LAKE MILLS, Iowa — A Winnebago County judge dismissed a bank’s lawsuit against a customer for non-payment of a $150,000 loan, saying its former president breached a fiduciary relationship with the man and was aware of his growing dementia when the loan was made in 2007.

Judge Bryan McKinley dismissed the 2010 lawsuit by Manufacturers Bank and Trust of Lake Mills against Clemence Weber, 87, of Austin, last month.

The judge said Weber “relied upon the good faith of his lender, and as a result, Mr. Weber has lost the money that was loaned … and he is currently exposed to liability in excess of $250,000.”

The lawsuit sought repayment of the loan, at 16 percent interest, plus collection and attorney fees.

Dave Kingland, the bank’s chief executive officer, said Wednesday that the bank was weighing options about whether to appeal. A message left for a telephone number in Lake Mills for the bank’s former president, Randy Finer, was not immediately returned Thursday.

The newspaper said Weber, who bought and sold real estate in the Lake Mills area for several years, lives in an assisted living facility in Austin.

Weber’s son Brian, an attorney in Dodge Center said he was granted power of attorney for his father in 2005. Brian Weber said he became suspicious when he did not immediately get a response from Finer when he first asked about a loan his father said he recalled signing in 2007.

A year later, Finer sent Brian Weber information about the loan and he got more concerned, Weber said.

“It made no sense,” Weber said in a phone interview. “No one structures loans this way.”

According to court records, the loan involved a Lake Mills contractor who had exhausted his line of credit with the bank. Finer, according to court documents, suggested the contractor asked family members to take out loans that would provide the contractor with additional credit.

Despite bank policy that required a loan officer to prove the applicant’s ability to repay the loan, “Mr. Finer did not collect such documentation before extending loans” and “the family did not have the net worth or the income to support the loans that were made,” court records say.

With his client still short of credit, Finer suggested the contractor approach Clemence Weber, who previously had sold some of his property to the contractor.

Finer prepared a promissory note for Clemence Weber’s signature and an agreement for the contractor to sign, which included a borrower’s pledge of collateral to pay a debt.

Finer told Weber the contractor was offering his property as security, “and Mr. Weber would not have to pay the promissory note until the collateral was gone,” the court records say.

“The court finds this statement to be a misrepresentation of the legal effect of the promissory note.”

All the loans taken by Weber and the contractor’s family were designated as secure, but only secured by the mortgages on the contractor’s property that already had been pledged to the bank for previous loans. No loan committee reviewed the transactions, court records say.

Neither Finer nor the contractor disclosed the contractor’s financial situation or the value of the property that secured the debt, the court said.

The court also noted neither Weber’s attorney nor his son was notified of Clemence Weber’s involvement, even though Brian Weber had notified the bank of his power of attorney status and involvement with his father’s financial affairs.

Clemence Weber was diagnosed with progressive dementia in 2008 and was classified as a vulnerable adult under Minnesota law. Doctors testified symptoms would have been obvious at least one to two years before 2008.

The court said the fiduciary relationship between the bank and Weber “was breached by MBT taking advantage of Mr. Weber.”

There was no financial settlement. The bank was to pay the cost of the action, which was $160.