Barrett v. Guaranty Bank & Trust Co.

• Decision Date: 17 April 1970
• Docket Number: Gen. No. 53163
• Parties: Lonnie BARRETT, Jr., Plaintiff-Appellant, v. GUARANTY BANK & TRUST COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 94

260 N.E.2d 94

123 Ill.App.2d 326

Lonnie BARRETT, Jr., Plaintiff-Appellant, v. GUARANTY BANK & TRUST COMPANY, Defendant-Appellee.

Gen. No. 53163.

Appellate Court of Illinois, First District.

April 17, 1970.

Helmut Eifert, Chicago, for plaintiff-appellant.

Goldberg, Weigle, Mallin, Gitles & Parson, Chicago, for defendant-appellee; John Hudson, Terence J., Anderson, Chicago, of counsel.

STOUDER, Justice.

Plaintiff-Appellant, Lonnie Barrett, Jr., commenced this action in the Circuit Court of Cook County, against Guaranty Bank & Trust Company, Defendant-Appellee, seeking to recover for the alleged violation of Chap. 74, Sec. 6, Ill.Rev.Stat.1967, (Interest Act). The court dismissed plaintiff's complaint for failure to state a cause of action and it is from this judgment that this appeal follows.

The facts are undisputed. On May 6, 1960, defendant extended to plaintiff a construction loan of $25,000, at an interest rate of 6 1/2% Per annum. This was a loan for 74 days. In addition to the interest, defendant charged plaintiff a 'bank fee' of 3% Of the loan or $750.00. The construction loan was, by mutual agreement, extended for short periods of time and the interest rate was increased to 7% Per annum. Two 'extension fees' were charged in February and May of 1961, in the amounts of $500.00 and $549.00 respectively.

In September, 1962, the principal balance of the construction loan, plus accrued interest thereon, plus the bank fee and the extension fees, plus further advances of money made by defendant to plaintiff were converted into a secured loan of $41,000, payable in monthly installments at an interest rate of 7% Per annum. Plaintiff made the monthly payments required, including principal and interest, through and including May, 1966.

The complaint alleged that the 'bank fee' and 'extension fees' were usurious, that such usurious charges were extended and included in the existing loan and that the defendant's receipt of interest and the plaintiff's obligations with respect thereto are continuing violations of the Interest Act (Chap. 74, Ill.Rev.Stat.1963). Recovery of a penalty was sought as provided by the 1963 amendment of Sec. 6, Chap. 74, Ill.Rev.Stat.1963.

The trial court dismissed the complaint for failure to state a cause of action and on appeal plaintiff argues that this ruling was erroneous. Before discussing such assignment of error it is necessary to consider the procedure involved since plaintiff also argues that it was erroneous.

With respect to the procedure in the trial court it appears that plaintiff filed his complaint together with a jury demand in June, 1967. Defendant was served with summons on June 30, 1967, but filed no appearance, answer or other pleading. On August 14, 1967, at the request of plaintiff, defendant was defaulted and the case thereafter was by assignment, set for hearing on September 18, as a 'jury prove up.' On this date the plaintiff appeared but instead of being permitted to present evidence he was informed by the court that after examining the complaint it was the opinion of the court that the complaint did not state a cause of action. Plaintiff was permitted to file a brief within 30 days which he did and on October 25, 1967, plaintiff's complaint was dismissed. On this occasion defendant's attorney filed a petition to vacate the default order but at the suggestion of the trial court the motion was withdrawn. Plaintiff filed a post judgment motion to vacate the judgment and thereafter defendant filed a memorandum which together with plaintiff's previous memorandum, was considered by the trial court and on February 4, 1968, plaintiff's motion to vacate the judgment was denied.

In summarizing plaintiff's objections to the procedure which is concededly unusual, plaintiff contends that the sufficiency of the complaint was not properly raised in the trial court and is therefore not a proper issue in this court. As argued by plaintiff and as is apparent from the record, no pleading was ever filed by defendant raising the issue. The trial court in raising the issue sua sponte indicated in its orders only that the complaint did not state a cause of action, no reasons being given for such ruling.

Plaintiff relies on Chap. 110, Sec. 40(2) and Sec. 42(1), (2) and (3), Ill.Rev.Stat.1967, which generally provide that objections to pleadings both as to form and substance must be specific and must be made in the trial court and if not timely made will be waived. The aforementioned sections do not purport to prevent a trial court from considering the sufficiency of a pleading on its own initiative, and it would appear inevitable in a default case that the trial court will give the question some consideration if for no other reason than to determine the sufficiency of the evidence. It is also true that a trial court need give no reasons for its rulings and although in cases such as this where the issues are not clearly formed by the pleadings the better practice might well be to advise counsel of such reasons, the failure to do so does not result in error. The principal case relied upon by plaintiff is Addante v. Pompilio, 303 Ill.App. 172, 25 N.E.2d 123. We believe the case has no application since it involves a judgment entered after hearing evidence pursuant to complaint and answer. No question was raised concerning the action of the trial court under circumstances similar to those in the instant case.

Even though we believe the procedure could have been more effective, nevertheless we believe that the issue relating to the failure of the complaint to state a cause of action is properly before us. To hold otherwise would require us to reverse the judgment of the trial court without considering or being able to consider the very issue decided by the trial court.

The substance of plaintiff's argument so far as the merits of the case are concerned, is that the complaint states a cause of action under Chap. 74, Sec. 6, Ill.Rev.Stat.1967. Because the procedure involved as described above, did not result in a limitation of the issues the plaintiff has devoted a substantial portion of his brief to the questions of whether the transactions occurring prior to September 1, 1963, constituted usury. Defendant in its brief concedes that whether such conduct was usurious or not was a question of fact which it could not dispute under the posture of the pleadings. For the purpose of this appeal the only question raised is the applicability of the 1963 amendment to Section 6, Chap. 74, Ill.Rev.Stat.1963. Such Section provides, '6. Penalty. If any person or corporation knowingly contracts for or receives, directly or indirectly, by any device, subterfuge or other means, unlawful interest, discount or charges for or in connection with any loan of money, the obligor may, recover by means of an action or defense an amount equal to twice the total of all interest, discount and charges determined by the loan contract or paid by the obligor, whichever is greater, plus such reasonable attorney's fees and court costs as may be assessed by a court against the lender. The payments due and to become due including all interest, discount and charges included therein under the terms of the loan contract, shall be reduced by the amount which the obligor is thus entitled to recover. Recovery by means of a defense may be had at any time after the loan is transacted. Recovery by means of an action may be had at any time after...