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12/14/88 Federal Deposit Insurance v. Barry Ablin Et Al.

December 14, 1988





532 N.E.2d 379, 177 Ill. App. 3d 390, 126 Ill. Dec. 694 1988.IL.1788

Appeal from the Circuit Court of Cook County; the Hon. Albert Green, Judge, presiding.


JUSTICE McNAMARA delivered the opinion of the court. RIZZI and FREEMAN, JJ., concur.


Plaintiff, FDIC, as receiver of United of America Bank, (the Bank), brought this action against defendants Barry and Esther Ablin to foreclose a mortgage on their residential real estate. The trial court granted summary judgment in favor of plaintiff and ordered the foreclosure and sale of defendants' home, and granted plaintiff's petition for attorney fees. On appeal, defendants contend the trial court erred in entering summary judgment because material facts were in dispute regarding the rate of interest to be applied to the note secured by the real estate. Defendants further maintain that the trial court abused its discretion in dismissing their counterclaim and prohibiting an amended answer asserting an affirmative defense under the Federal Truth in Lending Act (15 U.S.C. § 1601 et seq. (1982)). Defendants also challenge the award of attorney fees to plaintiff.

On May 12, 1983, defendants executed a note with the Bank for $107,000, putting up a mortgage on their home as collateral. The interest rate to be charged on the mortgage note was "2% over the bank's prime rate as it may change from time to time, with a floor on loan rate of 12 1/2%." Between May 12, 1983, and April 2, 1984, defendants paid $10,973.43 as interest on the mortgage.

On April 24, 1984, the Bank failed and plaintiff was appointed as receiver. At the time of the Banks' failure, the unpaid principal balance on defendants' loan was $107,000. On February 7, 1986, plaintiff filed a complaint for foreclosure and other relief.

On February 6, 1987, defendants rescinded the transaction and demanded return of all the money they had paid. On February 13, 1987, defendants filed a counterclaim alleging that neither the Bank nor plaintiff as receiver provided defendants with notice of the right to rescind the loan transaction as required by TILA. (15 U.S.C. § 1601 et seq. (1982) (and the regulations promulgated thereunder, 12 C.F.R. § 226.1 et seq. (1988)).) Defendants sought return of all interest and other fees paid on the loan. Defendants also alleged the above violation as an affirmative defense in their first amended answer.

The trial court dismissed defendants' counterclaim with prejudice on the grounds that the claim was barred by the three-year statute of limitations stated in 15 U.S.C. § 1635(f) (1982). The trial court granted defendants leave to file a second amended answer provided that the second amended answer did not contain affirmative matters previously ruled on by the court. Defendants filed a notice of reservation of rights of appeal to ensure that by tendering a second amended answer with affirmative defenses, they were not waiving the rights or claims set forth in the initial affirmative defenses.

Defendants' second amended answer asserted that the rate of interest being charged by plaintiff was based on a nonexistent prime rate and was further barred by the Illinois usury statute (Ill. Rev. Stat. 1985, ch. 17, par. 6413).

Plaintiff filed a motion for summary judgment and attached the affidavit of John Donovan, a bank liquidation specialist with plaintiff, who attested to the fact that defendants failed to make payments due under the note. Plaintiff's motion for summary judgment listed the amount of principal and interest outstanding on defendants' note.

Defendants filed a response to the motion for summary judgment challenging the calculation of interest owed. Defendants filed the affidavit of Professor William Bryan, former director of the Bank for more than three years prior to its closing. Bryan attested that at all times while he was director, the Bank officers determined the Bank's prime rate. The Bank had no fixed formula or standard for determining the prime rate but rather observed the rates being announced by other Chicago area banks. Defendants maintained that because the Bank determined its own prime rate, there was no prime rate after the date that the Bank closed.

Plaintiff filed an additional affidavit of Donovan in which he attested that with regard to liquidation of the Bank, it was determined that the Bank would follow the prime rate declared by Continental Illinois Bank in setting the Bank's prime rate. Thus, plaintiff used Continental's prime rate for computations of amounts due plaintiff as receiver. Plaintiff used a rate of between 20% and 21% to determine the ...

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