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Crown Mortgage Company v. Joseph Young; Minnie Mcclinden

March 18, 2013


Appeal from the Circuit Court of Cook County. No. 04 CH 04632 Honorable Moshe Jacobius, Judge, Presiding.

The opinion of the court was delivered by: Presiding Justice Hoffman

PRESIDING JUSTICE HOFFMAN delivered the judgment of the court with opinion. Justice Rochford concurred in the judgment and opinion.

Justice Delort concurred in the judgment and opinion, and specially concurred, with opinion.


¶ 1 The appellant, Unclaimed Funds Unit, LLC (Unclaimed), appeals the circuit court's order denying its petition for turnover of surplus foreclosure funds owed to the defendant, Minnie McLenden. Unclaimed argues that the defendant validly assigned her interest in the surplus to it and that the court erred in finding the assignment unconscionable. For the reasons that follow, we affirm the circuit court's judgment.

¶ 2 This matter arises out of the 2004 foreclosure of the defendant's mortgage on her home, whose later judicial sale yielded a surplus of over $14,000. The defendant never claimed the funds on her own, but, in February 2012, Unclaimed filed a petition for turnover of the funds. The petition stated that the defendant had assigned her interest in the funds to Unclaimed, for "Fifty Dollars *** and for other good and valuable consideration." On April 18, 2012, Unclaimed appeared in the circuit court to prosecute its petition, and it asserted that it had promised to give the defendant $50 plus half of the surplus in exchange for her assignment of the full $14,000 to Unclaimed. After the attorney for Unclaimed acknowledged that he had not given the defendant notice of the court hearing, the circuit court informed him that it would not proceed absent such notice. The court also warned that he saw "a serious issue of conscionability" of the assignment contract. The court explained as follows:

"We have rules here in terms of how much you can charge on a mortgage foreclosure, $1,500. To charge somebody $7,000 for something that is not at all difficult or complicated because of the fact that we have a help desk here -- anybody can go here. We have people, pro ses, and basically they pay nothing."

¶ 3 On May 1, 2012, the defendant appeared in court and testified regarding the assignment contract. The defendant recalled that she received a letter "stating that [she] had some money that [she] didn't even know about." The defendant stated that she could go about getting the money "through [Unclaimed]." She said that she contacted Unclaimed, which sent a notary to her home with papers for her signature. The defendant said that Unclaimed never told her that she could obtain the money without its help and that she agreed to split the money with Unclaimed in exchange for assistance. However, she agreed that the actual contract that she signed stated that she would receive only $50 and unspecified other consideration, without making mention of any split of the proceeds. When asked, the defendant said that she did not know that she could have obtained all of the money by consulting with the court's help desk. She said that she agreed to the assignment because she believed that Unclaimed was working as her attorney, and because it informed her of her entitlement to the funds. On further examination, the defendant testified that she could read only "[a] little bit" and that her niece read the contract to her before she signed it.

¶ 4 After hearing the defendant's testimony, the court declared the agreement to be unconscionable, denied Unclaimed's petition, and informed the defendant that she could go to the help desk to claim the entire $14,000.

¶ 5 Unclaimed later filed a timely motion to reconsider, to which it attached a copy of the initial letter it had sent to the defendant, as well as a copy of a contract between it and the defendant. The contract stated that Unclaimed would give the defendant half of the surplus funds, plus $50. The initial solicitation letter stated that Unclaimed had "located monies that we believe belongs [sic] to you" and that, with her approval, it would "do further research and then determine the best method for retrieving the monies." The letter invited the defendant to call Unclaimed for further information. The circuit court denied the motion to reconsider, and Unclaimed filed this timely appeal.

¶ 6 Unclaimed's principal argument on appeal is that the circuit court erred in declaring its contract with the defendant to be unconscionable. The parties do not dispute the facts underlying the circuit court's determination of unconscionability; they present us with only the question as to whether the court correctly found unconscionability based on those facts. "The determination of whether a contract or a portion of a contract is unconscionable is a question of law, which we review de novo." Kinkel v. Cingular Wireless LLC, 223 Ill. 2d 1, 22, 857 N.E.2d 250 (2006).

¶ 7 "Unconscionability can be either 'procedural' or 'substantive' or a combination of both." Razor v. Hyundai Motor America, 222 Ill. 2d 75, 99, 854 N.E.2d 607 (2006). "Procedural unconscionability refers to a situation where a term is so difficult to find, read, or understand that the [party] cannot fairly be said to have been aware [she] was agreeing to it, and also takes into account a lack of bargaining power." Razor, 222 Ill. 2d at 100. "Substantive unconscionability refers to those terms which are inordinately one-sided in one party's favor." Razor, 222 Ill. 2d at 100. We agree with the circuit court's determination that both facets of unconscionability are present here.

¶ 8 Several aspects of this contract's formation indicate its procedural unconscionability. First, there was an obvious inequality in the parties' abilities to understand the transaction at hand. Unclaimed, a company that deals in this type of transaction, presented its contract to a defendant who did not fully understand Unclaimed's relationship to her and, had very limited reading skills, and had no knowledge of the simple procedures required to obtain the surplus money at issue. Unclaimed preyed on this disparity by claiming in its solicitation letter that it needed to conduct research to determine how to obtain the money, when, as the circuit court noted, the matter required no research at all. Second, and relatedly, there existed a vast discrepancy in bargaining power between the defendant, a widowed woman with limited education and apparently limited means, and Unclaimed, a company with sufficient resources to send a notary to the plaintiff's residence to obtain her signature on a contract it devised. Third, the defendant's testimony regarding how the contract was presented to her demonstrates that she was offered no opportunity to change the contract that Unclaimed proposed or to meaningfully negotiate its terms.

ΒΆ 9 Standing alone, this procedural unconscionability might be insufficient to invalidate Unclaimed's contract. However, it more than suffices once combined with an even stronger showing of substantive unconscionability. As the circuit court noted, this agreement would have the defendant pay approximately $7,000 to Unclaimed for a service she could have obtained for free. These terms epitomize the " 'overall imbalance in the obligations and rights imposed by [a] bargain, and significant cost-price disparity' " (Kinkel, 223 Ill. 2d at 28 (quoting Maxwell v. Fidelity Financial Services, Inc., 184 Ariz 82, 89, 907 P. 2d 51 (1995)) that defines substantive unconscionability. Indeed, although Unclaimed's appellate brief contains a section purporting to challenge the circuit court's substantive unconscionability finding, that section offers nothing to address the gaping cost-price disparity in this agreement; it instead diverts attention back to the procedural aspects of the contract. Accordingly, we see no reason to dispute the circuit court's conclusion that Unclaimed's ...

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