Land of Lincoln Goodwill Industries, Inc. v. PNC Financial Services Group, Inc.
2007 U.S. App. LEXIS 30767
7th Cir.2014Background
- Goodwill's loan from PNC included a prepayment charge under Article IX that could apply if prepaid during a period with a fixed rate.
- The loan had an Initial Rate of 4.79% for the first ten years and an Adjusted Rate thereafter, with a potential Taxable Rate if taxability occurred.
- PNC calculated a prepayment charge when Goodwill notified of full prepayment on March 30, 2012 for a May 2012 payoff.
- Goodwill sued for a declaratory judgment contending no prepayment charge was owed because the loan is adjustable-rate and 9.1 has no application.
- The district court held the prepayment charge applied under 9.1 because notice occurred during a period when interest accrued at a fixed rate (4.79%).
- On appeal, the Seventh Circuit applied Illinois contract interpretation and affirmed that section 9.1 governs the prepayment charge in this scenario.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 9.1 imposes a prepayment charge. | Goodwill argues no fixed-rate period during prepayment. | PNC contends each ten-year segment is a fixed-rate period for 9.1 purposes. | Yes; 9.1 applies during the initial fixed-rate period. |
Key Cases Cited
- River East Plaza, L.L.C. v. Variable Annuity Life Ins. Co., 498 F.3d 718 (7th Cir. 2007) (prepayment charge protective in fixed-rate periods)
- In re LHD Realty Corp., 726 F.2d 327 (7th Cir. 1984) (prepayment charges and contract interpretation)
- Davis v. GN Mortg. Corp., 396 F.3d 869 (7th Cir. 2005) (contract terms and addendum integration)
- United States v. Phillips, 731 F.3d 649 (7th Cir. 2013) (describing standard terms of stated-interest loans)