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Janes v. First Fed. Sav. & Loan Assn.





Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County; the Hon. Donald J. O'Brien, Judge, presiding.


Rehearing denied June 28, 1974.

Billy F. Janes and Marie Janes brought this action in the circuit court of Cook County against the First Federal Savings and Loan Association of Berwyn (Berwyn), the Irving Federal Savings and Loan Association (Irving), and the Chicago Title and Trust Company (Chicago Title). Each of the defendants filed a motion to strike and dismiss the amended complaint and for summary judgment, and the motions were granted and judgment was entered in favor of the defendants. The Appellate Court, First District, affirmed (11 Ill. App.3d 631), and we allowed leave to appeal.

The action purports to be brought by the plaintiffs on their own behalf and on behalf of all others similarly situated. It is concerned with the charges for title examination and title insurance in connection with two real estate transactions. In one of them the Janeses purchased property, and to finance the purchase obtained a mortgage from Berwyn. In the other transaction the Janeses sold real estate, and the purchase was financed by Irving. In connection with each transaction title insurance was purchased from Chicago Title.

Count I of the amended complaint names Berwyn as defendant, and describes the purchase transaction which was financed by Berwyn. It alleges that Berwyn ordered "on behalf of Plaintiffs" a preliminary report and title insurance policy; that Chicago Title submitted its invoice for the preliminary report and title insurance policy to Berwyn and suggested an apportionment of that cost between the buyer and the seller; that the invoice was paid from proceeds of the plaintiffs' loan from Berwyn; that thereafter Chicago Title gave to Berwyn "a ten per cent discount or rebate from the full amount of the bill originally issued"; and that Berwyn retained the discount "as an illegal profit in the making of the loan." It is also alleged that the retention of the discount or rebate was a wrongful conversion or unjust enrichment of Berwyn, and that the retention, without disclosure to the plaintiffs, violated Federal Reserve Regulation Z, Section 226.4. Count I also contains allegations designed to sustain the complaint as a class action.

The trial court did not pass upon the class action aspects of the amended complaint, and in view of our disposition of the matter we find it unnecessary to describe or discuss them.

Count I prays for a declaration that the practice of Berwyn "in accepting discounts or rebates * * * without disclosure, or credit, or payment to its customers of such discounts or rebates violates Federal [Reserve] Regulation Z, Section 226.4 and constitutes an unjust enrichment on the part of [Berwyn] or is held in trust [sic] for Plaintiffs," and it requests an injunction to restrain the practice complained of as well as a declaration that the plaintiffs are entitled to refunds and an accounting.

Count II of the amended complaint names Irving as defendant, and contains substantially similar allegations with respect to the transaction in which the plaintiffs sold real estate to persons whose purchase was financed by a mortgage loan from Irving. Substantially similar relief is prayed for in this count.

Count III names Chicago Title as a defendant, describes the transactions alleged in counts I and II and alleges that the defendant savings and loan associations paid the title charges from the proceeds of the respective loans; that Chicago Title, "knowing that the Defendant Savings and Loan Associations do not pay over to purchasers or sellers, or credit purchasers or sellers, with the ten percent discount or rebate," continues to pay that discount or rebate; and that Chicago Title, knowing who the parties to the real estate transactions were, conspired with the savings and loan associations to unjustly enrich them, or alternatively to deprive the plaintiffs of funds that were rightfully theirs. The relief sought is that the court enjoin Chicago Title from offering discounts to preferred customers without offering such discounts to all customers.

Berwyn's "motion to dismiss and for summary judgment" asserted that there "are numerous types of arrangements and provisions concerning the customary prompt payment allowance referred to in the complaint," and it asserted that the complaint alleged no legal basis for requiring "a passing on or accounting for a prompt payment allowance received by a lender." It further asserted that under the terms of Federal Reserve Regulation Z, disclosure of the "prompt payment allowance" was not required. Berwyn's motion was accompanied by the affidavit of its president, George F. Thomas, which stated that in connection with its loans, Berwyn orders preliminary reports and title insurance and stated that the preliminary report of title ordered by Berwyn "is many times utilized by parties to the real estate transaction and paid for as the parties to the transaction agree." The affidavit also asserted that there are numerous ways of ordering and paying for preliminary reports and title insurance and stated: "Most title reports including the report referred to in the complaint are paid for by the seller and portions are prorated between the buyer and seller at the time of closing, although said report is ordered by the lender for its own purpose."

Irving's "motion to dismiss and for summary judgment" asserted that the amended complaint failed to allege any contract with Irving with respect to the title charges described in the amended complaint, and that disclosure of the charges in question was not required by Federal Reserve Regulation Z. The affidavit of Edwin M. Lake, president of Irving, recites that it orders preliminary reports on title for its own use and utilizes them for its benefit and the benefit of borrowers. It also alleges that in the instance described in the amended complaint, Irving did not deal with the plaintiffs and did not look to the plaintiffs for the payment of any title bill. It alleges that it pays title bills promptly when due "and receives from time to time whatever prompt payment allowance is customarily allowed." The affidavit further states:

"That this Association has no agreement with the CHICAGO TITLE AND TRUST COMPANY or any title insurance company in connection with preliminary reports on title, other than to pay for the customary prevailing charges in the area for such service. Ultimately, the Association charges all costs in connection with title work to the Buyer, or other arrangements as may be made between the Association and the Buyer applying for a mortgage loan, or whatever directions the Buyer may give to this Association in connection with title charges."

The motion of Chicago Title to dismiss the complaint and for summary judgment was based upon the assertion that the amended complaint failed to allege any acts of conspiracy, any conspiratorial agreement between the parties or any illegality on the part of Chicago Title. The affidavit of John Waddell, senior vice-president of Chicago Title, stated that it "has provided a monthly prompt payment allowance to Savings and Loan Associations which have opened a credit account with CT&T and have themselves agreed to pay all charges on the account by the 10th day of the month following the date of the invoice sent by CT&T." The affidavit further recited: "The allowance is dependent upon payment of the invoice by the Savings and Loan Association on or before the 10th day of the month following the date of the invoice, subject to extensions made to accommodate (a) mailing and processing delays, (b) items billed on the last three days of a month, and (c) reasonable explanation of delay by a Savings and Loan Association which has a good payment record."

The affidavit also stated that the ten percent allowance reflects recognition by CT&T of the following factors:

"(a) Savings and Loan Associations personally undertake to pay the charges, pursuant to a written agreement in the form attached hereto as Exhibit 1, regardless of whether the real estate transaction in question is consummated and regardless of whether they are able to obtain subsequent reimbursement of such amounts from their borrowers. By assuming contractual responsibility for payment of the charges, the Savings and Loan Association relieves CT&T of the substantial collection burden which would exist if CT&T were required to look for payment to the thousands of Savings and Loan borrowers and sellers of real estate.

(b) The Savings and Loan Associations also render services which result in certain operating economies which would not be realized if CT&T were required to deal with each customer of a Savings and Loan Association as an individual CT&T customer. These include (i) the filling out in savings and loan offices of applications for title policies, thereby eliminating CT&T's need for additional order consultants, (ii) the assembling by the Savings and Loan Associations of such documents as judgment affidavits, mechanics lien waivers and tax receipts, which they submit with the application, thereby eliminating labor which would otherwise be involved in CT&T's consideration of the title and (iii) ...

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