Court of Appeals of Illinois, First District, Fourth Division
Appeal from the Circuit Court of Cook County. No. 11 CH 43251. Honorable Moshe Jacobius, Judge Presiding.
John S. Xydakis, of Law Office of John S. Xydakis, of Chicago, for appellants.
Stephen L. Golan and Caren A. Lederer, both of Golan & Christie LLP, of Chicago, for appellee.
JUSTICE ELLIS delivered the judgment of the court, with opinion. Justices Howse and Cobbs concurred in the judgment and opinion.
[¶1] This is a mortgage foreclosure case in which the principal defenses raised by the homeowner arise under the federal Truth in Lending Act (TILA) (15 U.S.C. § § 1601 et seq. (2006)). In this appeal, we must decide whether plaintiff, People's Bank of Arlington Heights (People's Bank), was required to comply with certain disclosure provisions of TILA before foreclosing on a home owned by defendants Marshall Atlas and Arlene Atlas. The trial court found TILA inapplicable, and thus granted summary judgment in favor of People's Bank, because the loan secured
by the mortgage on defendants' home was a commercial loan, not a consumer loan, and was thus exempt from TILA's disclosure requirements. We agree with the trial court and affirm its judgment.
[¶2] I. BACKGROUND
[¶3] The loan and foreclosure at issue in this case were preceded by some factual background that we will briefly detail. Defendant Marshall Atlas was the owner of Salta Group, Inc. (Salta), and his wife Arlene Atlas was an owner of HBZ, Inc. (HBZ). Both Salta and HBZ were in the business of purchasing tax certificates--delinquent real estate taxes sold by the county in which the subject property was located. To fund their operations, Salta and HBZ took out various loans from People's Bank. Marshall personally guaranteed the loans to Salta, and Arlene personally guaranteed the loans to HBZ. In May 2010, People's Bank renewed Salta's revolving line of credit in the amount of $2.3 million. (It renewed a similar revolving draw loan to HBZ as well, but that loan is not pertinent to this appeal.) The Salta line of credit was secured by a security interest in the tax certificates owned by Salta.
[¶4] In June 2011, People's Bank became concerned that the Salta line of credit was under-collateralized because, it alleges, the tax certificates were less valuable than they had been represented to be, and because People's Bank believed that Marshall had pledged those tax certificates to secure loans from other sources, as well.
[¶5] To satisfy People's Bank's concern and to pay down the Salta line of credit, Marshall and Arlene personally borrowed $960,000 from People's Bank and executed a first mortgage on their residence to secure the loan. The proceeds of that loan were not given to Marshall or Arlene; instead, they were transferred directly and credited to the Salta line of credit. It is this $960,000 loan that is the subject of this appeal.
[¶6] The first page of the note for this loan indicated that the loan's purpose was " Consumer." One paragraph of the note, captioned " Loan Purpose," stated, " The purpose of this Loan is to provide a shareholder loan to Salta Group, Inc."
[¶7] The note also contained a paragraph entitled, " Federal Truth-In-Lending Disclosures," which included information regarding the loan's interest rate, the estimated monthly payments, the amount financed, and the total payments defendants would make.
[¶8] The note included two documents entitled, " Notice of Right of Rescission." These notices said that they " relate[d] to a consumer credit account dated July 26, 2011" between People's Bank and defendants, Marshall and Arlene. The notices both contained the following provisions:
" Your Right to Cancel
You are entering into a transaction that will result in a mortgage/lien/security interest on/in your home. You have a legal right under federal law to cancel this transaction, without cost, within three business ...