{ "id": 3159138, "name": "PAUL J. SCHRANZ, II, et al., Plaintiffs-Appellees, v. I. L. GROSSMAN, INC., et al., Defendants-Appellants", "name_abbreviation": "Schranz v. I. L. Grossman, Inc.", "decision_date": "1980-11-07", "docket_number": "No. 79-359", "first_page": "507", "last_page": "523", "citations": [ { "type": "official", "cite": "90 Ill. App. 3d 507" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "423 P.2d 82", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 10584212 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/p2d/423/0082-01" ] }, { "cite": "56 N.E.2d 405", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1926, "opinion_index": 0 }, { "cite": "387 Ill. 568", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2497346 ], "year": 1926, "opinion_index": 0, "case_paths": [ "/ill/387/0568-01" ] }, { "cite": "308 N.E.2d 329", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "17 Ill. App. 3d 370", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2513500 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/17/0370-01" ] }, { "cite": "225 N.E.2d 98", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "81 Ill. App. 2d 453", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 2542970 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/81/0453-01" ] }, { "cite": "376 N.E.2d 720", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "60 Ill. App. 3d 304", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3354357 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/60/0304-01" ] }, { "cite": "232 A.2d 405", "category": "reporters:state_regional", "reporter": "A.2d", "opinion_index": 0 }, { "cite": "50 N.J. 101", "category": "reporters:state", "reporter": "N.J.", "case_ids": [ 1939538 ], "opinion_index": 0, "case_paths": [ "/nj/50/0101-01" ] }, { "cite": "582 F.2d 424", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 857810 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/f2d/582/0424-01" ] }, { "cite": "174 N.E. 368", "category": "reporters:state_regional", "reporter": "N.E.", "weight": 2, "year": 1978, "opinion_index": 0 }, { "cite": "342 Ill. 342", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5253796 ], "weight": 2, "year": 1978, "opinion_index": 0, "case_paths": [ "/ill/342/0342-01" ] }, { "cite": "98 S. Ct. 302", "category": "reporters:federal", "reporter": "S. Ct.", "opinion_index": 0 }, { "cite": "54 L. Ed. 2d 191", "category": "reporters:federal", "reporter": "L. Ed. 2d", "opinion_index": 0 }, { "cite": "434 U.S. 905", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6413984, 6414209, 6415012, 6414790, 6414665, 6413868, 6414893, 6414093, 6415127, 6414555, 6415230, 6414431 ], "opinion_index": 0, "case_paths": [ "/us/434/0905-02", "/us/434/0905-04", "/us/434/0905-10", "/us/434/0905-08", "/us/434/0905-07", "/us/434/0905-01", "/us/434/0905-09", "/us/434/0905-03", "/us/434/0905-11", "/us/434/0905-06", "/us/434/0905-12", "/us/434/0905-05" ] }, { "cite": "558 F.2d 871", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 946771 ], "year": 1977, "opinion_index": 0, "case_paths": [ "/f2d/558/0871-01" ] }, { "cite": "226 N.E.2d 369", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 3, "pin_cites": [ { "page": "373" } ], "opinion_index": 0 }, { "cite": "37 Ill. 2d 243", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2866281 ], "weight": 3, "pin_cites": [ { "page": "250" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/37/0243-01" ] }, { "cite": "240 Ill. App. 85", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 3127481 ], "weight": 3, "opinion_index": 0, "case_paths": [ "/ill-app/240/0085-01" ] }, { "cite": "259 Ill. App. 305", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 3337200 ], "year": 1926, "opinion_index": 0, "case_paths": [ "/ill-app/259/0305-01" ] }, { "cite": "178 S.E.2d 299", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "122 Ga. App. 574", "category": "reporters:state", "reporter": "Ga. App.", "case_ids": [ 725710 ], "opinion_index": 0, "case_paths": [ "/ga-app/122/0574-01" ] }, { "cite": "140 N.E.2d 924", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "13 Ill. App. 2d 99", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5171897 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/13/0099-01" ] }, { "cite": "106 N.E. 206", "category": "reporters:state_regional", "reporter": "N.E.", "opinion_index": 0 }, { "cite": "264 Ill. 230", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 6045554 ], "opinion_index": 0, "case_paths": [ "/ill/264/0230-01" ] }, { "cite": "201 N.E.2d 127", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "pin_cites": [ { "page": "133" } ], "opinion_index": 0 }, { "cite": "51 Ill. App. 2d 289", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5278964 ], "weight": 2, "pin_cites": [ { "page": "301-02" } ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/51/0289-01" ] }, { "cite": "440 F.2d 547", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 760255 ], "opinion_index": 0, "case_paths": [ "/f2d/440/0547-01" ] }, { "cite": "90 Ill. 396", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2757325 ], "opinion_index": 0, "case_paths": [ "/ill/90/0396-01" ] }, { "cite": "219 N.E.2d 755", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "73 Ill. App. 2d 283", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 2582804 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/73/0283-01" ] }, { "cite": "334 N.E.2d 246", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "31 Ill. App. 3d 449", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2713030 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/31/0449-01" ] } ], "analysis": { "cardinality": 1205, "char_count": 42001, "ocr_confidence": 0.898, "pagerank": { "raw": 4.1651543153530356e-07, "percentile": 0.9120089626846971 }, "sha256": "68f12a7f44aecdefdb754d8463d6f1317a9d9143e0f9b7d5bfd82c95e81f8333", "simhash": "1:bf8883506698f4f6", "word_count": 6899 }, "last_updated": "2023-07-14T22:48:32.356040+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "PAUL J. SCHRANZ, II, et al., Plaintiffs-Appellees, v. I. L. GROSSMAN, INC., et al., Defendants-Appellants." ], "opinions": [ { "text": "Mr. JUSTICE LORENZ\ndelivered the opinion of the court:\nPlaintiffs brought this action on a promissory note made by defendant I. L. Grossman, Inc. (Grossman), and guaranteed by defendant Evans Mill Supply Co. (Evans), to a third party Pro\u2019s, Inc. (Pro\u2019s), who later transferred these instruments to the plaintiffs. Following a bench trial, the trial court found plaintiffs to be holders in due course of a security interest in these instruments and awarded plaintiffs a judgment of $49,194.77. Defendants, Grossman and Evans, appeal, and plaintiffs cross-appeal from the trial court\u2019s judgment.\nAs grounds for reversal, defendants maintain that (1) two parties, William C. Nicholus, d/b/a Enterprise Sales Co., and Melvin Bressler were improperly aligned by the trial court as defendants; (2) that Louis Rifkin and Pro\u2019s, Inc., were necessary parties to this action and were not joined; (3) that the Evans guaranty was not assignable, and in addition, the assignment of the guaranty in this case materially altered the terms of Evans\u2019 obligation as guarantor resulting in a discharge of the guarantor; (4) that the Grossman note was not negotiated to plaintiffs; (5) that plaintiffs were not holders in due course of these instruments, and (6) that the trial court made several erroneous evidentiary rulings during the trial.\nPlaintiffs, in their cross-appeal, maintain that they are holders in due course for the full amount of the Grossman note and Evans guaranty. Consequently, plaintiffs seek a remand to the trial court for purposes of receiving a judgment for the full amount of the note and guaranty.\nThe pertinent facts are as follows:\nIn December of 1970, William C. Nicholus, d/b/a Enterprise Sales Co., Melvin Bressler and plaintiffs became shareholders of Pro\u2019s. One year later, Federal litigation commenced between Pro\u2019s and plaintiffs along with Bressler and Nicholus. In settlement of this litigation, the parties entered into an agreement in April 1973 whereby Pro\u2019s paid plaintiffs, Bressler and Nicholus, a $15,000 cashier\u2019s check and executed a promissory note for $60,000 which was secured by a promissory note of $135,000 made by Grossman and payable to the order of Pro\u2019s and a guaranty by Evans of the Grossman note. Both the Grossman note and the Evans guaranty were negotiated by Pro\u2019s to plaintiffs, Bressler and Nicholus. In return for this consideration, plaintiffs, Bressler and Nicholus, executed a release of their claims against Pro\u2019s and transferred to Pro\u2019s their shares in that corporation. After the note and guaranty were placed into an escrow with Chicago Title and Trust Company, plaintiffs\u2019 attorney and agent, Philip Bloom, sent Grossman and Evans notices of negotiation by Pro\u2019s of the note and guaranty. The notices also included the name of Louis Rifkin as an endorsee of the note and guaranty. However, neither the note nor the guaranty were actually endorsed to Rifkin.\nIn January 1974 Grossman refused to make further payment to Pro\u2019s on Grossman\u2019s note of $135,000 whereupon Pro\u2019s terminated its payments to plaintiffs under the $60,000 promissory note. Following Pro\u2019s default, Bloom notified the escrowee, Chicago Title and Trust, of Pro\u2019s default, and Chicago Title and Trust, consistent with the terms of the escrow agreement, gave Bloom possession of the Grossman note and the Evans guaranty. Plaintiffs subsequently brought the instant action on the note and guaranty.\nAt this point, a brief procedural history of this action is warranted. On December 6, 1974, nine months after the complaint was filed, plaintiffs moved to join William C. Nicholus, d/b/a Enterprise Sales Co., and Melvin Bressler as plaintiffs. The trial court on February 18,1975, granted this motion nunc pro tunc to December 6, 1974. On February 4, 1975, defendants filed their answer including affirmative defenses to the plaintiffs\u2019 complaint. Defendants denied that plaintiffs were holders of these instruments; that plaintiffs gave value for the instruments; and that plaintiffs received the instruments in good faith and without notice of any defenses against the instruments. As affirmative defenses, defendants claimed that Louis Rifkin is a necessary party to the present action; that the Evans guaranty is not assignable; and that the purported assignment of the Evans guaranty materially altered the guarantor\u2019s obligation, thereby resulting in a discharge of the guarantor. Finally, defendants assert that the note and guaranty were issued to Pro\u2019s as a result of significant misrepresentations which would constitute valid defenses against a mere holder.\nThroughout the discovery stage of this litigation, defendants sought repeatedly to obtain the deposition of Bressler and Nicholus. Neither plaintiff responded to the notices of deposition. In March 1978, plaintiffs\u2019 attorney moved to re-align Bressler and Nicholus as defendants under section 23 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 23), which motion was denied on March 7, 1978. One week later, defendants moved for sanctions against plaintiffs because of the refusal of Bressler and Nicholus to appear for deposition. After hearing the arguments of both sides, the trial court on March 14, 1978, entered an order realigning Bressler and Nicholus as defendants, confessing judgments against Bressler and Nicholus, and barring Bressler and Nicholus from providing testimony favorable to the remaining plaintiffs. Thereafter, plaintiffs\u2019 counsel, Philip Bloom, moved to withdraw as counsel for Bressler and Nicholus. Bloom informed the court that Bressler had requested Bloom\u2019s firm to withdraw as counsel, and that Bressler had assigned all his interest in the Grossman note and the Evans guaranty to the remaining plaintiffs, Schranz, Redhead and Sebrowski. A written assignment by Bressler was attached to the motion. Bloom also represented to the court that he had been unable to contact Nicholus and that he believed Nicholus has either left the jurisdiction permanently, or is dead. The trial court granted the motion to withdraw as counsel for Bressler and Nicholus.\nFinally, immediately prior to trial on August 7, 1978, the trial court found as a matter of law that the Evans guaranty was assignable. The trial court also concluded that the terms of the assignment of the Evans guaranty from Pro\u2019s to the plaintiffs did not materially alter Evans\u2019 obligation as guarantor, and therefore did not discharge Evans\u2019 obligation as guarantor of the Grossman note.\nThe resolution of this case rests in part on several documents which were introduced into evidence at the trial below. We note that it is the burden of the appellant to furnish a record sufficient to establish reversible error. (Sandberg v. American Machining Co. (1975), 31 Ill. App. 3d 449, 334 N.E.2d 246.) Where the record is lacking, a reviewing court will indulge every presumption favorable to the judgment or order appealed from. (Sandberg.) Here, the appellant has failed to include the agreement embodying the settlement of the Federal litigation between plaintiffs and Pro\u2019s and the escrow agreement in the record before this court. Consequently, we will assume that the terms of both the settlement agreement and the escrow agreement support the trial court\u2019s ultimate findings in this case.\nThe first issue we face is defendants\u2019 contention that the trial court\u2019s order of March 14, 1978, re-aligning Bressler and Nicholus as defendants was improper. This order came as a result of the defendants\u2019 motion for sanctions under Supreme Court Rule 219 (Ill. Rev. Stat. 1977, ch. 110A, par. 219). Since Bressler and Nicholus had failed to appear for their depositions, the trial court believed severe sanctions were required. The trial court, however, was concerned by the requirement of section 3 \u2014 116 of the Uniform Commercial Code (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 116). Section 3 \u2014 116 of the Uniform Commercial Code provides in pertinent part:\n\u201cAn instrument payable to the order of two or more persons\n(b) if not in the alternative is payable to all of them and may be negotiated, discharged or enforced only by all of them.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 116.)\nThe trial court apparently felt that it could not dismiss these two parties without eliminating the remaining plaintiffs\u2019 cause of action by virtue of section 3 \u2014 116 of the Commercial Code. Consequently, the trial court attempted to sanction Bressler and Nicholus as severely as possible without dismissing them from the suit. This was accomplished by the March 14, 1978, order.\nIn our view, the purpose of section 3 \u2014 116 is to protect the interest of all parties entitled to payment under the instrument. (See Kanelos v. Tzamalis (1966), 73 Ill. App. 2d 283, 219 N.E.2d 755.) By this rule, an instrument payable to two or more persons, and not in the alternative, could only be enforced jointly by those persons. While the trial court\u2019s action in this case of re-aligning these parties was unusual, we believe it in no way violated the purpose of section 3 \u2014 116 or prejudiced the interests of the defendants.\nFirst, Bressler and Nicholus were joined as plaintiffs to this suit and thus had the opportunity to reap the benefits of enforcing the note and guaranty. They voluntarily chose not to participate in this litigation. Their interest in the note and guaranty was not denied them by a clandestine act of less than all the parties seeking to enforce the instruments, but rather by their own indifference. In fact, Bressler assigned his interest in the instruments to the remaining plaintiffs. The purpose of section 3 \u2014 116, to protect the interest of all parties, has not been violated.\nSecond, the trial court\u2019s order of March 14, 1978, did not prejudice these defendants. Before reaching defendants\u2019 main argument on this point, we must dispose of their contention that the trial court\u2019s order confessing judgment against Bressler and Nicholus without notice was improper. Simply stated, defendants lack standing to contest an order which solely affects the interests of other parties. The propriety of this order could only be contested by Bressler or Nicholus. No prejudice or harm resulted to defendants.\nDefendants\u2019 more significant argument is that the trial court\u2019s order barring the testimony of Bressler and Nicholus greatly impaired their ability to show that either the plaintiffs, Bressler, or Nicholus had notice of available defenses against the Grossman note and Evans guaranty. This notice, of course, would defeat plaintiffs\u2019 claim to holder in due course status. Our review of the hearings between counsel and the court on March 14,1978, and on August 7,1978, reveals that the trial court did not prohibit defendants from obtaining the testimony of Bressler or Nicholus. On both occasions, the trial court stressed that Bressler and Nicholus would only be prevented from providing testimony favorable to the remaining plaintiffs. Defendants were free to call them on their own behalf, and if necessary, they could be treated as hostile witnesses. (See Ill. Rev. Stat. 1977, ch. 110A, par. 238.) We also note that the record is barren as to what steps defendants took to obtain the testimony of Bressler and Nicholus once they were re-aligned as defendants. Consequently, there remains the possibility that defendants could have obtained the testimony of Bressler and Nicholus had they chosen to do so. In addition, defendants provided no specific factual offer of proof describing the relevant and significant testimony which could be provided by Bressler and Nicholus. General references that Bressler and Nicholus had notice of defenses to the note and guaranty are not sufficient to show prejudice. The trial court\u2019s order of March 14,1978, does not constitute reversible error.\nDefendants\u2019 second contention on appeal is that Louis Rifkin was a necessary party to this action. In reaching this conclusion, defendants rely on the reference in the notices of negotiation to Rifkin as an endorsee of these instruments; Rifkin\u2019s involvement in the Federal litigation between Pro\u2019s and plaintiffs; and Rifkin\u2019s participation in the settlement agreement between Pro\u2019s and plaintiffs. Thus, they reason that Rifkin had an interest in the note which required him to be joined as a plaintiff in this action. (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 116.) Section 3 \u2014 116 requires only that an instrument made payable to two or more persons, not in the alternative, must be jointly enforced by all the parties. In this case, the instruments were endorsed to Schranz, Redhead, Sebrowski, Nicholus, d/b/a Enterprise Sales Co., and Bressler. The instruments were not endorsed to Rifkin. Moreover, according to Bloom, the inclusion of Rifkin\u2019s name as an endorsee in the notice of negotiation was a clerical mistake. We hold that Louis Rifkin was not a necessary party to this action under section 3-116 (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 116).\nDefendants\u2019 third contention is that the Evans guaranty was not assignable. The general rule in Illinois is that guaranties are nonassignable. (Second National Bank v. Diefendorf (1878), 90 Ill. 396.) This rule, however, is not applied automatically. Rather, the courts will examine the facts of each case to determine whether the policy underlying the rule is applicable. The rule is a corollary of general contract principles that a party may be held only to the precise obligation which it undertook. (See Essex International, Inc. v. Clamage (7th Cir. 1971), 440 F.2d 547.) Thus, the assignment of the guaranty will not discharge the guarantor unless the \u201cessentials of the original contact [of guaranty] have * * * been changed and the performance required of the principal is * * * materially different from that first contemplated.\u201d (Claude Southern Corp. v. Henry\u2019s Drive-In, Inc. (1964), 51 Ill. App. 2d 289, 301-02, 201 N.E.2d 127, 133.) Defendants here contend that the simple assignment of the guaranty pursuant to a contract between the creditor-guarantee (Pro\u2019s) and third parties (plaintiffs) resulted in a material alteration of the guarantor\u2019s (Evans\u2019) obligation. We do not agree. As in Claude Southern Corp. neither the obligation of the guarantor (Evans) nor the extension of credit by the creditor (Pro\u2019s) nor the obligation of the principal (Grossman) was in any way altered by this assignment. Grossman is still obligated to make its payments to Pro\u2019s under the $135,000 note; Pro\u2019s extension of credit on the Grossman note remains; and only the direction of payment by Evans has been altered, not its obligation to pay. No material alteration of the guarantor\u2019s obligation has taken place. Thus, we hold that the simple assignment of the guaranty from Pro\u2019s to plaintiffs does not discharge Evans.\nDefendants also contend that more than a simple assignment of the guaranty is involved in this case; the notice of negotiation of the Evans guaranty eliminated the option of prepayment and thus materially altered Evans obligation as guarantor. They point out that a material alteration of the guarantor\u2019s obligation will result in a discharge of the guarantor. (Claude Southern Corp. v. Henry\u2019s Drive-In, Inc. (1964), 51 Ill. App. 2d 289, 201 N.E.2d 127.) In the case at bar, the underlying promissory note between Grossman and Pro\u2019s granted Grossman \u201cfull right of prepayment without penalty.\u201d By this language, Grossman could accelerate the payments and thus complete payment of the note before its maturity. Regardless of whether Grossman chose to exercise its prepayment option, Evans\u2019 duty as guarantor remained unaltered. It became liable to Pro\u2019s only when Grossman failed to make a timely payment to Pro\u2019s. The purported elimination of the acceleration clause by the notice of negotiation did not affect Evans; it remained liable only upon the default of Grossman. Thus, no material alteration of Evans\u2019 obligation occurred in this case.\nDefendants next maintain that plaintiffs were not holders of a negotiable instrument. More specifically, they claim that the Grossman note was not negotiated to plaintiffs because of a lack of delivery. A holder has possession of an instrument which has been properly negotiated to him. (Ill. Rev. Stat. 1977, ch. 26, par. 1 \u2014 201(20); Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 302.) Negotiation is defined as:\n\u201c(1) Negotiation is the transfer of an instrument in such form that the transferee becomes a holder. If the instrument is payable to order it is negotiated by delivery with any necessary indorsement; if payable to bearer it is negotiated by delivery.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 302.)\nThey do not contest that the Grossman note was payable to order (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 110) and was properly indorsed by Pro\u2019s. Thus, the only question is whether the note was delivered to plaintiffs.\nOn April 13, 1973, after the execution of the settlement agreement between Pro\u2019s and plaintiffs, the Grossman note was placed into an escrow account with Chicago Title and Trust. According to Bloom, the escrow agreement dictated that the note and guaranty were to remain in escrow until such time as Pro\u2019s defaulted on its note to plaintiffs. Pro\u2019s did default on its note to plaintiffs in February 1974. Upon notice of this default, the escrowee, according to its duty under the escrow agreement, delivered the note and guaranty to plaintiffs. We must decide whether delivery, under the Commercial Code, occurred when the note was placed into escrow or at the time it was delivered from escrow to plaintiffs. Establishment of this fact will support the trial court\u2019s threshold finding that plaintiffs were holders of a negotiable instrument. Additionally, establishment of the time of delivery is crucial in determining whether plaintiffs received the note without notice of defenses against it.\nThe Commercial Code defines \u201cdelivery\u201d of an instrument as \u201cvoluntary transfer of possession.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 1 \u2014 201(14).) Where the maker of a note has parted with possession and all control over it, there is a valid delivery. (Burr v. Beckler (1914), 264 Ill. 230, 106 N.E. 206.) A delivery may be conditional where it takes effect only upon the happening of a future event, provided that the parties agree the instrument would be ineffective until the happening of the future event. (Investors Commercial Corp. v. Metcalf (1957), 13 Ill. App. 2d 99, 140 N.E.2d 924.) However, in the present case, Pro\u2019s tendered both possession and control over the note when it was placed in escrow. Once placed in escrow, neither Pro\u2019s nor plaintiffs could retrieve the note on their own initiative. Rather, both parties could only receive the instrument upon the happening of a certain event, either Pro\u2019s default on the $60,000 note or by its payment of the note. This conditional delivery was effective because both parties understood that the instrument could only be enforced by the plaintiffs upon Pro\u2019s default on the note. Thus, delivery of the Grossman note occurred when it was placed in escrow with Chicago Title and Trust.\nNext, defendants contend that plaintiffs are not holders in due course because they have not tendered value for the instruments. Plaintiffs executed a release of their claims against Pro\u2019s in the Federal litigation and transferred their stock to Pro\u2019s in return for a $15,000 cashier\u2019s check, Pro\u2019s promissory note for $60,000 secured by the Grossman note, for $135,000 and the Evans guaranty. The Commercial Code defines \u201ctaking for value\u201d as follows:\n\u201cA holder takes the instrument for value:\n(a) to the extent that the agreed consideration has been performed or that he acquires a security interest in or a lien on the instrument otherwise than by legal process; or\n(b) when he takes the instrument in payment of or as security for an antecedent claim against any person whether or not the claim is due; or\n(c) when he gives a negotiable instrument for it or makes an irrevocable commitment to a third person.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 303.)\nPlaintiffs maintain that the execution of the release was value as payment of an antecedent claim (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 303(b); Jones v. Sheffield (1970), 122 Ga. App. 574, 178 S.E.2d 299), and also by tendering to Pro\u2019s their stock in that corporation. Further, plaintiffs assert that they gave value by accepting the Grossman note and Evans guaranty as security for an antecedent claim, the $60,000 Pro\u2019s note. (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 303(b); Joseph Mazer Co. v. Blauer-Goldstone Co. (1930), 259 Ill. App. 305; Barber v. General Automotive Corp. (1926), 240 Ill. App. 85.) In response defendants assert that no value was given because neither the release, the stock, the note nor the guaranty were delivered to the respective parties; rather they were placed into an escrow account. Assuming, without deciding, that the Grossman note and Evans guaranty need be delivered to constitute value, we believe value was given here.\nA similar argument confronted our supreme court in Crest Finance Co. v. First State Bank (1967), 37 Ill. 2d 243, 226 N.E.2d 369. In that case, the seller of stock was to receive a promissory note and the buyer was to assume guaranties made by the seller or discharge the underlying obligations to these guaranties. The stock was placed into an escrow account pending the buyer\u2019s action to assume the seller\u2019s guaranties or discharge the underlying debts. Our supreme court held that transfer of the stock into escrow was an \u201cirrevocable commitment\u201d under section 3 \u2014 303(c) of the Commercial Code and thus, value. The court stated that the seller had placed the stock beyond his control which was an irrevocable commitment. To conclude otherwise, said the court, would ignore\n\"* * * the \u2018irrevocable commitment\u2019 language in section 3 \u2014 303(c) which, according to comment 6 is new but recognizes an exception to the rule that an executory promise is not value. \u2018Irrevocable commitment\u2019 in section 3 \u2014 303(c) cannot be read to mean complete performance, otherwise it would be surplusage because the situation would have been covered by section 3 \u2014 303(a).\u201d (Crest Finance Co., 37 Ill. 2d 243, 250, 226 N.E.2d 369, 373.)\nThe court stressed that no act remained for the seller to complete delivery, but only the act of the buyer either to assume the guaranties or discharge the underlying obligations. Similarly in the present case, plaintiffs have transferred all control over their release and the stock by placing them in escrow. Only the action of Pro\u2019s in either paying its note or defaulting on it would remove the release and stock from escrow. The opinion in Crest Finance Co. remains the law today. Consequently, we conclude that plaintiffs have given value for the Grossman note and Evans guaranty.\nDefendants further maintain that plaintiffs are not holders in due course because they took the note with notice that it was overdue and that defenses against it exist. The Grossman note and the Evans guaranty were given to Pro\u2019s as consideration for the sale of a division of Pro\u2019s entitled Parade Products Division (Parade). As additional consideration to Gross-man, Pro\u2019s agreed to transfer to Grossman an employment contract between Parade\u2019s president, Harold Mize, and Pro\u2019s. Defendants contend that plaintiffs took the Grossman note and Evans guaranty with notice that (1) the Grossman note was overdue; (2) Pro\u2019s was unable to assign the Mize contract to Grossman which was an essential part of the consideration for the Grossman note; and (3) Pro\u2019s fraudulently misrepresented to Grossman the assets of Parade.\nAccording to the Commercial Code, a holder in due course is a holder who takes the instrument for value, in good faith, and without notice that it is overdue, dishonored, or of any defense against or claim to it on the part of any person. (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 302.) Notice is defined as:\n\u201cA person has notice\u2019 of a fact when\n(a) he has actual knowledge of it; or\n(b) he has received a notice or notification of it; or\n(c) from all the facts and circumstances known to him at the time in question he has reason to know that it exists.\n(Ill. Rev. Stat. 1977, ch. 26, par. 1 \u2014 201(25).)\nThe crucial time in determining whether a holder has notice is the time of negotiation of the instrument to the holder. (McCook County National Bank v. Compton (8th Cir. 1977), 558 F.2d 871, cert. denied (1977), 434 U.S. 905, 54 L. Ed. 2d 191, 98 S. Ct. 302.) If the holder receives notice of a defense or that the instrument is overdue after the instrument has been negotiated, then that notice is ineffective to defeat his status as a holder in due course. We also note that the element of notice in the definition of a holder in due course (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 302) is a question of fact to be decided by the trier of fact. (Paine v. Sheridan Trust & Savings Bank (1930), 342 Ill. 342, 174 N.E. 368; Oscar Gruss & Son v. First State Bank (7th Cir. 1978), 582 F.2d 424.) With this background, we now examine separately each of the defendants\u2019 arguments on this point.\nFirst, defendants maintain that plaintiffs obtained the Grossman note and Evans guaranty with notice that the note was overdue. The Grossman note and Evans guaranty were placed into an escrow account on April 13, 1973, consistent with the terms of the settlement agreement between Pro\u2019s and plaintiffs. At this time, the note had been endorsed to plaintiffs. In February 1974, Grossman defaulted on its $135,000 note to Pro\u2019s, and in turn, Pro\u2019s defaulted on its $60,000 note to plaintiffs. Plaintiffs unquestionably were aware of the Grossman default at that time. On May 17, 1974, plaintiffs received out of escrow the Grossman note and Evans guaranty. From these facts, defendants claim, the delivery of the instruments out of escrow on May 17, 1974, was the negotiation of the note. Consequently, they conclude that plaintiffs had notice the note was overdue three months before the note was negotiated to them.\nThe fallacy of defendants\u2019 argument is their determination of the time of negotiation of the note. Since the Grossman note was order paper, it was negotiated by delivery with all necessary endorsements. (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 202.) As we have discussed above, delivery of the Grossman note occurred when it was placed into escrow, and not when it was delivered out of escrow. Thus, the note was negotiated to plaintiffs at the time it was placed into escrow, April 13,1973, and at that time, plaintiffs were without notice that the note was overdue.\nSecond, defendants contend that plaintiffs had notice that Pro\u2019s was unable to assign the employment contract of Harold Mize to Grossman as required by the sale agreement between Grossman and Pro\u2019s. This lack of consideration constitutes a defense to the Grossman note. The operative facts which purportedly support defendants\u2019 argument center on a shareholders meeting of Pro\u2019s. This meeting took place on February 13, 1973, and was attended by plaintiffs, Schranz and Redhead, who were then shareholders and directors of Pro\u2019s. According to defendants\u2019 version of the testimony, Schranz and Redhead admitted that at the meeting the shareholders discussed the sale of Parade to Grossman; that Harold Mize\u2019s employment contract was part of the consideration for that sale; and that Harold Mize declared at the meeting that his contract was unassignable. Our review of the record does not coincide with defendants\u2019 version. Paul Redhead testified that he was present at the shareholders meeting in 1973 when the terms of the sale agreement between Pro\u2019s and Grossman were discussed. Redhead also stated that he was aware that the assignment of Harold Mize\u2019s employment contract was one of the terms to that sale. On cross-examination by defendants\u2019 attorney of Redhead the following colloquy took place:\n\u201cQ. And do you recall Mr. Mize stating that he did not feel he had an employment agreement with Pro\u2019s Inc., do you recall that?\nA. I believe the subject came up for discussion.\n* * *\nQ. Do you recall Mr. Mize stating that as far as he was concerned, he had no employment agreement with Parade Products?\nA. He made some references to having no employment agreement.\u201d\nWhile this exchange reveals that the assignability of Mize\u2019s employment contract was discussed, it fails to reveal what conclusions were reached by the Pro\u2019s shareholders. It is entirely possible that this potential problem was resolved during the course of the shareholders meeting. This possibility was encountered in the redirect examination of Redhead:\n\u201cQ. Did you have any reason to believe at that time [April 13, 1973] that Mr. Mize would not perform an employment agreement in April of \u201973 with regard to Grossman?\nA. I thought Mr. Mize would continue working there [Parade with its new owner Grossman]. Now, I do not know about the employment agreement.\u201d\nRedhead\u2019s testimony on this point reveals that any problem with regard to Mize was resolved before the negotiation of the note.\nPaul Schranz, who was called to testify by defendants under section 60 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 60) was questioned as to the Pro\u2019s shareholders meeting.\n\u201cQ. I asked you at the meeting did you hear the statement made at that meeting on February 13 that Mr. Mize\u2019s employment agreement was to be assigned to I. L. Grossman by Pro\u2019s as one of the terms of the purchase?\nA. No, I did not.\nQ. Did you recall Mr. Mize standing up and making a statement?\nA. Yes, I do.\nQ. What did Mr. Mize say?\nA. Have no idea.\u201d\nNeither this testimony nor Redhead\u2019s testimony establish that plaintiffs had notice on February 13,1973, that Mize\u2019s employment contract would not be assigned to Grossman. Moreover, the redirect examination of Redhead would allow the trial court to infer that any problem, if one existed, with regard to Mize\u2019s employment contract was resolved by the time of negotiation of the Grossman note to plaintiffs. We conclude that there was sufficient evidence to support the trial court\u2019s finding that plaintiffs had no notice of the defense involving Mr. Mize\u2019s employment contract at the time of negotiation of the Grossman note.\nThird, defendants maintain in their brief before this court that plaintiffs had notice of their defense that Pro\u2019s participated in a fraud in selling Parade to Grossman. Defendants have offered no citation to the record to support this contention, and we have found none. We therefore find no merit to defendants\u2019 contention.\nDefendants next contend that plaintiffs lacked good faith when the Grossman note was negotiated to them, and thus are not holders in due course. (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 302.) Under the heading of good faith, defendants have offered several buttressing arguments. The Commercial Code defines good faith as \u201chonesty in fact in the conduct or transaction concerned.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 1 \u2014 201(19).) Also, the question of good faith is a question of fact to be left to the trier of fact. Paine v. Sheridan Trust & Savings Bank (1930), 342 Ill. 342, 174 N.E. 368; Oscar Gruss & Son v. First State Bank (7th Cir. 1978), 582 F.2d 424.\nIn defendants\u2019 initial supporting argument, defendants assert that plaintiffs had notice of defenses against the note and that it was overdue when it was negotiated to them. This argument is easily dismissed, as we have just concluded above that plaintiffs did not have notice that the note was overdue or that there were defenses against it when it was negotiated to them.\nAs a second buttressing argument, defendants assert that a close relationship exists between plaintiffs and Pro\u2019s which casts serious doubt over plaintiffs\u2019 good faith. Defendants believe that this relationship makes plaintiffs guilty by association of the alleged fraudulent practices exercised by Pro\u2019s in the sale of Parade. As legal support for this theory, defendants rely on the more stringent analysis of the good faith element conducted by courts when examining consumer financing transactions. (See Unico v. Owen (1967), 50 N.J. 101, 232 A.2d 405.) Our review of the record does not support defendants\u2019 bald conclusion that a close relationship existed between plaintiffs and Pro\u2019s. While plaintiffs were temporarily shareholders and directors of Pro\u2019s, heated litigation developed between the two groups. In settlement of this litigation, plaintiffs executed a release of their claims against Pro\u2019s and returned their shares in Pro\u2019s in exchange for a $15,000 casher\u2019s check and Pro\u2019s $60,000 note secured by the Grossman note and the Evans guaranty. We do not believe that this would be the basis for a close and confidential relationship which would infer knowledge of Pro\u2019s fraud to plaintiffs. The trial court\u2019s finding of good faith is supported by the record.\nIn defendants\u2019 final argument on this point, they assert that plaintiffs failure to join initially Nicholus, d/b/a Enterprise Sales Co., and Rressler, and to join Louis Rifkin, demonstrates their lack of good faith in this matter. We have previously concluded that Louis Rifkin was not a necessary party to this action, and we note that Nicholus and Rressler were properly joined by plaintiffs. Defendants\u2019 remaining arguments on the good faith issue are meritless and do not warrant discussion.\nDefendants also raise several evidentiary issues in their appeal. Based on our review of the record, we believe only two of these issues need be discussed here. They initially claim that the trial court\u2019s refusal, until the defense began its case, to order plaintiffs to produce a copy of the settlement agreement between plaintiffs and Pro\u2019s was error. During the plaintiffs\u2019 case, the trial court allowed plaintiffs\u2019 counsel and the witnesses to refer to this document without ordering production of it by plaintiffs. When questioned on this point, the trial court explained that it would not order production of the document until it was convinced of its relevance to this case. While we feel it would have facilitated the trial of this matter to order production of this document at an earlier point, we do not believe the trial court\u2019s cautious approach constitutes reversible error. The trial court ordered production of this document at the start of the defendants\u2019 case. The document was introduced into evidence and was used by defense counsel in his examination of Bloom and Schranz both of whom testified under the provisions of section 60 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 60). Thus, any limitation imposed on defense counsel\u2019s original cross-examination of the plaintiffs due to the lack of the document was remedied by the subsequent availability of that document. No reversible error was committed on this point.\n\u2022 12 Defendants\u2019 second point is that the testimony of the plaintiffs was so contradictory and improbable as to prevent the trial court from giving weight to it. In short, defendants are challenging the sufficiency of the evidence presented to support the trial court\u2019s findings. We do not agree. The credibility of witnesses and the weight to be given their testimony are decisions for the trial court. (Pettee v. County of De Kalb (1978), 60 Ill. App. 3d 304, 376 N.E.2d 720.) A reviewing court must bear in mind that the trial court was in a superior position to determine the credibility and weight of a witness\u2019 testimony. (Godfrey v. Brown (1967), 81 Ill. App. 2d 453, 225 N.E.2d 98.) Thus, in a trial without a jury, the appellate court will reverse the judgment only where the trial court\u2019s findings are palpably contrary to the manifest weight of the evidence. (Chicago Central C.F.M., Inc. v. Kimmons (1974), 17 Ill. App. 3d 370, 308 N.E.2d 329.) We have reviewed the record and the arguments made by defendants before the court. In our opinion, plaintiffs established by a preponderance of the evidence that they were holders of a negotiable note negotiated to them for value, in good faith, and without notice that the note was overdue, or that it had been dishonored, or that there was any defense or claim to it.\nThis brings us to the final issue which was raised by plaintiffs in their cross-appeal from the judgment below. Plaintiffs contend that they were entitled to the full value of the Grossman note, which was $135,000, either as holders in due course or as holders. In plaintiffs\u2019 brief and reply brief, the argument sections on this point contain mere conclusions. Plaintiffs have failed to provide reasoning, statutory support, or relevant case law. Their oblique reference to Crest Finance Co. v. First State Bank (1967), 37 Ill. 2d 243, 226 N.E.2d 369, adds nothing to their position. Nevertheless, we feel there is merit to plaintiffs\u2019 conclusion that as holders they may be entitled to the full value of the Grossman note.\nThe instant factual situation is expressly covered by the Commercial Code in section 3 \u2014 302(4), which provides:\n\u201cA purchaser of a limited interest can be a holder in due course only to the extent of the interest purchased.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 302(4).)\nPlaintiffs\u2019 execution of the release of their claims against Pro\u2019s and tender of their shares was in exchange for $75,000, $15,000 payable by cashier\u2019s check and a $60,000 note. The Grossman note and Evans guaranty acted only as security for the $60,000 note. Thus, plaintiffs may only be holders in due course to the extent of their security interest. (See In re Estate of Feldman (1944), 387 Ill. 568, 56 N.E.2d 405; Barber v. General Automotive Corp. (1926), 240 Ill. App. 85; and In re United East Coast Corp. (E.D.N.Y. 1969), 6 U.C.C. Rptr. 449; and Wood v. Willman (Wy. 1967), 423 P.2d 82.) Consequently, the trial court properly found plaintiffs to be holders in due course to the extent of their security interest.\nAs to the remaining balance of the note, we believe plaintiffs are holders. While section 3 \u2014 302(4) limited plaintiffs\u2019 status as holders in due course to the extent of their security interest, it does not eliminate their proven status as holders of the note. The Commercial Code defines the rights of a holder:\n\u201cThe holder of an instrument whether or not he is the owner may transfer or negotiate it and, except as otherwise provided in Section 3 \u2014 603 on payment or satisfaction, discharge it or enforce payment in his own name.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 301.)\nSection 3 \u2014 603 does not prevent full payment to the plaintiffs as holders in this case. (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 603.) Consequently, plaintiffs as holders may enforce the note to its full value. It must be remembered, however, that plaintiffs are only holders to the remaining balance, and as such, are subject to defenses against the note which may be raised by defendants. (See Wood v. Willman (Wy. 1967), 423 P.2d 82; and Barber v. General Automotive Corp. (1926), 240 Ill. App. 85.) Thus, the trial court\u2019s rejection of plaintiffs\u2019 claim to the full amount of the note was error, and this case must be remanded to the trial court to consider plaintiffs\u2019 claim as holders to the remainder of the note. At that time, defendants would be free to raise any defenses which they may have against the note. Of course, our opinion in no way adjudicates the ultimate rights to the proceeds of the note as between Pro\u2019s and plaintiffs.\nFinally, defendants maintain that Pro\u2019s was a necessary party to this action. They reason that since plaintiffs are seeking the full value of the Grossman note and the Evans guaranty, Pro\u2019s, who has a legitimate claim at least to the surplus of the note beyond the plaintiffs\u2019 security interest, is a necessary party. In our opinion, Pro\u2019s interest in the note has not been infringed upon by this action. Pro\u2019s may, in a separate action against plaintiffs, challenge their right both to the amount of the security interest and to the balance of the note. Proceeding in this fashion would also be consistent with the general purpose of article 3 of the Commercial Code to facilitate thp free negotiability of commercial paper.\nDefendants also believe that the failure to join Pro\u2019s may subject them to double liability on the note; the first liability would be paying the judgment to plaintiffs and the second liability would be incurred if Pro\u2019s were able to sue defendants on the note. The Commercial Code was cognizant of this possibility and provided against the second liability by section 3 \u2014 603. Section 3 \u2014 603 states in pertinent part:\n\u201cThe liability of any party is discharged to the extent of his payment or satisfaction to the holder even though it is made with knowledge of a claim of another person to the instrument unless prior to such payment or satisfaction the person making the claim either supplies indemnity deemed adequate by the party seeking the discharge or enjoins payment or satisfaction by order of a court of competent jurisdiction in an action in which the adverse claimant and the holder are parties.\u201d (Ill. Rev. Stat. 1977, ch. 26, par. 3 \u2014 603.)\nThus, if defendants were found liable to plaintiffs for the full amount of the note, section 3 \u2014 603 would prevent a second liability payment on the note to Pro\u2019s. We therefore conclude that while Pro\u2019s was a party which could be properly joined, it was not a necessary and indispensable party to this action.\nAccordingly, the judgment of the circuit court is affirmed in part, reversed in part and remanded.\nAffirmed in part; reversed in part and remanded.\nSULLIVAN, P. J., and MEJDA, J., concur.", "type": "majority", "author": "Mr. JUSTICE LORENZ" } ], "attorneys": [ "Allen C. Engerman, Barry A. Erlick, and Jerry A. Esrig, all of Solomon, Rosenfeld, Elliott, Stiefel & Engerman, Ltd., of Chicago, for appellants.", "Philip M. Bloom and Jeffrey J. Keck, both of Bloom, Denberg & Vanasco, Ltd., of Chicago, for appellees." ], "corrections": "", "head_matter": "PAUL J. SCHRANZ, II, et al., Plaintiffs-Appellees, v. I. L. GROSSMAN, INC., et al., Defendants-Appellants.\nFirst District (5th Division)\nNo. 79-359\nOpinion filed November 7, 1980.\nAllen C. Engerman, Barry A. Erlick, and Jerry A. Esrig, all of Solomon, Rosenfeld, Elliott, Stiefel & Engerman, Ltd., of Chicago, for appellants.\nPhilip M. Bloom and Jeffrey J. Keck, both of Bloom, Denberg & Vanasco, Ltd., of Chicago, for appellees." }, "file_name": "0507-01", "first_page_order": 529, "last_page_order": 545 }