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01/11/88 Wood River Area v. Germania Federal Savings &

January 11, 1988

WOOD RIVER AREA DEVELOPMENT CORPORATION, AND ALL PERSONS AND CORPORATIONS SIMILARLY SITUATED, PLAINTIFFS-APPELLEES

v.

GERMANIA FEDERAL SAVINGS & LOAN ASSOCIATION, DEFENDANT-APPELLANT



APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT

519 N.E.2d 15, 165 Ill. App. 3d 488, 116 Ill. Dec. 425 1988.IL.15

Appeal from the Circuit Court of Madison County; the Hon. Wendell Durr, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE HARRISON delivered the opinion of the court. KARNS and LEWIS, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HARRISON

This action was originally commenced by plaintiff Wood River Area Development Corporation (Wood River) when it filed a multicount complaint against defendant, Germania Federal Savings and Loan Association, seeking damages for defendant's alleged breach of a commercial loan agreement. Wood River later added a count in its complaint bringing a class action against defendant on behalf of all borrowers who had entered into similar loan agreements with defendant. The plaintiffs in the class action count subsequently moved for partial summary judgment. The circuit court of Madison County entered partial summary judgment in favor of the class and found, pursuant to Supreme Court Rule 308 (107 Ill. 2d R. 308), that its order involved a question of law as to which there is substantial ground for difference of opinion and that an interlocutory appeal may materially advance the ultimate termination of the litigation. The trial court identified the following question for our consideration: "Whether a provision in a promissory note that purports to give the payee the right to change the interest rate at any time without reference to any fixed standard ascertainable from the instrument itself or any other fixed, objective standard beyond the payee's own discretion, is valid." We granted defendant leave to appeal the court's order pursuant to Rule 308, and we now reverse and remand.

In its initial complaint, Wood River alleged causes of action for fraud, breach of the covenant of good faith and fair dealing, and breach of contract. Wood River later amended its complaint to add counts alleging negligent misrepresentation, wilful and wanton conduct, and estoppel, but subsequently voluntarily dismissed its counts for negligent misrepresentation and wilful and wanton conduct. Later, Wood River added a count for a class action, alleging there were other commercial borrowers who had signed notes similar to that signed by Wood River.

This dispute arises from loans obtained from defendant by several commercial borrowers. In the case of Wood River, the loan was obtained in 1971. The loan commitment issued by defendant to Wood River included the following provisions:

"AMOUNT: $245,000.00 provided the amount disbursed

does not exceed 75% of the ap-

praised value.

TERM: Twenty (20) Years INTEREST RATE: Nine Percent (9%)

PAYMENTS: Interest only on amounts ...


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