Appeal from the Circuit Court of St. Clair County; the Hon.
Dennis Jacobsen, Judge, presiding.
JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:
This appeal follows a judgment of foreclosure entered in the circuit court of St. Clair County. A judicial sale took place pursuant to this judgment, but was set aside by order of the trial court pending this appeal. The issues presented on appeal are (1) whether foreclosure should have been precluded as violative of the Illinois usury statute (Ill. Rev. Stat. 1981, ch. 17, par. 6404(2)(b)), (2) whether foreclosure should have been precluded as violative of Federal truth-in-lending regulations (12 C.F.R. 226.8), and (3) whether foreclosure should have been precluded by the doctrine of equitable estoppel. The issues presented on cross-appeal are (1) whether the trial court acted properly in setting aside the judicial sale, and (2) whether the cause should be remanded to the trial court for a determination of the issue of defendant's entitlement to attorney fees and costs incurred pursuant to the appeal.
On September 13, 1977, defendants John H. Conrath, Willard J. Conrath, Mary Beth Conrath, and Anna Conrath signed a note for $112,000, payable to Belleville Citizens Savings, predecessors in interest to plaintiff American Savings Association. As collateral for the loan, defendants mortgaged their interest in two eight-unit apartment buildings in the city of Belleville. The terms of the note called for the principal and interest to be paid in monthly installments of $902, beginning on the first day of October 1977. The instrument, as it appears in the record, proceeds to state, "The entire principal balance of this note will be due and payable five (5) years from date." By two letters dated August 4, 1982, defendants were advised that their loan would reach maturity on September 13, 1982, and that current market conditions dictated an increase in the interest rate of the loan from 9% to 15% for the following 12 months. On August 26, 1982, defendants were notified by letter that if they failed to execute a proposed loan modification agreement subjecting the loan to the higher interest rate, the loan would be considered in default, and a foreclosure action would ensue. Defendants failed to execute the loan modification agreement, and plaintiff initiated the present action on October 8, 1982. Following judgment for plaintiff, a judicial sale was held on April 26, 1983. The order setting aside the sale was entered on May 9, 1983.
Additional documents furnished to defendants at the time the note was executed provided no indication that the balance of the loan was payable in five years. The loan settlement statement indicated only that the loan would be payable at a 9% interest rate in monthly payments of $902. The loan passbooks indicated a loan of 30 years at 9%. Federal truth-in-lending statements furnished to defendants stated that "[p]ayments for principal and interest on this transaction shall be 360 monthly installments of $902.00 beginning on the 1st day of October 1977 and due on the 1st day of each month thereafter." Defendants John and Willard Conrath testified that they were unaware of the five-year call provision in the note, and that they would not have signed the note had they been aware of the provision. Each admitted, however, that he did not thoroughly read the note, and that the provision could have been present on the face of the note at the time of its execution. On direct examination, John Conrath alluded to an "experiment" conducted by himself and his attorney regarding the typed lines of the note:
"Q. With regard to the typing of this line [the five-year call provision], do you notice anything unusual about the way it's typed?
A. Well, it's — It's regular typing from any standard typewriter. As far as unusual, it's typed in between the standard form paragraphs. That's about the only thing I could say is unusual about it, and the fact that it doesn't seem to possibly be written at the same time.
Q. Okay. Did you and I conduct an experiment in my office with that — a copy of that same note with regard to how it was typed?
Q. Okay, and if I could, just for purposes of illustration, let's say that we were to draw a line on this note through the various lines of typing. Now, if you would refer to — This is a straight line, is it now, running down through the lines of typing?
Q. Okay, how many lines of typing does it run through?
A. It runs through four different lines of typewritten print.
Q. And what is the [fourth] typed line?
A. The next typed line reads, `The entire principal balance of this note will be due and payable five years from date,' and the projected line projects down through that line and goes directly ...