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Ross Advertising, Inc., Charlene J. v. Heartland Bank and Trust

May 22, 2012

ROSS ADVERTISING, INC., CHARLENE J.
DEVORE, MARK J. DOOLITTLE, ARTHUR WAYNE FLITTNER, AND DAVID A. GOERS, PLAINTIFFS-APPELLANTS,
v.
HEARTLAND BANK AND TRUST COMPANY, AN ILLINOIS STATE BANK, AND DON SHAFER,
DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of the 10th Judicial Circuit, Peoria County, Illinois Circuit No. 10-L-17 Honorable Scott A. Shore, Judge, Presiding.

The opinion of the court was delivered by: Justice Holdridge

JUSTICE HOLDRIDGE delivered the judgment of the court, with opinion.

Justices Carter and Wright concurred in the judgment and opinion.

OPINION

¶ 1 This case involves claims brought by a corporate borrower and its guarantors against a lender. Defendant, Heartland Bank and Trust Company (Heartland), issued plaintiff, Ross Advertising, Inc. (Ross), a $750,000 revolving line of credit for one year secured by a promissory note executed by Ross and guaranteed by individual plaintiffs, Charlene J. Devore, Mark J. Doolittle, Arthur Wayne Flittner, and David A. Goers. The plaintiffs filed a complaint against Heartland and its loan officer, Donald L. Shafer (Shafer), which the circuit court dismissed. The plaintiffs subsequently filed an amended complaint in three counts (the complaint). In count I, Ross asserted a claim against Heartland for breach of contract and breach of the implied duty of good and fair dealing. In count II, Ross asserted a claim against Heartland and Shafer for tortious interference with contract and business relations. In count III, the plaintiff guarantors asserted claims against Heartland and Shafer for tortious interference with contract and business relations.

¶ 2 The defendants filed a motion for summary judgment, which the circuit court granted. After the circuit court denied the plaintiffs' motion to reconsider, the plaintiffs timely appealed the circuit court's grant of summary judgment.

¶ 3 BACKGROUND

¶ 4 In 2005, Heartland issued Ross a revolving line of credit in the amount of $650,000. Heartland renewed the line of credit for the next several years. On April 1, 2009, after performing a full review of Ross's financial condition (which included a review of Ross's then-current financial statements), Heartland again renewed the loan, this time extending Ross a $750,000 revolving line of credit for one year secured by a promissory note executed by Ross (the Note).

¶ 5 The Note provided that Ross agreed to pay the loan "in one payment of all outstanding principal plus all accrued unpaid interest on April 1, 2010." The Note required Ross to make regular monthly payments of all accrued unpaid interest due as of each payment date on the first of each month, beginning on May 1, 2009. However, the Note did not require Ross to make any principal payments until April 1, 2010.

¶ 6 The Note provided that "[u]pon default, [Heartland] may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then [Ross] will pay that amount." The Note listed various events or conditions which "shall constitute an event of default" under the Note, including "[t]he dissolution or termination of [Ross's] existence as a going business" and "the insolvency of [Ross]." The Note also stated that Heartland "will have no obligation to advance funds under th[e] Note" if: "(a) [Ross] or any guarantor is in default under the terms of this Note or any agreement that [Ross] or any guarantor has with [Heartland], including any agreement made in connection with the signing of this Note; or (b) [Ross] or any guarantor ceases doing business or is insolvent."

¶ 7 Moreover, the Note stated that Ross "and any other party that signs, guarantees, or endorses the Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor."

¶ 8 Each of the guaranty agreements signed by the individual guarantors provided that each guarantor waived the right to require Heartland to "make any presentment, protest, demand, or notice of any kind, including notice of any non-payment of the Indebtedness, or of any non-payment related to any collateral, or any notice of any action or non-action on the part of the Borrower." (Emphasis added.)

¶ 9 Don Shafer was the loan officer for Heartland who handled the loan with Ross. On July 27, 2009, Shafer met with David Goers, the president of Ross, and Mark Doolittle, a vice president of Ross, both of whom were guarantors of Ross's obligations under the Note. Goers testified in his deposition that the purpose of the July 27, 2009, meeting was to inform Mr. Shafer of changes that had recently taken place inside Ross, including the fact that two of Ross's shareholders had resigned that day. During the meeting, Goers gave Shafer a document detailing the measures Ross was taking to deal with the recessionary economy (such as cost reductions and other measures) and describing Ross's current business plan, including its plan for servicing existing clients and acquiring new clients. The document also included cash flow projections. At the conclusion of the meeting, Shafer asked Goers to provide him with Ross's updated balance sheet and income statement so he could review Ross's current financial position.

¶ 10 The next morning, Shafer sent Goers an e-mail stating that, in light of their discussion during the meeting on July 27, 2009, Shafer was "sure" that Heartland would be requiring Ross's owners to provide Heartland with additional collateral in the form of cash, real estate, or securities. Shafer stated that the amount of additional collateral would depend upon Ross's current inventory, receivables, and equipment balances, but he guessed it would be approximately $500,000. In addition, Shafer told Goers that Heartland might also require Ross's owners to provide a capital infusion of approximately $100,000, but he would not know for certain until he reviewed Ross's updated financial information.

ΒΆ 11 During his deposition, Shafer testified that he sent this e-mail to Goers because Goers had told him during the July 27, 2009, meeting that Ross was suffering losses and that the decline in business had resulted in a drop in the company's receivables. Accordingly, Shafer was concerned that the outstanding balance on the line of credit was substantially higher than Ross's existing collateral for the loan ...


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