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06/02/87 the First National Bank of v. Harold E. Carlton Et Al.

June 2, 1987

THE FIRST NATIONAL BANK OF DANVILLE, PLAINTIFF-APPELLANT

v.

HAROLD E. CARLTON ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT

509 N.E.2d 1046, 156 Ill. App. 3d 880, 109 Ill. Dec. 207 1987.IL.733

Appeal from the Circuit Court of Vermilion County; the Hon. Carl A. Lund, Judge, presiding.

APPELLATE Judges:

JUSTICE HEIPLE delivered the opinion of the court. BARRY, P.J., and SCOTT, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HEIPLE

Suit was brought in Vermilion County by The First National Bank of Danville (bank) against Harold Carlton and Lillian Smoot on a note signed by the defendants. The court granted summary judgment as to Carlton after finding his obligation on the note had been fully satisfied. The court later entered judgment against Mrs. Smoot in the amount of $45,000 and ordered foreclosure of the mortgage on her 40-acre farm. The bank appeals the summary judgment order and the amount of judgment entered against Mrs. Smoot. We reverse and remand.

In 1983, members of Lillian's family, her son, Donald, his wife, Susie, and their three children (the Smoots), were engaged in farming operations. Donald Smoot contacted the bank about the possibility of refinancing Smoot Farms' existing loans at the bank and about borrowing additional funds to meet the 1983 operating expenses and to make the mortgage payment to the Federal Land Bank, which was threatening foreclosure. The bank's representative, Julian Fruhling, informed Don Smoot that the bank would advance the requested funds provided that the note for the $180,000 mortgage payment was secured by "an acceptable comaker(s) to the bank." Fruhling also indicated that the three notes would be secured by existing grain, 1983 crops, Payment-in-Kind proceeds, machinery and equipment, and a security agreement with an assignment of beneficial interest on all real estate owned by the Smoots. Fruhling was later told that Don's mother, Lillian, was willing to mortgage her 40 acres and that Carlton was also willing to sign the $180,000 note.

The Smoots' attorney, Thomas Meyer, prepared a draft of a supplemental agreement captioned "Agreement for Application of Crops Receipts," which set out the order in which the proceeds from the PIK corn and 1983 crops would be applied to repay the principal and interest on the three notes. Fruhling reviewed the draft, and revisions were made by Meyer and at least one other person, possibly Fruhling.

With the revisions, the Agreement for Application of Crop Receipts (supplemental agreement) provided in pertinent part:

"WHEREAS, the Bank is about to loan Two Hundred Forty-five Thousand Dollars ($245,000.00) to Smoot, and

WHEREAS, Sixty-five Thousand Dollars ($65,000.00) of these funds will be used for 1983 farm operations and One Hundred Eighty Thousand Dollars ($180,000.00) of the funds will be used to make a payment which is owing to the Federal Land Bank, and

WHEREAS, Smoot has in his possession 50,000 bushels of corn which is PIK corn, and

WHEREAS, Carlton, for and in consideration of One Dollar ($1.00) and other good and valuable consideration has agreed to act as a ...


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