2015 IL App (1st) 133775
Ill. App. Ct.2015Background
- Plaintiff lender Allied Arlington Heights loaned Marshall and Arlene Atlas $960,000 secured by a mortgage on their residence.
- Proceeds were transferred to pay down Salta Group’s line of credit, a business concern owned by Marshall; Arlene guaranteed HBZ’s loans.
- Note labeled the loan as 'Consumer' with a 'Loan Purpose' to provide a shareholder loan to Salta; disclosures for a consumer loan were included.
- Defendants argued the loan was used for business purposes and thus exempt from TILA; lender contends it was commercial and not governed by TILA.
- Defendants claimed they did not receive two copies of the Notice of Right to Rescind; they mailed a rescission in August 2012.
- Trial court conducted an evidentiary hearing on receipt of disclosures; summary judgment granted in favor of lender after amended motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does TILA apply to the loan as a consumer loan? | Bank contends the loan is commercial; TILA not applicable. | Loans labeled consumer and with TILA disclosures indicate consumer purpose; rescission rights apply. | TILA does not apply; loan was commercial. |
| If TILA applies, did two copies of rescission notices need to be delivered? | Even if TILA applies, two notices were allegedly delivered and signed for receipt. | Defendants did not receive two copies; rescission rights were improperly triggered. | Not material since TILA does not apply to this commercial loan. |
| Was there a genuine issue of material fact on the loan’s purpose and nature? | Record supports a commercial purpose; loan intended to pay Salta’s debts. | Documents labeled as consumer create triable issue about consumer status. | No genuine issue; loan was commercial, so TILA inapplicable. |
| Did the trial court err in granting summary judgment on TILA applicability? | Even if forms say consumer, substance shows commercial purpose. | Disputed factual questions about disclosures preclude summary judgment. | Correct to grant summary judgment; TILA does not apply. |
Key Cases Cited
- Maurer v. Westbank Bank, N.A., 276 Ill. App. 3d 553 (1995) (loan purpose governs TILA applicability; not automatic consumer status)
- Weisberg v. Northwest Federal Sav. & Loan Ass’n, 97 Ill. App. 3d 470 (1981) (resolving that residence interest does not automatically convert to consumer loan)
- Skidis v. First National Bank of Belleville, 82 Ill. App. 3d 602 (1980) (pattern that commercial purpose can prevail despite partial residence security)
- Riviere v. Banner Chevrolet, Inc., 184 F.3d 457 (5th Cir. 1999) (substance over form in determining consumer vs. business loan)
- Shames-Yeakel v. Citizens Financial Bank, 677 F. Supp. 2d 994 (N.D. Ill. 2009) (case law supporting transaction-wide analysis for TILA purposes)
- First National Bank in Belleville v. Skidis, 82 Ill. App. 3d 602 (1980) (illustrates non-automatic consumer status when collateral supports business loan)
- Poe v. First National Bank of DeKalb County, 597 F.2d 895 (5th Cir. 1979) (recognizes complexity of consumer vs. business in loan purpose)