In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 12‐1208
WELLS FARGO BUSINESS CREDIT,
Plaintiff‐Appellee,
v.
DONALD J. HINDMAN,
Defendant‐Appellant.
____________________
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 2:10‐cv‐00348‐RTR — Rudolph T. Randa, Judge.
____________________
ARGUED SEPTEMBER 5, 2012 — DECIDED OCTOBER 30, 2013
____________________
Before BAUER, MANION, and TINDER, Circuit Judges.
TINDER, Circuit Judge. Wells Fargo Business Credit sued
Donald J. Hindman under diversity jurisdiction for breach of
contract. Wells Fargo and Hindman were both creditors of
Clark National, Inc., whose president and CEO was Hind‐
man’s son, and several related companies. Wells Fargo
agreed to make loans and extend credit to the companies on‐
ly if Hindman agreed to become a subordinated creditor.
Hindman agreed and subsequently executed a series of sub‐
2 No. 12‐1208
ordination agreements with Wells Fargo, which subordinat‐
ed all present and future debts, liabilities, and obligations
that the companies owed to Hindman to any amounts they
owed to Wells Fargo.
In January 2010, a series of events occurred resulting in
Hindman authorizing a wire transfer of $750,000 from his
personal investment account at Wells Fargo to Clark at the
request of his son. By that time, however, his son purported‐
ly had been stripped of the authority to make business deci‐
sions by Clark’s board of directors. When the authorized de‐
cision makers learned about the purported loan, they or‐
dered Hindman’s son to reject the funds. Hindman’s son
promptly instructed the Wells Fargo Bank vice‐president in
charge of Hindman’s personal investment account to stop
the transaction. For reasons that are not clear, the transaction
was not stopped before the $750,000 hit Clark’s accounts and
was automatically used to pay down its Wells Fargo line of
credit. A few days later, however, the same Wells Fargo
Bank vice‐president who had attempted to stop the transac‐
tion transferred $750,000 from Clark’s account to Hindman’s
account at a bank in Florida at Hindman’s request.
Wells Fargo claims that Hindman’s receipt of the
$750,000 constitutes a clear violation of the subordination
agreements because Clark repaid a debt to Hindman while it
had outstanding obligations to Wells Fargo. Hindman, on
the other hand, maintains that a valid loan was never con‐
summated between him and Clark because his son had been
stripped of authority to make business decisions and thus
could not bind the company. Furthermore, the authorized
decision makers rejected the proposed loan once they
learned about it; that is, there was never an authorized ac‐
No. 12‐1208 3
ceptance, and so a valid loan contract never existed. Wells
Fargo ignores most of Hindman’s arguments and maintains
that the transfer of funds completed the loan because Hind‐
man’s son had signed a subordinated debenture and Clark
used the funds to pay down its line of credit and take subse‐
quent cash advances. Hindman responds that even if a valid
loan existed, he did not breach the subordination agree‐
ments, either because the loan was properly rescinded by the
parties thereto, or because Wells Fargo consented to return
of the funds. Wells Fargo says that rescission of the loan
agreement would place Hindman in breach of the subordi‐
nation agreements unless it had given proper consent, and it
argues that the vice‐president who returned the money to
Hindman lacked authority to give consent under the subor‐
dination agreements.
The district court granted Wells Fargo’s motion for
summary judgment and denied Hindman’s cross‐motion. It
rejected Hindman’s arguments concerning rejection and re‐
scission as irrelevant. The court reasoned that Hindman’s
transfer of $750,000 to Clark created a debt, liability, or obli‐
gation and that returning the funds to Hindman before
Wells Fargo had been paid in full constituted a breach of the
subordination agreements because Wells Fargo had not con‐
sented. This was the extent of the court’s reasoning. It did
not explain why Hindman’s arguments were irrelevant, and
it did not acknowledge the dispute over the issue of consent.
The court subsequently awarded damages of $750,000 plus
interest to Wells Fargo, which Hindman also challenges.
We vacate the judgment and remand for further proceed‐
ings. The arguments raised by Hindman in the district court
and on appeal are not baseless and should have been ad‐
4 No. 12‐1208
dressed by both the district court and Wells Fargo. By failing
to address Hindman’s plausible arguments, Wells Fargo has
failed to carry its burden in showing that there are no genu‐
ine issues of material fact and that it is entitled to judgment
as a matter of law. See Fed. R. Civ. P. 56. It may well turn out
that Hindman’s facially plausible arguments are not persua‐
sive, but based on this record and Wells Fargo’s seeming re‐
fusal to acknowledge those arguments, we cannot make that
determination without performing Wells Fargo’s tasks for it,
which we will not do.
I. Background
Hindman owned and operated Clark and three related
companies (collectively, “Borrowers”) for a number of years.
When Hindman retired around 2005, his son Donald D.
Hindman (“D.D.H.”) assumed control of the family busi‐
nesses and became president and CEO of Clark. While
Hindman ceased participating in day‐to‐day operations, he
remained involved by routinely making loans to Borrowers
to initiate capital‐raising campaigns and by serving as
chairman of Clark’s board of directors. (Appellant’s Separate
App. 51; Appellee’s Supp. App. 46.)
Wells Fargo Business Credit is a secured lender that
loaned money and extended credit to Borrowers. The busi‐
ness line of credit provided funds as working capital to cov‐
er expenses while incoming accounts receivable were pend‐
ing. The amount of advances Borrowers could take on their
line of credit depended on the accounts receivable and in‐
ventory they reported on their daily collateral reports. Wells
Fargo closely monitored those reports and adjusted Borrow‐
ers’ line of credit accordingly. All incoming cash (including
loans) was reported on the daily collateral report and depos‐
No. 12‐1208 5
ited into a cash‐collateral account held by Wells Fargo for
Borrowers’ benefit. Wells Fargo used the incoming funds to
pay down Borrowers’ line of credit, which created available
credit on which Borrowers could take additional advances.
All advances approved by Wells Fargo then would be de‐
posited into Borrowers’ master‐funding account. (Appellee’s
Supp. App. 68–69.)
Before agreeing to provide this line of credit, Wells Fargo
required that any debts Borrowers owed or would owe to
Hindman be subordinated to ensure that Wells Fargo would
get paid before he would. Accordingly, Wells Fargo and
Hindman entered into a series of subordination agreements
under which Hindman became a subordinated creditor.
There were three largely identical subordination agreements
in total. (Appellant’s Separate App. 1–7; Appellee’s Supp.
App. 1–8, 27–33, 36–42.) As Wells Fargo alleges breach of all
three, and none of the parties’ arguments rely on any differ‐
ences in the wording of the agreements, we simply refer to
them as the subordination agreements.
The subordination agreements subordinated payment of
“Subordinated Indebtedness” to payment in full of Borrow‐
ers’ indebtedness to Wells Fargo, and that term is defined in
relevant part as “each and every … debt, liability and obliga‐
tion of every type and description which any Borrower may
now or at any time hereafter owe to [Hindman], whether
such debt, liability or obligation now exists or is hereafter
created or incurred.” (Appellant’s Separate App. 2.) Hind‐
man agreed that he would not, absent Wells Fargo’s prior
written consent, “demand, receive or accept any payment
(whether of principal, interest or otherwise)” from Borrow‐
ers until their indebtedness to Wells Fargo had been paid in
6 No. 12‐1208
full and Wells Fargo had released its lien on any collateral
(subject to a few narrow exceptions not relevant here). (Id. at
3.) In the event Hindman received an unauthorized pay‐
ment, the subordination agreements provided that he would
“hold the amount so received in trust for [Wells Fargo] and
[would] forthwith turn over such payment to [Wells Fargo].”
(Id.)
Toward the end of 2009, D.D.H. informed Wells Fargo in
face‐to‐face meetings that Clark needed additional capital
and that a majority of this capital would likely come from
Hindman. To protect Wells Fargo’s status as senior creditor,
its representatives discussed with D.D.H. a form of subordi‐
nated debenture that would be used for all future subordi‐
nated loans. (Appellee’s Supp. App. 47, 51.)
On January 6, 2010, Hindman emailed Tom Bassett, a
vice‐president of Wells Fargo Bank (not Business Credit)
who handled Hindman’s personal investment account, in‐
structing Bassett to go ahead and sell some of Hindman’s
stock to provide $1 million in working capital for Clark and
requesting that it be done promptly. (Appellant’s Separate
App. 27.) On January 7, D.D.H. emailed Bassett instructing
him to hold the funds from the sale of equities in Hindman’s
account until D.D.H. provided wiring instructions, which
D.D.H. expected to do the following day. (Id. at 49.)
On January 8, Clark’s board of directors held a meeting.
It is unclear from the record how many directors Clark had,
but the minutes reflect that a quorum was present, consist‐
ing of the following three directors: Hindman, D.D.H., and
Robert Early. Hindman served as chairman and D.D.H.
served as secretary. Also in attendance were Clark CFO
Mark Bruno; Kevin Cleary, a member of Clark’s board of
No. 12‐1208 7
advisors and the president of Dearborn Partners, which had
been retained by Clark to provide financial advisory ser‐
vices; and T.D. Decker, Clark’s full‐time turn‐around con‐
sultant and financial advisor. (Id. at 51.) At this meeting, the
board agreed to Cleary’s suggestion that D.D.H. “would step
aside from corporate decision‐making and focus on new
sales, preserving existing customer relationships and assist‐
ing, as needed, in the sales of assets.” (Id. at 52.) At the same
time, the board agreed that Decker and CFO Bruno “would
be responsible for all corporate business decisions and
would operate [Clark] in the best interests of the creditors.”
(Id. at 52.) Also during this meeting, Hindman discussed the
possibility of loaning another $750,000 to Clark, but no
commitment was made. (Id. at 13, 19, 52.)
Shortly before the board meeting, Cleary had expressed
his opinion that Clark required at least $3 million in new
capital to continue operating. (Id. at 13, 50.) By January 14, it
had become clear to Early that even $3 million would be in‐
sufficient. (Id. at 22.) Given the dire straits Clark was in, Bru‐
no was of the view that a $750,000 loan from Hindman to
Clark would not be prudent because Hindman would simp‐
ly be throwing away his money. (Id. at 19.)
Shortly after noon on January 12, Bassett emailed D.D.H.
to inform him that Bassett was ready to make a transfer out
of Hindman’s investment account and into Clark’s account.
(Id. at 27, 46.) A few minutes later, D.D.H. wrote back that he
was trying to obtain Wells Fargo Business Credit’s approval
for the funds to come in as secured. (Id. at 28, 46.) Soon
thereafter, D.D.H. spoke on the phone with Kathryn D. Wil‐
liams, a vice‐president of Wells Fargo Business Credit who
was primarily responsible for the business‐lending relation‐
8 No. 12‐1208
ship with Clark, about the loan Hindman was going to
make. (Id. at 46; Appellee’s Supp. App. 57.) At 1:04 p.m.,
Williams requested a copy of the note so that she could pre‐
pare a subordinated debt agreement. (Appellee’s Supp. App.
57.) At 1:46 p.m., D.D.H. sent Williams an email with a copy
of the note attached. (Id. at 58.) Bruno, Decker, and Cleary
were copied on the email. (Id.) At 2:49 p.m., Decker sent
D.D.H. an email that read: “After discussions …, [Cleary]
thinks we should talk with you about the timing of receiving
and spending the $[7]50,000. Before we accept the funds, we
should discuss.” (Appellant’s Separate App. 47.)
On the morning of January 13, D.D.H. called Hindman
and asked him to call Bassett to release the funds from
Hindman’s investment account. (Id. at 16, 44.) Hindman
made the call, and at 10:58 a.m., Bassett emailed D.D.H. to
inform him that the order had been placed and would post
to Clark’s account that day. (Id. at 44.) Bruno, Decker, Cleary,
and Early were not aware that D.D.H. was doing this. (Id. at
13, 20, 22.)
Also, at 11:55 a.m. that day, D.D.H. emailed a revision of
the executed debenture to Williams. (Appellee’s Supp. App.
55–56.) The debenture reflected that Hindman would loan
$750,000 to Clark to be repaid by November 1, 2011. (Id. at
56.) D.D.H. signed the debenture as president and CEO of
Clark and dated it (though dated January 12, 2009, there is
no dispute that it was actually signed on January 12, 2010);
Hindman did not sign it. (Id.)
On January 14, Maria Preston, Clark’s A/R (accounts re‐
ceivable) and Cash Manager, contacted Bassett and another
Wells Fargo representative to tell them that the wire transfer
could not be deposited into the specified account. (Appel‐
No. 12‐1208 9
lant’s Separate App. 36.) Apparently, Bassett had directed
the $750,000 to be credited to Clark’s payroll account, when
it should have been credited to either the cash‐collateral or
master‐funding account. (Id. at 37, 38, 59; Appellee’s Supp.
App. 99.) After a series of email exchanges, on which Bruno
had been copied, the funds were deposited into Clark’s cash‐
collateral account. (Appellant’s Separate App. 34–38.)
While all of this was going on, there was a conference
among Cleary, D.D.H., Decker, Bruno, and Early, during
which D.D.H. was directed by the others to contact Wells
Fargo immediately and stop or reverse the transfer of funds.
(Id. at 16, 20.) D.D.H. contacted Bassett and told him to stop
or reverse the transaction, and D.D.H. believes that he gave
this instruction before the $750,000 hit Clark’s cash‐collateral
account. (Id. at 16.) But for reasons that are unknown, the
transfer was neither stopped nor reversed that day, and the
statement for Clark’s cash‐collateral account shows that
$750,000 was received from Hindman on January 14. (Appel‐
lee’s Supp. App. 109.)
On the morning of January 15, Maria Preston sent an
email to Bassett (D.D.H. and Bruno were copied), informing
him that Clark had received $750,000 the previous day but
that it appeared “that the originator is trying to reverse
payment.” (Appellant’s Separate App. 34.) A few minutes
later, D.D.H. emailed the following to Bassett and Preston
(Bruno and Decker were copied): “TB: Please hold the wire
on your end if possible—thanks. Left you a VM.” (Id. at 71.)
Fifteen minutes later, Bassett emailed Preston (D.D.H. and
Bruno were copied), saying that he was “very confused” as
to what was going on: “I was told that the first $750k trans‐
fer ‘suspended’ because we used the incorrect account
10 No. 12‐1208
[number]—as they were retrieving that transfer, they made a
second $750k transfer to the correct account—are they trying
to reverse that one, too? I have a call into those people so we
can get this matter resolved—I am sorry for the confusion.”
(Id. at 33.) About two hours later, D.D.H. emailed Bassett,
stating “please reverse if it hit our account.” (Id. at 32.) Then
at 1:12 p.m., Bassett responded to D.D.H. with an email,
which simply read, “Done!” (Id. at 32.) According to Hind‐
man’s bank statement, the $750,000 was back in his account
by the close of business. (Id. at 70.) The next day, January 16,
Bruno emailed Early to inform him that the $750,000 was
held back and that, as a result, Hindman had not loaned any
money that week. (Id. at 23.)
But this fiasco was by no means over. On the same day
that D.D.H. and Bassett were trying to stop or reverse the
wire transfer, Wells Fargo Business Credit received Clark’s
daily collateral report, which had been signed by Clark’s
treasurer and reported $751,847.49 as non‐A/R cash.1 (Appel‐
lee’s Supp. App. 64.) Accordingly, Wells Fargo used the
$750,000 to pay down Clark’s line of credit. (Id. at 127.) Ac‐
cording to Wells Fargo, Clark used Hindman’s $750,000 and
other funds to draw advances totaling $3,036,089.96 between
January 15 and January 21. The statement for Clark’s master‐
funding account reflects the following advances:
1 Classifying the funds as “non‐A/R cash” allowed Clark to take up to
100% of the loan as additional advances. Had it been classified as “A/R
cash,” then Clark would have been able to take additional advances
equal to 15% of the loan; this is because, with regard to pending accounts
receivable, Wells Fargo would loan 85% of the invoice amount to Clark
before the cash came in, with the remaining 15% available once the in‐
voice had been paid in full. (Appellee’s Supp. App. 144.)
No. 12‐1208 11
January 15: $471,668.95
January 19: $910,793.56
January 20: $592,208.82
January 21: $1,061,418.63
(Id. at 132.)
Hindman’s personal account statement reflects that the
$750,000 that purportedly had been returned to his account
on January 15 was withdrawn from his account on January
19. (Appellant’s Separate App. 70.) Hindman did not author‐
ize this. The account statement includes a note that the orig‐
inal transaction could not be reversed. (Id. at 70.) Upon dis‐
covering this, Hindman contacted Bassett and asked him to
wire the funds to Hindman’s account at Gibraltar Bank in
Florida; Bassett did so on January 21. (Appellee’s Supp. App.
139.) Thus, $750,000 of the $1,061,418.63 placed into Clark’s
master‐funding account on January 21 was wired to Hind‐
man’s personal account at another bank.
According to Williams, after January 15, the day the
funds appeared in Clark’s account, she spoke with Hindman
over the phone and informed him that repayment of the loan
would violate the subordination agreements. She also
phoned Bruno and informed him that payment from Clark
to Hindman of the $750,000 would violate not only the sub‐
ordination agreements but the credit and security agreement
between Wells Fargo and Clark. (Id. at 52.) While monitoring
Clark’s accounts, she noticed that $750,000 had been wired
to Hindman’s account at Gibraltar Bank in Florida. (Id. at
53.) On February 2, 2010, Williams sent a letter to Hindman
notifying him that Clark’s payment to him on January 21
was a breach of the subordination agreements and a default
12 No. 12‐1208
of Clark’s credit and security agreement. (Id. at 65–66.) On
April 7, Wells Fargo made a written demand to Hindman
and Clark ordering that Hindman return the $750,000 to
Clark; Hindman refused. (Id. at 48.)
Shortly after the money was returned to Hindman, Clark
went belly up and began liquidating its assets. (Id.) As of
March 25, 2011, Clark still owed Wells Fargo $7,306,098.34.
(Id. at 49.)
On April 22, 2010, Wells Fargo filed this diversity suit in
the Eastern District of Wisconsin, asserting claims of breach
of contract and promissory estoppel. The parties subsequent‐
ly filed cross‐motions for summary judgment as to liability.
On June 21, 2011, the district court issued its decision and
order granting Wells Fargo’s motion and denying Hind‐
man’s motion. In response to Hindman’s primary contention
that he never actually loaned money to Borrowers because
the transaction had been rejected or rescinded, the district
court concluded: “This distinction is irrelevant. It is undis‐
puted that Hindman transferred $750,000.00 to Borrowers,
which created a ‘debt, liability and obligation’ owed to
Hindman as the Subordinated Creditor.” Wells Fargo subse‐
quently filed a motion for a determination of damages. On
January 11, 2012, the district court issued its decision and
order granting Wells Fargo’s motion and entered judgment
against Hindman in the amount of $750,000.00, plus pre‐
judgment interest. Hindman now appeals the district court’s
grant of summary judgment to Wells Fargo on both liability
and damages.
No. 12‐1208 13
II. Discussion
We review a district court’s grant of summary judgment
de novo, Abbott v. Sangamon Cnty., Ill., 705 F.3d 706, 713 (7th
Cir. 2013), construing all facts and inferences in favor of the
nonmovant, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986). Summary judgment is proper only “if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477
U.S. 317, 322–23 (1986).
A. Liability
Wells Fargo maintains that Hindman clearly breached
the subordination agreements because he transferred
$750,000 to Clark, which created a “debt, liability, or obliga‐
tion” on Clark’s part (i.e., “Subordinated Indebtedness”),
and because he then accepted repayment of those funds
without prior written consent and while Clark had outstand‐
ing obligations to Wells Fargo. It argues that we need not
concern ourselves with any other facts because the subordi‐
nation agreements and the subordinated debenture executed
by D.D.H. are clear and unambiguous.
Hindman, on the other hand, argues that there are genu‐
ine issues of material fact as to whether the funds he trans‐
ferred were accepted by Clark. In his view, if there was no
acceptance then there was not a valid loan because a loan is
a contract, and if there was not a valid loan then Clark in‐
curred no “debt, liability, or obligation” to Hindman under
the subordination agreements. Alternatively, even if there
were a valid loan, Hindman contends that it was either re‐
14 No. 12‐1208
scinded by agreement between him and Clark or repaid with
Wells Fargo’s consent.
1. Creation of Subordinated Indebtedness
In order for Hindman to have breached the subordina‐
tion agreements, it must be established that his wire transfer
created a “debt, liability, or obligation.” The parties seem to
agree that for this to happen there must have been a valid
loan—i.e., they do not argue that the term “Subordinated
Indebtedness” is ambiguous.2 A loan is
a contract by which one delivers a sum of mon‐
ey to another and the latter agrees to return at
a future time a sum equivalent to that which he
borrows.
In order to constitute a loan there must be a con‐
tract whereby, in substance one party transfers
to the other a sum of money which that other
agrees to repay absolutely, together with such
additional sums as may be agreed upon for its
use. If such be the intent of the parties, the
2 As a fallback, Hindman does raise the possibility that the term is am‐
biguous, suggesting that an overly broad reading of “each and every …
debt, liability and obligation of every type and description” might in‐
clude pensions, travel‐expense reimbursements, director’s fees, or
health‐insurance premiums but that, when the commercial context is
restored, the subordinated agreements clearly would not apply to such
“payments” from Clark to Hindman. See ConFold Pac., Inc. v. Polaris In‐
dus., Inc., 433 F.3d 952, 955 (7th Cir. 2006) (discussing latent ambiguity).
Given our resolution of Hindman’s primary argument, we need not ad‐
dress his alternative contention, which in any event is waived because it
was raised for the first time on appeal. See, e.g., Williams v. Dieball, 724
F.3d 957, 961 (7th Cir. 2013).
No. 12‐1208 15
transaction will be considered a loan without
regard to its form.
Calcasieu‐Marine Nat’l Bank v. Am. Emp’rs Ins. Co., 533
F.2d 290, 296–97 (5th Cir. 1976) (emphases added) (internal
quotation marks omitted) (citing In re Grand Union Co., 219 F.
353, 356 (2d Cir. 1914); accord United States v. Kristofic, 847
F.2d 1295, 1296 (7th Cir. 1988). Accordingly, whether the
transaction at issue created Subordinated Indebtedness de‐
pends on whether a valid loan contract was created between
Hindman and Clark.
The basic elements of a contract are offer, acceptance, and
consideration. In re F.T.R., 833 N.W.2d 634, 649 (Wis. 2013).3
Hindman’s arguments focus on the element of acceptance.
But Wells Fargo suggests that, even though a loan is a con‐
tract, acceptance is not a prerequisite to its formation. This is
a curious argument, particularly because it comes from a
bank. Suppose A walks into a branch of Wells Fargo, plops
$10,000 down on the counter, and says, “I am loaning this to
you and you will pay me double next week.” Under Wells
Fargo’s view, it would be stuck with the money and owe
$20,000 to A the following week, even if the banker to whom
A had tendered the money immediately had said “no, thank
you,” and refused to take the cash. But there clearly would
not be an enforceable contract in that scenario. See Nat’l Bank
of Paulding v. Fid. & Cas. Co., 131 F. Supp. 121, 123–24 (S.D.
3 Wisconsin law applies to the parties’ dispute (with one caveat, noted
later) by virtue of a choice‐of‐law provision in the subordination agree‐
ments. But most, if not all, of the legal principles involved in this appeal
are well‐established rules that are largely uniform throughout the coun‐
try, which the parties implicitly acknowledge by their heavy reliance on
Illinois law.
16 No. 12‐1208
Ohio 1954) (“In order to have a loan, there must be an
agreement, either expressed or implied, whereby one person
advances money to the other and the other agrees to repay it
upon such terms as to time and rate of interest, or without
interest, as the parties may agree. In order to have a contract,
there must be a meeting of minds.”); Restatement (Second) of
Contracts § 55 illus. 2 (1981) (“A offers to lend B $100 on
specified terms and tenders the money to B. B’s acceptance
of the tender forms a contract on the terms specified.”); cf.
Goossen v. Estate of Standaert, 525 N.W.2d 314, 318 (Wis. Ct.
App. 1994) (valid loan contract existed between borrower
and lender, where borrower offered to borrow money, lend‐
er accepted offer by processing the loan, and borrower pro‐
vided consideration by paying lender’s loan fee). We thus
consider Hindman’s arguments that there was never a valid
loan due to lack of acceptance.4
Under Wisconsin law, “whether an offer was accepted is
a question of fact.” Hoeft v. U.S. Fire Ins. Co., 450 N.W.2d 459,
463 (Wis. Ct. App. 1989). For “acceptance of a contract to oc‐
cur, there must be a meeting of the minds, a factual condi‐
tion that can be demonstrated by word or deed.” Zeige Dis‐
trib. Co. v. All Kitchens, Inc., 63 F.3d 609, 612 (7th Cir. 1995)
(Wisconsin law). Objective manifestations of assent, rather
4 It is important to distinguish between the fundamental contractual el‐
ement of acceptance and accepting loan proceeds. They are not necessari‐
ly the same; it depends on how the parties structure their transaction. Cf.
Restatement (Second) of Contracts, supra, § 62. Consider the following: A
says to B, “if you loan me $10, I promise to pay you $15 a week later.” If
B subsequently tenders $10 to A, a valid contract is formed upon B’s per‐
formance and A’s refusal of the loan proceeds would constitute a breach.
This is a classic example of a unilateral contract. See, e.g., Patel v. Am. Bd.
of Psychiatry & Neurology, Inc., 975 F.2d 1312, 1314 (7th Cir. 1992).
No. 12‐1208 17
than subjective intentions, are controlling. See Associated Milk
Producers, Inc. v. Meadow Gold Dairies, Inc., 27 F.3d 268, 272
(7th Cir. 1994) (Wisconsin law).
Hindman does not dispute that he transferred money to
Clark with the intent to make a loan, but he argues that the
anticipated loan never came into existence because there was
no acceptance by Clark, given that D.D.H. had already been
stripped of his authority to make business decisions for
Clark when he signed the subordinated debenture. Wells
Fargo ignores Hindman’s argument and contends that the
subordinated debenture unambiguously reflects that Hind‐
man made a loan of $750,000 to Clark and that Clark had
agreed to repay the loan. It relies on the fact that D.D.H. no‐
tified it in late‐2009 (before he was stripped of his authority)
that Hindman would be making a loan to Clark.
A corporation is a legal entity separate from its directors,
officers, and shareholders, In re Rehab. of Centaur Ins. Co., 632
N.E.2d 1015, 1017 (Ill. 1994), but it can act only through “its
officers and directors and is bound by their actions when
performed within the scope of their authority,” Ahlgren v.
Blue Goose Supermarket, Inc., 639 N.E.2d 922, 928 (Ill. App. Ct.
1994). Under Illinois law, which governs the internal affairs
of an Illinois corporation such as Clark, see, e.g., Wachovia
Sec., LLC v. Banco Panamericano, Inc., 674 F.3d 743, 754 (7th
Cir. 2012), “the business and affairs of the corporation shall
be managed by or under the direction of the board of direc‐
tors,” 805 ILCS 5/8.05(a); see also Hall v. Woods, 156 N.E. 258,
267 (Ill. 1927). The board, therefore, “is the true agent of a
corporation, and the actions of the directors of the board, if
within the scope of the corporate charter, are binding upon
18 No. 12‐1208
it.” Baltimore & Ohio R.R. Co. v. Foar, 84 F.2d 67, 70 (7th Cir.
1936).
Wells Fargo offers no evidence to contradict Hindman’s
evidence that Clark’s board of directors stripped D.D.H. of
his authority to make business decisions on January 8, 2010,
which was four days before the subordinated debenture was
executed and five days before the wire transfer. There is no
evidence that a loan agreement was completed before Janu‐
ary 8. It does not matter that negotiations may have been
ongoing since late‐2009, when D.D.H. still had authority. See
Perritt Ltd. P’ship v. Kenosha Unified Sch. Dist. No. 1, 153 F.3d
489 (7th Cir. 1998) (no contract formed for purchase of real
estate where, midway through extended negotiations, the
school district’s status under Wisconsin law changed in a
manner divesting the school board of authority to purchase
real estate and no agreement had been finalized before the
status change). The only evidence in the record shows that
D.D.H. lacked actual authority to bind Clark when the pur‐
ported loan was executed.
We acknowledge that this is a strange case because
D.D.H. was not some low‐level employee but rather Clark’s
president and CEO. Generally, a corporation’s highest‐
ranking officers’ duties are outlined in the corporation’s by‐
laws, and while the board may alter an officer’s authority by
resolution, it may do so only if the resolution is consistent
with the bylaws. 805 ILCS 5/8.50. However, Clark’s bylaws
are not part of the record, and Wells Fargo has made no at‐
tempt to argue that the board was prohibited from stripping
its president and CEO of business‐decision‐making authori‐
ty without removing him from his office. Therefore, Wells
No. 12‐1208 19
Fargo cannot prevail on the theory that D.D.H. retained ac‐
tual authority to bind Clark in contract.
Nor can Wells Fargo prevail on the ground that D.D.H.
had apparent authority, which “‘exists where a principal
through his words or conduct, creates a reasonable impres‐
sion that the agent has been granted the authority to perform
certain acts,’” Orix Credit Alliance, Inc. v. Taylor Mach. Works,
Inc., 125 F.3d 468, 474 n.1 (7th Cir. 1997) (quoting Wasleff v.
Dever, 550 N.E.2d 1132, 1138 (Ill. App. Ct. 1990)). It is true
that “[t]he existence and scope of an agency relationship are
questions of fact.” Id. at 474. But Hindman was present at the
meeting where the board stripped D.D.H. of his authority.
Thus, he had actual knowledge that D.D.H. could not make
business decisions, and he could not have reasonably be‐
lieved that D.D.H. had authority to enter into a loan agree‐
ment on behalf of Clark.
On the other hand, Wells Fargo probably held a reasona‐
ble belief that D.D.H. had authority. Indeed, there is no evi‐
dence that Clark ever notified Wells Fargo that D.D.H. had
been stripped of his authority, and he signed the debenture
as president and CEO. But this does not help Wells Fargo for
two reasons. First, it was not a party to the purported loan
agreement between Clark and Hindman, and we have found
no cases in which a plaintiff was able to invoke the doctrine
of apparent authority to enforce a contract to which it was
not a party. Second, even if Wells Fargo could invoke that
doctrine, it would be required to show that it took some ac‐
tion in reliance upon D.D.H.’s apparent authority. See Harris
v. Knutson, 151 N.W.2d 654, 658 (Wis. 1967) (apparent agen‐
cy requires “[r]eliance … by the plaintiff, consistent with or‐
dinary care and prudence”). And as discussed below, there
20 No. 12‐1208
is a genuine dispute of fact as to whether Wells Fargo al‐
lowed Clark to take additional cash advances or otherwise
acted in reliance on the $750,000 transfer from Hindman.
Because D.D.H. lacked authority to bind Clark under or‐
dinary principles of agency, the fact that he executed the
subordinated debenture does not establish that Hindman
and Clark had a valid loan agreement. Looking for another
reason to bind Clark, one might posit that Clark’s board of
directors ratified the loan, given that D.D.H. and Hindman
constituted a majority of the directors who had previously
voted to strip D.D.H. of authority. However, under Illinois
law, a board of directors cannot act informally (without a
meeting) unless it has the written consent of all directors. 805
ILCS 5/8.45. It is unclear how many directors Clark had, but
we do know that at least one director (Robert Early) did not
consent to the loan. Thus, the actions of D.D.H. and Hind‐
man did not constitute actions by the board and could not
serve to bind Clark to a loan agreement.
Alternatively, Clark may be deemed to have accepted the
loan agreement through its actions, for example, if it put the
loan proceeds to use. See Hoffman v. Ralston Purina Co., 273
N.W.2d 214 (Wis. 1979) (finding acceptance where offeree
accepted benefits of offer but never expressly accepted and,
in fact, said he would not accept); Phillips Petroleum Co. v.
Taggart, 73 N.W.2d 482, 488 (Wis. 1955) (“One cannot accept
the benefits of a contract over a long period of time and then
successfully contend that the contract is not binding.”).
Hindman argues that Clark never took any advances
based on the $750,000 and that the people with authority to
bind Clark took immediate action to reject the purported
loan by instructing D.D.H. to stop the wire transfer. For its
No. 12‐1208 21
part, Wells Fargo maintains that Clark accepted the loan
through its conduct and points to three facts: (1) $750,000
appeared on Clark’s daily collateral report for January 15,
which had been signed by Clark’s treasurer, Robert Sears; (2)
once Wells Fargo received that report, Williams spoke with
another Clark representative, Maria Preston, who informed
her that the influx of cash was another capital loan from
Hindman (Appellee’s Supp. App. 52); and (3) Clark used the
$750,000 to pay down its line of credit and took $3,036,089.96
in advances between January 15 and January 21.
We conclude that there are genuine issues of material fact
that need to be resolved before determining whether Clark
accepted through its actions. Hindman has designated evi‐
dence showing that the people with authority to make busi‐
ness decisions acted swiftly in attempting to reject his loan
once they found out about it. There is no dispute that, de‐
spite those efforts, the wire transfer went through and the
funds hit Clark’s account. Though not entirely clear, it ap‐
pears that the daily collateral reports were accounting ledg‐
ers showing what money was coming in and that all incom‐
ing funds had to be reported. In other words, it is not clear
from the record that Clark had the option of not reporting
the funds on the daily collateral report once they hit its ac‐
count. That Preston informed Williams that the cash influx
was another capital loan from Hindman is not dispositive.
There is nothing to support the notion that Preston had au‐
thority to bind Clark to a loan obligation or that she was
even purporting to do so; rather, all that can be said is that
she believed a valid loan had been made and relayed that
information to Williams, but Preston was not in the loop of
decision makers.
22 No. 12‐1208
Finally, there is a disputed question of fact as to whether
Clark actually used the $750,000 to take cash advances. Alt‐
hough the record shows that $3,036,089.96 was advanced be‐
tween January 15 and January 21, when the $750,000 (which
is included in that figure) was wired to Gibraltar Bank by
Bassett, Wells Fargo has failed to demonstrate that those ad‐
vances could not have been taken but for the influx of
$750,000 on January 15. The daily collateral report for Janu‐
ary 15 shows that Clark had $2,727,430.26 available for bor‐
rowing. (Appellee’s Supp. App. 64.) Set aside Hindman’s
$750,000 for the moment and the total available for borrow‐
ing becomes $1,977,430.26, which was more than enough to
cover the $471,668.95 in advances taken on January 15, and
even the additional advances of $910,793.56 and $592,208.82
taken on January 19 and 20, respectively (as the advances for
those three days total $1,974,671.33). Of course, the total ad‐
vances between January 15 and 21 exceed the borrowing
availability reflected on the January 15 daily collateral report
(which includes the $750,000) by $308,659.70. The problem
with concluding that this shows Clark to have drawn on the
$750,000 is that, although all advances between January 15
and 21 are accounted for, there is no evidence as to how
much incoming cash Clark received on January 19, 20, and
21 with which it paid down its line of credit.5 The only daily
collateral report included in the record is for January 15.
We agree with Wells Fargo that if Clark in fact took ad‐
vances that it could not have taken but for the influx of
5 That the total advances taken over those four days exceeds the borrow‐
ing availability reflected on the January 15 daily collateral report sug‐
gests that there was incoming cash, because otherwise Wells Fargo
would have been allowing an overdraft of $308,659.70.
No. 12‐1208 23
$750,000 from Hindman, then Clark accepted the loan as a
matter of law, notwithstanding the fact that the authorities at
Clark were attempting to have the loan funds rejected. If, on
the other hand, Clark took only advances that it could have
taken without Hindman’s funds, then it is difficult to see
how Clark accepted the loan given the wealth of evidence
that those with decision‐making authority promptly took
steps to reject the funds, though a trier of fact might find
otherwise after gauging witness credibility and examining
the documentary evidence. The record developed thus far
does not provide an answer either way.
This is a very peculiar case. The district court erred in
casting aside Hindman’s arguments as irrelevant. There may
be grounds for rejecting Hindman’s theory, but relevance is
not one of them. We need not explore what those other
grounds may be because Wells Fargo has not bothered to
raise them and instead has largely ignored Hindman’s spe‐
cific contentions concerning D.D.H.’s authority. Although
Clark may have accepted through its conduct, there are too
many factual uncertainties in this record to warrant sum‐
mary judgment in either party’s favor.
Because the record is unclear as to whether Clark accept‐
ed Hindman’s purported loan, thereby creating Subordinat‐
ed Indebtedness, we cannot say that Hindman breached the
subordination agreements as a matter of law. This problem
alone requires that the district court’s judgment be vacated
and the cause remanded for further proceedings. The par‐
ties, however, quarrel over several other issues that are like‐
ly to reappear on remand if Clark is found to have accepted
Hindman’s loan. We will address those issues in the interest
24 No. 12‐1208
of judicial economy. See, e.g., Stollings v. Ryobi Techs., Inc., 725
F.3d 753, 763 (7th Cir. 2013).
2. Rescission
Assuming a valid loan agreement was created, Hindman
contends that he still is not liable for breach because he and
Clark rescinded the loan agreement and the subordination
agreements did not prevent them from doing so. Both par‐
ties use Illinois law to establish the test for rescission: “A
claim for rescission is sufficient if it alleges: (1) substantial
nonperformance or breach by the defendant; and (2) that the
parties can be restored to the status quo ante.” Horwitz v.
Sonnenschein Nath & Rosenthal LLP, 926 N.E.2d 934, 942 (Ill.
App. Ct. 2010) (citation omitted). Wells Fargo argues that
rescission was not permitted under Horwitz because it would
not be restored to the status quo ante. But Wells Fargo is nei‐
ther a party nor a third‐party beneficiary to the putative loan
agreement between Hindman and Clark, and Horwitz speaks
of the parties being restored to their previous positions.
Moreover, the test articulated in Horwitz applies only where
the parties disagree and the party seeking rescission is doing
so on the basis of the other party’s nonperformance (hence
the prong dealing with substantial nonperformance or
breach). See 926 N.E.2d at 942–43. Here, however, Hindman
claims that he and Clark agreed to rescind the purported loan
agreement, see, e.g., St. Norbert Coll. Found., Inc. v. McCormick,
260 N.W.2d 776, 782 (Wis. 1978), so it is not clear how Hor‐
witz is applicable.
In any event, we agree with Wells Fargo that the subor‐
dination agreements prohibited Hindman and Clark from
rescinding the loan agreement without prior written consent.
Hindman accurately points out that the subordination
No. 12‐1208 25
agreements contain no express language on the issue of re‐
scission. But rescission becomes a possibility only once a
contract is formed, that is, once a “debt, liability or obliga‐
tion” has been created. The subordination agreements pro‐
hibited Hindman from accepting repayment from Clark on
those debts, liabilities, and obligations while Clark remained
indebted to Wells Fargo (absent consent). Allowing Hind‐
man and Clark to agree to rescind their purported loan
agreement would render the subordination agreements use‐
less. Under Hindman’s theory, Clark could use all loans
from Hindman to pay down its line of credit, take more ad‐
vances from Wells Fargo, and then turn around and agree
with Hindman to rescind the loan agreements, resulting in
Hindman receiving payment before Wells Fargo, which is
precisely what the subordination agreements were intended
to prevent. Thus, assuming a valid loan agreement was cre‐
ated in the first place, Hindman cannot escape liability for
breach under a theory of rescission.
3. Consent
Paragraph 3 of the subordination agreements provides in
relevant part that Hindman “shall not, without the Lender’s
prior written consent, demand, receive or accept any payment
(whether of principal, interest or otherwise) from any Bor‐
rower in respect of the Subordinated Indebtedness.” (Em‐
phasis added.) Hindman argues that he did not breach the
subordination agreements because Wells Fargo consented to
the repayment through its representative, Thomas Bassett.
Wells Fargo says that Bassett had no authority to give con‐
sent and, in any event, that the evidence is undisputed that
Bassett did not consent.
26 No. 12‐1208
We think there are genuine issues of material fact con‐
cerning this issue. It is true that Bassett was a vice‐president
of Wells Fargo Bank with responsibility over Hindman’s per‐
sonal accounts, whereas responsibility for Clark’s business
accounts rested with Wells Fargo Business Credit. But the
subordination agreements recite that they are “for the bene‐
fit of WELLS FARGO BANK, NATIONAL ASSOCIATION
(the ‘Lender’), acting through its Wells Fargo Business Cred‐
it operating division.”
That the subordination agreements define “Lender” as
Wells Fargo Bank and require prior written consent to come
from the Lender makes them susceptible to the interpreta‐
tion that consent from Wells Fargo Bank was sufficient.
However, the “acting through” language gives rise to anoth‐
er reasonable interpretation, i.e., that consent must come
from Wells Fargo Business Credit. Because the agreements are
“susceptible to more than one reasonable interpretation,”
they are ambiguous, and extrinsic evidence may be consid‐
ered to resolve the ambiguity. See Town Bank v. City Real Es‐
tate Dev., LLC, 793 N.W.2d 476, 484 (Wis. 2010). If extrinsic
evidence does not resolve the ambiguity, the agreements
should be construed against the drafter, Wells Fargo. See
Roth v. City of Glendale, 614 N.W.2d 467, 476 (Wis. 2000)
(Sykes, J., concurring) (explaining that default rules, such as
construction against the drafter, are tie‐breakers that are ap‐
plied only after extrinsic evidence has been examined).
Just as they did before the district court, the parties all
but ignore this controlling provision and make unsupported
assertions that Bassett either did or did not have authority to
consent. The district court, for its part, did not discuss the
issue of consent at all. Thus, it is unclear whether Wells Far‐
No. 12‐1208 27
go could point to extrinsic evidence showing that the parties
intended for consent to be obtained from Wells Fargo Busi‐
ness Credit. If not, the provision should be construed against
Wells Fargo such that consent from Wells Fargo Bank would
suffice. But we simply cannot tell from this record.
Moreover, even assuming the requisite consent could
come from Bassett, Hindman is not necessarily entitled to
summary judgment. Curiously, Wells Fargo makes little of
the fact that the subordination agreements require “prior
written consent.” It is debatable whether the January 15
email from Bassett to D.D.H. reading “Done!” amounts to
prior written consent or is merely an after‐the‐fact confirma‐
tion of the failed reversal. A fact finder, however, might rea‐
sonably view it as written consent to support the eventual
transfer to the Florida bank on January 21. The subordina‐
tion agreements, after all, do not define the parameters of the
term “prior written consent.”
All this goes to show that at this point there is a genuine
dispute of fact as to the issue of consent. But further devel‐
opment of the record and the parties’ legal arguments on
remand may add sufficient clarity that it can be decided as a
matter of law.
B. Damages
In the event of a breach, the subordination agreements
provide that the amount of unauthorized payment received
by Hindman shall be held in trust and turned over to Wells
Fargo. Hindman argues that this “Prohibited Payments
Clause” is an unenforceable liquidated‐damages clause.
Wells Fargo maintains that this is a moot point because its
actual damages were $750,000.
28 No. 12‐1208
We agree with Wells Fargo and the district court that, if
Hindman breached, the proper award of damages is
$750,000. “In a breach of contract action, the fundamental
idea is to put the injured party in as satisfactory a position as
the party would have been in had the contract been per‐
formed.” Int’l Prod. Specialists, Inc. v. Schwing Am., Inc., 580
F.3d 587, 598 (7th Cir. 2009) (citing Thorp Sales Corp. v. Gyuro
Grading Co., 331 N.W.2d 342, 346 (Wis. 1983)). Had Hindman
not breached the subordination agreements by accepting
payment of $750,000, there would have been $750,000 more
in assets available for Clark to use in paying down its un‐
paid debt to Wells Fargo (its most senior creditor), which as
of March 25, 2011, was $7,306,098.34.
Hindman argues that Wells Fargo’s actual damages are
limited to the amount of additional advances taken against
the $750,000. He posits that if it can be shown that Clark
took, for example, only $100,000 in additional advances, then
Wells Fargo’s actual damages are only $100,000. In other
words, if Wells Fargo relied on the $750,000 only to the extent
of the $100,000 it allowed Clark to take, it would provide a
windfall of $650,000 to award Wells Fargo $750,000.
We disagree. The subordination agreements between
Hindman and Wells Fargo were intended to ensure that
Clark paid off its debts to Wells Fargo before paying off its
debts to Hindman. Wisconsin law calls for placing the non‐
breaching party in the position it would have been in had
the contract been performed instead of simply restoring the
parties to their original positions. Assuming that Hindman
breached, the only way to place Wells Fargo in the position
that it would have been in had Hindman not breached
would be to award the full $750,000. As Wells Fargo’s actual
No. 12‐1208 29
damages are $750,000 (again, assuming breach), the enforce‐
ability of the “Prohibited Payments Clause” is immaterial.
III. Conclusion
For the foregoing reasons, the district court’s judgment is
VACATED and the cause is REMANDED for further proceed‐
ings consistent with this opinion.