No. 3--00--0252

(Consolidated with No. 3--00--0253)

_________________________________________________________________

							IN THE

							APPELLATE COURT OF ILLINOIS

							THIRD DISTRICT

							A.D., 2001 

SEARS, ROEBUCK AND COMPANY, 		)	Appeal from the Circuit Court

							)	of the 10th Judicial Circuit, 

	Plaintiff-Appellant,		)	Tazewell County, Illinois

							)

	v.						)

							)

DAYNA CONRY					)	No. 99--LM--409, 99--LM--408

							)

	and						)

							)	

MARY PLOTTS,					)	Honorable

                                )	J. Peter Ault,

	Defendants-Appellees.		)	Judge, Presiding

_________________________________________________________________

	JUSTICE BRESLIN delivered the opinion of the court:

_________________________________________________________________

	The defendants, Dayna Conry and Mary Plotts, failed to make

payments for consumer goods that they purchased from Sears, Roebuck and Company (Sears) on Sears credit card accounts.  After the defendants’ debts were discharged in bankruptcy, Sears sued

to take possession of its collateral, asserting that it had a

purchase money security interest in the merchandise.  810 ILCS 5/9--107 (West 1998).  The trial court ruled Sears had failed to prove that the defendants entered into a security agreement with

Sears.  Sears’ motion to reconsider was denied.  We reverse and

hold that a security interest was adequately proven by Sears when

it produced the defendants’ signed credit card sales receipts 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 accounts.  After the defendants

failed to make payments 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 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 interest 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 receives a Sears credit card.  The

application form contains the Sears security agreement.  When the

credit card is sent to the customer, it is accompanied 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 language granting Sears a purchase money

security interest 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 defendants for the

goods Sears was seeking to recover.  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 security agreement."  He

testified that this exhibit was a copy of the security agreement

that went into effect on September 1997.  The copy of the Sears

security agreement in the record includes the designation "9/97."

	On cross-examination, Neuroth stated that he believed 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 indicating 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 security 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 reconsideration was denied, Sears

appealed.  Neither Conry nor Plotts submitted appellee briefs on

appeal.

STANDARD OF REVIEW

	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, 710 N.E.2d 849 (1999).

ANALYSIS

	A security interest is an interest in personal property or

fixtures which secures payment 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 interest 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 collateral.  810 ILCS 5/9--203(1) (West 1998).  A security

interest attaches when it becomes enforceable against the debtor

with respect to collateral.  Attachment occurs as soon as all of

the events specified in subsection (1) above have taken place

unless explicit agreement postpones the time of attaching.  810

ILCS 5/9--203(2) (West 1998).

	On appeal, the narrow issue is whether Sears proved that it

retained a purchase money security interest in the consumer goods

purchased by the defendants.  More specifically, the issue

revolves around whether the testimony of Neuroth, the signed

Sears credit card sales receipts, and the unsigned 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 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. (wWest 1998)) regarding security interests. 

	In Sears, Roebuck and& Co. v. Silch, 899 S.W.2d 153 (Mo. Ct. App. S.D.  1995), the Missouri appellate court found that where Sears

failed to produce a signed security agreement, a signed Sears

sales ticket containing language expressly conveying a security

interest 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 language to demonstrate the parties’ intention 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 security 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 denying 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.JL.,., AND and HOLDRIDGE , J., concur.and HOMER