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Chapter 15 Secured Transaction. Priority creditors and perfected security interests

The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters,
West and their affiliates.
748 N.E.2d 1248 Page 1
321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46 UCC Rep.Serv.2d 859
(Cite as: 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178)

[2] Secured Transactions 349A 41

Appellate Court of Illinois, 349A Secured Transactions


Third District. 349AI Nature, Requisites, and Validity
SEARS, ROEBUCK AND COMPANY, Plaintiff- 349AI(B) Security Agreements
Appellant, 349Ak41 k. Necessity and Sufficiency of
v. Writing in General. Most Cited Cases
Dayna CONRY and Mary Plotts, Defendants-Ap-
pellees. Secured Transactions 349A 228
Nos. 3-00-0252, 3-00-0253.
349A Secured Transactions
May 4, 2001. 349AVII Default and Enforcement
349Ak228 k. Possession by Secured Party.
Department store from which two discharged Most Cited Cases
Chapter 7 debtors had purchased consumer goods Signed credit card receipts for consumer goods,
on credit card accounts sued to take possession of which incorporated a department store's security
its collateral, asserting that it had a purchase money agreement by reference and granted the store a se-
security interest in the merchandise. The Circuit curity interest in the items purchased, were suffi-
Court, 10th Judicial Circuit, Tazewell County, J. cient to establish a signed security agreement
Peter Ault, J., ruled in favor of debtors on ground between purchaser and store, as required for store
that department store had failed to prove that the to enforce its purchase money security interest with
debtors had entered into security agreements with respect to the collateral. S.H.A. 810 ILCS 5/9-203
the store. Department store appealed. The Appellate (1).
Court, Breslin, J., held, as a matter of first impres- **1248 *998 ***178 Melissa Uzzell,Blatt, Hasen-
sion, that signed credit card sales receipts were suf- miller, Leibsker & Moore, Normal, for Sears,
ficient to establish signed security agreements Roebuck & Company.
between debtors and store.
Gerald L. Hall, Pekin, for Mary Plotts in No.
Reversed. 3-00-0252 and Dayna Conry in No. 3-00-0253.

West Headnotes
Justice BRESLIN delivered the opinion of the
[1] Appeal and Error 30 893(1) court:

30 Appeal and Error The defendants, Dayna Conry and Mary Plotts,
30XVI Review failed to make payments for consumer goods that
30XVI(F) Trial De Novo they purchased from Sears, Roebuck and Company
30k892 Trial De Novo (Sears) on Sears credit card accounts. After the de-
30k893 Cases Triable in Appellate fendants' debts were discharged in bankruptcy,
Court Sears sued to take possession of its collateral, as-
30k893(1) k. In General. Most serting that it had a purchase money security in-
Cited Cases terest in the merchandise. 810 ILCS 5/9-107 (West
In reviewing the trial court's conclusions of law, the 1998). The trial court ruled Sears had failed to
reviewing court applies a de novo standard of re- prove that the defendants entered into a security
view. agreement with Sears. Sears' motion to reconsider

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748 N.E.2d 1248 Page 2
321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46 UCC Rep.Serv.2d 859
(Cite as: 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178)

was denied. We reverse and hold that a security in- of the sales receipts that had been signed by the de-
terest was adequately proven by Sears when it pro- fendants for the goods Sears was seeking to recov-
duced the defendants' signed credit card sales re- er. Immediately above the defendants' signatures on
ceipts incorporating a Sears security agreement by each of these receipts was printed the following
reference and stating that the buyers granted Sears a language, “Purchased under my Sears account and
security interest in the merchandise. security agreement, incorporated by reference. I
grant Sears a security interest in this merchandise
until paid, unless prohibited by law.”
BACKGROUND
Neuroth also identified an exhibit that is entitled
During 1998, the defendants purchased various
“Sears National Bank [,] Sears card account and se-
consumer goods from Sears on Sears credit card ac-
curity agreement.” He testified that this exhibit was
counts. After the defendants failed to make pay-
a copy of the security agreement that went into ef-
ments on their accounts, Sears sued to replevy the
fect on September 1997. The copy of the Sears se-
goods from the defendants in separate cases. The
curity agreement in the record includes the designa-
defendants each filed for chapter 7 bankruptcy (11
tion “9/97.”
U.S.C. § 701 et seq. (1994)) and did not reaffirm
these credit card **1249 ***179 debts with Sears. On cross-examination, Neuroth stated that he be-
After the bankruptcies were discharged, Sears sued lieved the next update of the security agreement
to exercise its right to obtain possession of the was in 1999. He conceded that he had produced
goods by virtue of its purchase money security in- neither signed credit card applications nor signed
terest in the merchandise as collateral. security agreements for the defendants. He stated
that he did not know when the defendants' accounts
After the cases were consolidated, the court heard
were opened. He did not know if the defendants'
evidence and arguments on the merits. Dennis
credit card applications included language indicat-
Neuroth testified that he was employed by Sears in
ing that the applicants agreed to accept each new
the bankruptcy recovery department. He explained
version of the security agreement that Sears might
how a customer opens a Sears credit card account.
send to them. Neuroth testified that it was standard
The customer fills out an application, sends it to
operating procedure that purchases made on a Sears
Sears for review, and if approved, the customer re-
credit card were made under the terms of the secur-
ceives a Sears credit card. The application *999
ity agreement then in force. However, he could not
form contains the Sears security agreement. When
point to specific language in a prior agreement
the credit card is sent to the customer, it is accom-
binding the defendants to the agreement offered in
panied by a copy of the security agreement. Sears
the exhibit.
periodically updates the security agreement and
sends a copy of the update to the credit card holder. The court's written order found that although the
court agreed with Sears' “ ‘composite document’
When a customer purchases consumer goods using
theory, the court [felt] that there must be some
a Sears credit card, the customer signs a sales ticket
proof presented that the defendants had, in fact,
that describes the merchandise and contains lan-
entered into the underlying credit card agreement.”
guage granting Sears a purchase money security in-
The order stated that such “proof [was] lacking in
terest in the merchandise. The customer's signature
this case.” Accordingly, the court entered judgment
is recorded electronically by a Sears computer, and
for the defendants. After Sears' motion for recon-
the signed sales receipt is retained by the customer.
sideration was denied, Sears appealed. Neither
Neuroth identified electronically generated copies Conry nor Plotts submitted appellee briefs on ap-
peal.

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748 N.E.2d 1248 Page 3
321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46 UCC Rep.Serv.2d 859
(Cite as: 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178)

*1000 STANDARD OF REVIEW provided sufficient proof of such a security interest.


These cases also arose under statutes identical or
[1] In reviewing the trial court's conclusions of law, similar to the Illinois statutes under article 9 of the
the reviewing court applies a de novo standard of Uniform Commercial Code (810 ILCS 5/9-101 et
review. Zeitz v. Village of Glenview, 304 Ill.App.3d seq. (West 1998)) regarding security interests.
586, 238 Ill.Dec. 52, 710 N.E.2d 849 (1999).
In Sears, Roebuck & Co. v. Silch, 899 S.W.2d 153
(Mo.Ct.App.1995), the Missouri appellate court
ANALYSIS
found that where Sears failed to produce a signed
A security interest is an interest in personal prop- security agreement, a signed Sears sales ticket con-
erty or fixtures which secures **1250 ***180 pay- taining language expressly conveying a security in-
ment or performance of an obligation. 810 ILCS terest complied with the statutory requirements of a
5/1-201(37) (West 1998). A security agreement is security agreement. Likewise, the court in In re
an agreement that creates or provides for a security Hance, 181 B.R. 184 (Bankr.M.D.Penn.1993), held
interest. 810 ILCS 5/9-105(1)(l ) (West 1998). A that in the absence of a signed security agreement,
security interest is a purchase money security in- signed Sears sales checks contained sufficient lan-
terest to the extent that it is taken or retained by the guage to demonstrate the parties' intention*1001 to
seller of the collateral to secure all or part of its grant a security interest to Sears. See also In the
price. 810 ILCS 5/9-107(a) (West 1998). Such an Matter of Wiegert, 145 B.R. 621
interest is not enforceable against the debtor with (Bankr.D.Neb.1991), In re Hardage, 99 B.R. 738
respect to the collateral and does not attach unless (Bankr.N.D.Tex.1989), and In re Tillery, 124 B.R.
the debtor has signed a security agreement which 127 (Bankr.M.D.Fla.1991) for similar results.
contains a description of the collateral, value has
In the instant case, the defendants signed Sears
been given, and the debtor has rights in the collater-
credit card sales receipts incorporating a security
al. 810 ILCS 5/9-203(1) (West 1998). A security
agreement by reference and granting Sears a secur-
interest attaches when it becomes enforceable
ity interest in the items purchased. By analogy with
against the debtor with respect to collateral. Attach-
the cases cited above, the signed Sears credit card
ment occurs as soon as all of the events specified in
receipts satisfied the Illinois statutory requirement
subsection (1) above have taken place unless expli-
of a signed security agreement. Therefore, we hold
cit agreement postpones the time of attaching. 810
that the trial court erred as a matter of law by deny-
ILCS 5/9-203(2) (West 1998).
ing Sears' motion for reconsideration.
[2] On appeal, the narrow issue is whether Sears
proved that it retained a purchase money security CONCLUSION
interest in the consumer goods purchased by the de-
fendants. More specifically, the issue revolves For the foregoing reasons, we reverse the ruling of
around whether the testimony of Neuroth, the the Tazewell County circuit court and hold that
signed Sears credit card sales receipts, and the un- Sears has a valid purchase money security interest
signed Sears security agreement provided sufficient in the merchandise purchased on the defendants'
proof of Sears' security interest in the goods. Sears credit cards.

This case appears to be one of first impression in Reversed.


Illinois. But other courts have ruled that signed
Sears sales receipts or invoices with identical or HOMER, P.J., and HOLDRIDGE, J., concur.
similar language to the sales receipts in this case Ill.App. 3 Dist.,2001.
Sears, Roebuck & Co. v. Conry

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748 N.E.2d 1248 Page 4
321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46 UCC Rep.Serv.2d 859
(Cite as: 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178)

321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec.


178, 46 UCC Rep.Serv.2d 859

END OF DOCUMENT

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Chapter 15 Secured Transaction. Priority creditors and perfected security interests

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Date of Printing: Oct 26, 2010

KEYCITE

Sears, Roebuck & Co. v. Conry, 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46 UCC
Rep.Serv.2d 859 (Ill.App. 3 Dist.,May 04, 2001) (NO. 3--00--0252, 3--00--0253)
History

Direct History

=> 1 Sears, Roebuck & Co. v. Conry, 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46
UCC Rep.Serv.2d 859 (Ill.App. 3 Dist. May 04, 2001) (NO. 3--00--0252, 3--00--0253)

Negative Citing References (U.S.A.)

Distinguished by
2 In re Sabol, 337 B.R. 195, 58 UCC Rep.Serv.2d 756 (Bankr.C.D.Ill. Feb 06, 2006) (NO.
05-80582, 05-8138) HN: 1,2 (Ill.Dec.)

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Westlaw Delivery Summary Report for PATRON ACCESS,-

Date/Time of Request: Tuesday, October 26, 2010 13:31 Eastern


Client Identifier: PATRON ACCESS
Database: KEYCITE-HIST-IMG
Citation Text: 748 N.E.2d 1248
Service: KeyCite
Lines: 1
Documents: 1
Images: 1

Chapter 15 Secured Transaction. Priority creditors and perfected security interests

The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters,
West and their affiliates.
Date of Printing: Oct 26, 2010

KEYCITE

Sears, Roebuck & Co. v. Conry, 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46 UCC
Rep.Serv.2d 859 (Ill.App. 3 Dist., May 04, 2001) (NO. 3--00--0252, 3--00--0253)

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Westlaw Delivery Summary Report for PATRON ACCESS,-

Date/Time of Request: Tuesday, October 26, 2010 13:31 Eastern


Client Identifier: PATRON ACCESS
Database: KEYCITE-REFS
Citation Text: 748 N.E.2d 1248
Service: KeyCite
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Documents: 1
Images: 0

Chapter 15 Secured Transaction. Priority creditors and perfected security interests

The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters,
West and their affiliates.
Date of Printing: Oct 26, 2010

KEYCITE

Sears, Roebuck & Co. v. Conry, 321 Ill.App.3d 997, 748 N.E.2d 1248, 255 Ill.Dec. 178, 46 UCC
Rep.Serv.2d 859 (Ill.App. 3 Dist. May 04, 2001) (NO. 3--00--0252, 3--00--0253)
Citing References

Negative Cases (U.S.A.)

Distinguished by
1 In re Sabol, 337 B.R. 195, 199+, 58 UCC Rep.Serv.2d 756, 756+ (Bankr.C.D.Ill. Feb 06, 2006)
(NO. 05-80582, 05-8138) " HN: 1,2 (Ill.Dec.)

Positive Cases (U.S.A.)

Cited
2 Portfolio Acquisitions, L.L.C. v. Feltman, 909 N.E.2d 876, 886, 391 Ill.App.3d 642, 655, 330
Ill.Dec. 854, 864 (Ill.App. 1 Dist. May 20, 2009) (NO. 1-07-3004)
3 In re Sarah Michaels, Inc., 358 B.R. 366, 377, 61 UCC Rep.Serv.2d 819, 819 (Bankr.N.D.Ill. Jan
11, 2007) (NO. 03 B 19465, 05 A 01252) " HN: 2 (Ill.Dec.)

Mentioned
4 Helms v. Certified Packaging Corp., 551 F.3d 675, 681, 67 UCC Rep.Serv.2d 684, 684 (7th
Cir.(Ill.) Dec 30, 2008) (NO. 08-1017, 08-1119) HN: 2 (Ill.Dec.)

Secondary Sources (U.S.A.)


5 Anderson on the Uniform Commercial Code s 9-203:57, Generally (2010) HN: 2 (Ill.Dec.)
6 9 Arizona Practice s 10:11, Creation and attachment of security interests--Creating and authentic-
ating a valid security agreement (2010) HN: 2 (Ill.Dec.)
7 California Business Law Deskbook s 11:14, Creation and attachment of security interests-
-Creating and authenticating a valid security agreement (2009) HN: 2 (Ill.Dec.)
8 Documenting Secured Transactions s 5:2, Security Agreement (2010) HN: 2 (Ill.Dec.)
9 Financial Handbook for Bankruptcy Professionals s 4.2, Claims, discharge, and equity interests
(2010) HN: 2 (Ill.Dec.)
10 Guidebook to Security Interests Personal Property s 19:23, Credit card transactions and con-
sumers (2010) HN: 2 (Ill.Dec.)
11 Hawkland Uniform Commercial Codes Series s 9-203:5, Need for signed security agreement
(2010) HN: 2 (Ill.Dec.)
12 2B Illinois Practice Series s 5/9-203, Attachment and enforceability of security interest; pro-
ceeds; supporting obligations; formal requisites (2009) HN: 2 (Ill.Dec.)

© 2010 Thomson Reuters. All rights reserved.


13 Law & Practice of Secured Transactions: Working with Article 9 s 2.02, THE SECURITY
AGREEMENT-REQUIRED ELEMENTS (2010) HN: 2 (Ill.Dec.)
14 The Law of Sec. Trans. Under the UCC P 12.02(2), THE SEARS PMSI CASES (2010) HN: 1,2
(Ill.Dec.)
15 20 Minnesota Practice Series s 10:14, Creation and attachment of security interests--Creating and
authenticating a valid security agreement (2010) HN: 2 (Ill.Dec.)
16 49 N.J. Prac. Series s 10:14, Creation and attachment of security interests--Creating and authen-
ticating a valid security agreement (2010) HN: 2 (Ill.Dec.)
17 Problem Loan Workouts s 4:10, Security agreements (2010) HN: 2 (Ill.Dec.)
18 The Law of Debtors and Creditors s 7:17, Scope of Article 9--Intent to create a security interest
in personal property or fixtures (2010) HN: 2 (Ill.Dec.)
19 14 West's Legal Forms S 2:1, Transactions subject to UCC Article 9--In general (2010) HN: 2
(Ill.Dec.)
20 CJS Secured Transactions s 42, Composite documents theory (2010) HN: 2 (Ill.Dec.)
21 Illinois Forms Legal and Business s 16B:1, Personal property leasing (2010) HN: 2 (Ill.Dec.)
22 Illinois Forms Legal and Business s 16B:6, Uniform Commercial Code Article 2A (2010) HN: 2
(Ill.Dec.)
23 Illinois Forms Legal and Business s 45:22, Reimbursement agreement--Provisions--Limitation of
issuer's liability (2010) HN: 2 (Ill.Dec.)
24 Illinois Forms Legal and Business s 45:35, Advice of credit (2010) HN: 2 (Ill.Dec.)
25 Illinois Forms Legal and Business s 45:37, Confirmation of credit (2010) HN: 2 (Ill.Dec.)
26 Illinois Forms Legal and Business s 45:7, Assignment of right to proceeds (2010) HN: 2
(Ill.Dec.)
27 Illinois Law and Practice Secured Transactions s 60, Generally; requirement of writing (2010)
HN: 2 (Ill.Dec.)
28 U.C.C. SURVEY-ARTICLE 9 DEVELOPMENTS, 58 Bus. Law. 1635, 1656 (2003) HN: 2
(Ill.Dec.)
29 CONSUMER BANKRUPTCY DEVELOPMENTS, 57 Bus. Law. 1333, 1355+ (2002) HN: 1,2
(Ill.Dec.)
30 CREDIT CARD RECEIPTS ESTABLISHED SECURITY AGREEMENT, 06-27-01 West's
Bankruptcy Newsletter 17 (2001) HN: 2 (Ill.Dec.)

Court Documents

Appellate Court Documents (U.S.A.)

Appellate Briefs
31 Dorothy ARRUDA, Melanie Velleco, Blanche I. Sroka, Vincent Kowal & Kathleen Kowal,
Plaintiffs-Appellants, v. SEARS ROEBUCK & COMPANY, Sears National Bank, Stephen J.
Shechtman, Shechtman & Halperin, Preston W. Halperin; Joseph S.U. Bodoff, Douglas A. Giron,
Thomas E. Carlotto, Holly L. Raiano & Dykema Gossett, PLLC, Defendants-Appellees., 2002

© 2010 Thomson Reuters. All rights reserved.


WL 34217000, *34217000+ (Appellate Brief) (1st Cir. Jul 24, 2002) Appellants' Brief (NO.
02-1198) HN: 1,2 (Ill.Dec.)
32 In Re: SARAH MICHAELS, INC., Sarah Michaels, LLC, and Fasma, LLC, Debtors. CPC AC-
QUISITION, INC., Plaintiff-Appellee, cross-Appellant, v. Brenda P. HELMS, not individually
but as Chapter 7 Trustee of the Estate of Sarah Michaels, Inc., Sarah Michaels, LLC, and Fasma,
LLC, Defendant-Appellant, cross-Appellee., 2008 WL 2559041, *2559041+ (Appellate Brief)
(7th Cir. Jun 20, 2008) Principal and Response Brief and Supplemental Appendix of
Plaintiff-Appellee, Cross-Appellant Cpc Acquisition, Inc. (NO. 08-1017, 08-1119) "
HN: 2 (Ill.Dec.)
33 In re: SARAH MICHAELS, INC., Sarah Michaels, LLC, and Fasma, LLC, Debtors., CPC AC-
QUISITION, INC., Plaintiff-Appellee, cross-Appellant, v. Brenda P. HELMS, not individually
but as Chapter 7 Trustee of the Estate of Sarah Michaels, Inc., Sarah Michaels, LLC, and Fasma,
LLC, Defendant-Appellant, cross-Appellee., 2008 WL 2329553, *2329553+ (Appellate Brief)
(7th Cir. May 28, 2008) Principal and Response Brief and Required Short Appenix of
Plaintiff-Appellee, Cross-Appellant CPC Acquisition, Inc. (NO. 08-1017, 08-1119) "
HN: 2 (Ill.Dec.)
34 PORTFOLIO ACQUISITIONS, LLC, Plaintiff-Appellant, v. Randy FELTMAN, Defendant-Ap-
pellee., 2008 WL 6013935, *6013935+ (Appellate Brief) (Ill.App. 1 Dist. Aug 22, 2008) Brief of
Defendant-Appellee (NO. 07-3004)
35 PORTFOLIO ACQUISITIONS, LLC., Appellant, v. Randy FELTMAN, Appellee., 2008 WL
6013934, *6013934+ (Appellate Brief) (Ill.App. 1 Dist. May 02, 2008) Appellant's Brief (NO.
07-3004)

Trial Court Documents (U.S.A.)

Trial Motions, Memoranda and Affidavits


36 Kenneth A. MCCREADY, Plaintiff, v. Larry STERN, Defendant., 2005 WL 4114442, *4114442
(Trial Motion, Memorandum and Affidavit) (C.D.Ill. Aug 03, 2005) Plaintiff's Objections to
Report and Recommendation of Magistrate Judge (NO. 05-2032)
37 CPC ACQUISITIONS, INC., an Illinois Corporation, Appellant, v. Brenda HELMS, Not Indi-
vidually, but solely as Chapter 7 Trustee for the Estate of Sarah Michaels, Inc., et al., Appellee.,
2007 WL 1973396, *1973396+ (Trial Motion, Memorandum and Affidavit) (N.D.Ill. May 25,
2007) Reply Brief for Appellant, CPC Acquisitions, Inc. (NO. 07CV702)
38 CPC ACQUISITIONS, INC., an Illinois Corporation, Appellant/Intervenor, v. Brenda HELMS,
Not Indivdually, but solely as Chapter 7 Trustee for the Estate of Sarah Michaels, Inc., et al., Ap-
pellee/Adversary Plaintiff., 2007 WL 1291355, *1291355 (Trial Motion, Memorandum and Affi-
davit) (N.D.Ill. Mar 26, 2007) Brief and Short Appendix for Appellant, CPC Acquisitions,
Inc. (NO. 07CV702)

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