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Theodosakis v. Austin Bk. of Chicago





APPEAL from the Circuit Court of Cook County; the Hon. RICHARD L. CURRY, Judge, presiding.


This is an appeal from the trial court order which granted defendant's motion to dismiss plaintiffs' complaint as amended. The issues presented for review are: (1) whether the complaint, as amended, states a cause of action; (2) whether the purported modification agreement of December 20, 1974, converted the demand note into an installment note; and (3) whether the bank's renewal note of August 18, 1979, was unilaterally and without consideration ineffective to alter the terms of the December 20, 1974, agreement. We affirm.

The complaint as amended contains the following allegations.

On March 18, 1974, plaintiffs executed a promissory note payable to the bank in the principal amount of $227,000 due on demand after date and bearing interest at the rate of 8 1/2 percent per annum. At the time the note was executed, there was an oral agreement between the plaintiffs and the bank that monthly principal payments in the amount of $2000 plus interest on the principal balance due would be paid on the note. There was no agreement as to the duration of this oral repayment arrangement.

On April 11, 1974, the bank billed plaintiffs for the payments of $2000 plus interest in accordance with the understanding. From May 22, 1974, to October 24, 1974, plaintiffs made the payments of $2000 per month plus interest, leaving a principal balance on October 24, 1974, in the amount of $215,000 with interest paid to October 20, 1974.

During the months of November and December, 1974, plaintiffs became aware that the payments as agreed were too burdensome and requested the president of the bank to modify the payments and to enter into a permanent arrangement for the liquidation of the indebtedness. Pursuant to an agreement entered into between plaintiff John Theodosakis and the bank on December 20, 1974, the bank sent plaintiffs a letter stating that the bank agreed to bill plaintiffs $2000 a month to be applied against the principal and interest starting on January 20, 1975, and each month thereafter. Additional lump sum principal reductions were to be made upon the successful sale of certain properties. On the same day plaintiffs paid the bank $2000 due on November 20, 1974, under the original agreement, an additional sum for interest due up to and including December 20, 1974, and an additional payment of $26,000 to be applied to the principal. One of the parcels of real estate referred to in the letter was sold and a sum of approximately $5000 was paid to the bank and applied to other indebtedness due from plaintiffs to the bank.

Monthly payments pursuant to the December 20, 1974, letter were made for approximately 5 years through the month of August 1979. On August 18, 1979, the bank wrote plaintiffs a letter enclosing a renewal note in the amount of $141,708.93. Upon receipt of the letter and renewal note, plaintiff Helen A. Theodosakis telephoned the bank to question the necessity for a renewal note and explained that plaintiffs had never been previously requested to sign renewal notes. The officer of the bank who signed the letter replied that Federal regulations required borrowers of the bank to furnish a statement that proceeds of the loan will be used solely for business purposes and that the bank did not have such a statement on file and would have to have it for their records. The bank officer did not mention anything in the conversation about any change in the terms of the note and Mrs. Theodosakis assumed the terms were unchanged. Plaintiffs, relying upon the bank officer's reason for sending the renewal note, signed and returned the renewal note to the bank.

The renewal note dated August 20, 1979, differed from the letter of December 20, 1974, in that it provided for payment "On demand but not later than August 20, 1980" and the interest rate was changed from 8 1/2 percent to the "prime" rate. Plaintiffs had no negotiations with the bank for any modification of the payment terms as provided in the letter of December 20, 1974, and no consideration passed between the parties to support a change in the terms of the note.

On September 19, 1979, plaintiffs, through their attorney, sent a letter to the bank enclosing a check for the installment due September 20, 1979, on the note dated March 18, 1974. Plaintiffs also enclosed the original note of March 18, 1974, and requested that the renewal note dated August 20, 1979, be cancelled and returned to plaintiffs.

On October 16, 1979, the bank returned plaintiffs' check and demanded payment of the indebtedness according to the terms of the August 20, 1979, renewal note. The bank remains unwilling to recognize the agreement of December 20, 1974.

Neither the original note nor the renewal note was ever negotiated by the bank and was in the possession of the bank when the complaint was filed. Copies of the notes dated March 18, 1974, and August 20, 1979, and the letters dated December 20, 1974, August 18, 1979, September 19, 1979, October 16, 1979, and January 19, 1980, were attached as exhibits to the complaint.

The bank filed a motion to dismiss the complaint as amended as insufficient in law pursuant to section 45 of the Illinois Civil Practice Act. (Ill. Rev. Stat. 1977, ch. 110, par. 45.) Plaintiffs filed a response. The court granted the motion and this appeal followed.


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