dissenting:
I
Because the Currency Exchange’s complaint fails to adequately allege a cause of action against Hodge, I would affirm the circuit court’s dismissal of the Currency Exchange’s action against Hodge. (See Falk v. Martel (1991), 210 Ill. App. 3d 557, 562 (“It is well established that dismissal of a complaint may be upheld upon any basis found in the record, including a failure to state a cause of action”); Munizza v. City of Chicago (1991), 222 Ill. App. 3d 50, 55; Midwest Bank & Trust Co. v. Village of Lakewood (1983), 113 Ill. App. 3d 962, 974; Bauscher v. City of Freeport (1968), 103 Ill. App. 2d 372, 375.) Accordingly, I respectfully dissent.
In its complaint, the Currency Exchange alleged, in pertinent part, as follows:
“1. That on or about March 8, 1990, for value received, the Defendant, Beulah M. Hodge, made and delivered to the Defendant, Fred Fentress, her certain check, a copy of which is hereto attached marked Exhibit ‘A’ and made a part hereof.
2. That thereafter, the Defendant, Fred Fentress, endorsed said check to the Plaintiff for value and who [sic] became a holder in due course under the Uniform Commercial Code.
* * *
3. That Plaintiff holds and owns said check and there is due and owing to the Plaintiff from the Defendants and each of them the sum of $500.00.”
On appeal to this court, the Currency Exchange contends that its status as a holder in due course entitles it to payment from Hodge no matter what Hodge’s legal rights were with respect to Fentress.' According to the Currency Exchange, it is entitled to recovery from Hodge even if Hodge could rightfully have refused to pay Fentress.
In Knox College v. Celotex Corp. (1981), 88 Ill. 2d 407, this court discussed pleading requirements in Illinois. The court stated:
“Notice pleading, as known in some jurisdictions, is not sufficient under our practice act. ***
‘This court has repeatedly held that a complaint which does not allege facts, the existence of which are necessary to enable a plaintiff to recover does not state a cause of action and that such deficiency may not be cured by liberal construction or argument.’ (Emphasis added.)” Knox College, 88 Ill. 2d at 426-27, quoting People ex rel. Kucharski v. Loop Mortgage Co. (1969), 43 Ill. 2d 150, 152.
See also Beckman v. Freeman United Coal Mining Co. (1988), 123 Ill. 2d 281, 287.
The UCC defines a holder in due course of a negotiable instrument as follows:
“(1) A holder in due course is a holder who takes the instrument
(a) for value; and
(b) in good faith; and
(c) without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.” Ill. Rev. Stat. 1989, ch. 26, par. 3 — 302.
Here, the Currency Exchange’s status as a holder in due course is an essential element of the Currency Exchange’s action. The complaint alleges that “the Defendant *** endorsed said check to the Plaintiff for value” and that the plaintiff thereby “became a holder in due course under the UCC.” The Currency Exchange’s complaint, however, does not contain sufficient allegations of fact to support its claim that it is a holder in due course. The complaint fails to allege any relevant facts to establish the claim that the Currency Exchange took the check “for value,” “in good faith” and “without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.” (Ill. Rev. Stat. 1989, ch. 26, pars. 3-302(l)(a), (l)(b), (l)(c).) Accordingly, the complaint fails to adequately state a cause of action against Hodge.
The record in this case suggests that the Currency Exchange is not a holder in due course. Initially, I note that the check in this case was an uncertified personal check. It was not a payroll check or a government check. It can hardly be doubted that any currency exchange would question whether it would be able to collect on an uncertified personal check. Further, the check in this case was made payable to “Fred Fentress — A-OK Plumbing.” It was endorsed “Fred Fentress A-OK Plumbing,” underneath which was the notation “Sole Owner.” Any currency exchange presented with such a check would have to question whether the named individual was indeed the sole owner of the named business and entitled to the proceeds of the check. (See, e.g., Owens v. Nagel (1929), 334 Ill. 96 (where payee of note was an individual whose name on note was followed by the word “trustee,” alleged holder in due course who purchased note from payee in settlement of personal debt of the payee was, by the terms of the note, put on inquiry regarding the trusteeship and could not be considered a holder in due course).) One must wonder whether the Currency Exchange in this case asked for and received documentation establishing that there was such a business as “A-OK Plumbing” and that Fred Fentress was the “sole owner,” entitled to the proceeds of a check made payable to “Fred Fentress — A-OK Plumbing.” Also, this personal check was made payable to the order of a business. It is reasonable to assume that a business person would have a business bank account where the check could be negotiated without a fee. Why would such a person choose to pay a fee to a currency exchange? Failure to plead facts leaves questions of good faith and defenses unanswered. I make these observations for the purpose of pointing out that, in my view, the record here casts doubt upon whether the Currency Exchange can, in good faith, plead facts sufficient to support the conclusion that it is a holder in due course.
The majority here states that “[t]he legal sufficiency of the Currency Exchange’s action, including the allegation that it possesses the check as a holder in due course, is admitted by Hodge’s motion [to dismiss].” (156 Ill. 2d at 117.) I do not disagree with the fundamental notion that “[a] motion to dismiss admits all facts well pleaded together with all reasonable inferences which could be drawn from those facts.” (Horwath v. Parker (1979), 72 Ill. App. 3d 128, 134; Debolt v. Mutual of Omaha (1978), 56 Ill. App. 3d 111, 113.) However, it is also well established that a motion to dismiss “does not admit conclusions of law or conclusions of fact unsupported by allegations of specific facts upon which such conclusions rest.” (Emphasis added.) (Horwath, 72 Ill. App. 3d at 134; Debolt, 56 Ill. App. 3d at 113.) In this case, the Currency Exchange’s complaint did not allege facts in support of the conclusion that it was a holder in due course. Accordingly, that conclusion was not admitted by Hodge’s motion to dismiss.
II
Even if the conclusion that the Currency Exchange is a holder in due course were deemed admitted by Hodge’s motion to dismiss, I would affirm the trial court’s dismissal of the Currency Exchange’s complaint. The majority here incorporates into section 3 — 305 of the UCC an additional requirement that must be met before the defense of illegality can be raised to defeat the claim of an alleged holder in due course. That additional requirement is not found anywhere in the plain language of section 3 — 305, however. Section 3 — 305 provides, in pertinent part:
“[A] holder in due course *** takes the instrument
free from * * *
(2) all defenses of any party to the instrument with
whom the holder has not dealt except * * *
(b) *** incapacity, or duress, or illegality of the transaction, as renders the obligation of the party a nullity.” (Emphasis added.) (Ill. Rev. Stat. 1989, ch. 26, par. 3 — 305.)
With respect to the defenses of duress and illegality, the comments to section 3 — 305 of the UCC state, in pertinent part, that “[t]hey are primarily a matter of local concern and local policy. All such matters are therefore left to the local law. If under that law the effect of the duress or the illegality is to make the obligation entirely null and void, the defense may be asserted against a holder in due course.” (Emphasis added.) Ill. Ann. Stat., ch. 26, par. 3 — 305, Uniform Commercial Code Comment, at 66 (Smith-Hurd Supp. 1992).
The plain language of section 3 — 305 and the comments to section 3 — 305 make it clear that where the illegality of a transaction renders the obligation of the maker of an instrument a nullity, the illegality of the transaction can be raised as a defense by the maker of the instrument, even against a holder in due course. Section 3 — 305 does not state that illegality is a defense only where the instrument arising from a contract or transaction has been expressly declared void by the legislature due to the illegality of the transaction. Had the legislature intended for illegality to be a defense only where it had expressly declared an instrument void due to the illegality of the underlying transaction, it could easily have said so in section 3 — 305. It did not say so, however.
The only inquiry necessary to resolve the issue presented in this case, then, is whether the contract between Hodge and Fentress is void on the grounds of illegality. The comments to the UCC instruct that one must look to Illinois statutory and case law to determine whether the underlying contract was illegal and, as a result of that illegality, void. (Ill. Ann. Stat., ch. 26, par. 3 — 305, Uniform Commercial Code Comment, at 66 (Smith-Hurd Supp. 1992).) An examination of the statute providing for the licensing of plumbers, the public policy behind that statute, and Illinois case law concerning the illegality of contracts made in contravention of professional licensing laws establishes that the contract between Hodge and Fentress is illegal and void.
The Illinois Plumbing License Law (Ill. Rev. Stat. 1989, ch. 111, par. 1101 et seq.) specifically prohibits the performance of plumbing work by nonlicensed plumbers. Pursuant to the Act, “all plumbing shall be performed only by plumbers licensed under the provisions of this Act.” (Ill. Rev. Stat. 1989, ch. Ill, par. 1103(1).) The Act imposes criminal penalties on anyone performing plumbing services without a license. (Ill. Rev. Stat. 1989, ch. Ill, par. 1128.) The rationale behind the prohibition of plumbing work by nonlicensed plumbers is set forth in the Plumbing License Law. The portion of the Law setting forth its purpose and underlying policy states:
“It has been established by scientific evidence that improper plumbing can adversely affect the health of the public. *** Faulty plumbing is potentially lethal and can cause wide spread disease and an epidemic of disastrous consequences.
To protect the health of the public it is essential that plumbing be installed by persons who have proven their knowledge of the sciences of pneumatics and hydraulics and their skill in installing plumbing.
Consistent with its duty to safeguard the health of the people of this State, the General Assembly therefore declares that individuals who plan, inspect, install, alter, extend, repair and maintain plumbing systems shall be individuals of proven skill. *** [T]his Act is therefore declared to be essential to the public interest.” Ill. Rev. Stat. 1989, ch. 111, par. 1101.
Here, the contract between Hodge and Fentress presents the kinds of dangers the Illinois Plumbing License Law was intended to guard against. Affidavits attached to Hodge’s section 2 — 619 motion to dismiss, which were not contradicted by the plaintiff, establish that Fentress was not a licensed plumber. The affidavits also establish that Hodge and her husband, Eric, believed that Fentress was a licensed plumber at the time they contracted with him for plumbing services. Had Fentress performed the work required of him pursuant to the contract with Hodge, it is likely that his work would not have conformed to acceptable plumbing standards and would have posed the kinds of dangers which the Plumbing License Law was intended to prevent.
Illinois courts have recognized that “generally a statute which declares an act illegal and which imposes a penalty for its violation renders the contract for the performance of the act void and unenforceable.” (T.E.C. & Associates, Inc. v. Alberto-Culver Co. (1985), 131 Ill. App. 3d 1085, 1096 (declaring a fully performed contract made in violation of an employment agency licensing act illegal and void).) More specific to this case, the court in Wright v. Baird (1928), 249 Ill. App. 90, 92-94, held that a contract made for the services of an unlicensed plumber was illegal and void under the then-existing version of the Plumbing License Law even where the services had already been performed. The court rejected the unlicensed plumbers’ contention that “the act is a measure merely to procure revenue and in no manner affects the validity of the contract expressed or implied.” (Wright, 249 Ill. App. at 92.) The court stated, “It seems plain from the reading of the statute that the measure is broader than a mere act to procure revenue, and that its purport is to conserve the health of the citizens of the State, passed under the police power of the State.” (Wright, 249 Ill. App. at 94.) The court in Wright also specifically rejected the plumbers’ argument that the licensing statute must expressly declare that a contract made in violation of the statute is void in order for a court to find the contract void. Wright, 249 Ill. App. at 95.
Like the contract in Wright, the contract made between Hodge and Fentress in this case must be considered illegal and void. Performance of plumbing services under the contract expressly contravenes the current Plumbing License Law. The Law provides for criminal sanctions against unlicensed plumbers. The Law further contains a strong public policy statement concerning the relationship between licensing plumbers and the need to protect the public health. Clearly, the contract for the services of an unlicensed plumber in the instant case is the type of contract which Illinois courts have consistently declared illegal and void. (See, e.g., T.E.C. & Associates, Inc., 131 Ill. App. 3d at 1096; Keenan v. Tuma (1926), 240 Ill. App. 448, 455-57 (an unlicensed architect could not recover for his services because the contract was made in violation of the applicable professional licensing act; the court stated that “the alleged contract of employment became a nullity” (emphasis added)); Tovar v. Paxton Community Memorial Hospital (1975), 29 Ill. App. 3d 218, 220 (an unlicensed physician could not recover for breach of his employment contract as the contract was in violation of public policy and void); Leoris v. Dicks (1986), 150 Ill. App. 3d 350, 354 (court refused to enforce a contract for attorney compensation which violated a rule against attorney fee-splitting).) Because the contract between Hodge and Fentress is void, the section 3 — 305 defense of illegality is available to Hodge.
Courts in other States have ruled that the defense of illegality of the contract may be asserted against a holder in due course without requiring that the negotiable instrument in question be expressly declared void by statute. In Wilson v. Steele (1989), 211 Cal. App. 3d 1053, 259 Cal. Rptr. 851, the court held that a contract made by an unlicensed home contractor was void and illegal and that this defense could be asserted against a holder in due course. The court noted that the contractor, being unlicensed, had violated the applicable licensing statute. Applying California’s version of section 3— 305, the court then determined that this defense could be asserted against a holder in due course. In Columbus Checkcashiers, Inc. v. Stiles (1990), 56 Ohio App. 3d 159, 565 N.E.2d 883, the court likewise held that a check given as consideration for a contract between a homeowner and an unlicensed home contractor was illegal and void and that the defense of illegality could be asserted against the holder in due course. Like the court in Wilson, the Columbus Checkcashiers court relied on the applicable contractor licensing statute forbidding any unlicensed person to perform the work of a licensed contractor. In Columbus Checkcashiers, as in the instant case, the homeowner stopped payment on the check, and the alleged holder in due course sued to recover the amount of the check. The Ohio court found in favor of the homeowner on the grounds that the contract was illegal and void under the Ohio version of section 3 — 305. See also Middle Georgia Livestock Sales v. Commercial Bank & Trust Co. (1971), 123 Ga. App. 733, 735-36, 182 S.E.2d 533, 535 (pursuant to Georgia’s version of section 3 — 305, a note given for the purchase of stolen cattle was unenforceable “even in the hands of a holder in due course” because the underlying contract was illegal and “void ab initio”).
In Columbus Checkcashiers and Wilson, as in the instant case, the subject matter of the contract, performance by an unlicensed individual, was prohibited by law. Accordingly the courts held that the contract was illegal and void. Moreover, the courts held that this defense could be asserted against a holder in due course. Most importantly, the courts in Columbus Checkcashiers and Wilson did not require that a statute expressly declare the note in question void in order for the defense of illegality to be available. Such a requirement is likewise not a part of Illinois’ version of section 3 — 305. In contrast, under New Jersey law, which the majority here purports to follow, the comments to that State’s version of section 3 — 305 expressly state that, “[i]n New Jersey, a holder in due course takes free and clear of the defense of illegality, unless the statute which declares the act illegal also indicates that payment thereunder is void.” (Emphasis added.) (N.J. Stat. Ann. §12A:3 — 305(2)(b), New Jersey Study Comments (West 1962), as quoted in New Jersey Mortgage & Investment Corp. v. Berenyi (1976), 140 N.J. Super. 406, 409, 356 A.2d 421, 423.) Notably, Illinois did not include a similar directive in its comments to section 3 — 305.
The majority asserts that to bar recovery by the Currency Exchange in this case would be unfair because the Currency Exchange is an innocent third party which had no knowledge of the circumstances of the contract between Hodge and Fentress. However, section 3 — 305 clearly provides that the general policy favoring free negotiability is not absolute. There is a competing policy disfavoring certain transactions, such as those involving infancy, duress, illegality or misrepresentation as to the true nature of an instrument (i.e., fraud in the factum). (Ill. Rev. Stat. 1989, ch. 26, par. 3 — 305.) Pursuant to section 3 — 305, the Currency Exchange takes a check subject to these and certain other real defenses. The Illinois legislature has provided that, by definition, a holder in due course is one who does not have notice of any of the real defenses listed in section 3 — 305. (See Ill. Rev. Stat. 1989, ch. 26, par. 3 — 302(l)(c).) By statute, the innocence of the holder in due course cannot defeat any of the real defenses listed in section 3 — 305, including illegality. Accordingly, the argument that the Currency Exchange could not have known that the underlying transaction was illegal is simply misplaced. Such reasoning would lead to the conclusion that all of the defenses listed in section 3 — 305 should be unavailable to defeat the claim of a holder in due course, a conclusion obviously contrary to the provisions of section 3 — 305.
For the above reasons, I dissent. I would affirm the judgment of the appellate court which affirmed the circuit court’s dismissal of the Currency Exchange’s action against Hodge.