{ "id": 5412823, "name": "James W. Mills et al., Plaintiffs-Appellants, v. State National Bank et al., Defendants-Appellees", "name_abbreviation": "Mills v. State National Bank", "decision_date": "1975-05-01", "docket_number": "No. 58555", "first_page": "830", "last_page": "838", "citations": [ { "type": "official", "cite": "28 Ill. App. 3d 830" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "15 U.S.C. \u00a7 1635", "category": "laws:leg_statute", "reporter": "U.S.C.", "year": 1970, "pin_cites": [ { "page": "(a)" } ], "opinion_index": 0 }, { "cite": "15 U.S.C. \u00a7 1640", "category": "laws:leg_statute", "reporter": "U.S.C.", "year": 1970, "pin_cites": [ { "page": "(a)" } ], "opinion_index": 0 }, { "cite": "324 N.E.2d 417", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "60 Ill.2d 141", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5415467 ], "opinion_index": 0, "case_paths": [ "/ill-2d/60/0141-01" ] }, { "cite": "12 C.F.R. \u00a7\u00a7 226.2", "category": "laws:admin_compilation", "reporter": "C.F.R.", "pin_cites": [ { "page": "(f)" } ], "opinion_index": 0 }, { "cite": "15 U.S.C. \u00a7\u00a7 1602", "category": "laws:leg_statute", "reporter": "U.S.C.", "pin_cites": [ { "page": "(f)" } ], "opinion_index": 0 }, { "cite": "50 N.E.2d 755", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "383 Ill. 638", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2485875 ], "opinion_index": 0, "case_paths": [ "/ill/383/0638-01" ] }, { "cite": "279 N.E.2d 98", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "2 Ill.App.3d 1051", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 2752140 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/2/1051-01" ] }, { "cite": "222 N.E .2d 535", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1971, "opinion_index": 0 }, { "cite": "77 Ill.App.2d 413", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 2571705 ], "year": 1971, "opinion_index": 0, "case_paths": [ "/ill-app-2d/77/0413-01" ] }, { "cite": "201 N.E.2d 478", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "51 Ill.App.2d 340", "category": "reporters:state", "reporter": "Ill. App. 2d", "case_ids": [ 5278449 ], "opinion_index": 0, "case_paths": [ "/ill-app-2d/51/0340-01" ] }, { "cite": "320 N.E.2d 208", "category": "reporters:state_regional", "reporter": "N.E.2d", "weight": 2, "opinion_index": 0 }, { "cite": "24 Ill.App.3d 142", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5307257, 5310859 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/ill-app-3d/24/0142-01", "/ill-app-3d/24/0142-02" ] }, { "cite": "271 Ill.App. 419", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 3218974 ], "opinion_index": 0, "case_paths": [ "/ill-app/271/0419-01" ] }, { "cite": "141 U.S. 384", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 3555626 ], "year": 1933, "opinion_index": 0, "case_paths": [ "/us/141/0384-01" ] }, { "cite": "139 N.E. 603", "category": "reporters:state_regional", "reporter": "N.E.", "opinion_index": 0 }, { "cite": "308 Ill. 381", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5096818 ], "opinion_index": 0, "case_paths": [ "/ill/308/0381-01" ] }, { "cite": "15 U.S.C. \u00a7 1601", "category": "laws:leg_statute", "reporter": "U.S.C.", "year": 1970, "pin_cites": [ { "page": "et seq." } ], "opinion_index": 0 } ], "analysis": { "cardinality": 934, "char_count": 20009, "ocr_confidence": 0.743, "pagerank": { "raw": 1.9590789429356587e-07, "percentile": 0.7377630896627564 }, "sha256": "1142c62cdae6f07c9566107db3539ac7c637f9efed3d320aeaedf4c8bb589118", "simhash": "1:9075d3b21d84ddfa", "word_count": 3243 }, "last_updated": "2023-07-14T21:36:05.902616+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "James W. Mills et al., Plaintiffs-Appellants, v. State National Bank et al., Defendants-Appellees." ], "opinions": [ { "text": "Mr. JUSTICE McNAMARA\ndelivered the opinion of the court:\nPlaintiffs, James W. Mills and Mary Ann Mills, filed a class action complaint in the circuit court of Cook County against State National Bank (hereinafter the Bank) and Bankers Consultants Corporation, Bankers Consultants Corporation-North, and Mortgage Service Corporation (hereinafter the Brokers). Plaintiffs\u2019 first count of the amended complaint charged that a loan made by the Bank to plaintiffs which had been procured by the Brokers was tainted by usury and violations of Federal and State law. The second and third counts alleged that the Brokers had violated the Illinois Deceptive Trade Practices Act and the Illinois Consumer Fraud Act, respectively. After extensive pretrial discovery had been completed and after all parties had filed motions for summary judgment, the trial court granted defendants\u2019 motions with respect to count one, denied the Brokers\u2019 motions as to counts two and three, and denied plaintiffs\u2019 motions with respect to all of the counts. The trial judge accompanied his order with a written memorandum. Thereafter, plaintiffs voluntarily dismissed the second and third counts of the amended complaint. They have appealed from the order regarding count one.\nThe record consists of pleadings, affidavits, depositions, answers to interrogatories, and exhibits. It reflects the following pertinent facts.\nState National Bank is a national banking association engaged in the general banking business, including the making of loans. Bankers Consultants Corporation and Bankers Consultants Corporation-North are both Illinois corporations involved in the loan brokerage business. Mortgage Service, another Illinois corporation under substantially the same ownership and control as the above-mentioned firms, specializes in evaluating credit for customers of the two loan brokerage corporations.\nIn April, 1967, plaintiffs borrowed $15,000 from a savings and loan association, secured by a first mortgage on their residence. In May, 1969, plaintiffs borrowed an additional $5,580 from Harris Mortgage Loan Corporation, secured by a junior mortgage on their home. The second loan was for a period of 3 years, payable in 36 monthly installments of $155 each, including interest at a purported annual percentage rate of 19.5 per cent.\nIn August, 1969, an employee of the Brokers contacted plaintiffs, informed them that he was aware of their latest loan, and related that his company might be able to refinance the loan on better terms. The parties in this case differ as to the precise nature of the representations made by the Brokers' employee. In any event, on August 12, 1969, after concluding a meeting with a different representative of the Brokers, plaintiffs signed a \u201cRetention Agreement\u201d authorizing the Brokers to negotiate a loan on their behalf with a bank up to $5,800 or such other sum as might be mutually satisfactory. The agreement further provided that successful negotiation of a loan would entitle the Brokers to a $700 commission which the Brokers could \u201ccause the lender to disburse * * * from the principal amount of the loan at the same time and as part of the proceeds of the said loan * * In the event that plaintiffs failed to follow through with an approved loan agreement secured by the Brokers, the agreement stipulated that the Brokers would still be entitled to their fee as \u201cliquidated damages\u201d for the negotiation of the loan. At the meeting the Brokers\u2019 representative prepared a loan application for plaintiffs using the Brokers' forms and credit information furnished by plaintiffs.\nSubsequently, the Brokers submitted the loan application to defendant bank. Tire Bank independently verified the credit information contained in the application and made additional credit inquiries. The Bank eventually approved the loan. The loan was evidenced by a certain installment of $159.55 each, including certain add-on finance charges at a purported annual percentage rate of 19.75 per cent. The note was secured by a trust deed on plaintiffs\u2019 property.\nAt the closing on August 27, 1969, the Bank delivered to plaintiffs a document purporting to be a full disclosure of information concerning the particulars of the loan as required by the Federal Truth-In-Lending Act (15 U.S.C. \u00a7 1601 et seq. (1970)) and Regulation Z thereunder, as well as the Illinois interest statute (Ill. Rev. Stat. 1969, ch. 74, par. 4a). On the face of the document, the finance charge was listed as follows:\n\u201cFINANCE CHARGE, consists of: ...................$2,379.86\nService Charge.........................$ 700.00\nInterest................................$1,679.86\u201d\nPlaintiffs then executed all the pertinent documents and approved the disbursements of the loan proceeds, including the fee that was paid to the Brokers.\nThe notice of right of rescission contained an error. Although the printed copy stated that the borrowers had until midnight of the third business day after consummation of the deal to rescind the transaction, the date \u201cAugust 29\u201d instead of \u201cAugust 30\u201d was typed in the pertinent blanks.\nPlaintiffs made their payments on the loan until this action was filed. They thereupon fully paid off the loan and discharged the debt.\nPlaintiffs\u2019 first principal contention is that the Brokers acted in this matter as agents of the Bank and, therefore, that the Brokers\u2019 fee should be treated as additional interest, thereby rendering the loan usurious. Plaintiffs additionally argue that the loan should be considered void because of various violations of Federal and State disclosure laws.\nIn denying the existence of a principal-agency relationship between it and the Brokers, the Bank points to the following facts set forth in defendants\u2019 affidavits.\nBetween April, 1968, and August, 1970, the Brokers submitted a number of loan applications to the Bank on behalf of the Brokers\u2019 customers. The Bank did not solicit any of the applications and played no part in the Brokers\u2019 decisions to submit the applications. Tire Brokers dealt with more than six other banks in the area, and the Bank handled a substantial amount of installment loans involving people and firms other than the Brokers. The Bank granted 137 of the loan applications submitted to it by the Brokers, some on terms other than those sought, and rejected at least 41. Many of the applications rejected by the Bank were eventually approved by other banking institutions. The Bank independently verified credit information supplied in connection with any proposed loan and \u25a0 independently obtained further credit information on proposed borrowers. The Brokers never exercised any authority regarding the loan once it had been approved, never had or purported to have any authority concerning renewals or extensions of loans, and never had any responsibility in the collection or service of loans. The Bank solely determined whether to grant a loan. The Bank never had any agreement concerning the brokerage fees with the Brokers or their customers and never received any portion of the fees. It never suggested how tire Brokers should be paid. Although the Bank was aware that a written agreement existed between the Brokers and their customers, the Bank was never given a copy of the agreement, played no role in drafting it, and was not aware of the specifics contained in it.\nThe pivotal issue in this case is whether the Brokers acted, at least in a partial capacity, as agents for the Bank. It is well-established in this State that a broker, in negotiating a loan of another person\u2019s money, may charge the borrower a commission without thereby making the loan at the full rate of interest usurious. (Northern Trust Co. v. Sanford (1923), 308 Ill. 381,139 N.E. 603.) Where the fee is paid to the lender\u2019s agent for making the loan, with the lender\u2019s knowledge, the amount of the fee will be treated as interest for purposes of determining usmy. (Fowler v. Equitable Trust Co. (1891), 141 U.S. 384.) Courts will not countenance an evasion of the usury statute and accordingly will look to the substance and not the form of a transaction. Chicago Title & Trust Co. v. Jensen (1933), 271 Ill.App. 419.\nAn agent is one who undertakes to manage some affairs to be transacted for another by his authority, on account of the latter, who is called the principal, and to render an account. (Farrell v. Lincoln National Bank (1974), 24 Ill.App.3d 142, 320 N.E.2d 208.) The acts of an agent are considered in law to be those of the principal. (John Deere Co. v. Metzler (1964), 51 Ill.App.2d 340, 201 N.E.2d 478.) The agent\u2019s authority can come only from his principal. (Wing v. Lederer (1966), 77 Ill.App.2d 413, 222 N.E .2d 535.) The party alleging an agency relationship has the burden of proving it by a preponderance of the evidence. Bright v. Max E. Miller & Son, Inc. (1971), 2 Ill.App.3d 1051, 279 N.E.2d 98.\nA recent decision of this court, Farrell v. Lincoln National Bank (1974), 24 Ill.App.3d 142, 320 N.E.2d 208, involves facts and questions of law identical to those found in this case. In Farrell, this court affirmed the trial court\u2019s allowance of summary judgment on behalf of the defendants bank and brokers, holding that the plaintiffs\u2019 inferences of agency were insufficient as a matter of law to overcome the facts and disclaimers offered by the defendants. We agree with the reasoning of Farrell and adhere to its conclusion.\nIn arguing that an agency relationship existed between the Bank and the Brokers in tins case, the plaintiffs point out that the Brokers obtained the relevant information regarding the security for the loan; that the Bank never examined the collateral; that the Brokers ordered a preliminary report of title, for which it was compensated by the Bank; and that the Brokers prepared the notes, trust deed, disclosure statement, and notice of right of rescission.\nHowever, as was noted in Farrell, it is not uncommon for a third person anxious to consummate a business transaction for his client to assemble credit information for a lending institution. Hopefully, it will shorten the wait for the parties and make the application more attractive. In the absence of anything in the record to support an inference that the Bank was bound to accept the application prepared by the Brokers, we are unable to agree with plaintiffs that the mere preparation of these documents transformed the Brokers from agents of the borrowers to agents of the lender. It is clear to us that their actions were prompted by their own self-interest, not that of the Bank.\nPlaintiffs also rely on a circular published and advertised by the Brokers which alleged that the Brokers represented a group of banks in making available bank loans to prospective customers. The circular stated in part as follows:\n\u201cCHICAGO GROUP OF BANKS APPROVE $16 MILLION PROGRAM FOR HOME OWNERS.\nRecently, a group of Chicago Banks appointed Steven-Bruce Investment Go. [Bankers Consultants Corporation] Loan Representative for a New 16 Million Dollar Bank program.\nTire Bank funds will be used to offer Homeowners 1 to 5 year, large, personal loans from $1500-$7500. The program is designed to stop Homeowners from borrowing money from loan companies and finance companies and to curtail charge accounts and charge cards.\u201d\nA second document offered by plaintiffs was a copy of a letter, dated October 20, 1966, sent by the Brokers to the Plaza Drive-In Bank. The letter purported to offer various local banks a package \u201cloan arrangement\u201d service whereby the Brokers would perform various services for the banks as their agents, such as soliciting loans, preparing and screening loan applications, investigating credit, preparing loan documents, and facilitating loan closings. Hie letter listed Richard C. Chapeck, a vice-president of State National Bank, as one of eight references.\nAccording to the Bank\u2019s affidavits, the circular, admitted by the Brokers to be false, had not been seen by the Bank or its employees before this action was commenced. It had been issued without its authority or consent. The circular had been distributed over a year prior to the loan in question and over 2 years prior to the institution of this suit. As to the letter, no Bank employee had received a copy of it, had ever been consulted about it, had ever approved it, or had even known of its existence prior to this action. Chapeck denied authorizing the use of his name as a reference and denied knowing it was being used in such a capacity.\nThe short answer to plaintiffs\u2019 contention is that the two exhibits are not statements by the Brokers that they were acting as representatives of State National Bank. At most, they were solicitations by the Brokers for business. Even if the exhibits could be construed as claims by the Brokers of agency, the exhibits cannot be considered to establish agency because they would constitute mere statements of agents out of the principal\u2019s presence, never ratified or consented to by the principal. (Farrell v. Lincoln National Bank; Fredrick v. Wolf (1943), 383 Ill. 638, 50 N.E.2d 755.)\nAs a final claimed inference of agency, plaintiffs note that the disclosure statement described the Brokers\u2019 fee as a service charge. Since the Illinois Truth-In-Lending Act allegedly requires only the disclosure of fees of the lender, plaintiffs suggest that a proper inference to be drawn is that the Bank considered the commission to be its own and not the Brokers\u2019.\nRelevant sections of the Federal Truth-In-Lending Act (15 U.S.C. \u00a7\u00a7 1602(f), 1605(a)(3) (1970)) and Federal Reserve Board Regulation Z (12 C.F.R. \u00a7\u00a7 226.2(f), 226.2(m), 226.4(a)(3) (1970)) require the disclosure of a \u201cfinder\u2019s fee\u201d paid to an \u201carranging\u201d creditor as part of the finance charge. In this case, the Brokers qualify as such a creditor. Another provision of Regulation Z, section 226.6(d), permits a joint disclosure statement where there are multiple creditors. Thus, it is obvious the word \u201ccreditor\u201d as used in these Federal provisions is broader in meaning than the word \u201clender\u201d as used in our State provision. We conclude that the Banker\u2019s compliance with the Federal provisions has no probative value on the issue of agency. (Farrell v. Lincoln National Bank.) While the Bank may have been better served in designating the Brokers\u2019 fee as something other than a \u201cService Charge,\u201d we look to the substance of the transaction and not the form, and conclude that on the facts of this case this designation alone was insufficient to create a genuine issue of an agency relationship between the Bank and the Brokers. Accordingly, we hold that the trial court correctly ruled that as a matter of law the Brokers did not operate as the Bank\u2019s agents in the present case.\nPlaintiffs additionally argue that regardless of the resolution of the agency issue, this loan should be held usurious on its face because the commission was imposed \u201cdirectly or indirectly\u201d by th\u00a7 Bank as consideration of the loan, thus requiring its treatment as interest. (See Ill. Rev. Stat. 1969, ch. 74, par. 4.1 \u2014 1.) However, the evidence shows that the retention agreement was entered into prior to the time the Brokers approached the Bank. Since much of the argument offered by plaintiffs on this point is similar to that offered, and rejected, on the issue of agency, we are left with the mere fact that the Bank disbursed part of the loan proceeds to the Brokers as directed. Such evidence is insufficient to support plaintiffs\u2019 position.\nPlaintiffs next seek to void this transaction because of alleged violations of Federal and State disclosure laws. In support of their position they maintain that the disclosure was untimely, that the notice of rescission was erroneous, and that the commission was made nonrefundable.\nWe need not determine whether the disclosure on the day of closing was untimely. This issue was not raised in the trial court and hence must be deemed waived for purposes of review. (Kravis v. Smith Marine, Inc. (1975), 60 Ill.2d 141, 324 N.E.2d 417.) Plaintiffs\u2019 contention that the issue is preserved for our consideration because the trial judge \u201csaw fit to touch upon it\u201d in his memorandum is unsupported by legal authority, is unpersuasive, and is rejected by this court.\nPlaintiffs argue that the incorrect date on the notice of right of rescission acted to \u201cvoid the entire Loan and to make the defendants liable in this State Court action for a violation of the Federal statute.\u201d\nA review of the Federal Truth-In-Lending Act reveals that a violation of the Act of the type complained of here provides two possible remedies. One is a suit for a civil penalty within 1 year of the consummation of the consumer credit transaction. (15 U.S.C. \u00a7 1640(a) (1970).) In their brief plaintiffs concede that the present action is not founded upon this provision. The second possible remedy is an action for rescission. (15 U.S.C. \u00a7 1635(a) (1970).) However, it appears to ns that plaintiffs are not seeking this remedy either. Count one of the amended complaint does not pray for rescission. Plaintiffs have never notified defendants of their decision to rescind, as the Federal statute requires. Moreover, plaintiffs prepaid the loan and discharged their obligation immediately after this action was commenced. Indeed, plaintiffs appear to concede the fact that they have never exercised their right to rescind, stating in their reply brief that they \u201ccould have rescinded\u201d the loan instead of prepaying it. The gist of plaintiff\u2019s position appears to be that a violation of the notice of right of rescission section creates implicit additional rights under Illinois law to void the loan. We need not decide whether such an action is permitted under this provision because the issue was not raised or pleaded in the trial court.\nPlaintiffs finally contend that the loan should be held void because the Brokers\u2019 fee was made nonrefundable upon rescission. This position is grounded upon an alleged statement made by a representative of the Brokers that a rescission of the loan by plaintiffs would have no effect on their fee. Brokers deny the veracity of the statement. There is nothing in the record indicating that the statement was made by an employee of the Bank.\nThe purported statement has no bearing on Illinois law. In the first place, Illinois law does not provide a right of rescission similar to the Federal provision. Furthermore, the only remotely pertinent State law provision, section 4a(a) of the Illinois interest act (Ill. Rev. Stat. 1969, ch. 74, par. 4a(a) ),\u25a0 merely provides that a partial refund of interest must be made upon prepayment of a loan. Since we have held that the Brokers\u2019 fee in this case is not to be considered interest, the provision has no applicability. In regard to Federal law, section 1635(b) of the Truth-In-Lending Act does provide that upon rescission a borrower is not liable for \u201cany finance or other charges.\u201d However, since plaintiffs have not sought rescission, that section also has no bearing on the present case.\nWe conclude that the trial court correctly granted summary judgment on count one in favor, of the defendants. Since plaintiffs cannot successfully maintain their action individually, the class action cannot be maintained.\nIn view of our holding, it is not necessary to consider the additional contention of the Brokers that national banks are exempt from State usury laws.\nAccordingly, the judgment of the circuit court of Cook County is affirmed.\nJudgment affirmed.\nMcGLOON, P. J., and MEJDA, J., concur.", "type": "majority", "author": "Mr. JUSTICE McNAMARA" } ], "attorneys": [ "Sidney Z. Karasik, of Chicago, for appellants.", "Jenner & Block, of Chicago (William B. Davenport, Garold L. Britton, and Peter A. Flynn, of counsel), for appellee State National Bank.", "Lieberman, Levy, Baron & Stone, of Chicago (Myron Lieberman and Robert L. Schlossberg, of counsel), for appellee Bankers Consultants." ], "corrections": "", "head_matter": "James W. Mills et al., Plaintiffs-Appellants, v. State National Bank et al., Defendants-Appellees.\n(No. 58555;\nFirst District (3rd Division)\nMay 1, 1975.\nSidney Z. Karasik, of Chicago, for appellants.\nJenner & Block, of Chicago (William B. Davenport, Garold L. Britton, and Peter A. Flynn, of counsel), for appellee State National Bank.\nLieberman, Levy, Baron & Stone, of Chicago (Myron Lieberman and Robert L. Schlossberg, of counsel), for appellee Bankers Consultants." }, "file_name": "0830-01", "first_page_order": 854, "last_page_order": 862 }