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05/19/89 Polo National Bank, v. David W. Lester Et Al.

May 19, 1989





539 N.E.2d 783, 183 Ill. App. 3d 411, 132 Ill. Dec. 220 1989.IL.768

Appeal from the Circuit Court of Ogle County; the Hon. F. Lawrence Lenz, Judge, presiding.


JUSTICE DUNN delivered the opinion of the court. UNVERZAGT, P.J., and McLAREN, J., concur.


Plaintiff, Polo National Bank, filed suit against David and Linda Lester for $5,286.94 allegedly owed on a $23,000 promissory note. The trial court found for defendants, ruling that a release of trust deed executed by Polo National Bank released the total amount owed on the note. Plaintiff appeals, contending that the release of the trust deed released only the security and not the note. For the reasons stated below, we reverse.

The Lesters executed a promissory note to Polo National Bank for $23,000. As security for the note, the Lesters executed a second mortgage on their residence in the form of a trust deed. Subsequently, the residence was sold, and Polo National Bank received $19,105.25 to apply to the $23,000 note. Prior to the closing on the house, Polo National Bank also executed and delivered a release of trust deed on the property. The release stated in relevant part:

"The party secured in and by a certain trust deed executed by

do hereby acknowledge receipt of full payment and satisfaction of the moneys secured in and by said document, and in consideration thereof do hereby FOREVER release and discharge the same, and quit claim all right and interest to and in the premises therein described or conveyed, for a description whereof reference may be had to said document or said record thereof. Said trust deed was made to secure one or more promissory notes bearing even date therewith aggregating the sum of Twenty-three thousand and 00/100 . . . Dollars. I further certify that said note or notes has or have been presented to me with satisfactory evidence that the same, with interest due thereon, has or have been fully paid and cancelled."

After Polo National Bank received $19,105.25 from the house sale, it notified defendants in writing that they still owed $5,286.94 on the note. Plaintiff sent defendants four written notices. In the third notice, plaintiff asked defendants to bring their obligation to current status and requested that defendants make a payment of at least $185.45 to pay off the interest. Plaintiff also asked defendants to deliver title of their Cadillac as collateral for the amount owed. Two weeks after this notice was sent, David Lester made a cash payment of $185.45.

At trial, David Lester testified it was his understanding that the bank's receipt of the proceeds from the house sale would settle the obligation owed on the note. He stated that this was what his real estate agent told him. He also said he was never told by anyone at Polo National Bank that he would have to pay for a deficiency that resulted from the house sale. As for the $185.45 payment he made after the house sale, Lester explained that he made that payment under the belief that he owed this amount on a different loan with Polo National Bank. Lester admitted that the normal payment on this different loan was $368.19, but he stated that he believed the $185.45 was an interest payment he owed on that loan.

Doug Harper testified he handled defendants' account at Polo National Bank. He stated the bank never intended to release the total amount due on the note in executing the release of trust deed; it only intended to release the security. The bank still possessed the note, which had never been canceled. Harper stated he talked with David Lester before the house closing, and they talked about working together to pay off the amount defendants would owe after closing. When the trial court asked Harper if he ever told defendants before the house was sold that they would be responsible for a deficiency, Harper replied that he felt he did, but he could not recall a specific conversation or date of conversation.

The trial court held the trust deed release operated as a complete release of the note. The court found the parol evidence rule applied to the release and determined that two exceptions to the rule were not present; the release was not ambiguous and there was no evidence of mutual mistake. The court then stated that it could consider parol evidence where the document did not state the true intent of the parties. The court concluded that the extrinsic evidence did not support plaintiff's position that it did not intend to release defendants' obligation on the note.

Plaintiff contends the trial court erred in finding that the trust deed release also operated to release the note. The general standard of review in a case where the evidence consists mainly of documents is that the court is not bound by the trial court's finding and may make an independent determination on the facts. (Howard A. Koop & Associates v. KPK Corp. (1983), 119 Ill. App. 3d 391, 398.) Where, however, extrinsic evidence is introduced to aid the interpreting of a contract, the determination of the trial court ...

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