RBS Citizens, National Ass'n v. RTG-Oak Lawn, LLC
407 Ill. App. 3d 183
| Ill. App. Ct. | 2011Background
- They challenge circuit court orders striking and dismissing affirmative defenses and counterclaims in a foreclosure action on a junior mortgage; the lender is RBS Citizens, National Association (successor by merger to Charter One Bank, N.A.).
- RTG-Bloomingdale, RTG-Oak Lawn, LLC, and related Gammonley entities guaranteed the Bloomingdale loan and granted a junior Oak Lawn mortgage as additional security in 2008 forbearance agreements.
- Forbearance agreements set sales requirements for condominium units and included a Sale Deficiency Amounts scheme; the period ended December 31, 2008 and the Note became due January 1, 2009.
- The Note’s interest terms are disputed; defendants allege violations of the Interest Act, breach of the duty of good faith and fair dealing, and fraud; the circuit court dismissed these defenses and counterclaims with prejudice.
- The appellate court held that waivers in the forbearance agreements do not unconditionally bar all claims (Consumer Fraud Act not waivable), but the Note’s language is unambiguous and supports a 365/360 interest calculation; the circuit court’s dismissal with prejudice was affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the waiver of defenses in the forbearance agreements bars the defenses and counterclaims. | RBS contends waiver applies to defenses and counterclaims. | Defendants argue waivers do not bar all claims, especially Consumer Fraud Act. | Waiver applies to most defenses; Consumer Fraud Act not waived. |
| Whether the Note’s interest calculation is ambiguous and violates the Interest Act. | Plaintiff argues no violation; computation follows the Note. | Defendants contend ambiguity and miscomputation (360/360 vs 365/360). | Note unambiguously uses 365/360; no Interest Act violation. |
| Whether the duty of good faith and fair dealing was violated. | Defendants rely on implied duty to prevent abuse of discretion. | RBS allegedly exercised discretion to charge more interest. | No breach; no discretion given unambiguously; doctrine not violated. |
| Whether dismissal with prejudice was appropriate and reconsideration warranted. | Prejudice favors granting reconsideration. | Judgment should allow amendment; reconsideration necessary for new evidence. | Dismissal with prejudice proper; reconsideration denied. |
Key Cases Cited
- Bank of America, N.A. v. 108 N. State Retail LLC, 401 Ill. App. 3d 158 (2010) (waiver of defenses recognized in some contexts; not dispositive here)
- Old Republic Insurance Co. v. Ace Property & Casualty Insurance Co., 389 Ill. App. 3d 356 (2009) (contract interpretation and ambiguity review)
- Gore v. Indiana Insurance Co., 376 Ill. App. 3d 282 (2007) (duty of good faith implied in contracts; precontract actions not covered)
- Beraha v. Baxter Health Care Corp., 956 F.2d 1436 (1992) (precedes Seventh Circuit principle on contract formation)
- D.S.A. Finance Corp. v. County of Cook, 345 Ill. App. 3d 554 (2003) (fraud rule: cannot claim deceit when contract terms are clear)
- Northern Trust Co. v. VIII South Michigan Associates, 276 Ill. App. 3d 355 (1995) (sophisticated parties and contract interpretation relevance)
- Gallagher v. Lenart, 226 Ill. 2d 208 (2007) (ambiguity in contract language standard)