Commonwealth Eastern Mortg. Co. v. Williams

• Decision Date: 27 October 1987
• Docket Number: No. 86-3546,86-3546
• Citation: 163 Ill.App.3d 103,516 N.E.2d 515,114 Ill.Dec. 360
• Parties: , 114 Ill.Dec. 360 COMMONWEALTH EASTERN MORTGAGE COMPANY, Plaintiff, Counter-defendant, Appellee, v. James L. WILLIAMS, Defendant, Counter-plaintiff, Appellant.
• Court: United States Appellate Court of Illinois

Page 515

516 N.E.2d 515

163 Ill.App.3d 103, 114 Ill.Dec. 360

COMMONWEALTH EASTERN MORTGAGE COMPANY, Plaintiff Counter-defendant, Appellee, v. James L. WILLIAMS, Defendant, Counter-plaintiff, Appellant.

No. 86-3546.

Appellate Court of Illinois First District, Second Division.

Oct. 27, 1987.

Martin C. Ashman, Ltd., Chicago (Martin C. Ashman, Alan L. Meserow and Michael A. Oppenheimer, of counsel), for defendant, counter-plaintiff, appellant.

Walsh, Case, Coale & Brown, Chicago (Leon E. Lindenbaum and Robert S. Hirschorn, of counsel), for plaintiff, counter-defendant, appellee.

Justice STAMOS delivered the opinion of the court:

In July 1982, the defendant-appellant, James L. Williams ("Williams") signed a contract to purchase real estate. The plaintiff-appellee, Jersey Mortgage Company ("Jersey") financed $109,000 of the $110,000 purchase price. After several months, Williams defaulted on his mortgage payments. Jersey then filed a complaint against Williams for mortgage foreclosure. Williams filed a two-count counterclaim and affirmative defense; Jersey moved for summary judgment. The trial court granted Jersey's motion for summary judgment on November 20, 1986. On December 22, 1986, Williams filed notice of this appeal. At oral argument, Jersey advised the court that Commonwealth Eastern Mortgage Company had bought out Jersey and that Jersey is now known as the Commonwealth Eastern Mortgage Company. The court then ordered that the caption of this opinion be amended to reflect the change.

In or around July 1982, Williams signed a contract to purchase an eight-unit building located at 5115 South Drexel Avenue in Chicago ("the property"). The contract contained a financing contingency clause. Williams sought to secure financing from Jersey. Williams dealt with Jersey's agent, Robert Cross ("Cross"), when Williams applied for the loan. Williams first met Cross at the real estate broker's office where Cross assisted Williams in completing the loan application. The purchase price of the property was $110,000; Williams put $1,000 down and Jersey financed the additional $109,000.

The next time that Williams met Cross, they were at the Veterans Administration ("VA"). The VA had agreed to insure the loan for a three-unit but not for an eight-unit building. The VA sent Williams a certificate of commitment dated October 1, 1982, regarding the loan. Cross and Williams then had to go to the VA to see if the VA would insure the mortgage at a higher funding because of the money that would be required to convert the eight-unit building into a three-unit building. The VA advised Williams that he had several options. One of the options involved the sellers' escrow. This option did not work. Nevertheless, the VA insured the loan on the condition that Williams would convert the building into three units. It was at this point in time that the issue of additional funding arose. Williams would have to obtain additional financing in order to pay for the construction work necessary to convert the building from eight units to three units.

At the meeting with the VA officer, Cross allegedly told or indicated to Williams "that there should be no problem getting additional funding, securing the business with the second mortgage in order to do the work." During Williams' deposition, the following exchange took place when Williams was questioned as to the alleged additional funding:

Q. Did he (Cross) give you a specific dollar amount that they would finance you for?

A. I don't recall a specific dollar amount.

Q. Were any terms of that additional refinancing discussed such as, the interest rate?

A. No. That it would be secured by a second mortgage on the property.

Q. Were you told by Mr. Cross specifically what rehabilitation activities that they would extend this credit for?

A. No. We didn't get in to specifics. The whole object of rehabilitation was to meet the VA's approval as a three-flat building.

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Q. Did he (Cross) say that the company would offer you credit or did he say they would assist you in procuring additional credit?

A. The indication was that Jersey Mortgage would furnish the money.

Williams never received anything in writing from Cross in regard to the conversation that they had had about the additional financing. Williams, likewise, did not send anything to Cross indicating that it was Williams' understanding that Jersey was to provide him with additional financing. Williams met Cross at the VA at least one more time "to discuss the loan and find ways of financing--closing on the property." Williams then talked to Cross on the phone regarding the possibilities in terms of financing. In more than one conversation, Cross advised Williams that Williams would be able to get some kind of second mortgage on the property. No specifics of the loan, however, were discussed. Furthermore, Cross and Williams did not talk about an application for this second mortgage "because all of this was conversation basically prior to closing the mortgage so we could find out what we are doing in order to close on the loan."

Before closing on the property, Williams had no idea (no formal estimates) what the rehabilitation costs were going to be. Based on his own experience, Williams felt that the rehabilitation work would require between $70,000 and $100,000. Williams did not tell Jersey about this estimated price range until after the closing on the property took place.

Just prior to closing on the property, Williams went out to one of Jersey's local offices and signed the loan papers. Williams closed on the property in December of 1982. None of the closing documents discussed anything about additional financing on the property. Williams testified that he signed the mortgage and understood that he was making a mortgage to Jersey. Although Williams admitted that he did not read the mortgage word for word, he stated that the mortgage did not provide for an extension of additional credit. Furthermore, at the time that he signed the mortgage, Williams did not believe that he was borrowing more than the stated $109,000. After closing on the property, Williams acted as his own general contractor and began work on the property. Williams hired subcontractors to perform some of the work.

In January of 1983, Williams began making full monthly mortgage payments to Jersey. On various occasions, Williams tendered late payments. Jersey, however, did not refuse to accept tender of a mortgage payment until Williams had run out of funds and completely discontinued making his mortgage payments. It was not until several months after the closing that Williams contacted Jersey regarding the additional financing. On April 18, 1984, Jersey advised Williams that additional financing would not be forthcoming. Jersey indicated that they did not give rehabilitation loans.

Following the April 18 notification, Williams' correspondence with Jersey involved at least two letters. One letter was dated May 16, 1984 and the other letter was dated May 23, 1984. The May 16 letter, from Williams to Jersey, stated that Williams had received word that Jersey did not make rehabilitation loans. Williams wrote to Jersey that he "thought that the funds needed for rehab of the property could be secured by Jersey as a second mortgage to your existing first mortgage on the property in as much as the refurbished property value would far exceed the mortgages." In its May 23 letter, Jersey first advised Williams that Williams' mortgage had been placed in foreclosure. Jersey also wrote that it did not extend rehabilitation loans or second mortgage loans.

After the April 18 notification, Williams discontinued his rehabilitation work on the property. Williams attempted to get money from other lenders, but was unsuccessful "because of the Jersey Mortgage credit information which shows slow paying on the loan." On May 29, 1984, Jersey filed a complaint for mortgage foreclosure against Williams.

Williams subsequently filed a two-count counterclaim against Jersey, charging Jersey with breach of an oral contract and fraudulent misrepresentation, and an affirmative defense based on the breach of the oral contract claim. Jersey moved for summary judgment on July 30, 1986. On November 3, 1986, Williams filed an affidavit. Although Williams was unable to supply the terms of the alleged additional financing when he gave his deposition in April of 1985, Williams clearly supplied such terms in his November 1986 affidavit. Williams' affidavit stated that: the amount of the mortgage would be "for the amount necessary to do the rehabilitation to a 3-flat building," "the second mortgage would ride along with the first mortgage as to interest and terms of repayment," and the "interest on the second mortgage would be at the V.A. market at that time." Despite Williams' November 3 affidavit, Jersey's motion for summary judgment was granted. On December 22, 1986, Williams filed notice of this appeal.

The purpose of summary judgment is not to decide issues of fact but to determine whether any genuine issue of fact exists. (Kobus v. Formfit Co. (1966), 35 Ill.2d 533, 538, 221 N.E.2d 633.) A motion for summary judgment is properly granted if the pleadings, depositions and admissions on file, together with any affidavits and exhibits, when construed strictly against the moving party and liberally in favor of the opponent (Killeen v. R.W. Dunteman Co. (1979), 78 Ill.App.3d 473, 475, 33 Ill.Dec. 930, 397 N.E.2d 436) show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law (Fooden v. Board of Governors (1971), 48 Ill.2d 580, 586, 272 N.E.2d 497). A court of review will not reverse an order granting summary judgment unless it finds that a material question of fact is present and that the moving party is not entitled to judgment as a matter of law. Estate of Kern v. Handelsman (1983), 115 Ill.App.3d 789, 793...