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Amcore Bank, N.A. v. Hahnaman-Albrecht

November 14, 2001

AMCORE BANK, N.A., ROCK RIVER VALLEY, N/K/A AMCORE BANK, N.A., PLAINTIFF-APPELLANT,
v.
HAHNAMAN-ALBRECHT, INC., DEAN HAMILTON, JEFFREY HAMILTON, DAVID VON HOLTEN, AND PAUL A. RITTMANIC, DEFENDANTS (GRAND PREMIER TRUST AND INVESTMENT, INC., AS TRUSTEE OF THE THOMAS F. CONLEY TRUST DATED SEPTEMBER 1, 1988, DEFENDANT-APPELLEE).



Appeal from the Circuit Court of Lee County. No. 97--L--15 Honorable David T. Fritts, Judge, Presiding.

The opinion of the court was delivered by: Justice Callum.

Ordered published January 2, 2002.

AMCORE BANK, N.A., ROCK RIVER VALLEY, N/K/A AMCORE BANK, N.A., PLAINTIFF-APPELLANT,
v.
HAHNAMAN-ALBRECHT, INC., DEAN HAMILTON, JEFFREY HAMILTON, DAVID VON HOLTEN, AND PAUL A. RITTMANIC, DEFENDANTS (GRAND PREMIER TRUST AND INVESTMENT, INC., AS TRUSTEE OF THE THOMAS F. CONLEY TRUST DATED SEPTEMBER 1, 1988, DEFENDANT-APPELLEE).

Appeal from the Circuit Court of Lee County. No. 97--L--15 Honorable David T. Fritts, Judge, Presiding.

The opinion of the court was delivered by: Justice Callum.

Plaintiff, Amcore Bank, N.A., lent $17 million to defendant, Hahnaman-Albrecht, Inc. (HAI). When HAI defaulted on the loan, plaintiff sued HAI and the individual guarantors, Dean Hamilton, Jeffrey Hamilton, Thomas Conley, David Von Holten, and Paul Rittmanic. Grand Premier Trust and Investment, Inc., as trustee of the Thomas F. Conley trust dated September 1, 1988, was substituted for Conley when he died. Conley's guaranty had been signed by his son, Kristopher, pursuant to a durable power of attorney. Grand Premier argued that the guaranty was invalid because Kristopher did not have the authority to sign it. Following an evidentiary hearing, the trial court entered judgment for Grand Premier and found no just reason to delay enforcement or appeal (155 Ill. 2d R. 304(a)).

Plaintiff appeals, arguing that the trial court erred in (1) failing to find that plaintiff acted in good faith in relying on the power of attorney; (2) concluding that the power of attorney did not authorize Kristopher to sign guaranties; and (3) failing to find that Grand Premier ratified the guaranty. We affirm.

BACKGROUND

Thomas Conley, Dean Hamilton, and Paul Rittmanic were the original founders and shareholders of Hahnaman Elevator. In 1984, Hahnaman Elevator merged with Albrecht Grain Company and became HAI. In August 1994, Conley (via his trust), Dean Hamilton, and Rittmanic each owned 19½% of HAI.

HAI began borrowing funds from First Bank South in 1986. First Bank South required Conley, Dean Hamilton, and Rittmanic to guaranty the loans. Conley guarantied the debt from 1986 to 1994. On May 1, 1993, Conley guarantied to First Bank South a final loan of $8 million. Conley's net worth was greater than Rittmanic's or Dean Hamilton's, and his guaranty was important to First Bank South.

Conley was diagnosed with Parkinson's disease in the mid-1970s. In the early 1990s, Conley's illness was causing him to suffer from dementia. By 1992, he was becoming increasingly confused about his surroundings. By late 1993 and early 1994, Conley would wander off and get lost, and his wife purchased an identification bracelet for him to wear. On April 18, 1994, Conley and his wife went to First Bank South to sign loan renewals. Jill Flickinger, an officer at the bank, testified that Conley signed the documents with his wife's help, but he did not appear to understand what he was being told.

In 1988, Conley created a trust entitled "Thomas F. Conley Trust dated September 1, 1988." Conley was the trustee, and First Bank South (defendant Grand Premier's corporate predecessor) was authorized to succeed him as trustee if he became unable to handle his own affairs. The trust gave the trustee the power to pledge trust assets for the debts of any business in which Conley held at least a 5% interest. On the same day that he created the trust, Conley executed a durable power of attorney that named his wife, Joanne, as attorney-in-fact.

In 1992, Conley's attorney, Philip Ward, prepared another durable power of attorney for Conley. This one named both Kristopher and Joanne Conley as attorneys-in-fact and was meant to replace the 1988 power of attorney. The form was the standard power of attorney used by Ward's office. Conley executed this document in October 1992. A draft of the document had been sent to him in June 1992. At that time, Ward sent the Conley family a letter explaining that the power of attorney was very broad, "but not broad enough to allow the attorney in fact to continue any 'guarantee' program in your business transactions. Those decisions I believe should be made only by Tom alone." Ward testified that he believed at the time that the power of attorney did not authorize the attorneys-in-fact to guaranty HAI's loans. Ward also testified that the power of attorney was not intended to change the trust provision giving the trustee the authority to pledge trust assets to support HAI's debts.

Conley had an estate planning meeting in November 1992. The meeting was attended by Conley, John Nagy (his accountant), Joanne and Kristopher Conley, Steve Flahaven (the former senior vice president of First Bank South), Flickinger, and Ken Urban (a Grand Premier employee). At this meeting, Conley expressed a desire to retain his interest in HAI under certain conditions. He did not mention whether he wished to continue to guaranty HAI's debts. The parties discussed setting up an investment committee to handle Conley's investments in HAI. Nagy, Ward, and Flahaven were suggested as committee members. No one suggested that Kristopher should be on the committee.

In January 1993, the trust was amended. The grant of authority to the trustee was changed in certain respects, but the trustee's authority to pledge trust assets to support Conley's business debts was not altered. The amendment stated Conley's preference for retaining his HAI shares as long as his friends were involved in the company. However, it cautioned that Conley did not wish to invest further in HAI, even if his share decreased. Eventually, it became clear that an investment committee could not be formed because of conflicts of interests. That December, Joanne, Kristopher, and Kristopher's sisters discussed having an advisor to the trustee instead. They determined that Kristopher should act in that capacity. Kristopher was appointed advisor to the successor trustee, with the power to vote family securities and to veto their sale. Kristopher testified that the role of advisor was emasculated to the point that there was very little the advisor could do.

On July 25, 1994, Flickinger mailed Conley a letter stating that Grand Premier was replacing him as trustee of the Conley Trust. According to Flickinger, Grand Premier stepped in because she had no doubt that Conley was under a disability that prevented him from acting as trustee. Conley was admitted to a nursing home in November 1994 and died in 1999.

In January 1994, HAI was looking for a new bank. HAI wanted an operating line of credit for its grain storage and fertilizer sale operation. Representatives of HAI met with Gordon Monn, a commercial relationship officer for plaintiff. Plaintiff required that the loan be guarantied by Conley, Dean Hamilton, Jeff Hamilton, Rittmanic, and Von Holten. During the loan negotiations, plaintiff was informed that Conley was unable to sign the guaranty and that his guaranty would be signed by his son, Kristopher, pursuant to a durable power of attorney.

Monn called Ward to ask him whether the power of attorney gave Kristopher the authority to sign the guaranty. Ward told Monn that the power of attorney would allow either Joanne or Kristopher to sign the guaranty. Ward based his opinion on the broad grant of authority in the first two paragraphs:

"I, THOMAS CONLEY, *** hereby appoint *** my wife JOANNE CONLEY, and my son, KRISTOPHER CONLEY, each individually and not jointly, my attorney-in-fact (herinafter referred to as 'my agent') for me and in my name, to perform for me every act of every kind and nature which may be deemed desirable or advisable to be performed for me.

Without in any way limiting the general power herein given, I hereinafter specify particular powers which I intend to be given as part of and not a limitation of the above general powers."

After speaking with Ward, Monn prepared a memorandum for the HAI file in which he recorded his understanding of Ward's opinion. In this memorandum, Monn stated that Ward had researched the issue and concluded that the power of attorney would allow Kristopher to sign the guaranty and that, in Ward's opinion, the power of attorney could not be contested in court. However, Ward had emphasized that he represented the Conleys and that Monn should seek the advice of ...


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