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07/26/88 George Holden Et Al., v. Gayle A. Nevergall

July 26, 1988

GEORGE HOLDEN ET AL., PLAINTIFFS-APPELLEES AND CROSS-APPELLANTS

v.

GAYLE A. NEVERGALL, A/K/A GAYLE A. LOAR, DEFENDANT-APPELLANT AND CROSS-APPELLEE



APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT

526 N.E.2d 928, 172 Ill. App. 3d 700, 122 Ill. Dec. 535 1988.IL.1153

Appeal from the Circuit Court of Marion County; the Hon. Richard H. Brummer, Judge, presiding.

APPELLATE Judges:

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

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HARRISON

Plaintiffs, George and Waunetta Holden, brought suit on a promissory note seeking recovery for principal, interest, and attorney fees. The defendant, Gayle Loar, the daughter of the plaintiffs, raised the defense of usury and counterclaimed for the statutory penalty for usury under section 6 of the Interest Act (Ill. Rev. Stat. 1985, ch. 17, par. 6413). The circuit court of Marion County tried this cause on December 2, 1986. On February 19, 1987, the circuit court found that the parties had entered into a usurious contract, but it did not impose the statutory penalty. The circuit court recalculated the balance due under the note using the maximum allowable statutory interest rate of 9% per annum under section 4 of the Interest Act (Ill. Rev. Stat. 1985, ch. 17, par. 6404), determined that the note carried a balance of $18,568.26, and added attorney fees of $1,866.83 in accordance with the note's provisions. The defendant appeals, and the plaintiffs cross-appeal. We affirm in part, reverse in part, and remand.

On August 26, 1981, defendant and her mother purchased a home at 317 Country Club Estates in Salem, Illinois, from Susan and Spencer Grover, and received title to the house in joint tenancy. The purchasers assumed from the Grovers an existing mortgage of $40,000 on the property. That mortgage was payable to Marion County Savings and Loan in Salem and carried an interest rate of 14.5%. The record indicates that plaintiffs subsequently transferred their interest in the subject real estate to the defendant. The plaintiffs delivered a gift of $10,000 to the defendant on November 3, 1981, and delivered another gift of $10,000 on December 10, 1981, and the defendant applied these gifts toward reducing the principal of the mortgage indebtedness. The defendant made monthly payments of $246.96 on the mortgage, and, as of September 7, 1982, the mortgage had a remaining balance due of $19,430.93. George Holden owned a $20,000 certificate of deposit which matured on that date, and, pursuant to an agreement among Holden, his wife, and the defendant, Holden paid the mortgage on the house and received and recorded a release from the savings and loan. In addition, Holden paid the defendant the difference between the balance due on the mortgage and the $20,000 certificate of deposit. The plaintiffs prepared and the defendant executed a promissory note providing interest at the rate of 14.5% per annum for $20,000 payable on demand to the plaintiffs, and the defendant delivered the note to the plaintiffs on September 7, 1982.

Defendant thereafter made 34 monthly payments of $246.96 each to the plaintiffs. The defendant made her last monthly payment on July 26, 1985. The defendant divided these payments, in accordance with the terms of the note, between principal and interest, which, after the 34 monthly payments, reduced the principal of the note by $244.91 to $19,755.09. The remaining payments of $8,151.73 represented interest charges.

The relationship between the plaintiffs and the defendant deteriorated in the summer of 1985. In July of 1985, defendant listed the house for sale with a real estate broker, and the defendant made no further payments on the note subsequent to that month. The plaintiffs filed a complaint seeking the recovery of principal, accrued interest, and attorney fees on the note, and filed a lis pendens ; and the defendant raised the defense of usury and counterclaimed for the statutory penalty for usury under section 6 of the Interest Act (Ill. Rev. Stat. 1985, ch. 17, par. 6413).

The circuit court of Marion County tried this cause on December 2, 1986. On February 19, 1987, the circuit court found that the parties had entered into a usurious contract, but it did not impose the statutory penalty. The trial court recalculated the balance due under the note using the maximum allowable statutory interest rate of 9% per annum, determined that the note carried a balance of $18,568.26, and added attorney fees of $1,866.83 in accordance with the note's provisions. The defendant appeals, and the plaintiffs cross-appeal.

The defendant contends that the trial court erred in failing to impose the statutory penalties for usury and that the trial court erred in awarding attorney fees under the terms of an illegal note. The plaintiffs contend that the trial court erred by reducing the rate of interest on the note to 9%, and that the court should have enforced the interest on the note at the rate of 14.5%, in accordance with the terms of the note.

The defendant initially contends that the trial court erred in failing to impose the statutory penalties for usury. Section 4 of the Interest Act prescribes, "The maximum rate of interest that may lawfully be contracted for is determined by the law applicable thereto at the time the contract is made." (Ill. Rev. Stat. 1985, ch. 17, par. 6404.) It also provides:

"In all written contracts it shall be lawful for the parties to stipulate or agree that 9% per annum, or any less sum of interest, shall be taken and paid upon every $100 of money loaned or in any manner due and owing from any person to any other person or corporation in this state, and after that rate for a greater or less sum, or for a longer or shorter time, except as herein provided." (Ill. Rev. Stat. 1985, ch. 17, par. 6404.)

The plaintiffs did not contend that any of the numerous exceptions to the rate of 9% per annum ...


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