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02/11/88 the De Kalb Bank, v. Robert Purdy Et Al.

February 11, 1988





520 N.E.2d 957, 166 Ill. App. 3d 709, 117 Ill. Dec. 606 1988.IL.180

Appeal from the Circuit Court of De Kalb County; the Hon. Rex F. Meilinger, Judge, presiding.


PRESIDING JUSTICE LINDBERG delivered the opinion of the court. INGLIS and WOODWARD, JJ., concur.


Defendants, Robert Purdy, Mary Lois Purdy and Myron Kinzler, appeal the judgment of the circuit court of De Kalb County in favor of plaintiff, The De Kalb Bank, awarding plaintiff the sum of $105,571.31 in the possession of the clerk of the court and additional sums with prejudgment interest in the amount of $79,056.33. The suit involved the rights to rents received and to be received by defendants, Purdys, from the other defendant, Kinzler. Plaintiff claimed an interest in the rents under a trust deed executed in its favor by the Purdys to secure various loans received from plaintiff.

In March 1983, the Purdys were indebted to plaintiff in the amount of $3,088,556.27 in principal and interest for money loaned to them by plaintiff for the operation of their farms. On March 15, 1983, the Purdys and plaintiff executed a loan agreement and a trust deed by which plaintiff agreed to refinance the Purdys' current debt and loan additional sums up to a total indebtedness of $3,500,000 for the operation of the Purdys' farms. This agreement was secured by a trust deed on the farms executed by the Purdys in favor of plaintiff. The new due date on the existing and future loans was February 1, 1984. Plaintiff also agreed to look only to the security for satisfaction of the debt upon default. Plaintiff agreed not to attempt to recover the loans from the Purdys' personal assets, or medical building owned by the Purdys, or from the income of the Purdys' medical practice.

On January 31, 1984, the Purdys leased their farms to Myron Kinzler, a friend and the farm manager for the Purdys. One day later, on February 1, 1984, the Purdys defaulted on their loans to plaintiff. Plaintiff learned of the leases to Kinzler when they were recorded and notified Kinzler on February 17, 1984, by a certified letter of the prior encumbrances of plaintiff and its intent to pursue necessary action. Plaintiff's trust deed had been properly recorded in March 1983.

Under the terms of the trust deed, upon default, plaintiff had several rights. One right was the right to possession and to receive the rents and profits. The lease provided for Kinzler to pay rent to the Purdys as follows:

"The sum of $25,000.00 on or before the date hereof . . .; 35 bushels of corn per tillable acre, payable in kind at the time of harvest; and, in the event Tenant places this acreage into the 1984 Federal Feed Grain Program, one-half (1/2) of all deficiency payments payable to Tenant under said program, payable at the time any such payments are received by the Tenant."

On October 26, 1984, plaintiff procured an order for injunction against the Purdys restraining them from transferring, assigning or disposing of any rent to be received by them from Kinzler under their lease with Kinzler. The order provided that the corn could be harvested and sold, provided that the proceeds of the sale and a full accounting were filed with the clerk of the court. In addition, the order provided that if the Purdys received any payments due to the placement of the farms into the Federal Feed Grain Program by tenant, the parties by stipulation, or the court on either party's motion would make an appropriate ruling as to the sequestration of such payments. This order was effective pending a final hearing on the cause. Defendant Kinzler was represented at the injunction hearing by his own counsel, and though the order did not specifically restrain him, he was ordered to comply with the terms of the injunction.

Plaintiff alleged numerous grounds for relief, all of which centered on the loan agreement and trust deed and the actions of the Purdys and Kinzler surrounding the lease of their farms the day before they defaulted on their loans with plaintiff. The trial court found the Purdys in default and that plaintiff was entitled to a certificate of deposit in the amount of $105,571.31, representing the proceeds from the sale of corn received by the Purdys under their lease with Kinzler. In addition, the court construed the lease agreement between the Purdys and Kinzler and found Kinzler owed additional rents representing improper charges deducted from the sale of the corn as well as one-half the deficiency payments Kinzler received under the Federal Feed Grain Program. The Purdys and Kinzler were found jointly and severally liable for these additional amounts, and the court also awarded prejudgment interest for a total judgment (in addition to the certificate of deposit) of $79,056.33 in favor of plaintiff. All parties have appealed.

Defendants argue on appeal that the trial court erred in: (1) finding that the order of injunction sequestering the rents to be received by the Purdys was effective to perfect plaintiff's lien on the rent; (2) in construing the lease so as to find additional rent due from Kinzler to the Purdys and, therefore, to plaintiff under the trust deed; (3) in awarding prejudgment interest to plaintiff; (4) in finding the Purdys jointly and severally liable with Kinzler for the additional rents due; and (5) in failing to apply the doctrine of laches to bar plaintiff's cause of action as against Kinzler.

Plaintiff raises one issue on the cross-appeal. Plaintiff argues the trial court erred in finding that only Kinzler was a tenant under the lease and not finding that Kinzler's partner was also a tenant, and, therefore, additional relief representing one-half the payments received by Kinzler's partner under the Federal ...

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