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August 28, 1995


Appeal from the Circuit Court of McHenry County. No. 93-LA-365. Honorable Haskell M. Pitluck, Judge, Presiding.

The Honorable Justice Doyle delivered the opinion of the court: Inglis and Hutchinson, JJ., concur.

The opinion of the court was delivered by: Doyle

JUSTICE DOYLE delivered the opinion of the court:

Plaintiffs, Kenneth McAloon and Harrow Gate Builders, Inc., brought an action for breach of contract and fraud in the circuit court of McHenry County against defendants, Northwest Bancorp, Inc., Charter Bank and Trust (Charter), its officers and directors, and George Moser, John Hayes, Jr., and Christine Moser Altenberger, individually and as officers and directors. Plaintiffs sought to recover damages occasioned by defendants' alleged oral misrepresentation committing Charter, twice, to loan money to plaintiffs and then failing to adhere to both commitments. Both plaintiffs' original and first amended complaints were dismissed without prejudice. Plaintiffs filed a second amended complaint. Defendants then moved to dismiss that complaint, raising the Credit Agreements Act (Act) (815 ILCS 160/1 et seq. (West 1992)) as a defense to plaintiffs' claims. Defendants asserted that because the alleged loan commitments were not in writing and were not signed by both parties, as required by the Act, the claims were barred. Based on the Act, the trial court granted defendants' motion to dismiss. Plaintiffs filed a timely appeal.

On appeal plaintiffs contend that: (1) the trial court erred in dismissing their second amended complaint based on the court's application of the Act to plaintiffs' claims; (2) the trial court erred in finding that plaintiffs' equitable estoppel claim did not defeat application of the Act; and (3) the trial court erred in dismissing the fraud action against the individual defendants.

In their second amended complaint, plaintiffs alleged that prior to August 1992 defendants had granted plaintiffs' oral loan commitments, honoring such commitments as if written up in full, and that plaintiffs had relied on this operating procedure as the "necessary, true and correct method" of obtaining loans from defendants. According to plaintiffs, defendants rarely granted written loan commitments, and defendants' officers and directors were instructed not to place loan commitments in writing so that defendants could avoid lender liability suits.

Before August 1992, defendants loaned plaintiffs money for phase I of a multiphase construction project. To obtain funding for the land acquisition and development of phase II, plaintiffs went to Midwest Bank in Melrose Park, which verbally committed to provide funding if plaintiffs obtained a permanent loan commitment from another lender. Seeking a backup letter of credit, plaintiff McAloon spoke with defendant Charter on or about September 5, 1992. McAloon also sought funds for cost overruns of phase I and refinancing of the third mortgage on his personal residence in which Charter had placed a security interest as collateral for the multiphase construction project.

Plaintiffs alleged that Charter's senior loan officer prepared a written proposal of McAloon's loan request and presented it to the bank's loan committee. Plaintiffs further alleged that Charter agreed to provide the funds to finance the cost overruns, the acquisition and development of phase II, and the refinancing of McAloon's third mortgage. Plaintiffs asserted that approval of the loan proposal was signified by the fact that the committee members present at the time of the approval placed their initials on the written proposal.

According to plaintiffs' complaint, one of plaintiffs' subcontractors, who was to be paid from the loan proceeds under Charter's loan commitment, contacted Charter to verify approval of the loan before beginning work on phase II of the project. Plaintiffs alleged that Charter assured the subcontractor of its loan commitment.

Plaintiffs further claimed that on or about September 15, 1992, the loan committee reevaluated plaintiffs' loan structure and then decided not to honor the loan. Plaintiffs alleged that up to this time Charter rarely withdrew a prior loan commitment, choosing instead to work on restructuring the loan mechanics. According to plaintiffs, one committee member, allegedly, suggested that the bank falsify the reason for disallowing the loan approval. Plaintiffs asserted Charter then informed them that it had received a bank examiner notice that the bank had become too heavily concentrated in real estate loans and, therefore, was unable to honor its loan commitment to plaintiffs.

Plaintiffs alleged that in reliance on Charter's loan commitment subcontractors had initiated work in the construction project and McAloon had spent personal monies for some of the development costs, which the bank had promised to fund. Additionally, withdrawal of the loan commitment stopped the cash flow that allowed plaintiffs to function effectively as a contractor and developer.

According to the complaint, plaintiffs contacted Valley Bank of Du Page County and received a verbal commitment for a permanent loan commitment letter, which would take 8 to 12 weeks to process. Early in October 1992, Charter offered to restructure its original loan commitment to meet with the bank examiner's approval. Plaintiffs alleged that as a result of this offer they relinquished the opportunity to seek loan funding from Valley Bank of Du Page County and instead accepted Charter's offer to restructure the loan.

Between November and December 1992, Charter wrote a letter to the seller of the land to be used for phase II, indicating that plaintiffs' loan had been approved and that funds would be released after the sale of two units of phase I. Plaintiffs asserted that this statement within Charter's letter constituted the first indication of a condition precedent to the release of the funds. Plaintiffs alleged that they were unable to meet this condition precedent since the loan was needed to finalize the interiors and landscaping of the units in phase I as well as for the land acquisition for phase II. Plaintiffs had two buyers for units, but one was unwilling to close on an incomplete unit. The other agreed to close if plaintiffs could find a lender to finance the unit. This buyer applied to Charter and, allegedly, was informed several months later that Charter would not lend the buyer money, as to do so would benefit plaintiffs, which the bank was not willing to do.

Plaintiffs asserted that Charter had breached the second oral agreement to lend funds to plaintiffs despite plaintiffs' efforts to accommodate the bank and that, as a result, plaintiffs had experienced financial difficulties. Plaintiffs also asserted that by the time Charter and plaintiffs had entered into a "work-out agreement" to complete construction of phase I of the project ...

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