Appeal from the Circuit Court of Kane County; the Hon. John A.
Krause, Judge, presiding.
JUSTICE NASH DELIVERED THE OPINION OF THE COURT:
Rehearing denied August 31, 1982.
Third-party respondent, Valley National Bank of Aurora (Bank), appeals from a judgment entered against it for $115,146.95 in favor of plaintiff, the Vendo Company (Vendo), after a finding the Bank as a citation respondent violated section 73(4)(a) of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 73(4)(a)).
Judgments obtained by Vendo against defendants Harry B. Stoner for $170,835 and Stoner Investments, Inc. (Investments) for $7,345,000 were affirmed (Vendo Co. v. Stoner (1974), 58 Ill.2d 289, 321 N.E.2d 1, cert. denied (1975), 420 U.S. 975, 43 L.Ed.2d 655, 95 S.Ct. 1398), and Vendo commenced supplementary proceedings to enforce them in the circuit court of Kane County. On January 4, 1975, a citation to discover assets was issued to the Bank, on order of a judge, directing it to appear before the court for examination concerning the property of the judgment debtor. The citation served upon the Bank, as authorized by section 73(4)(a), also contained the following notice:
"YOU ARE PROHIBITED from making or allowing any transfer or other disposition of, or interfering with, any property not exempt from execution or garnishment belonging to the judgment debtor or to which he may be entitled or which may be acquired by or become due to him and from paying over or otherwise disposing of any money not so exempt, which is due or becomes due to him, until the further order of court or termination of the proceedings."
On January 17, a citation deposition was taken of Paul Manning, executive vice-president of the Bank, who produced documents and testified as to other matters, but did not disclose that the Bank held U.S. Treasury Notes having a par value of $110,000 which had been pledged to the Bank by Investments as collateral for a loan by the Bank to Lektro-Vend Corporation (Lektro-Vend). Lektro-Vend was not a party to the underlying litigation which resulted in Vendo's judgment; however, Harry B. Stoner was the controlling shareholder of Investments and it was the controlling shareholder of Lektro-Vend. Stoner and members of his family also held 34 percent of the shares of the Bank, he was chairman of its board of directors and its business premises were owned by and leased from Investments.
On January 23, Stoner, Investments and Lektro-Vend filed suit against Vendo in the United States District Court alleging that Vendo's enforcement of its State court claims was in violation of Federal anti-trust laws and sought a preliminary injunction against Vendo. At a hearing held on February 14, the district judge suggested that the parties might enter into a "standstill agreement" to avoid the question of issuance of a temporary restraining order. The judge inquired whether Vendo was willing to hold up on collection efforts and whether Stoner, Investments and Lektro-Vend would undertake not to transfer assets out of the ordinary course of business while the Federal court considered the evidence and briefs to be submitted to it. The parties, through their attorneys, agreed to those terms. Counsel for Vendo also advised the court that certain citations had been served prior to that time and that while their legal effects would remain, nothing further by way of enforcement would occur. The judge stated that "whatever their status was before, it continues to be."
On March 6, however, at the direction of Harry B. Stoner, the Bank liquidated the treasury notes pledged to it by Investments to secure the loan to Lektro-Vend. The proceeds of $115,146.95 were applied to the $86,641 outstanding balance of the secured loan and also to payment of two other loans made by the Bank to Lektro-Vend, totaling $13,666.30, which were not secured by that collateral. The Bank transferred the $14,839.65 balance from the treasury notes to Lektro-Vend as an "advance" at Stoner's direction. This transaction was not revealed to Vendo by the Bank or the other parties at the time it took place, but they learned of it at a later date.
The standstill agreement continued in force until June 27, 1975, when the district court entered a preliminary injunction restraining all collection proceedings by Vendo. (Lektro-Vend Corp. v. Vendo Co. (N.D. Ill. 1975), 403 F. Supp. 527.) On appeal the injunction was reversed by the United States Supreme Court (Vendo Co. v. Lektro-Vend Corp. (1977), 433 U.S. 623, 53 L.Ed.2d 1009, 97 S.Ct. 2881), and the Federal litigation was finally dismissed in 1981.
At some time during the Federal litigation Vendo learned the Bank had held the treasury note collateral pledged by the judgment debtor, Investments, and had liquidated it and transferred the proceeds. On April 10, 1981, Vendo filed a motion in the circuit court of Kane County for judgment against the Bank, pursuant to section 73(4)(a) of the Civil Practice Act, in the amount of the value of the property of the judgment debtor allegedly transferred in violation of the restraining provisions of the citation. The Bank responded denying liability and at the hearing of Vendo's motion for judgment Paul Manning, the Bank's executive officer, testified he was aware of and had relied upon the standstill agreement made in the district court and that the transfer of funds from Investments to Lektro-Vend was carried out in the ordinary course of business as permitted by that agreement. Manning also testified he believed ownership of the treasury notes was transferred to the Bank when they were pledged as security and that they were not subject to disclosure under the citation. He further testified that the Bank made its decision to call the Lektro-Vend loan and liquidate the collateral because Lektro-Vend was suffering losses and the United States Comptroller of Currency referred to the loan as possible trouble. Frank Nemecheck, president of the Bank, testified that it had rejected Lektro-Vend's application for additional loans. There was also evidence presented that the Bank had received an opinion from its attorneys that the treasury notes were not subject to the citation. After the hearing the judgment was entered from which the Bank now appeals.
The Bank contends first that the trial court erred in refusing admission of transcripts of the district court proceedings at which the "standstill agreement" was entered into between those parties. It argues the transcripts were relevant as evidence Vendo had waived its right to proceed against the Investment collateral held by the Bank and that Vendo is estopped to complain of the transfer of the treasury notes to which it implicitly agreed in order to avoid issuance of a restraining order against it. The Bank also asserts that the transcripts of the agreement offered evidence that Investments and Lektro-Vend could continue to operate and to transfer assets in the ordinary course of business, thus properly carrying out the treasury note transaction in question without violating section 73.
• 1-3 We agree that the transcripts, which have been preserved for our consideration by an offer of proof, ought to have been allowed in evidence. Each party is entitled to present evidence which is relevant and material to his theory of the case (Schneider v. Kirk (1967), 83 Ill. App.2d 170, 180, 226 N.E.2d 655, 659, appeal denied (1967), 36 Ill.2d 632), and evidence which tends to show conduct inconsistent with an opponent's theory is admissible (Haffa v. Haffa (1969), 115 Ill. App.2d 467, 474, 253 N.E.2d 507, 511, appeal denied (1970), 42 Ill.2d 585; Vacker v. Yeager (1909), 151 Ill. App. 144, 152). Clearly, evidence that Vendo approved or consented to the transaction upon which it based its motion for judgment would be relevant and could be controlling of the outcome of the case. The trial court erred in refusing to admit and consider the transcripts and in denying the Bank's offer of proof. Since they are contained in the record on appeal we will consider them as if the trial court had admitted them into evidence below. Phillips v. Salk, Ward & Salk, Inc. (1974), 20 Ill. App.3d 359, 367, 314 N.E.2d 262, 268; Gundich v. Emerson-Comstock Co. (1960), 24 Ill. App.2d 138, 143, 164 N.E.2d 512, 515, rev'd on other grounds (1960), 21 Ill.2d 117, 171 N.E.2d 60.
• 4 Estoppel is the good faith reliance by one party, to the extent of a change of position to his detriment, upon the conduct of the other as a result of which that other party will not be permitted to raise a contention inconsistent with his misleading conduct. (Terracom Development Group, Inc. v. Coleman Cable & Wire Co. (1977), 50 Ill. App.3d 739, 747, 365 N.E.2d 1028, 1034; Allstate Insurance Co. v. National Tea Co. (1975), 25 Ill. App.3d 449, 461, 323 N.E.2d 521, 530, appeal denied (1975), 58 Ill.2d 596.) Consideration of the transcripts, however, the essential aspects of which we referred to earlier, does not find support for the Bank's waiver or estoppel argument. At most, the agreement made in the Federal court required that Vendo not proceed in its collection efforts beyond the place it had reached at that point; no additional enforcement procedures would be undertaken by it, but the legal effect of the citation which had been served on the Bank would continue in force. It seems apparent the Bank could not rely upon the doctrines of waiver or estoppel to avoid the judgment imposed upon it. Nor can the Bank persuasively argue that the treasury note transaction was permitted as undertaken in the ordinary course of business. The collateral was held by it subject to the continuing restraints of the citation and its transfer in these circumstances may not be considered as undertaken in the ordinary course of business.
The Bank next contends the trial court erred in entering judgment for the entire value of the collateral without giving the Bank a right of set-off as the holder of a security ...