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10/24/88 Diamond Mortgage v. Henrietta Armstrong

October 24, 1988





530 N.E.2d 1041, 176 Ill. App. 3d 64, 125 Ill. Dec. 632 1988.IL.1563

Appeal from the Circuit Court of Cook County; the Hon. Harold A. Siegan, Judge, presiding.


JUSTICE MANNING delivered the opinion of the court. QUINLAN and O'CONNOR, JJ., concur.


An understanding of the issues before the court on this appeal depends more upon an understanding of the litigation's procedural history than upon an exposition of its underlying factual matrix.

Defendant, Henrietta Armstrong, appeals from a judgment of foreclosure and sale entered by the circuit court, and both she and attorney Steven Morton appeal from an award of attorney fees entered against them pursuant to section 2-611 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2-611). We disagree with the judgment of the circuit court, and hence we reverse.

On December 4, 1985, defendant signed a contract with All American Aluminum & Construction Co. (All American) for home improvements. The contract provided for certain repairs to be made on the defendant's home for the sum of $15,000 in cash, payable upon completion. All American referred Mrs. Armstrong to Diamond Mortgage Corporation of Illinois (Diamond) for financing, and subsequently, Mrs. Armstrong obtained a loan in the principal amount of $14,500 from Diamond. Diamond apparently acted as both the lender and an arranger of financing and assessed a fee of $4,000 against Mrs. Armstrong for its services in arranging the loan ($290 of this fee was given to All American as a referral fee). The fee was added to the principal balance of the mortgage.

Although none of the repairs specified in the contract were ever performed, Diamond dispersed payment in the amount of $4,000 to All American. Mrs. Armstrong sought to cancel the contract and claims that when she did, Diamond attempted to coerce her, defaulted her, and filed a foreclosure action.

Mrs. Armstrong filed affirmative defenses to the foreclosure action alleging fraud on the part of the plaintiff. She maintained that she had not been informed of the $4,000 brokerage fee prior to closing and that the addition of this fee made the payment terms more onerous than previously contemplated. She further claimed that she did not understand the contents of all the documents presented to her by Diamond, but because she could not pay the cancellation fee specified in her contract with All American, she nonetheless signed them.

Diamond filed a pleading labeled "Amended Motion for Judgment on the Pleadings as to Certain Defendants and Summary Judgment in favor of Plaintiff as to the Affirmative Matters Raised in Defendants [ sic ] Answer and for Entry of a Judgment of Foreclosure and Sale of the Premises." In this document Diamond alleged that defendant's answer and affirmative defenses did not constitute a valid defense to the foreclosure action and claimed that by failing to respond to a prior request to admit facts, defendant had admitted all of the material allegations in the complaint, and consequently, plaintiff was now entitled to judgment.

Defendant filed a memorandum in response to the motion for summary judgment, claiming that she had established a prima facie case for fraud in her affirmative defenses. Diamond then filed a motion to strike this memorandum as being irrelevant and conclusory and sought attorney fees pursuant to section 2 -- 611 for allegedly false pleading.

On August 26, 1987, the court held a hearing at which it assessed fees and costs in the amount of $375 against defendant's attorney, Steven Morton, purportedly pursuant to section 2 -- 611, for allegedly obstructing Diamond's deposition of the defendant. The matter was then continued for an evidentiary hearing on Diamond's motion for summary judgment. The trial court subsequently refused to reconsider or clarify this order.

On October 28, 1987, defendant filed amended affirmative defenses, an amended counterclaim and a motion to continue or strike the pending evidentiary hearing on plaintiff's motion for summary judgment. The counterclaim alleged that Diamond was guilty of fraud in that it violated section 433 of the Federal Trade Commission Regulations (16 C.F.R. ยง 433 1988)), the Illinois Consumer Fraud and Deceptive Business Practices Act (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 261 et seq.), and "An Act relating to loans and purchases of ...

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