods\u201d under the UCC. The written agreement is entitled \u201cpurchase order.\u201d It lists various software \u201csubsystems\u201d with descriptions corresponding to standard accounting tasks (e.g., \u201cAccounts Receivable Subsys.,\u201d \u201cInventory Control Subsys\u201d). There is nothing in plaintiffs complaint or in the purchase order itself to suggest that these components were developed \u201cfrom scratch.\u201d The subsystems are separately priced, but sold as a package for $20,000. The price for services, in comparison, is only $15,000. Moreover, this amount includes customization of the software. Customization may be treated as \u201cthe \u2018manufacture\u2019 of the \u2018good\u2019 from existing software\u201d rather than as a service. Dharma Systems, Inc., 148 F.3d at 655. Thus, more than $20,000 of the contract price is for goods and less than $15,000 is for services. In addition, the services provided \u2014 installation, training, and support \u2014 \u201care not substantially different from those generally accompanying package sedes of computer systems consisting of hardware and software.\u201d Advent Systems Ltd., 925 F.2d at 676. The agreement is a sale subject to the statute of frauds because it provided for transfer of the software for an unlimited time for a single payment. Accordingly, plaintiff has not shown the existence of a meritorious claim that could have withstood the UCC\u2019s statute of frauds. Plaintiff was not entitled to relief under section 2 \u2014 1401 of the Code.\nFor the foregoing reasons, the judgment of the circuit court of Lake County is affirmed.\nAffirmed.\nMcLAREN and BOWMAN, JJ., concur.", "type": "majority", "author": "JUSTICE CALLUM" } ], "attorneys": [ "Lawrence M. Liebman, of Law Offices of Lawrence M. Liebman, of Morton Grove, and Morton H. Cohon, of Chicago, for appellant.", "Michael J. Salvi, of Salvi, Salvi & Wifler, of Lake Zurich, for appellee." ], "corrections": "", "head_matter": "DEALER MANAGEMENT SYSTEMS, INC., Plaintiff-Appellant, v. DESIGN AUTOMOTIVE GROUP INC., Defendant-Appellee.\nSecond District\nNo. 2\u201404\u20140410\nOpinion filed January 18, 2005.\nRehearing denied February 17, 2005.\nLawrence M. Liebman, of Law Offices of Lawrence M. Liebman, of Morton Grove, and Morton H. Cohon, of Chicago, for appellant.\nMichael J. Salvi, of Salvi, Salvi & Wifler, of Lake Zurich, for appellee." }, "file_name": "0416-01", "first_page_order": 434, "last_page_order": 440 }