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Emrick v. First National Bank of Jonesboro

September 18, 2001

MILDRED E. EMRICK, PLAINTIFF-APPELLANT
v.
FIRST NATIONAL BANK OF JONESBORO AND SCOTT WILKINS, DEFENDANTS-APPELLEES



Appeal from the Circuit Court of Union County. No. 97-L-14 Honorable D.D. Bigler, Judge, presiding

The opinion of the court was delivered by: Justice Kuehn

Released for publication October 30, 2001.

MILDRED E. EMRICK, PLAINTIFF-APPELLANT
v.
FIRST NATIONAL BANK OF JONESBORO AND SCOTT WILKINS, DEFENDANTS-APPELLEES

Appeal from the Circuit Court of Union County. No. 97-L-14 Honorable D.D. Bigler, Judge, presiding

Attorneys for Appellant: D. Keith Kessler, Jr., David M. Foreman, Crain, Miller & Milner, Ltd., 623 E. Broadway, P.O. Box 867, Centralia, IL 62801. Attorneys for Appellees: Edward Renshaw, Feirich, Mager, Green, Ryan, 2001 West Main Street, P.O. Box 1570, Carbondale, IL 62903.

The opinion of the court was delivered by: Justice Kuehn

 PUBLISHED

Mildred E. Emrick appeals from the trial court's April 14, 1999, and June 14, 2000, orders relative to the defendants' summary judgment motion. We reverse and remand.

This suit stems from a dispute involving the manner in which the First National Bank of Jonesboro applied the proceeds from a sale of collateral. On August 20, 1992, Jeff Emrick, who owned and operated a trucking company known as Emrick Trucking, Inc., borrowed $421,252 from the First National Bank of Jonesboro (the Bank) for purposes of debt consolidation. Jeff Emrick is the son of Mildred E. Emrick. The August 20, 1992, loan was secured by a security agreement, bearing the same date, between Jeff Emrick, doing business as Emrick Trucking, Inc. (Emrick Trucking), and the Bank. That security agreement gave the Bank a security interest in several trucks, trailers, and other equipment in the event of a default on the loan. However, the Bank felt that it needed further guaranties in order to make this loan, and it required Mildred to personally guaranty the August 20, 1992, loan up to $150,000. On that same date, Mildred signed a guaranty document to which only she and the Bank were parties. That guaranty was secured by a mortgage on her home.

On January 3, 1994, Emrick Trucking borrowed an additional $30,000 from the Bank to pay bills and expenses. This loan was not specifically secured. Mildred was not a party to this loan, and she did not specifically guaranty its repayment. The original security agreement between Emrick Trucking and the Bank contained language that could be construed as including this second loan. The security interest Emrick Trucking gave the bank applied to the original loan and to "all other additional indebtedness or liabilities for which [Emrick Trucking] is now or may become liable to [the Bank]." Mildred's guaranty contained no such similar language.

Sometime during that first quarter of 1994, Emrick Trucking defaulted on both loans. Apparently without the Bank's consent, Emrick Trucking sold most of the trucks, trailers, and other equipment pledged as collateral on the first loan, raising $343,252. Proceeds from these sales were given to the Bank. The Bank applied these proceeds first to pay off the unsecured $30,000 note and then to reduce the outstanding balance owed on the first note. After taking these steps, $108,000 remained due on the original loan.

Since there was still a deficiency on the original loan, the Bank instituted a mortgage foreclosure action against Mildred. It appears that Mildred sold a portion of her real estate for $108,917.32, but the record and briefs do not clarify if she sold it pursuant to the foreclosure or otherwise. In any event, the Bank applied those proceeds to the principal balance still due on the original note. The Bank dismissed the foreclosure suit for reasons that cannot for certain be determined from the record, although it appears that the Bank dismissed the suit when Mildred offered the Bank an amount equaling the balance owed on the first loan.

Mildred sued the Bank for breach of the guaranty document she had signed. Specifically, Mildred objected to the Bank's application of the proceeds of the sale of collateral to the unsecured note before the application of any amount to the loan to which her guaranty was connected. Mildred contended that the Bank's giving priority to the unsecured loan increased her risk under the guaranty. The Bank filed a motion for summary judgment claiming that the first loan and security agreement, to which Mildred was not a party, gave it the right to apply the proceeds from the sale of collateral to the subsequent loan. The Bank also contended that the issues Mildred raised in her suit were compromised by way of an accord and satisfaction, in that Mildred offered the $108,917.32 in full satisfaction of her $150,000 guaranty and the Bank accepted her offer.

During the pendency of this case, Mildred amended her complaint to add Scott Wilkins, the Bank's president, as an additional defendant. She essentially made the same allegations against Scott Wilkins as she had made against the Bank. As the bank president, he was the one allegedly responsible for making the priority ...


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