Appeal from the Circuit Court of Kane County, Sixteenth
Judicial Circuit; the Hon. JOHN S. PETERSEN, Judge, presiding.
MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT.
William C. Hardt and Marian D. Hardt, his wife, defendants, appeal from a decree of foreclosure of certain real estate held in the name of Commercial Construction Corporation, and pledged by Commercial as collateral on a note to the plaintiff, Benson Investment Corporation, dated May 4th, 1961, in the amount of $109,000. (Commercial has not appealed.)
Part of the proceeds of the collateral note was used to pay off previous loans made by Benson to the Hardts, individually, at admittedly usurious rates of interest. The issue is raised whether a defense of usury may be asserted by the Hardts, which would prevent the default in the mortgage.
While there was a maze of complicated transactions alluded to in the testimony, between parties and nonparties, we deem the following facts to be those relevant to the case before us.
Prior to May 4th, 1961, Safari Motor Lodge Corporation, a nonparty, applied for a loan from Benson in the amount of $75,000. Benson agreed to make the loan providing that Safari would execute a note in the principal amount of $109,000 which would include precomputed interest on the $75,000 to cover the 36-month term of the loan. Benson required additional collateral from Safari as the latter owned only a beneficial interest in a land trust holding title to the very heavily encumbered motel property.
Commercial was the contractor building the Safari motel, and Safari was indebted to Commercial on the building contract in excess of $200,000. Apparently to safeguard this investment, Commercial agreed to pledge the real estate in controversy, which was owned by Commercial, to further secure the loan from Benson to Safari. This was a precondition to Benson's loan to Safari, as was a further pledge of certain lots in Cook County owned by the Hardts, individually.
The Hardts were the sole stockholders and officers of Commercial Corporation. Prior to May 4th, 1961, the Hardts, individually, had borrowed various sums of money from Benson. It was not denied that these individual loans included interest at usurious rates. The balance on the individual loans was claimed by the Hardts to amount to $11,500, without interest, as of May 4th, 1961, but the court found from the evidence that the balance due on the prior loans, as of that date, was $26,000.
When the May 4th, 1961, loan was made, Benson furnished $37,500 in "fresh" money, satisfied the $26,000 obligation of the Hardts to Benson, and also satisfied an obligation of Commercial to Benson in the amount of $11,500. The total of these items made up the $75,000 principal of the loan, stated with the prepaid interest, to be in the amount of $109,000.
While the May 4th transaction was essentially one loan to Safari, Safari signed its note and trust deed in the amount of $109,000, pledging its beneficial interest in the motel property trust; Commercial signed its collateral note for $109,000 secured by a trust deed pledging the real estate foreclosed in this action; and in addition the Hardts pledged a parcel of real estate owned by them individually in Cook County, which is not involved in this litigation.
William C. Hardt, as president, and Marian D. Hardt, as secretary, signed the collateral note and trust deed involved in this foreclosure on behalf of Commercial. In addition, the Hardts, in their individual capacity, signed a usual printed form of guaranty on the reverse side of the note, which recited among other statements,
"We . . . jointly and severally guarantee payment of the within note, accepting all its provisions authorizing the maker, without notice to us or either of us, to obtain an extension or extensions in whole or in part and waiving presentment for payment, demand, protest and notice of protest and non-payment; . . . ."
Safari went into bankruptcy subsequently and the Bell Savings and Loan foreclosed against the motel property and eventually acquired ownership for lack of a purchaser at the foreclosure sale. This disposed of the motel security.
In this foreclosure the Hardts were made defendants individually, as persons interested in the real estate, but no relief was sought against them on the alleged guaranty.
In decreeing the foreclosure, the trial court found that the collateral note was in default, and that there was due, at the time of the default, the sum of $51,085.95 in principal and interest, and that the total due, as of the time of the decree, ...