### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 12

‐ 1208

W ELLS F ARGO B USINESS C REDIT

, Plaintiff

‐ Appellee

,

v.

D ONALD J. H INDMAN

, 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

.

____________________

A RGUED S EPTEMBER 5, 2012

— D ECIDED O CTOBER 30, 2013

____________________

Before B AUER

, M ANION

, and T INDER

, Circuit Judges

.

T INDER

, 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 in6 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 ofNo. 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 account10 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 default12 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 upon18 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, WellsNo. 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, there20 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 itsNo. 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 interest24 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 subordinationNo. 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 actualNo. 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

V ACATED and the cause is R EMANDED for further proceed

‐ ings consistent with this opinion.