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Chapter 15 Secured Transaction. Priority creditors and perfected security interests

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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.
SEARS, ROEBUCK AND COMPANY, Plaintiff-
Appellant,
v.
Dayna CONRY and Mary Plotts, Defendants-Ap-
pellees.
Nos. 3-00-0252, 3-00-0253.
May 4, 2001.
Department store from which two discharged
Chapter 7 debtors had purchased consumer goods
on credit card accounts sued to take possession of
its collateral, asserting that it had a purchase money
security interest in the merchandise. The Circuit
Court, 10th Judicial Circuit, Tazewell County, J.
Peter Ault, J., ruled in favor of debtors on ground
that department store had failed to prove that the
debtors had entered into security agreements with
the store. Department store appealed. The Appellate
Court, Breslin, J., held, as a matter of first impres-
sion, that signed credit card sales receipts were suf-
ficient to establish signed security agreements
between debtors and store.
Reversed.
349AI Nature, Requisites, and Validity
349AI(B) Security Agreements
349Ak41 k. Necessity and Sufficiency of
Writing in General. Most Cited Cases
Secured Transactions 349A 228
349A Secured Transactions
349AVII Default and Enforcement
349Ak228 k. Possession by Secured Party.
Most Cited Cases
Signed credit card receipts for consumer goods,
which incorporated a department store's security
agreement by reference and granted the store a se-
curity interest in the items purchased, were suffi-
cient to establish a signed security agreement
between purchaser and store, as required for store
to enforce its purchase money security interest with
respect to the collateral. S.H.A. 810 ILCS 5/9-203
(1).
**1248 *998 ***178 Melissa Uzzell,Blatt, Hasen-
miller, Leibsker & Moore, Normal, for Sears,
Roebuck & Company.
Gerald L. Hall, Pekin, for Mary Plotts in No.
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-
terest was adequately proven by Sears when it pro-
duced the defendants' signed credit card sales re-
ceipts incorporating a Sears security agreement by
reference and stating that the buyers granted Sears a
security interest in the merchandise.
BACKGROUND
During 1998, the defendants purchased various
consumer goods from Sears on Sears credit card ac-
counts. After the defendants failed to make pay-
ments on their accounts, Sears sued to replevy the
goods from the defendants in separate cases. The
defendants each filed for chapter 7 bankruptcy (11
U.S.C. § 701 et seq. (1994)) and did not reaffirm
these credit card **1249 ***179 debts with Sears.
After the bankruptcies were discharged, Sears sued
to exercise its right to obtain possession of the
goods by virtue of its purchase money security in-
terest in the merchandise as collateral.
After the cases were consolidated, the court heard
evidence and arguments on the merits. Dennis
Neuroth testified that he was employed by Sears in
the bankruptcy recovery department. He explained
how a customer opens a Sears credit card account.
The customer fills out an application, sends it to
Sears for review, and if approved, the customer re-
ceives a Sears credit card. The application *999
form contains the Sears security agreement. When
the credit card is sent to the customer, it is accom-
panied by a copy of the security agreement. Sears
periodically updates the security agreement and
sends a copy of the update to the credit card holder.
When a customer purchases consumer goods using
a Sears credit card, the customer signs a sales ticket
that describes the merchandise and contains lan-
guage granting Sears a purchase money security in-
terest in the merchandise. The customer's signature
is recorded electronically by a Sears computer, and
the signed sales receipt is retained by the customer.
Neuroth identified electronically generated copies
of the sales receipts that had been signed by the de-
fendants for the goods Sears was seeking to recov-
er. Immediately above the defendants' signatures on
each of these receipts was printed the following
language, “Purchased under my Sears account and
security agreement, incorporated by reference. I
grant Sears a security interest in this merchandise
until paid, unless prohibited by law.”
Neuroth also identified an exhibit that is entitled
“Sears National Bank [,] Sears card account and se-
curity agreement.” He testified that this exhibit was
a copy of the security agreement that went into ef-
fect on September 1997. The copy of the Sears se-
curity agreement in the record includes the designa-
tion “9/97.”
On cross-examination, Neuroth stated that he be-
lieved the next update of the security agreement
was in 1999. He conceded that he had produced
neither signed credit card applications nor signed
security agreements for the defendants. He stated
that he did not know when the defendants' accounts
were opened. He did not know if the defendants'
credit card applications included language indicat-
ing that the applicants agreed to accept each new
version of the security agreement that Sears might
send to them. Neuroth testified that it was standard
operating procedure that purchases made on a Sears
credit card were made under the terms of the secur-
ity agreement then in force. However, he could not
point to specific language in a prior agreement
binding the defendants to the agreement offered in
the exhibit.
The court's written order found that although the
court agreed with Sears' “ ‘composite document’
theory, the court [felt] that there must be some
proof presented that the defendants had, in fact,
entered into the underlying credit card agreement.”
The order stated that such “proof [was] lacking in
this case.” Accordingly, the court entered judgment
for the defendants. After Sears' motion for recon-
sideration was denied, Sears appealed. Neither
Conry nor Plotts submitted appellee briefs on ap-
peal.

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748 N.E.2d 1248
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
[1] In reviewing the trial court's conclusions of law,
the reviewing court applies a de novo standard of
review. Zeitz v. Village of Glenview, 304 Ill.App.3d
586, 238 Ill.Dec. 52, 710 N.E.2d 849 (1999).
ANALYSIS
A security interest is an interest in personal prop-
erty or fixtures which secures **1250 ***180 pay-
ment or performance of an obligation. 810 ILCS
5/1-201(37) (West 1998). A security agreement is
an agreement that creates or provides for a security
interest. 810 ILCS 5/9-105(1)(l ) (West 1998). A
security interest is a purchase money security in-
terest to the extent that it is taken or retained by the
seller of the collateral to secure all or part of its
price. 810 ILCS 5/9-107(a) (West 1998). Such an
interest is not enforceable against the debtor with
respect to the collateral and does not attach unless
the debtor has signed a security agreement which
contains a description of the collateral, value has
been given, and the debtor has rights in the collater-
al. 810 ILCS 5/9-203(1) (West 1998). A security
interest attaches when it becomes enforceable
against the debtor with respect to collateral. Attach-
ment occurs as soon as all of the events specified in
subsection (1) above have taken place unless expli-
cit agreement postpones the time of attaching. 810
ILCS 5/9-203(2) (West 1998).
[2] On appeal, the narrow issue is whether Sears
proved that it retained a purchase money security
interest in the consumer goods purchased by the de-
fendants. More specifically, the issue revolves
around whether the testimony of Neuroth, the
signed Sears credit card sales receipts, and the un-
signed Sears security agreement provided sufficient
proof of Sears' security interest in the goods.
This case appears to be one of first impression in
Illinois. But other courts have ruled that signed
Sears sales receipts or invoices with identical or
similar language to the sales receipts in this case
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.
Page 3
provided sufficient proof of such a security interest.
These cases also arose under statutes identical or
similar to the Illinois statutes under article 9 of the
Uniform Commercial Code (810 ILCS 5/9-101 et
seq. (West 1998)) regarding security interests.
In Sears, Roebuck & Co. v. Silch, 899 S.W.2d 153
(Mo.Ct.App.1995), the Missouri appellate court
found that where Sears failed to produce a signed
security agreement, a signed Sears sales ticket con-
taining language expressly conveying a security in-
terest complied with the statutory requirements of a
security agreement. Likewise, the court in In re
Hance, 181 B.R. 184 (Bankr.M.D.Penn.1993), held
that in the absence of a signed security agreement,
signed Sears sales checks contained sufficient lan-
guage to demonstrate the parties' intention*1001 to
grant a security interest to Sears. See also In the
Matter of Wiegert, 145 B.R. 621
(Bankr.D.Neb.1991), In re Hardage, 99 B.R. 738
(Bankr.N.D.Tex.1989), and In re Tillery, 124 B.R.
127 (Bankr.M.D.Fla.1991) for similar results.
In the instant case, the defendants signed Sears
credit card sales receipts incorporating a security
agreement by reference and granting Sears a secur-
ity interest in the items purchased. By analogy with
the cases cited above, the signed Sears credit card
receipts satisfied the Illinois statutory requirement
of a signed security agreement. Therefore, we hold
that the trial court erred as a matter of law by deny-
ing Sears' motion for reconsideration.
CONCLUSION
For the foregoing reasons, we reverse the ruling of
the Tazewell County circuit court and hold that
Sears has a valid purchase money security interest
in the merchandise purchased on the defendants'
Sears credit cards.
Reversed.
HOMER, P.J., and HOLDRIDGE, J., concur.
Ill.App. 3 Dist.,2001.
Sears, Roebuck & Co. v. Conry
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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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,-

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Citation Text: 748 N.E.2d 1248
Service: KeyCite
Lines: 1
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Images: 1

Chapter 15 Secured Transaction. Priority creditors and perfected security interests

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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,-

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Service: KeyCite
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Images: 0

Chapter 15 Secured Transaction. Priority creditors and perfected security interests

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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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