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04/12/89 Lake County Trust Company, v. Two Bar B

April 12, 1989





537 N.E.2d 1015, 182 Ill. App. 3d 186, 130 Ill. Dec. 686 1989.IL.508

Appeal from the Circuit Court of Cook County; the Hon. David J. Shields, Judge, presiding.


PRESIDING JUSTICE FREEMAN delivered the opinion of the court. RIZZI and WHITE, JJ., concur.


This is an appeal from an action in interpleader and for declaratory judgment seeking a declaration of the rights and liabilities of the parties regarding proceeds resulting from a crop share lease agreement. Defendants appeal from orders of the trial court which dismissed their amended counterclaim and granted plaintiffs' motion to strike defendants' motion for rehearing.

For the reasons stated below, we reverse the judgment of the circuit court and remand this matter for further proceedings.

On December 2, 1985, plaintiffs, Lake County Trust Company, as trustee under trust No. 3138 dated June 6, 1983 (Lake County Trust), and Holland Farms, Inc. (Holland Farms), filed a complaint in the nature of an interpleader and for declaratory judgment. The complaint alleges that Lake County Trust is a land trust organized and existing under the laws of the State of Indiana and that Holland Farms is the beneficiary of the trust. On June 13, 1983, Lake County Trust, as the buyer, executed a contract with defendants, Two Bar B, Inc. (Two Bar B), and Maurice L. Blanchette, as sellers, for the sale and purchase of certain farmland located in Jasper County, Indiana. On July 6, 1983, Lake County Trust executed an installment note payable to the order of Two Bar B for the purchase of the land, and the note was secured by a mortgage to defendant City National Bank of Kankakee (Bank). On the same date, Lake County Trust executed an assignment of rents, naming the Bank as payee. On September 28, 1983, Holland Farms and defendants, the Koebcke Brothers, executed a crop share lease agreement pursuant to which Holland Farms agreed to lease the farmland to the Koebcke Brothers on a 50/50 crop share basis.

On September 16, 1985, the Bank notified plaintiffs that the July 6, 1983, installment note, executed by Lake County Trust, was in default. The Bank also advised the recipients of the crop share funds to turn over to the Bank all of the crop share monies from the crop share lease agreement. The complaint alleges that thereafter, defendant Cargill, Inc. (Cargill), and/or defendant Jasper County Farm Bureau Co-op delivered to Holland Farms checks totaling an amount which allegedly comprised the crop share amount due to Holland Farms under the crop share agreement with Koebcke Brothers. Each of the checks designated as payees "Jasper Farms, c/o Lake County Trust Co. & City National Bank of Kankakee."

On January 14, 1986, several of the named defendants in the instant suit filed a mortgage foreclosure action in the Jasper superior court in the State of Indiana, naming Lake County Trust and Holland Farms as defendants. The Indiana action was based on the same installment note, mortgage instrument, and assignment of rents document as are the subject of the instant suit.

On September 24, 1986, plaintiffs in the instant case presented a motion to compel defendant Cargill to deposit the crop share checks and proceeds with the Cook County registry, pending the adjudication of the interpleader action. Cargill objected, asserting that the same funds were the subject of the Indiana proceeding. The trial court entered an order on October 1, 1986, granting plaintiffs' motion and ordering Cargill to deposit all of the funds referred to in the complaint, totalling $47,120.45, with the clerk of the circuit court of Cook County. On December 8, 1986, the trial court granted plaintiffs' motion to deposit to the same account an additional check arising out of the crop share lease proceeds, in the amount of $20,112.17.

On October 17, 1986, defendants filed an answer to the complaint, denying that plaintiffs are entitled to the relief sought. Also on that date, defendants filed a counterclaim, asserting their entitlement to all of the funds deposited with the clerk of court. The counterclaim alleges, among other things, that the installment note and assignment of rents executed by Lake County Trust on July 6, 1983, each named Two Bar B as payee. Attached to the counterclaim is an agency agreement, purportedly indicating that Two Bar B had endorsed the note, payable to the order of the Bank of Kankakee, in consideration for which the Bank agreed to act as the agent of several of the individually named defendants in collecting and disbursing proceeds under the note. The counterclaim alleges that plaintiffs defaulted on the note on July 2, 1985. On September 16, 1985, Lake County Trust was notified of the default and of the exercise of rights under the assignment of rents.

On November 5, 1986, plaintiffs filed a motion to strike and dismiss the counterclaim, asserting that the Bank and its beneficiaries lacked standing to assert rights in and to the note and assignment of rents, since the note attached to the counterclaim was not endorsed by Two Bar B, or payable to the order of the Bank of Kankakee. Defendants then filed a motion to attach, as an additional exhibit, an endorsement of the note by Two Bar B, payable to the order of the Bank as agent for certain individual defendants. Plaintiffs replied that the endorsement was not valid, as it was not made on the note itself or on a separate piece of paper firmly affixed to the note, if there was no longer any space for the endorsement on the back of the note itself. The trial court granted plaintiffs' motion to strike the counterclaim and allowed defendants 28 days in which to file an amended counterclaim.

On February 19, 1987, defendants filed an amended counterclaim. Attached to the amended counterclaim is a copy of the July 6, 1983, installment note, endorsed on the reverse side by Two Bar B payable to the order of the Bank of Kankakee as agent for the named individual defendants. Also attached is an affidavit of Robert Loitz, an agribusiness officer for the Bank, which states that the attachment to the counterclaim is a true and correct copy of the original note in the possession of the Bank, and that on the reverse side of the original ...

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