## Facts

- Melvin and Betty Franklin bought a used automobile from Essco Motors under an installment sales contract.
- After a down payment, the Franklins signed a promissory note for the remaining balance of $1,656.
- The written payment term called for monthly installments due on the 15th of each month.
- The Franklins made their February and March 1966 payments on the 15th, as the contract required.
- The Franklins testified that in April 1966 Essco verbally permitted them to make payments on the 27th of each month to match Mr. Franklin’s pay schedule.
- From April through October 1966, the Franklins paid on or by the 27th each month, and Essco accepted each payment without objection.
- In November 1966, Essco stated it could not reach the Franklins to obtain the monthly payment and had the car repossessed.
- Essco (Margolin, doing business as Essco Motors) filed an action to confess judgment on the promissory note.
- The Franklins counterclaimed, alleging the repossession was fraudulent and constituted conversion.
- The trial court entered judgment for the Franklins on their counterclaim, finding the repossession wrongful under the parties’ payment practice, and Essco appealed.

## Issues

1. Whether a seller/creditor that orally permits and consistently accepts payments on a later monthly date waives the right to treat the buyer as in default under the original due date without first giving notice that strict timing will again be required.
2. Whether repossessing the automobile under those circumstances supports the buyers’ counterclaim for wrongful repossession and conversion.

## Decision

- The Appellate Court of Illinois, First District, affirmed the judgment for the Franklins on their counterclaim.
- The court agreed that Essco’s repeated acceptance of payments on the 27th, following the claimed verbal permission, amounted to a waiver (and operated through estoppel principles) as to strict enforcement of the 15th-of-the-month due date.
- Because Essco did not give reasonable notice that it would demand payment on the original date before taking the car, the repossession was wrongful and supported liability for conversion.

## Legal Principles

- A party that knowingly accepts a different performance than the contract calls for—especially on a repeating, month-to-month basis—may waive the right to insist on strict compliance with the original term.
- Waiver in this setting is tied to estoppel: when one party’s words or conduct leads the other to reasonably rely on a relaxed payment practice, the first party may be barred from abruptly claiming default based on the stricter term.
- After establishing a course of accepting late (or later-dated) payments, a creditor generally must give reasonable notice before it can reinstate strict timing and declare a default based solely on the earlier due date.
- Repossession without a present right to possession—because no enforceable default exists under the waived practice—can constitute wrongful repossession and conversion.

## Conclusion

Margolin (d/b/a Essco Motors) accepted for months the Franklins’ payments on the 27th after allegedly granting verbal permission to pay on that date, which waived strict enforcement of the contract’s 15th-of-the-month due date and, through estoppel, prevented Essco from repossessing without first giving notice that it would again require payment on the original date; the appellate court therefore affirmed judgment for the Franklins on their conversion counterclaim.


Margolin v. Franklin, 270 N.E.2d 140 (1971)