APPELLATE COURT OF ILLINOIS, SECOND DISTRICT
521 N.E.2d 1267, 167 Ill. App. 3d 762, 118 Ill. Dec. 574 1988.IL.501
Appeal from the Circuit Court of Winnebago County; the Hon. Galyn W. Moehring, Judge, presiding.
JUSTICE WOODWARD delivered the opinion of the court. INGLIS, J., concurs. JUSTICE DUNN, Dissenting.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WOODWARD
Plaintiff, Commercial Mortgage & Finance Co., filed a complaint to foreclose the mortgage of defendants, who had defaulted on their loan payments. Defendants J. David Olson and Mary Ann Olson pleaded a defense based on usury. After a trial, the circuit court of Winnebago County issued a decree of foreclosure, and this appeal followed. We reverse and remand.
The sole issue before this court is whether or not borrowers are estopped from claiming usury as a defense when they have participated in the making of a usurious loan.
The relevant facts are as follows. Defendants were the sole proprietors of a Rockford business known as The Bridal Shoppe, which they had owned since 1972. Plaintiff made the following loans to defendants; each was secured by a mortgage on defendants' residence. On February 27, 1978, defendants were loaned $28,285.60 at 19.13% interest. Defendants were next loaned $32,749.65 at 19.13% interest on October 30, 1978. On October 2, 1980, defendants were loaned $17,500 at 21% interest.
The documentation for each loan contained a statement to the effect that the loan was for business purposes only. In or about October 1986, defendants defaulted on their loan payments, and plaintiff commenced foreclosure proceedings. At the time of their default, defendants owed $15,643.25 on the principal balance and $2,804.08 in interest., Defendants properly pleaded the affirmative defense that plaintiff had engaged in usurious practices prohibited by law. Ill. Rev. Stat. 1979, ch. 74, par. 6.
At trial, J. Robert Hogfeldt, plaintiff's president, testified that on October 2, 1980, he oversaw a loan transaction with defendants. Hogfeldt stated that both defendants had signed the mortgage and note, and they signed a statement that the purpose of the loan was to accumulate business inventory.
Ann Anderson, a loan officer for plaintiff, testified that on October 2, 1980, she handled a loan transaction between plaintiff and defendants. She stated that defendants signed the "business purpose" affidavit which stated that the loan was strictly to be used for business purposes, i.e., business inventory., Plaintiff put into evidence an October 30, 1980, statement apparently written in David Olson's handwriting which read:
"This is to rewrite a business loan made on February 27, 1978, to expand inventories and fixtures at 'The Bridal Shoppe,' 1006 E. State St., Rockford, Ill."
Plaintiff also put into evidence a document entitled "Declaration of Business Purpose" and signed by defendants on February 27, 1978. The document read in pertinent part:
"The undersigned represents and warrants that the credit will be used solely for the following business or commercial purposes: Expand inventory ...