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Wells Fargo Bank, N.A. v. Siegel

June 8, 2007


The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge


Plaintiff Wells Fargo Bank, N.A. ("Wells") brought the instant action against Defendant Paul Siegel ("Siegel") and included in its complaint a breach of contract claim based on an alleged breach of the Farmer Marketing Program provided by Ty-Walk Liquid Sales, Inc. ("Ty-Walk") (Count I), a breach of contract claim based upon the alleged failure to pay for additional goods and services provided by Ty-Walk (Count II), and a breach of contract claim based upon the alleged failure to repay a loan payment made by Ty-Walk on behalf of Siegel. (Count III).

On September 6, 2006, Wells moved for summary judgment in this case on all claims and on October 19, 2006, we denied Wells' motion for summary judgment on Count I, granted Wells' motion for summary judgment on Count II, and denied Wells' motion for summary judgment on Count III. A bench trial was conducted in this case as to Counts I and III from April 23, 2007, through April 26, 2007. We have reviewed all admissible evidence in this case and enter the following findings:


I. Jurisdiction

Wells is a national banking association with its principal place of business located in the state of California and its bank's organization certificate lists South Dakota as the state where Wells carries on its operations. Siegel is a citizen of the state of Illinois. In the complaint, Wells sought $380,525 on Count I, $20,678.47 on Count II, and $50,785 on Count III.

II. Breach of Contract Claim Based upon Farmer Marketing Program (Count I)

A. Parties

1. Siegel is a farmer and has been a farmer since the 1970s. (Tr. 146).

2. Ty-Walk was a grain merchant that marketed grain for farmers. (Tr. 37).

3. Wells is a national banking association and Ty-Walk pledged its accounts receivable, other rights to payment, contract rights, and the proceeds stemming from those rights to Wells as security for loans that Wells extended to Ty-Walk under a loan agreement ("Loan Agreement").

B. Standing of Wells

4. Ty-Walk ceased doing business in August 2001, and in June 2003, the Circuit Court of the Sixteenth Judicial Circuit, Kendall County, Illinois, entered an order, which granted Wells possession of the collateral of the Loan Agreement.

5. Wells brought the instant action to enforce the contractual rights of Ty-Walk that were assigned to Wells as part of the Loan Agreement. The parties stipulated that for the purposes of this action, Wells stood in the place of Ty-Walk.

C. Ty-Walk's Operations

6. Ty-Walk had an office in Minooka, Illinois and then transferred its office to Elwood, Illinois sometime around 1997 when it merged with another company. (Tr. 42).

7. Ty-Walk conducted meetings and discussion groups with farmers that related to grain marketing techniques. (Tr. 158-59).

8. Ty-Walk operated a program called the Farmer Marketing Program ("FMP"). (Tr. 38).

9. The intended general purpose of the FMP was to assist farmers in marketing their grain. (Tr. 38).

10. The FMP program was run by John C. "Buzz" Gibbons ("Gibbons"), the CEO for Ty-Walk, and Sherrie Martin ("Martin"). (Tr. 45-46).

11. Ty-Walk was operated in an informal and casual manner. Siegel, for example, was not required to sign a written contract to join the FMP and no definitive terms were set out in writing when he joined. (Tr. 164, 318). Gibbons also performed trades for Siegel based upon oral conversations without any written exchange or up-front documentation on the part of Ty-Walk. (Tr. 164).

Gibbons made informal sales pitches to farmers regarding the FMP at breakfast meetings, annual dinners and barbeques and would sometimes casually meet with farmers to discuss marketing matters. (Tr. 160-61). TyWalk's actions in regards to the FMP participants' grain were often based upon informal contacts with Gibbons or other Ty-Walk staff without written agreements or defined terms. (Tr. 158-60, 164-65). For instance, rather than an up-front agreement as to the marketing strategy, Gibbons would make marketing decisions on his own and the participants would only learn about the strategies "after the fact" by contacting Ty-Walk employees such as Cindy McDonald ("McDonald") and asking her to explain the strategy or actions chosen by Gibbons. (Tr. 45-46). Gibbons controlled the trades at Ty-Walk and not even the official customer contact representatives at Ty-Walk were made privy to Gibbons' dealings with the customers' grain. (Tr. 45, 106). In addition, McDonald stated that Gibbons would tell her to place calls for trades and McDonald, who also entered some of the data to document the trades for customers, generally had no idea whether the customer actually authorized the trade. (Tr. 48, 103).

12. Siegel began marketing his grain through James Tyler & Sons ("Tyler") and switched his grain transactions to Ty-Walk due to the fact that Ty-Walk charged a lower commission. (Tr. 158, 164).

13. McDonald was an employee of Ty-Walk that became involved in the operation of the FMP around 1994 or 1995. (Tr. 38).

14. McDonald testified that it was her general understanding that the FMP involved the trading of options and futures on the Board of Trade. (Tr. 39). However, McDonald was unable to confirm whether Siegel's participation in the FMP involved such trading or whether Siegel was aware of such trading. (Tr. 101-103). McDonald also testified that when Gibbons told her to call a broker for a trade, "unless someone specifically talked to" her, she had no way of knowing whether the FMP participant had authorized the trade. (Tr. 103). McDonald, in fact, testified that she has never spoken personally with Siegel, that she was not a contact for Siegel's account, and that she did not know if Siegel authorized certain trades on his account. (Tr. 103-04).

15. McDonald was not actually involved in the actual trading of grain. She was merely a "customer service person," and was a "go-between" that relayed messages to Gibbons, who handled all the trading decisions. (Tr. 44-45).

16. McDonald was shown paper records at trial that bore the name of Siegel and McDonald was able to testify as to the general procedures and software that likely produced the records, but McDonald was unable to testify as to specific recollections regarding the creation of any of the exhibits pertaining to Siegel's account or any trades involved in Siegel's account. (Tr. 47-50, 79, 100-01).

17. Barbara St. Germaine ("St. Germaine") worked for Ty-Walk and at some point was instructed to assist McDonald with the FMP. (Tr. 112-113).

18. St. Germaine was shown some of Ty-Walk's records on the witness stand that pertained to 2000 and 2001 and St. Germaine acknowledged that the records were created in 2000, when she was not assigned to the FMP, and in 2001, after her employment ended at Ty-Walk. (Tr. 127, 129). St. Germaine could not confirm whether she personally had been involved in mailing out the statements for Siegel's account. (Tr. 127-28).

19. St. Germaine testified that she was never contacted personally by Siegel, that she was never assigned to Siegel's account, and that she did not have personal knowledge regarding Siegel's account. (Tr. 131).

20. It was the customary practice at Ty-Walk to create paper records ("Trade Records") to document trades in a Ty-Walk customer's account. (Tr. 46, 116-17). The Trade Records were customarily created in triplicate. The top copy was signed by a Ty-Walk employee and the signature was imprinted on the two copies. The top copy was kept by Ty-Walk and the two copies were mailed to the customer. The customer was then expected to sign one of the two copies and return it to Ty-Walk. (Tr. 54-57, 76-77, 116-18).

21. McDonald testified that it was her understanding that the Trade Records were not intended to be a contract, but rather were merely "confirmations of a trade," that were "generated after the transaction occurr[ed]." (Tr. 58, 76, 81-82). McDonald could not recall whether the Trade Records were mailed to the customer. (Tr. 58-59).

22. Ty-Walk also sent its customers monthly statements of their accounts ("Monthly Statements"). (Tr. 85).

23. The individuals at Ty-Walk in charge of operating the FMP were Gibbons and Martin. (Tr. 45-46).

24. The Ty-Walk representatives with whom Siegel discussed the Ty-Walk grain marketing program were Gibbons and Martin. (Tr. 196, 482, 516-17).

D. Offer Regarding Participation in FMP

25. The offer proposed by Gibbons on behalf of Ty-Walk to Siegel regarding the FMP was that Siegel would sell and deliver grain to Ty-Walk and Ty-Walk would pay Siegel for the grain. (Tr. 482-83, 516-17).

26. Gibbons and Siegel understood that the part-payment Siegel would receive from Ty-Walk for his grain would be either a spot price or a future price. (Tr. 483).

27. Gibbons and Siegel understood that there would be a service fee of "a penny or two per bushel" when Siegel participated in the FMP. (Tr. 169).

28. Gibbons discussed with Siegel potential strategies for marketing grain and the fundamentals of the market and how to determine a good time to sell his crops, but Siegel never agreed to trading that would involve a loss and never had reason to conclude based upon the circumstances that the trading would involve a loss. (Tr. 161, 173).

29. Although Siegel understood that there was a possible "prospect" that Ty-Walk could trade futures or options with his account, Siegel never understood that, as part of the FMP, Ty-Walk was going to perform futures trading or options trading on behalf of Siegel and Siegel had no reason to conclude based upon the circumstances that Ty-Walk was going to perform such trading. (Tr. 169, 173, 318).

E. Acceptance of Offer for Participation in FMP

30. Siegel agreed to market his grain through the FMP. (Tr. 172, 516).

31. Siegel and Gibbons orally agreed that Siegel would participate in the FMP, but there is no written agreement commemorating that oral agreement. (Tr. 164).

32. Siegel's acceptance was to the perceived terms that entailed the selling and marketing of his grain through Ty-Walk on either a spot price or a future price. (Tr. 483).

33. Siegel understood that the purpose of marketing his grain through Ty-Walk was to limit his risk of loss and to get a better price for his grain than if he sold it on his own. (Tr. 518).

34. Siegel elected to market his grain through Ty-Walk because the commission per bushel was less at Ty-Walk ...

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