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12/09/87 Aurora Firefighter's v. C. J. Harvey

December 9, 1987





516 N.E.2d 1028, 163 Ill. App. 3d 915, 114 Ill. Dec. 873 1987.IL.1814

Appeal from the Circuit Court of Kane County; the Hon. Michael O'Brien, Judge, presiding.


JUSTICE HOPF delivered the opinion of the court. LINDBERG, P.J., and WOODWARD, J., concur.


Defendant, C. J. Harvey, appeals from a judgment entered against him following an unfavorable jury verdict in a collection action brought by plaintiff, Aurora Firefighter's Credit Union. He contends on appeal that the trial court erred in: (1) dismissing his State and Federal statutory affirmative defenses, (2) dismissing his pending counterclaim and denying leave to file a new counterclaim, (3) refusing the jury instructions tendered by him, and (4) allowing certain jury instructions tendered by plaintiff. We affirm in part and reverse in part.

On January 13, 1981, Delbert Dittman procured an official credit union loan application form from Donald Kramp, treasurer of the Aurora Firefighter's Credit Union (credit union). Dittman wanted to borrow $2,000 from the credit union to redeem the purchase of a lot which had been sold at a tax sale. He took the loan application to the defendant's residence. The defendant, in his own handwriting, completed the comaker's statement on the reverse side of the application. The parties agree that no typing appeared on the document at that time. Subsequently, Dittman completed the application and dated it January 13, 1981.

On January 15, 1981, Dittman and defendant drove to the credit union office, which was located at the home of Donald and Audrey Kramp. Dittman went into the house and returned with Audrey Kramp. Mrs. Kramp carried a clipboard which held a promissory note. Defendant signed the note. He testified that, other than Delbert Dittman's signature, the note was then entirely blank and contained no typing. Defendant further testified that prior to signing the note, he asked Dittman: "You going to mess me up on this?" Dittman responded in the negative, and Mrs. Kramp added, "Don't worry about Del. He has been a firefighter for a long time." Dittman testified that defendant stated that signing a blank note was like buying "a pig in a poke."

Both Dittman and defendant testified that the note signed by the latter was for $2,000 and defendant became the guarantor for the Dittmans to borrow $2,000 for the stated purpose of paying the taxes on their lot. A $2,000 check was drawn on the credit union, payable to Delbert Dittman on January 15, 1981. The evidence showed that Dittman endorsed the check and used it to redeem the lot from the Kane County tax sale. The evidence also showed that the amount of the loan was charged to Dittman's account with the credit union and that Dittman made a wage assignment as security for the loan.

At the time that the $2,000 loan was advanced to Dittman, he had an existing loan of $7,080.13 from the credit union. The credit union added the $7,080.13 loan balance to the $2,000 note, cancelled the old note, which had a different guarantor, and created a new loan instrument in the amount of $9,080.13. The finance charges increased the amount owed to $12,960.60.

Audrey Kramp testified that she had never left her residence to have anyone sign a credit union note or other papers and that she never had a blank note signed by anyone. Donald Kramp testified he saw the completed application and note at least two days before the check was issued by the credit union. He also stated that the application and note had been predated to January 15, 1981, before being given to Dittman to complete.

Dittman testified that when he was told the pre-existing loan would be added to the $2,000 he wished to borrow he wrote down that he was applying for a $10,000 loan. At no time did he reveal this fact to defendant. It is not contested that defendant did not receive a copy of the note. Defendant testified that he did not learn that he became a guarantor on the Dittmans' note in excess of $12,000 until he was contacted by the credit union two years later. At that time Dittman's debt had been discharged in bankruptcy, and the credit union was seeking payment from him as guarantor of the note. Ultimately, the credit union filed this action to collect from Harvey.

All of the errors alleged by defendant in this court are based on essentially a single determination made by the lower court relative to Harvey's pleadings. In addition to his answer to plaintiff's complaint, Harvey filed affirmative defenses and a counterclaim based on State and Federal consumer protection legislation. The credit union moved to strike and/or dismiss these pleadings. The trial Judge decided that, since the subject transaction involved a loan from a credit union, it was controlled solely by the Illinois Credit Union Act (Ill. Rev. Stat. 1985, ch. 17, par. 4401 et seq., formerly codified at Ill. Rev. Stat. 1979, ch. 32, par. 1301 et seq.) and that the consumer protection statutes which formed the basis for defendant's affirmative defenses and counterclaim were inapplicable. In accord with this Conclusion the trial court prohibited defendant from mentioning the consumer protection statutes to the jury. The effect of this prohibition was to leave defendant with no affirmative defenses and no counterclaim.

Defendant asks this court to hold, contrary to the trial court, that the State and Federal consumer protection legislation he relies on is applicable to a credit union loan process. We note that defendant cites to specific Federal statutes but fails to give dates for those citations. As pointed out by plaintiff, defendant has violated Supreme Court Rule 341(e)(5) (107 Ill. 2d R. 341(e)(5)) by also failing to provide us with the pertinent text of any of the statutory provisions he cites. Despite these omissions, however, we have reviewed the record and considered defendant's arguments. We conclude that the trial court properly found that certain of defendant's defenses and claims were inapplicable but erroneously rejected others.

Defendant seeks relief in Federal consumer protection statutes. Specifically, defendant cites sections 1601, 1604, 1606, 1671, and 1632 of the Truth in Lending Act (Truth in Lending) (15 U.S.C.A. § 1601 et seq. (West 1982)) and section 226 of Federal Reserve Board Regulation Z (12 C.F.R. § 226 et seq. (1987)). As previously noted defendant has provided no dates for his Federal citations. The citations given are our own. The statutory sections defendant relies on, with the exception of section 1671 which appears to have no relevance here, are concerned with disclosure of credit terms to the consumer. They set forth the need for such disclosure, provide for regulations to ensure disclosure, and specify the form of disclosure. Regulation Z was issued to implement the Truth in Lending Act. Defendant does not specify which parts of the lengthy regulation he invokes. He does, however, insist that Truth in Lending is applicable to the loan involved here and that he should have been able both to present relevant provisions of the law in his defense and to pursue a counterclaim based on violations of Truth in Lending. The credit union does not dispute that Truth in Lending applies to credit union loans. Rather, the credit union contends that, pursuant to Regulation Z, it was not required to make the Truth in Lending disclosures to Harvey because he was not a principal debtor on the loan made to Dittman. In our opinion, the credit union is correct.

According to section 1631(a) of the Truth in Lending Act: "creditor . . . shall disclose to the person who is obligated on a consumer . . . credit transaction the information required under this subchapter. In a transaction involving more than one obligor, a creditor . . . need not disclose to more than one of such obligors if the obligor given disclosure is a primary obligor." (15 U.S.C.A. ...

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