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06/30/94 JOHN H. WEBER v. DEKALB CORPORATION

June 30, 1994

JOHN H. WEBER, M. EILEEN WEBER, AND JOHN BERRY WEBER, PLAINTIFFS-APPELLANTS,
v.
DEKALB CORPORATION, INC., FORMERLY DEKALB AGRESEARCH, INC., A DELAWARE CORPORATION, HEINOLD COMMODITIES, INC., A DELAWARE CORPORATION, HAROLD HEINOLD, RALPH KLOPFENSTEIN, AND WILLIAM NISSEN, DEFENDANTS-APPELLEES.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE MARTIN C. ASHMAN, and HONORABLE EDWARD G. FINNEGAN, PRESIDING.

Petition for Rehearing Denied September 8, 1994. Petition for Leave to Appeal Denied December 6, 1994.

Johnson, Hoffman, Theis

The opinion of the court was delivered by: Johnson

JUSTICE JOHNSON delivered the opinion of the court:

Plaintiffs, John H. Weber, M. Eileen Weber, and John Barry Weber (hereinafter Barry) filed a three-count common law fraud action in the circuit court of Cook County against defendants, DeKalb Corporation, Inc., formerly DeKalb AgResearch, Inc. (hereinafter DeKalb), Heinold Commodities, Inc. (hereinafter Heinold), Harold Heinold, Ralph Klopfenstein, and William Nissen. The action involved two security agreements plaintiffs allege were fraudulently induced by defendants. These agreements gave Heinold and DeKalb a security interest in certain property owned by plaintiffs to secure Barry's debt to Heinold, his employer. Shortly after the agreements were executed, Heinold fired Barry. It then received the proceeds from its interest in the property and applied them to Barry's debt. Heinold filed a counterclaim against Barry, seeking to recover the portion of his debt not satisfied by the proceeds.

Count II of plaintiffs' complaint, seeking rescission of the security agreements, was dismissed. Ultimately, the trial court granted summary judgment on counts I and III of the complaint and entered judgment for Heinold in the amount of $746,267.97 on its counterclaim.

On appeal, plaintiffs contend (1) the trial court erroneously granted summary judgment on their fraud claim; (2) there was no consideration for the security agreements; and (3) judgment was improperly entered for Heinold on its counterclaim as Barry had significant setoffs and claims which the trial court failed to consider.

We affirm.

The following facts are relevant. Barry began his employment as a broker with Heinold, a commodities brokerage firm, in late 1969 or early 1970. In July 1981, he became the vice-president of marketing and remained in this position until his termination on or about July 28, 1983. During his tenure with Heinold, Barry amassed large debts to the company including three promissory notes of $239,251.71, $52,000 and $77,464.56. He also allowed $32,670.78 to accumulate in his Heinold trading account and had a "branch overdraw" of $45,452.93. Further, he owed DeKalb, Heinold's parent corporation, $100,000 resulting from DeKalb's payment of a loan Continental Bank made to Barry which DeKalb guaranteed.

On March 23, 1982, Barry accepted, in writing, a memorandum from the president of Heinold, Ralph Klopfenstein, confirming that his employment would continue "indefinitely or until such time as it may be renegotiated." Barry also received and acknowledged a memorandum from Klopfenstein which provided that one-half of his share from the Heinold profit sharing plan would be applied to his debt to the company and that all of his bonus would also be used to reduce his debt.

On March 11, 1983, Heinold expressed concern about the sum of Barry's debt. The record demonstrates that, at this point, Barry owed Heinold approximately $266,000. Heinold recognized that Barry was "fully mortgaged" and believed that further action was necessary to secure his debt. Accordingly Heinold requested additional property as security, including farmland, owned by Barry and his parents, John and Eileen Weber, as additional security. This proposal included proceeds from corn which the Webers were to receive under the United States Department of Agriculture's Payment-in-Kind program (hereinafter PIK), growing crops, and first and second mortgages on parcels of Weber farmland.

On July 14, 1983, an agreement (hereinafter agreement I) was executed between Barry and Heinold giving Heinold a security interest in crops grown on certain Weber property "in consideration for amounts previously or hereafter loaned" by Heinold to Barry. On July 18, 1983, another agreement (hereinafter agreement II) was executed to secure Barry's debt. This agreement was between Barry, his parents John and Eileen, and Heinold, giving Heinold a security interest in crops grown on another parcel of Weber property (hereinafter tract 5). As tract 5 was enrolled in PIK, John Weber assigned DeKalb all of the family's interest pursuant to PIK.

On July 18, 1983, subsequent to the execution of agreement I but prior to the execution of agreement II, Barry attended a meeting with Harold Heinold, Heinold's chairman, William Nissen, the general counsel, and Klopfenstein, the president. At this meeting, Barry stated that Harold Heinold characterized him as a "valued employee" and indicated that the company wanted him "to remain in his corporate positions in accordance with the terms" of his employment agreement. Heinold and Klopfenstein deny that these statements were ever made to Barry.

Klopfenstein testified that he decided to terminate Barry on July 25 or July 26, 1983. Barry was officially terminated on July 28, 1983. Klopfenstein explained that the events prompting Barry's dismissal were customer complaints about Barry--one of which resulted in Heinold's payment of $31,000 to a client who alleged that Barry mishandled his account--and information from Heinold brokers that the company's business was suffering due to an article concerning Barry's problems with the Internal Revenue Service in a Peoria, ...


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