APPELLATE COURT OF ILLINOIS, SECOND DISTRICT
505 N.E.2d 1378, 153 Ill. App. 3d 601, 106 Ill. Dec. 587 1987.IL.361
Appeal from the Circuit Court of Du Page County; the Hon. John J. Nelligan, Judge, presiding.
Justice Nash delivered the opinion of the court. Lindberg, P.J., and Inglis, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE NASH
Defendant, Thomas McWilliams, appeals from a judgment entered by the circuit court in favor of the plaintiff, William McComb, after a trial of plaintiff's action on a promissory note. In trial, defendant raised the affirmative defense of usury and sought to recover damages as provided for in section 6 of "An Act in relation to the rate of interest . . ." (Interest Act) (Ill. Rev. Stat. 1981, ch. 17, par. 6413). On appeal, defendant contends: (1) that the circuit court erred in finding defendant failed to establish that plaintiff knowingly charged an unlawful rate of interest, and (2) that the circuit court lacked authority to award plaintiff attorney fees.
The promissory note was executed as part of a complicated transaction wherein plaintiff and defendant exchanged parcels of real property. The agreed outcome of the transaction was that the defendant owed plaintiff the sum of $26,985.60, for which he executed a promissory note payable to the plaintiff. The note bore interest at a rate of 12% and provided for monthly installment payments of $500 for two years and a balloon payment. At the closing, no agreements were signed and plaintiff conveyed certain property to the defendant by deed. The note was not executed by defendant until several months later, and it was unsecured.
When the defendant fell delinquent in his payments, plaintiff brought an action on the note, seeking to recover the principal and accrued interest in the amount of $27,424.41, as well as attorney fees and costs. In his answer to the complaint, defendant raised the affirmative defense of usury, alleging that the interest rate of 12% exceeded the maximum legal rate of 9%, and sought to recover statutory damages. Ill. Rev. Stat. 1981, ch. 17, par. 6413.
In a bench trial, attorney Robert Borla, who represented plaintiff at the closing, testified that he did not prepare the note, but believed defendant's attorney or someone from that attorney's office prepared it. It was Borla's understanding that the note was to have been secured by a second mortgage, but it was not. He thought the maximum lawful rate of interest was 8% and did not recall how the parties arrived at a rate of 12% or whether he advised plaintiff as to the interest rate.
Plaintiff, who was employed as a business systems analyst and held a real estate broker's license, testified that defendant offered to pay 12% interest on the note, which plaintiff felt was low but agreeable. Plaintiff further testified that prior to the suit's being filed, defendant offered to settle the indebtedness on the loan for $16,000 and that after the suit was filed, plaintiff offered to recompute the note at 9%. At the time of the transaction, plaintiff did not know that 12% was usurious.
Robert Hilt, a realtor who handled the transaction, testified that it was the defendant who prepared the note and offered the interest rate of 12%.
Defendant, who was also a real estate broker, testified that plaintiff told him 12% was the rate of interest he would have to pay if he wanted plaintiff's property and that he eventually agreed to pay this rate. Over plaintiff's objection, defendant testified that after the suit was filed, defendant offered to discount the note for $18,000. Both defendant and his attorney, Craig Loveless, testified that at the time of the transaction, neither of them knew that a 12% rate of interest was usurious.
The trial court entered judgment for plaintiff for the balance due on the note, with interest at 9%, and awarded plaintiff his attorney fees and costs. Finding that the defendant failed to establish that plaintiff knowingly charged an unlawful rate of interest, the court refused to award the plaintiff statutory damages.
Defendant first contends that the court erred in finding that he failed to establish that plaintiff knowingly charged an unlawful rate of interest. In support of the judgment, plaintiff argues that the usury statute is inapplicable in the present case because the transaction was not a loan of money. ...