{ "id": 5581130, "name": "MEDI-FI TWO INCORPORATED, Plaintiff-Appellant, v. PATRICK RIORDAN, Defendant-Appellee", "name_abbreviation": "Medi-Fi Two Inc. v. Riordan", "decision_date": "1979-04-10", "docket_number": "No. 78-1016", "first_page": "491", "last_page": "496", "citations": [ { "type": "official", "cite": "71 Ill. App. 3d 491" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "381 N.E.2d 400", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "64 Ill. App. 3d 513", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3330690 ], "pin_cites": [ { "page": "517" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/64/0513-01" ] }, { "cite": "331 N.E.2d 365", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1978, "opinion_index": 0 }, { "cite": "29 Ill. App. 3d 956", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2497777 ], "year": 1978, "pin_cites": [ { "page": "962" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/29/0956-01" ] }, { "cite": "365 N.E.2d 967", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "50 Ill. App. 3d 231", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5642428 ], "pin_cites": [ { "page": "245" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/50/0231-01" ] }, { "cite": "308 N.E.2d 7", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1977, "opinion_index": 0 }, { "cite": "17 Ill. App. 3d 152", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2513039 ], "year": 1977, "pin_cites": [ { "page": "157" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/17/0152-01" ] }, { "cite": "147 N.E.2d 329", "category": "reporters:state_regional", "reporter": "N.E.2d", "pin_cites": [ { "page": "333" } ], "opinion_index": 0 }, { "cite": "13 Ill. 2d 72", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2774083 ], "pin_cites": [ { "page": "77" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/13/0072-01" ] }, { "cite": "185 N.E.2d 97", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "37 Ill. App. 2d 105", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5257074 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/37/0105-01" ] }, { "cite": "213 N.E.2d 89", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1962, "opinion_index": 0 }, { "cite": "66 Ill. App. 2d 134", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5291574 ], "year": 1962, "opinion_index": 0, "case_paths": [ "/ill-app-2d/66/0134-01" ] }, { "cite": "284 N.E.2d 470", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1965, "opinion_index": 0 }, { "cite": "5 Ill. App. 3d 1068", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2523513 ], "year": 1965, "pin_cites": [ { "page": "1071" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/5/1068-01" ] }, { "cite": "352 N.E.2d 266", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "40 Ill. App. 3d 782", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2965903 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/40/0782-01" ] }, { "cite": "345 N.E.2d 493", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1976, "opinion_index": 0 }, { "cite": "63 Ill. 2d 128", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5426498 ], "year": 1976, "pin_cites": [ { "page": "131" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/63/0128-01" ] } ], "analysis": { "cardinality": 671, "char_count": 12320, "ocr_confidence": 0.886, "pagerank": { "raw": 6.380125665320789e-08, "percentile": 0.39290167110128815 }, "sha256": "8cef1fcd2d951b72e10b14e7c6fa41a002b0f307ce9528e7434dbd69276141ae", "simhash": "1:319540552983dcd4", "word_count": 1976 }, "last_updated": "2023-07-14T15:52:26.554099+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "MEDI-FI TWO INCORPORATED, Plaintiff-Appellant, v. PATRICK RIORDAN, Defendant-Appellee." ], "opinions": [ { "text": "Mr. JUSTICE HARTMAN\ndelivered the opinion of the court:\nThe issue presented to us for review is whether plaintiff Medi-Fi Two Incorporated sustained its burden of proof in a contract action against defendant Dr. Patrick Riordan who allegedly breached an agreement between the parties.\nThe cause was tried before the court without a jury upon the complaint and a counterclaim resulting in judgment for defendantcounterplaintiff on the complaint and for plaintiff-counterdefendant on the counterclaim on September 28,1977. Plaintiff filed a post-trial motion on October 4, 1977, which was denied on April 19, 1978.\nBy amended notice of appeal of May 17,1978, plaintiff seeks review of the September 28, 1977, order finding the issues for defendant on the complaint, and of the order of April 19, 1978, vacating an earlier summary judgment for plaintiff entered on June 3,1977, finding the issues in favor of defendant and against plaintiff with respect to the complaint and answer. Defendant has filed no appellee\u2019s brief in this cause. We nevertheless consider the appeal on its merits. (First Capitol Mortgage Corp. v. Talandis Construction Corp. (1976), 63 Ill. 2d 128, 131, 345 N.E.2d 493; Williams v. Dunas (1976), 40 Ill. App. 3d 782, 352 N.E.2d 266.) The promissory notes upon which plaintiff bases his appeal, though admitted into evidence, were not a ground of recovery in the complaint or at trial; absent other factors, our consideration of the issue raised by the notes might well be precluded. (Ward v. Ondrejka (1972), 5 Ill. App. 3d 1068, 1071, 284 N.E.2d 470; Broberg v. Mann (1965), 66 Ill. App. 2d 134, 213 N.E.2d 89; Consoer, Townsend & Associates v. Addis (1962), 37 Ill. App. 2d 105, 185 N.E.2d 97.) To the end that \u201c \u00ae \u00ae \u00ae the rights of parties litigant * * * be adjudicated on their merits\u201d (Fleshner v. Copeland (1958), 13 Ill. 2d 72, 77, 147 N.E.2d 329, 333), however, we proceed to a substantive treatment of the instant appeal.\nFor the reasons hereinafter stated we affirm.\nThe contract between the parties, attached as an exhibit to the complaint, provided that plaintiff would furnish to defendant certain administrative and financial services with respect to accounts receivable owing to defendant from the Illinois Department of Public Aid (hereinafter \u201cDepartment\u201d). Plaintiff would take defendant\u2019s Department accounts, set them up in a schedule listing the net cash value of the charges in each account and return the schedule to defendant. Plaintiff would advance 91 percent of the amount of each such account to defendant, for which defendant signed separate promissory notes prepared by plaintiff. As compensation plaintiff was to receive the remaining nine percent of the estimated net cash value of each account against which it loaned the money. These and future accounts receivable were assigned by defendant to plaintiff as security for the obligations thereby incurred. Defendant further agreed to repay plaintiff for any amount rejected by the Department, or the difference between partial payment by the Department and the estimated cash value of the account, or to repay in full within six months any part of the estimated net cash value not paid for by the Department. Payments on the accounts receivable were to be made directly from the Department to plaintiff\u2019s chosen address, Post Office Box 92. Plaintiff was authorized to endorse defendant\u2019s name on each check, deposit it, and credit defendant\u2019s account; no provision was made for payment to plaintiff by any other means except directly from defendant in the event the Department failed to pay on an account. Defendant was to receive any surplus. Any warrant from the Department received by defendant directly was to be turned over to plaintiff at once without being cashed or deposited.\nBetween February 20, 1976, and July 30, 1976, plaintiff made 14 advances to defendant pursuant to the agreement, totalling *92,776.94. Each time an advance was made defendant executed and delivered to plaintiff a promissory note payable to plaintiff\u2019s order, in accordance with the required procedures. These notes totalled *102,037.85.\nDuring March and April of 1976, however, certain warrants issued by the Department, totalling *25,130 in payment of defendant\u2019s accounts receivable in that amount, somehow came into possession of a finance company with whom defendant had previously done business, Earns Associates, Inc. (hereinafter \u201cFams\u201d), although showing defendant as payee and addressed to him at plaintiff\u2019s Post Office Box 92. These warrants were deposited by Fams in its own bank account, without having been endorsed by defendant, as shown by photostatic copies of the warrants received in evidence. No connection between Fams and plaintiff appears in the record, nor does any evidence reveal how Fams came into possession of these funds, except plaintiff\u2019s conjecture that they were \u201cmisdirected.\u201d Of the *25,130 it received, Fams paid directly to plaintiff the sum of *17,820.40, which amount was then credited to defendant\u2019s account. There is no evidence in the record as to what agreement concerning the *25,130 was made between Fams and plaintiff; which accounts were covered by the *17,820.40 payment to plaintiff; or that defendant knew of or agreed to the arrangement. To the contrary, defendant claimed that he was entitled to full credit for the *25,130 received by Fams instead of the *17,820.40 paid over by Fams to plaintiff. After plaintiff rested, defendant moved to dismiss the complaint.\nThe trial court found that: there was no evidence to support the contention that the Department failed to pay any of defendant\u2019s accounts; the fact that plaintiff did not receive the money from the Department did not mean that warrants were not issued in satisfaction of the accounts; the warrants in question, having been issued by the Department and directed to plaintiff\u2019s post office box, may have been wrongfully taken by a third party; and defendant could not be held responsible for any misdirection of the funds represented by the warrants.\nPlaintiff first contends that once the promissory notes were received in evidence, with execution and delivery admitted, its burden of proof was fulfilled by simply introducing the ledger sheets showing an unpaid balance on the notes of *9,743.85, unless a defense was established by defendant. Plaintiff relies upon section 3 \u2014 307(2) of the Uniform Commercial Code (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 307(2); Telpner v. Hogan (1974), 17 Ill. App. 3d 152, 157, 308 N.E.2d 7, and Steven v. Falese Land Co. (1977), 50 Ill. App. 3d 231, 245, 365 N.E.2d 967) for this proposition. The record shows no such theory pleaded in plaintiff\u2019s complaint nor pursued on trial. Nevertheless, even had plaintiff done so, it overlooks the countervailing evidence presented by defendant at trial to the effect that plaintiff\u2019s general journal entries contained a number of errors and were contradictory as to the amount due and owing on the notes, including individual patient accounts receivable submitted by defendant to plaintiff for which plaintiff had failed to account. Presumably the trial court could have taken this evidence into consideration in arriving at his conclusion.\nPlaintiff stresses that the ownership of the accounts receivable and their proceeds was at all relevant times vested in defendant, plaintiff\u2019s claim upon them being in the nature of a security interest only. Relying upon subsection (2) of section 9 \u2014 504 of the Uniform Commercial Code, plaintiff avers that defendant is liable for any deficiency in the security interest as against his corresponding indebtedness to plaintiff upon the promissory notes. This subsection provides, inter alia, that (Ill. Rev. Stat. 1975, ch. 26, par. 9-504(2)):\n\u201cIf the security interest secures an indebtedness, the secured party must account to the debtor for any surplus, and, unless otherwise agreed, the debtor is liable for any deficiency.\u201d\nConsidered in isolation from the rest of section 9 \u2014 504 and the Illinois and Uniform Commercial Code commentary thereon, this language might apply to the facts before us as plaintiff contends. But the \u201cdeficiency\u201d referred to in the quotation hereinabove appears to have direct reference to the disposition of collateral provided for in subsection (1) of this section, reading in pertinent part as follows (Ill. Rev. Stat. 1975, ch. 26, par. 9 \u2014 504(1)):\n\u201cA secured party after default may sell, lease or otherwise dispose of any or all of the collateral in its then condition or following any commercially reasonable preparation or processing.\u201d\nThe Illinois Code Comment on section 9 \u2014 504 provides that \u201c[t]his section states the disposition rights of the secured party after default \u201d * (Ill. Ann. Stat., ch. 26, par. 9 \u2014 504, Illinois Code Comment, at 337 (Smith-Hurd 1974)); in its treatment of the concept of \u201cdisposition\u201d as used in this section, the official comment explains that \u201c[s]ubsection (1) does not restrict disposition to sale: the collateral may be sold, leased, or otherwise disposed of \u2014subject of course to the general requirement of subsection (2) [sic] that all aspects of the disposition be \u2018commercially reasonable\u2019.\u201d (Emphasis added.) (Ill. Ann. Stat., ch. 26, par. 9 \u2014 504, Uniform Commercial Code Comment, at 344 (Smith-Hurd 1974).) It should also be noted that the caption to section 9 \u2014 504, part of the statute under section 1 \u2014 109 of the Code (Ill. Rev. Stat. 1975, ch. 26, par. 1 \u2014 109), reads thus: \u201cSecured Party\u2019s Right to Dispose of Collateral After Default; Effect of Disposition.\u201d Ill. Rev. Stat. 1975, ch. 26, par. 9 \u2014 504.\nConstrued in conjunction with the aforegoing language and comment, section 9 \u2014 504 in its entirety is evidently intended to apply to some disposition of the collateral at the direction or with the agreement of the secured party, and only upon default by the debtor. In the case at bar defendant was not in default at the time plaintiff accepted the *17,820.40 payment from Earns, nor does plaintiff appear to have conducted or acquiesced in a disposition of the warrants through a transfer to Earns within the meaning of section 9 \u2014 504. To the contrary, the record shows plaintiff maintained that the warrants came into the possession of Earns without its knowledge or consent. Under these facts, plaintiff1 s reliance upon section 9 \u2014 504 is misplaced.\nApropos the requirement of this section that disposition be \u201ccommercially reasonable,\u201d the record before us contains no evidence that plaintiff ever informed defendant that warrants issued to his name, and which by plaintiff\u2019s own account were his property, had been wrongfully diverted to and cashed by Earns. Plaintiffs failure to notify defendant of Earns\u2019 action rendered defendant unable to make timely protest to the State by way of the Department for its payment on Earns\u2019 endorsement, or to take timely action against Earns to recover the warrants or their proceeds. In the instance of a failure of notice as required under article 9 of the Code, section 507(1) provides the party entitled to notice with \u201c\u00b0 \u00b0 \u00b0 a right to recover from the secured party any loss caused by a failure to comply [with notice requirements],\u201d where disposition of the proceeds has already been effected. (Ill. Rev. Stat. 1975, ch. 26, par. 9 \u2014 507(1).) Accordingly, even if plaintiff invoked section 9\u2014 504 of the Code against defendant for a deficiency in the collateral, he cannot be said to have complied with the requirements of the same section in its disposition so as to entitle him to reimbursement.\nThe result we reach is the same arrived at by the trial court, but is predicated upon a different reason, a well-established procedure for affirmance on review. Hall v. Humphrey-Lake Corp. (1975), 29 Ill. App. 3d 956, 962, 331 N.E.2d 365; Board of Education v. Schmidt (1978), 64 Ill. App. 3d 513, 517, 381 N.E.2d 400.\nAffirmed.\nSTAMOS, P. J., and DOWNING, J., concur.\nReferred to by the parties as Farnsworth; however, its endorsements- on the warrants read Fams.", "type": "majority", "author": "Mr. JUSTICE HARTMAN" } ], "attorneys": [ "Howard M. Turner, of Chicago, for appellant.", "Jared Kelner, of Lake Forest, for appellee." ], "corrections": "", "head_matter": "MEDI-FI TWO INCORPORATED, Plaintiff-Appellant, v. PATRICK RIORDAN, Defendant-Appellee.\nFirst District (2nd Division)\nNo. 78-1016\nOpinion filed April 10, 1979.\nRehearing denied May 16, 1979.\nHoward M. Turner, of Chicago, for appellant.\nJared Kelner, of Lake Forest, for appellee." }, "file_name": "0491-01", "first_page_order": 513, "last_page_order": 518 }