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July 19, 1994


Appeal from the Circuit Court of Cook County. Honorable Aaron Jaffe, Judge Presiding.

Released for Publication August 25, 1994. Petition for Leave to Appeal Denied February 1, 1995.

Hartman, Scariano, McCORMICK

The opinion of the court was delivered by: Hartman

JUSTICE HARTMAN delivered the opinion of the court:

Plaintiffs, James and Nancy Talbert (the Talberts), appeal from an order dismissing their amended complaint (complaint). The complaint charged defendant, Home Savings of America (Home Savings), with breach of contract and two counts of fraud, claiming that Home Savings wrongly assessed the Talberts $250 in "points" on their home mortgage loan. Presented as issues for review are whether the complaint sufficiently states a cause of action for breach of contract, common law fraud, and statutory fraud; and the breach of contract count is barred by affirmative matter.

The following facts are gleaned from the complaint and its exhibits. In July 1991, Home Savings advertised in the media certain mortgage loans with no points or application fees. Specifically, it advertised a "no-points fixed rate loan" with "no appraisal fee," and a "no-points adjustable rate loan" with "no appraisal fee and no application fee." The advertisement also stated: "Check with your local loan office for maximum loan amounts and other terms and limitations."

The next month the Talberts visited Home Savings' office and applied for a loan to refinance their home mortgage. Home Savings approved their application, of which they were notified in a commitment letter (commitment) dated August 29, 1991. The commitment advised that the letter and other written loan documents will "supersede any oral agreements, statements or representations that might have been made by you or [Home Savings]." The commitment also provided that the terms of the loan included an adjustable interest rate and "a loan fee of 0% of the loan amount plus $250."

At closing on September 16, 1991, a settlement statement, executed by the Talberts that same day, called the $250 fee a "LOAN APPLICATION FEE." On November 11, 1991, James Talbert wrote Home Savings a letter protesting the $250 fee, acknowledging that the fee had been explained to him and his wife, but questioned its appropriateness in light of Home Savings' advertisements.

Early in 1992, Home Savings sent the Talberts a statement which indicated that the $250 fee was to be reported to the Internal Revenue Service as points. According to the complaint, had Home Savings disclosed to the Talberts before the closing that the $250 fee actually was points, they "would have protested and/or not closed the loan."

Home Savings moved to dismiss the complaint pursuant to sections 2-615 and 2-619(a)(9) of the Code of Civil Procedure (735 ILCS 5/2-615, 5/2-619(a)(9) (West 1992) (section 2-615 or section 2-619(a)(9))). To that motion, Home Savings appended several documents that set forth in writing the home mortgage loan agreement between it and the Talberts. These documents, which the Talberts failed to attach to their complaint, portentously augment the complaint's allegations as follows.

When the Talberts initially visited Home Savings' office on August 12, 1991, they executed three documents: an addendum to their loan application, a notice concerning loan options, and their loan application. In the addendum, the Talberts chose to apply for an "ARM IV-C" adjustable rate mortgage loan. The Talberts certified in the addendum that "the terms of [several if not all Home Savings'] loan programs [had been explained to them] by the loan agent prior to acceptance of the completed application to which this Addendum is attached," and that they had read and understood "the provisions contained on both sides of this Addendum." The loan application also indicated that the Talberts were applying for a "IV-C" mortgage loan.

The notice advised that, under the "ARM IV-C" program, either of two loan options involving different fee structures were available. The Talberts chose the option where they would pay a "loan fee of 0% plus $250" with prepayment penalties, rather than a "loan fee of 1/2% plus $250" with no prepayment penalties. The Talberts acknowledged that the terms of the loan program, including the charges discussed above," had been described to them.

Home Savings later tendered to the Talberts a document entitled "GOOD FAITH ESTIMATES OF SETTLEMENT CHARGES." It again disclosed that the loan the Talberts had applied for would require them to pay the $250 fee upon closing. This document called the $250 fee a "Loan Origination Fee."

On the closing date, September 16, 1991, the parties executed the "Loan Closing Statement." It described the $250 fee simply as a "Loan Fee" and authorized Home Savings to deduct it from the loan proceeds prior to disbursement of the loan. The closing statement also provided: the borrower "agrees to the correctness hereof and further authorizes and ratifies the deductions and disbursements of the amounts shown above"; and "borrowers' execution of ...

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