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Tepfer v. Deerfield Savings & Loan Ass'n





Appeal from the Circuit Court of Cook County; the Hon. Richard L. Curry, Judge, presiding.


Rehearing denied October 20, 1983.

Plaintiffs, Arthur H. and Judith M. Tepfer, individually and as representatives of a class, brought an action in the chancery division of the circuit court of Cook County seeking monetary and injunctive relief against defendant, Deerfield Savings and Loan Association. Plaintiffs contend that they were damaged when, at the time their mortgage loan was closed, defendant deducted interest charges for the period of time between the loan disbursement and the first regular monthly principal and interest payment. Plaintiffs claim that the interest deduction violated the terms of the mortgage note. Following a hearing, the trial court dismissed plaintiffs' complaint. Plaintiffs appeal, arguing that the note's provisions regarding monthly interest payments "wholly control[led] the method of calculation and amount of interest" and therefore precluded defendant from deducting post-closing interest. We affirm the trial court's dismissal of plaintiffs' complaint.


In April 1976, plaintiffs applied to defendant for a mortgage loan of $52,000. The loan application was approved on April 26, 1976. The loan commitment document (1) indicated that monthly principal and interest payments would be $402.89 and that the first payment was due on July 1, 1976; (2) described estimated loan costs; and (3) provided the following: "Interest, from the date of closing to the first day of the month in which first payment is due, must be added to TOTAL ESTIMATED LOAN COSTS." Both plaintiffs signed the loan commitment form.

On May 2, 1976, plaintiffs signed a "disclosure statement of cost of loan pursuant to Federal Reserve Regulation `Z'" sent to them by defendant. The disclosure statement set out the amount of the loan, the terms of repayment, and the finance charges and other costs. Among the specified finance charges to be prepaid was "interest on loan from date of closing [anticipated to be June 14, 1976] to first regular payment date . . . $208.76."

On May 2, 1976, plaintiffs executed a note for payment of the loan that provided:

"FOR VALUE RECEIVED, the undersigned [plaintiffs] hereby promise to pay to [defendant] * * * the principal sum of FIFTY TWO THOUSAND AND NO/100 DOLLARS ($52,000), together with interest on the unpaid balance from time to time at the rate of EIGHT AND ONE HALF per centum (8 1/2%) per annum thereafter.

Said principal and interest shall be paid in monthly installments of FOUR HUNDRED TWO AND 89/100 DOLLARS ($402.89) on the FIRST day of each month, commencing with July 1, 1976 until this note is fully paid.

Said monthly payments shall be first applied to interest and the balance to principal. Interest for each month shall be added to the unpaid balance on the first day of each month at the rate of one-twelfth (1/12th) of the annual interest rate and shall be calculated upon the unpaid balance due as of the last day of the preceding month."

The loan was disbursed on June 15, 1976, one day later than expected at the time the disclosure statement was prepared. Plaintiffs received a disclosure settlement statement at this time, which they both signed. Under the heading of "items required by lender to be paid in advance" was an entry for "interest from 6/15/76 to 7/1/76 @ $12.28/day . . . 196.48." The amount of interest payable for the post-closing interval was reduced from $208.76 to $196.48 because of the one-day delay in closing.

Plaintiffs repaid the loan in May 1980. On August 7, 1980, they filed a complaint in chancery, individually and as representatives of a class, alleging that because the note did not provide for payment of interest for the post-closing interval, "the aforesaid charge should have been credited to the principal and not to interest." On June 15, 1982, following a hearing, the trial court, on defendant's motion, ordered that plaintiffs' complaint be stricken and the cause dismissed with prejudice. Plaintiffs appealed.


The only issue in this appeal is whether the above-quoted provisions of the note precluded the payment of interest on the mortgage loan for the 16-day post-closing interval after disbursement of the funds but before the due date of the first regular monthly installment. Plaintiffs' position is that the note is the exclusive statement of the contract between plaintiffs and defendant, and because the note is silent regarding post-closing interest, it was legally impermissible for defendant to charge interest for the post-closing interval. Defendant maintains that plaintiffs are seeking a windfall in the form ...

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