Appeal from the Circuit Court of Cook County. No. 09 CH 49410 Honorable Mary Anne Mason, Judge Presiding.
The opinion of the court was delivered by: Justice Cunningham
JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Presiding Justice Quinn and Justice Connors concurred in the judgment and opinion.
¶1 This appeal arises from a July 28, 2010 order entered by the circuit court of Cook County, which granted defendant-appellee Inland Bank's motion to dismiss a class action complaint on all counts with prejudice. On appeal, the appellants, Hubbard Street Lofts LLC and Andrew Ruttenberg, argue that: (1) the trial court erred in dismissing the counts for breach of contract, violation of the Illinois Interest Act (Interest Act) (815 ILCS 205/1 et seq. (West 2010)), and declaratory judgment in the appellants' complaint because the court misinterpreted sections 9 and 10 of the Interest Act; (2) the trial court improperly dismissed the breach of contract count in the appellants' complaint because the promissory note was ambiguous; and (3) the trial court erred in dismissing the counts for breach of the oral loan preparation contract, violation of the Consumer Fraud and Deceptive Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West ____)), and common law fraud in the appellants' complaint because the promissory note at issue was written and signed by the parties. For the following reasons, we affirm the judgment of the circuit court of Cook County.
¶3 On or around March 17, 2006, plaintiffs-appellants Hubbard Street Lofts, LLC and Andrew Ruttenberg (collectively, Hubbard Street Lofts) obtained a loan of $6,400,000 from AmeriMark Bank, whose successor in interest in this case is Inland Bank. Hubbard Street Lofts claim that prior to the drafting of the promissory note (the Note), the parties had an agreement that Hubbard Street Lofts would pay AmeriMark Bank a fee to draft a loan document based on the representation that the interest rate on the loan would be 8.000% per year. The Note contained in the record is the loan document that memorialized the parties' agreement. The Note is 1 1/2 pages long and contains multiple sections that are at issue in the case including:
(1) The heading, which states:
"Principal Amount: $6,400,000.00 Initial Rate: 8.000% Date of Note: March 17, 2006"
(2) The payment section, which states (in relevant part):
"PAYMENT. *** The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual Interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding."
(3) The variable interest rate section, which states: "VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is Lender's Prime Rate (the 'index'). This is the rate Lender charges, or would charge, on 90-day unsecured loans to the most creditworthy corporate customers. This rate may or may not be the lowest rate available from Lender at any given time. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each Day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 7.500% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 0.500 percentage points over the index, resulting in an Initial rate of 8.000% per annum. NOTICE: Under no circumstances will the Interest rate of this Note be more than the maximum rate allowed by applicable law."
(4) The signature clause, which states:
"PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE."
¶4 Most notable is the payment section of the Note and the way it provides for interest to be calculated. A recent decision in the Illinois Appellate Court, First District, shed some light on the different methods of interest calculation that are currently used by lenders. This court noted that banks generally use three different methods of computing interest, which are the 365/365 method (exact-day interest), the 360/360 method (ordinary interest), and the 365/360 method (bank interest). Asset Exchange II, LLC v. First Choice Bank, 2011 IL App (1st) 103718, ¶20 (quoting In re Oil Spill by the "Amoco Cadiz" off the Coast of France on March 16, 1978, No. 92-3282, 1993 WL 360955, *1-2 (7th Cir. Sept. 14, 1993)).*fn1 The exact-day method is calculated by taking an interest rate, dividing it by 365, and then applying it to each day of the year. The ordinary interest rate method is calculated the same way, only using 360 as the number of days instead of 365. The 365/360 bank method, which was used in the Note in the instant case, is slightly different. It is calculated by ...