In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 03-1617

THOMAS P. DAVIS and

CATHY M. DAVIS,

Plaintiffs-Appellants,

v.

G.N. MORTGAGE CORPORATION and

COUNTRYWIDE HOME LOANS, INC.,

Defendants-Appellees.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 01 C 6569—Charles R. Norgle, Sr., Judge.

____________

ARGUED JANUARY 15, 2004—DECIDED JANUARY 31, 2005

____________

Before COFFEY, KANNE, and EVANS, Circuit Judges.

COFFEY, Circuit Judge. On September 9, 1999, Thomas

P. Davis and Cathy M. Davis obtained a $288,000 adjustable rate mortgage (“ARM”) from the G.N. Mortgage

Corporation (“GN”) for the purpose of refinancing prior,

non-business personal debts which was to be secured by

their home in Manhattan, Il. A few months later, GN sold

the note to Countrywide Home Loans, Inc. (“Countrywide”).

The Davises paid off the 30-year ARM from GN less than

three years later, on February 20, 2002, and at that time
2 No. 03-1617

were assessed over $12,000 in penalties pursuant to the

terms of a five-year prepayment penalty rider included in the

mortgage document. The Davises objected to the penalty and

filed a diversity suit against GN and Countrywide, alleging

that the prepayment penalty agreement was fraudulently

obtained, that enforcement of the penalty constituted a

breach of contract and that the penalty violated the Illinois

Interest Act, 815 ILCS 205/1 et seq., and the Illinois

Consumer Fraud Act, 815 ILCS 505/1 et seq. The core of the

Davises’ claim is that the parties had agreed to a twentyfour month prepayment rider, but that GN had nevertheless fraudulently induced them into signing one that

provided for a penalty if the loan was paid before sixty

months had elapsed. The district court granted the

defendants-appellees’ motions for summary judgment on

each of the Davises’ legal claims, and the Davises appealed.

We affirm.

I. BACKGROUND

On September 9, 1999, Thomas and Cathy Davis (the

“Davises”), husband and wife and citizens of the State of

Illinois, closed on a $288,000 adjustable rate mortgage loan

(the “loan”) with an initial interest rate of 10.9% from the

GN Mortgage Corporation in order to refinance personal

debt. Aside from the Davises, the only other party present

at the loan closing was Patricia Bogdanovich (“Bogdanovich”),

the closing agent for TICOR Title Insurance Company,

which was the title company authorized by GN to conclude

the transaction.

At the closing, which took place at TICOR’s offices in

Joliet, Illinois, Bogdanovich presented the Davises with two

stacks of paper, each purportedly consisting of 24 documents

and totaling 43 pages. Included in the stacks were duplicate copies of the proposed adjustable rate note, mortgage,

adjustable rate rider to the mortgage, and accompanying

documents entitled “Prepayment Penalty Note Addendum,”
No. 03-1617 3

1 Indeed, it appears from the record that the Davises failed to

thoroughly read and understand the documents they signed until

September of 2001, just before they refinanced the loan, at which

time they learned that they would be charged a penalty.

2 After the closing, either because they were ignorant of it or they

had no reason to believe that the terms of the note were any

different than they had agreed to, the Davises failed to exercise

their right under federal law to cancel the agreement without

costs within three business days of signing it.

“Alternative Mortgage Transaction Parity Act Disclosure,”

and “Notice of Right to Cancel.” Although the Davises admit that they failed to read or compare the two sets of documents thoroughly at the time of the closing,1

 they allege

that Bogdanovich told them that the stacks were identical

in content and accurately represented the agreement between themselves and GN, including a provision setting

forth a two-year prepayment penalty period. The Davises

signed all of the documents in one of the stacks and

Bogdanovich delivered the signed stack to GN while the

Davises retained the unsigned stack for their records.2

Early in 2000, GN sold the Davises’ mortgage, including

all its rights and obligations emanating from the loan agreement, to Countrywide Home Loans, Inc. Thereafter, in the

summer of 2001, the Davises requested that Countrywide

apprise them of the amount required to satisfy the remaining balance on their loan as of its two-year anniversary;

September 9, 2001. Countrywide responded by informing

the Davises that a prepayment penalty of approximately

$12,000 (six months’ worth of interest on the loan) would

apply if the loan was paid off prior to the expiration of the

five-year prepayment penalty period, according to the signed

prepayment penalty addendum in their loan file. This came

as a surprise to the Davises, who had no knowledge that

they had agreed to a five-year prepayment penalty rider
4 No. 03-1617

3 The parties agree that GN had initially proposed a three-year

prepayment penalty period. Indeed, the Davises’ loan file contains

a document entitled “Conditional Loan Approval,” containing

notation of a three-year prepayment penalty period. That document, however, is not signed. The Davises allege that, prior to

closing on the loan, their mortgage broker, Monica Boatman

(“Boatman”), represented to them that GN had agreed to a two

year prepayment penalty period. However, for purposes of this

appeal, we will disregard the statement attributed by the Davises

to Boatman that GN had agreed to a two-year penalty period

because it constitutes inadmissible hearsay. See Bombard v. Fort

Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996) (“a party

may not rely upon inadmissible hearsay . . . to oppose a motion for

summary judgment.”). Boatman’s alleged comment is clearly an

out-of-court statement offered by the plaintiffs for the truth of the

matter asserted and, therefore, may not be relied upon by the

Davises to resist summary judgment. See Fed. R. Evid. 802;

Galdikas v. Fagan, 342 F.3d 684, 695 (7th Cir. 2003); Bombard, 92

F.3d at 562. Nevertheless, we will assume without deciding, that

the alleged statements of the title company’s closing agent,

Bogdanovich, are statements of a party opponent (the assumption

being that Bogdanovich was acting as GN’s agent at the closing)

and thereby admissible under Federal Rule of Evidence

801(d)(2)(D). As such, they may be considered as part of this appeal. Notwithstanding Bogdanovich’s statements, however, the

Davises’ claims still fail as a matter of law as discussed infra.

and instead believed that they had signed, and were only

subject to, a two-year prepayment penalty clause based on

alleged representations by Bogdanovich as well as their

own broker.3

Upon reviewing the unsigned copy of the mortgage contract that they retained from the closing, the Davises discovered two documents which they had not previously read

entitled “Prepayment Penalty Note Addendum,” both of

which had been drafted by GN. The riders were identical

except that one provided for a “twenty-four month penalty

period,” while the other provided for a “sixty month penalty
No. 03-1617 5

period.” The addendum that the Davises signed at the

closing was of the “sixty month” species, a fact which they

do not dispute. However, the Davises claim that at the closing they signed both a two-year and a five-year addendum.

They base this conclusion on the fact that they found a twoyear rider in the papers they retained after the closing and

that Bogdanovich told them that the two stacks of documents presented at the closing (one signed and returned to

GN and the other left with the Davises) were identical.

Therefore, the Davises allege that because they signed every

document in one of the stacks and found both a five-year

and a two-year rider in their stack, they must have signed

both versions at the closing. Unfortunately for the Davises

though, they are unable to produce a signed two-year

agreement. On the other hand, the mortgage companies

maintain that the parties never executed a two-year prepayment penalty addendum and that no such rider, signed or

unsigned, exists; therefore, the Davises were rightfully

charged a penalty when they refinanced before the sixtymonth period in the duly signed document elapsed.

On August 23, 2001, the Davises filed a diversity action

against GN and Countrywide in the United States District

Court for the Northern District of Illinois. In their original

complaint, the Davises sought a declaration that their loan

was subject to either a two-year prepayment penalty period

or no prepayment penalty period whatsoever. They also

claimed that they were entitled to relief under the Illinois

Interest Act, 815 ILCS 205/1 et seq., which, inter alia, makes

it unlawful for a loan to provide for a prepayment penalty

when that loan has an interest rate in excess of eight percent per annum (the Davis’ ARM carried an initial interest

rate of 10.9% per annum) and is secured by a mortgage on

residential real estate. 815 ILCS 205/4(2)(a). Before the matter

was adjudicated, however, the Davises chose to refinance

their loan at a lower, fixed interest rate with another mortgage company paying Countrywide the contested $12,781.76
6 No. 03-1617

4 Before the district court ruled on this motion, it required that

the Davises present documentation supporting their proposed

amended complaint. Accordingly, the plaintiffs produced a twopage declaration from Thomas Davis, dated April 19, 2002, that recounted his version of what occurred at the signing of the mortgage contract.

5 In response to the district court’s concerns over the existence of

federal jurisdiction, the plaintiffs properly pled, in their second

amended complaint, that they were citizens of Illinois, not merely

residents of the state. Neither of the defendants is an Illinois corporation or has the State of Illinois as its principal place of business. There also remained a question as to whether the amount in

controversy exceeded $75,000, given that the dispute appears to

be over a $12,000 prepayment penalty. However, the plaintiffs’

claim under the Illinois Interest Act sought statutory damages in

“an amount equal to twice the total of all interest, discount and

charges determined by the loan contract.” 815 ILCS 205/6. Given

that the loan amount was for $288,000, diversity jurisdiction was

proper. Cf. McCarthy v. Option One Mortgage Corp., 362 F.3d

1008 (7th Cir. 2004) (finding diversity jurisdiction in Illinois

Interest Act claim based on a $145,800 loan).

prepayment penalty in the process, thereby mooting this

portion of their claim. As a result, on April 2, 2002, the

Davises sought leave to file an amended complaint, which

the court conditionally granted.4

The plaintiffs filed their amended complaint on May 23,

2002, whereupon the trial judge addressed their failure to

properly plead diversity jurisdiction and granted them ten

days’ leave to file a second amended complaint to cure the

deficiency, which they accomplished. The second amended

complaint,5

 filed on May 30, 2002, contained four counts,

alleging: (1) that each of the defendants violated the

Illinois Interest Act when they imposed a prepayment

penalty without an agreement authorizing them to do so;

(2) that Countrywide breached the parties’ contract by

imposing a five-year prepayment penalty period; (3) that
No. 03-1617 7

6 The plaintiffs’ initial discovery requests from October 2001 had

been postponed through the beginning of 2002 because of agreement by the parties to allow for settlement negotiations. Their

settlement efforts failed, and on March 20, 2002, the district court

issued a scheduling order that included a discovery cut-off date of

July 31, 2002. Accordingly, on April 9, 2002, the Davises served

discovery requests on both mortgage company defendants, as well

as a notice of deposition for Bogdanovich. The trial judge, however, stayed discovery three days later pending his ruling on the

Davises’ motion for leave to file an amended complaint, which the

court later granted. The stay was lifted on May 23, 2002, seven

days before the plaintiffs filed their second amended complaint.

On July 11, 2002, the Davises’ counsel sent a letter to the

defendants requesting immediate compliance with their outstanding discovery requests. That same day, GN filed a motion to stay

discovery based upon its intention to file a motion for summary

judgment. The district judge granted this stay. Thus, throughout

this entire pretrial process, the defendants failed to respond to

any of the plaintiffs’ discovery requests.

GN through their agent Bogdanovich intentionally committed common law fraud when they misrepresented the terms

of the Davises’ mortgage loan; and (4) that GN fraudulently

caused the Davises to sign inconsistent prepayment penalty

riders, in violation of the Illinois Consumer Fraud Act, 815

ILCS 505/1 et seq.

At the time that the Davises filed their amended complaint,

they also sought discovery from the defendants. However,

due in part to settlement negotiations and two separate

stays issued by the trial judge—one giving the Davises

leave to file a second amended complaint and the other allowing GN to file a motion for summary judgment—GN

failed to reply to any of the Davises’ discovery requests.6

However, both of the mortgage company defendants had

previously complied with initial discovery requirements in

accordance with Federal Rule of Civil Procedure 26(a)(1),

and each provided the Davises copies of their respective
8 No. 03-1617

loan files for the September 9, 1999, transaction. Neither

company’s copy of the Davises’ loan file contained a twoyear addendum (either signed or unsigned), but both contained a signed, five-year addendum.

On July 24 and July 26, 2002, GN and Countrywide, respectively, filed motions for summary judgment. At this

time, the plaintiffs filed an emergency motion to reconsider

and vacate the district court’s July 12 order staying discovery pending defendants’ motions for summary judgment

and to obtain discovery pursuant to Federal Rule of Civil

Procedure 56(f). The trial court denied this motion on

July 26, 2002. The district court granted the defendants

summary judgment on all of the Davises’ claims on February 13, 2003. We affirm.

II. ANALYSIS

At the outset, we note that in a case where subject matter jurisdiction in federal court is premised on diversity

jurisdiction under 28 U.S.C. § 1332, we apply the substantive law of the forum state, here Illinois. See Merrill v.

Trump Indiana, Inc., 320 F.3d 729, 731 (7th Cir. 2003). Thus

we are obligated to “determine the issues presented herein

as we believe the [Illinois] courts would.” See Trytko v.

Hubbell, Inc., 28 F.3d 715, 719 (7th Cir. 1994) (quoting

Kutsugeras v. Avco Corp., 973 F.2d 1341, 1346 (7th Cir.

1992)).

A. The District Court’s Grant of Summary Judgment in

Favor of the Mortgage Companies

Summary judgment is proper if the “pleadings, depositions,

answers to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” Fed. R. Civ. P.

56(c). We review a district court’s grant of summary
No. 03-1617 9

judgment de novo, considering “all of the available affidavits, depositions, transcripts, and exhibits in the light most

favorable to the non-moving party.” Driebel v. City of

Milwaukee, 298 F.3d 622, 636 (7th Cir. 2002). A genuine

factual issue is one “ ‘that properly can be resolved only by

a finder of fact because [it] may reasonably be resolved in

favor of either party.’ ” Zemco Mfg. Inc. v. Navistar Int’l

Transp. Corp., 270 F.3d 1117, 1123 (7th Cir. 2001) (quoting

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986)).

Such an issue “is material only if it might affect the outcome of the case under the governing law.” Doe v. Roe No. 1,

52 F.3d 151, 153 (7th Cir. 1995) (internal quotation marks

omitted); see also Korf v. Ball State Univ., 726 F.2d 1222,

1226 (7th Cir. 1984). “[W]e are not required to draw every

conceivable inference from the record,” Gleason v. Mesirow

Fin., Inc., 118 F.3d 1134, 1139 (7th Cir. 1997), and mere speculation or conjecture will not defeat a summary judgment

motion, Estate of Phillips v. City of Milwaukee, 123 F.3d

586, 591 (7th Cir. 1997).

The Davises assert that the district court erred in granting summary judgment to the defendants because a genuine issue of material fact exists concerning whether or not

they signed a two-year prepayment penalty addendum to

their loan at the closing. Premised primarily on Thomas

Davis’s two-page personal declaration, the Davises allege

that: (1) their loan application originally reflected a proposed,

three-year prepayment penalty period; (2) their own loan

broker, Boatman, had informed them prior to closing that

GN had agreed to a two-year prepayment penalty period;

(3) at the closing, the Davises were presented with two

stacks of documents by Bogdanovich and instructed to sign

one copy which would be returned to GN, while the other

should be retained for their (the Davises’) records; (4) while

they failed to read and compare these two stacks line-byline, Bogdanovich, the closing agent, told them that the

stacks were identical and represented their agreement with
10 No. 03-1617

7 The Davises also highlight the fact that, at an April 12, 2002,

status hearing, one of GN’s attorneys stated that an unsigned,

two-year prepayment penalty agreement existed in the plaintiffs’

loan file. However, GN’s counsel withdrew this statement at the

very next status hearing, expressing to the court and the Davises

that his statement had been made in error. In its order granting

the defendants summary judgment, the trial judge determined

that the statement did not constitute a judicial admission and,

therefore, could not go towards creating a genuine issue of

material fact as to the existence of a signed, two-year penalty

agreement.

GN in all material aspects, including the agreed-upon twoyear prepayment penalty rider; and (5) upon later review,

the Davises found that their stack of loan documents contained both an unsigned two-year prepayment penalty

addendum as well as an unsigned five-year addendum.

Based on these alleged facts,7

 the Davises argue that a

reasonable trier of fact could infer that at the closing they

signed a two-year addendum in addition to the five-year

addendum discovered in the defendants’ files. Furthermore,

the plaintiffs claim that the existence of an unsigned twoyear addendum in their records is material to all of their

claims renewed on appeal; i.e., it is material to their breach

of contract claim because it establishes that the agreedupon and intended prepayment penalty period under the

contract is unclear, and it is material to the statutory and

common law fraud claims because it explains the allegedly

deceptive circumstances surrounding the obtainment of the

prepayment penalty agreement.

1. Breach of Contract Claim

The Davises claim Countrywide breached the

September 9, 1999, loan contract by enforcing a five-year

prepayment penalty rather than honoring an allegedly

agreed-upon two-year prepayment penalty. However, the
No. 03-1617 11

only evidence of any agreement to a two-year prepayment

penalty period, beyond the statements the Davises claim

Bogdanovich made at the closing, is an unsigned copy of a

two-year prepayment penalty addendum that they (the

Davises) received and retained from the closing for their

records.

Illinois adheres to a “four corners rule” of contract interpretation, which provides that “ ‘[a]n agreement, when reduced to writing, must be presumed to speak the intention

of the parties who signed it. It speaks for itself, and the

intention with which it was executed must be determined

from the language used. It is not to be changed by extrinsic

evidence.’ ” Air Safety, Inc. v. Teachers Realty Corp., 706

N.E.2d 882, 884 (Ill. 1999) (quoting Western Ill. Oil Co. v.

Thompson, 186 N.E.2d 285, 287 (Ill. 1962)). This approach

is consonant with the general rule under Illinois contract

law that “if the contract imports on its face to be a complete

expression of the whole agreement, it is presumed that the

parties introduced into it every material item, and parole

evidence cannot be admitted to add another item to the

agreement.” Sunstream Jet Express, Inc. v. Int’l Air Service

Co., Ltd., 734 F.2d 1258, 1265 (7th Cir. 1984) (quoting Pecora

v. Szabo, 418 N.E.2d 431, 735-36 (1981); see J & B Steel

Contractors, Inc. v. C. Iber & Sons, Inc., 642 N.E.2d 1215,

1217 (Ill. 1994). In other words, “[u]nder the parol evidence

rule, extrinsic or parol evidence concerning a prior or contemporaneous agreement is not admissible to vary or contradict a fully integrated writing.” Id. (emphasis in original)

(internal quotations omitted). However, “even when a contract is integrated on its face, if the contract is ambiguous,

as a matter of law, then extrinsic and parole evidence is

admissible to explain the terms of the ambiguous contract.”

Sunstream, 734 F.2d at 1266 (quoting Storybrook Homes,

Inc. v. Carlson, 312 N.E.2d 27, 29 (Ill. App. Ct. 1974)

(internal quotations omitted); see Pappas v. Waldron, 751
12 No. 03-1617

N.E.2d 1276, 1282 (Ill. App. Ct. 2001) (citing Air Safety,

706 N.E.2d at 884).

Accordingly, our task is to determine whether the loan

agreement is fully integrated, clear and unambiguous,

Krautsack v. Anderson, 768 N.E.2d 133, 146 (Ill. App. Ct.

2002). The threshold question for us to examine is whether

the contract in question, here the mortgage loan note, is a

fully integrated document, despite the lack of a specific

integration clause. See J & B Steel Contractors, Inc., 642

N.E.2d at 1217. The determination of whether a contract is

integrated is a question of law for the trial judge to decide.

See id. An integrated writing is one “intended by the

parties to be a final and complete expression of the entire

agreement,” Krautsack, 768 N.E.2d at 146 (internal quotation marks omitted), which means it “ ‘contains such language as imports a complete legal obligation,’ ” Eichengreen v.

Rollins, Inc., 757 N.E.2d 952, 958 (Ill. App. Ct. 2001)

(quoting Armstrong Paint & Varnish Works v. Continental

Can Co., 133 N.E. 711, 713 (1921)). Importantly, “only the

subject writing may be considered to determine the integration question.” Id. at 957; see also J & B Steel, 642

N.E.2d at 1218-20 (affirming the vitality of this rule, which

was first established in Illinois in Armstrong, 133 N.E. 711

(1921)).

The loan agreement entered into between GN and the

Davises is fully integrated, final in nature, and creates a

completed legal obligation between the parties. When viewing the loan agreement in its entirety, we find an uncomplicated set of documents that, when read together, clearly

and specifically state that the loan is subject to a prepayment penalty period of five years duration, as provided for

in a separately executed addendum. The Davises, in their

attempt to establish non-integration, cite to the underlying

promissory note, which provides that the borrower has the

right to repay the loan at any time without penalty. However, other documents in the agreement, i.e., the one-page
No. 03-1617 13

prepayment penalty note addendum itself, plainly states

that “notwithstanding and provision to the contrary [to language] contained in said Promissory Note or Deed of Trust . . .

[t]he first sixty months of the loan term is called the ‘penalty period.’ ” GN Mortgage Corporation’s Memorandum in

Support of Its Motion for Summary Judgment, Exh. D. The

inherent purpose of the addendum to the contract is to alter

the terms of the underlying agreement (here the promissory

note) and the existence of such a document can not reasonably be construed as establishing non-integration. Also, the

documents comprising the loan agreement were all executed on the same day, contemporaneous with each other

and, after reviewing each, we hold them to be internally

coherent and fully integrated. In addition, the Davises

have failed to present us with any case law to even suggest

that the lack of a specific integration clause in the loan

agreement, in and of itself, would render the agreement

incomplete or unintegrated. See Eichengreen, 757 N.E.2d at

957-58 (discussing J & B Steel, 642 N.E.2d 1215 (Ill.

1994)).

Notwithstanding the clear, comprehensive and integrated

nature and language of the loan contract, the Davises also

argue that the agreement is facially ambiguous because of

the existence of an unsigned two-year penalty addendum

document in their stack of the closing papers. This reasoning is unpersuasive; for the Davises cannot cite their unsigned copy of a two-year prepayment penalty rider, the

very extrinsic evidence they seek to introduce, to establish

that the contract is facially ambiguous thereby requiring

the consideration of extrinsic evidence. The introduction of

parole evidence to establish ambiguity in a facially unambiguous, signed, dated and fully integrated contract is a

practice which the Illinois Supreme Court has, to this date,

neither condoned nor sanctioned, and accordingly we refuse

to do so today. Air Safety, Inc., 706 N.E.2d at 884-85;

Commonwealth Ins. Co. v. Titan Tire Corp., 2004 WL
14 No. 03-1617

8 However, even if the Illinois Supreme Court were to adopt the

provisional admission rule, we do not believe that this rule would

apply in situations, such as the one before us, where a party is

seeking to introduce a completely new and different term into a

facially integrated and unambiguous contract. There is a sub-

(continued...)

2439727, *4 n.4 (7th Cir. 2004); see also See PPM Finance,

Inc. v. Norlandal USA, Inc., No. 04-1401, slip op. at 6 (7th

Cir. Dec. 16, 2004) (stating that Illinois courts will “look to

extrinsic evidence to determine the parties intentions only

if an agreement is ambiguous.”).

The Davises argue that we should employ the “provisional

admission approach” and consider extrinsic evidence concerning even facially unambiguous agreements. However,

in Air Safety, the Illinois Supreme Court reiterated the state

of contract law and the four-corners rule in Illinois when it

stated: “If the language of the contract is facially unambiguous, then the contract is interpreted by the trial court as

a matter of law without the use of parole evidence. Air

Safety, Inc., 706 N.E.2d at 884. In that same case, the

Supreme Court made clear that Illinois has “never officially

adopted the provisional admission approach.” Air Safety,

Inc., 706 N.E.2d at 885 n.1. In addition, the Court “expressly

decline[d] to rule on whether the provisional admission

approach may be applied to interpret a contract which does

not contain an integration clause until such a case is squarely

before [it].” Id.; but cf. AM Int’l, Inc. v. Graphic Mgmt.

Assocs., 44 F.3d 572, 574 (7th Cir. 1995). It is true that, although never definitively adopted either by the legislature

of Illinois or the highest court of that State, this court as

well as a number of the Illinois appellate courts have entertained the theory that under Illinois law “objective evidence

supplied by disinterested third parties may establish an

extrinsic ambiguity” in an otherwise unambiguous contract

under certain limited circumstances.8

 Commonwealth Ins.
No. 03-1617 15

8 (...continued)

stantial difference between the interpretation of contractual terms

and the addition of supplemental terms which were not contained

in the original writing. Although not discussed at length in the

case law, the provisional rule would seem only to encompass the

interpretation of a contract’s term(s), rather than the wholesale

substitution of one term for another. See, e.g., Air Safety, Inc., 706

N.E.2d at 885 (Under the provisional method “an extrinsic

ambiguity exists when someone who knows the context of the contract would know if the contract actually means something other

than what it seems to mean.”); Ahsan v. Eagle, Inc., 678 N.E.2d

1238, 1241 (Ill. App. Ct. 1997); Meyer v. Marilyn Miglin, Inc., 652

N.E.2d 1233, 1238-39 (Ill. App. Ct. 1995); see also Ocean Atl. Dev.

Corp., Inc., 322 F.3d 983, 1003-04; AM Int’l, Inc., 44 F.3d 572, 575.

9 Even if this court were to “provisionally admit” the two-year,

unsigned prepayment penalty rider, we would not be moved to

hold in favor of the Davises’ theory of the law. The fact remains

that the signed rider states on its face that the term shall be five

years. In addition, no signed or unsigned two-year rider was ever

found in the Davises’ loan file at GN or Countrywide. There is

nothing ambiguous about the terms of the five-year addendum,

nor does the existence of an unsigned two-year agreement interject ambiguity into an otherwise unambiguous, cohesive and fully

integrated contract.

10 The only objective evidence which the Davises have produced in

order to establish an extrinsic ambiguity with (their copy of an

unsigned two-year addendum) was not supplied by a disinterested

(continued...)

Co., 2004 WL 2439727, *4 (quoting Ocean Atl. Dev. Corp. v.

Aurora Christian Schs., Inc., 322 F.3d 983, 1003-04 (7th

Cir. 2003)); see also Air Safety, Inc., 706 N.E.2d at 885

(listing Illinois appellate court decisions). However, because

the Davises do not proffer objective third-party evidence,9

this suggested rule is inapplicable and, therefore, it is

unnecessary for us to predict whether the Illinois Supreme

Court would adopt this new rule of law. See Commonwealth

Ins. Co., 2004 WL 2439727, *4 n.4.10
16 No. 03-1617

10 (...continued)

third party, but was proffered by the Davises themselves, thus excepting them from the purview of the suggested rule. See Commonwealth Ins. Co., 2004 WL 2439727, *4. The only other evidence

(besides the unsigned two-year addendum) that the Davises offer

to establish extrinsic ambiguity is in the form of the Davises’ own

affidavit concerning the events surrounding the signing of the

contract and statements as to what Bogdanovich allegedly told

them the night of the closing. However, as subjective evidence, the

Davises’ statement about what Bogdanovich allegedly said would

not be considered admissible to demonstrate extrinsic ambiguity

in the contract because they are subjective in nature. See Ocean

Atl. Dev. Corp., 322 F.3d at 1004 (The parties’ own subjective

construction of the contract will not provide grounds for stepping

outside the four corners of the contract.).

In all, the entire loan contract, including its five-year

prepayment penalty agreement, is clear, unambiguous and

fully integrated; rendering extrinsic evidence inadmissible

to vary the contract’s terms. The Davises essentially ask us

to rewrite the signed and dated contract to include a

shorter prepayment penalty period, “but courts are not in

the business of rewriting contracts to appease a disgruntled

party unhappy with the bargain it struck.” PPM Finance,

Inc., No. 04-1401, slip op. at 6 (7th Cir. Dec. 16, 2004). Thus,

after review and consideration of the totality of the evidence, as is required, we hold that the signed and dated

five-year addendum is the only legally binding agreement

between the parties as to a prepayment penalty, and absent fraud, Countrywide cannot be found to have breached

their agreement with the Davises by merely enforcing their

rights to collect a penalty under the contract.

2. Common Law Fraud

The Davises, in a separate count of their complaint, go on

to allege that GN perpetrated a common law fraud during
No. 03-1617 17

11 While the Davises also allege the mutual mistake exception to

the parol evidence rule before this court, that argument was not

made before the district court at summary judgment. As such, it

will not be considered. Coker v. Trans World Airlines, Inc., 165

F.3d 579, 586 (7th Cir. 1999).

the execution of the contract, which occurs “where there is

a surreptitious substitution of one paper for another, or

where by some other trick or device a party is made to sign

an instrument which he did not intend to execute.”

Belleville Nat’l Bank v. Rose, 456 N.E.2d 281, 283 (Ill. App.

Ct. 1983) (citing Turzynski v. Libert, 259 N.E.2d 295, 298

(Ill. App. Ct. 1970)). The Davises claim that GN, along with

its purported agent (Bogdanovich), mislead them by misrepresenting the terms of the mortgage loan at the closing.

The Davises allege GN did so by presenting them with different versions of the prepayment penalty addendum, one

of which (the five-year version) was different from what

they bargained for and expected.

Under applicable Illinois law, an allegation of fraud must

be established by clear and convincing evidence. Cwikla v.

Sheir, 801 N.E.2d 1103, 1110 (Ill. App. Ct. 2003). However,

unlike the plaintiffs’ breach of contract claim, Illinois substantive law instructs that we are free to consider parole

evidence to assist us in determining the true intent of the

parties when a common law fraud has been alleged.11 See

O’Brien v. Cacciatore, 591 N.E.2d 1384, 1390 (Ill. App. Ct.

1992); McMahon Food Corp. v. Burger Dairy Co., 103 F.3d

1307, 1314 (7th Cir. 1996). Under Illinois law, the elements

the plaintiffs need to satisfy in order to establish common

law fraud are: “(1) a false statement of a material fact; (2)

defendant’s knowledge that the statement was false; (3)

defendant’s intent that the statement induce plaintiff to

act; (4) plaintiff’s reliance upon the truth of the statement;

and (5) plaintiff’s damages resulting from reliance on the
18 No. 03-1617

statement.” Capiccioni v. Brennan Naperville, Inc., 791

N.E.2d 553, 558 (Ill. App. Ct. 2003).

In order to satisfy the reliance element of their claim, the

Davises must demonstrate not only that they relied on the

GN’s representations regarding a two-year prepayment

rider, but that they were justified in doing so. See Soules v.

Gen. Motors Corp., 402 N.E.2d 599, 601 (Ill. 1980). When

addressing the issue of justified reliance, Illinois courts have

long recognized that “a party is not justified in relying on

representations made when he has ample opportunity to

ascertain the truth of the representations before he acts.

When he is afforded the opportunity of knowing the truth

. . . he cannot be heard to say he was deceived by misrepresentations.” Elipas Enterprises, Inc. v. Silverstein, 612

N.E.2d 9, 13 (Ill. App. Ct. 1993) (quoting Schmidt v.

Landfield, 169 N.E.2d 229, 232 (Ill. 1960)); see also Leon v.

Max E. Miller & Son, Inc., 320 N.E.2d 256, 260 (Ill. 1974);

Miller v. William Chevrolet/GEO, Inc., 762 N.E.2d 1, 9 (Ill.

App. Ct. 2001). This rule applies with equal force in

instances where fraud is alleged with respect to the execution of a written contract. See Belleville, 456 N.E.2d at 284;

see also N. Trust Co. v. VIII S. Mich. Assoc., 657 N.E.2d

1095, 1103 (Ill. App. Ct. 1995) (“A party cannot close his

eyes to the contents of a document and then claim that the

other party committed fraud merely because it followed this

contract.”). This is the so-called “due diligence rule,” Kolson

v. Vembu, 869 F. Supp. 1315, 1322 (N.D. Ill. 1994), which

defeats the Davises’ common law fraud claim.

Assuming arguendo that were we to conclude that the

Davises satisfy the other elements of a common law fraud

claim (e.g., a knowingly false statement as to a material fact

which was proffered to induce reliance), which they do not,

the evidence in the record would be deemed to be insufficient

to establish that any reliance on their part was justified.

The Davises’ claim is premised on oral statements allegedly

made by the closing agent, Bogdanovich, explaining at the
No. 03-1617 19

12 The Davises signed and dated a “NOTICE OF RIGHT TO

CANCEL” form which alerted them to the fact that they had “a

legal right under federal law to cancel this transaction, without

cost, within THREE BUSINESS DAYS.” Tr. 42, Exh. E. (Emphasis

in original).

time of the execution of the contract that the mortgage included a two-year prepayment penalty period. However,

notwithstanding the alleged statements by Bogdanovich,

the Davises had an opportunity and obvious obligation to

read the documents before they signed them (as well as up

to three days after signing to review and cancel the contract under federal law if they believed the agreement to be

flawed). Due to the significance of the mortgage transaction

(a $288,000 loan) and the Davises’ preoccupation with the

prepayment penalty agreement in particular, they were not

justified in relying on the alleged verbal statements alone.

The fact is that the Davises certainly had an incentive to

independently read and understand the contract in order

to confirm that the terms they were agreeing to, especially

the addendum regarding the prepayment penalty period,

were correctly set forth in the final version of the contract.

Their failure to read the prepayment addendum document

which they signed is even less justified in light of the fact

that, in addition to the ample two-hour closing meeting, the

Davises also were made aware that they had a full threeday period in which to review the entire agreement and

rescind it if they so decided.12 Indeed, considering the

multiple obligations which the mortgage document imposed

upon them, as well as the amount of money involved

($288,000), the Davises would have been well advised to

visit a qualified attorney within that time period to review

and fully explain the documents if in fact they had any

doubts or concerns over its contents. Nonetheless, because

the Davises were “afforded the opportunity of knowing the

truth of the representations . . . [, yet did] not avail [them-
20 No. 03-1617

selves] of the means of knowledge open to [them, they]

cannot be heard to say [they were] deceived by misrepresentations.” Elipas Enterprises, 612 N.E.2d at 13 (quoting

Schmidt, 169 N.E.2d at 232). Thus, on the facts set forth

here and in the record, we hold that the reliance element

of the Davises’ common law fraud claim cannot be met as

a matter of law.

3. Illinois Consumer Fraud Act

The plaintiffs also claim that GN’s actions during and

surrounding the closing on the loan violated the Illinois

Consumer Fraud Act (“ICFA”). In order to be held liable for

a violation of the ICFA the Davises must establish that: (1)

the defendant undertook a deceptive act or practice; (2) the

defendant intended that the plaintiff rely on the deception;

(3) the deception occurred in the course of trade and

commerce; (4) actual damage to the plaintiff occured; and

(5) the damage complained of was proximately caused by

the deception. Capiccioni, 791 N.E.2d at 558 (citing

Connick v. Suzuki Motor Co., Ltd., 675 N.E.2d 584, 593 (Ill.

1996)); 815 ILCS 505/2. While a complaint made pursuant

to the ICFA “must be pled with the same specificity as that

required under common law fraud,” Elson v. State Farm

Fire & Cas. Co., 691 N.E.2d 807, 816 (Ill. App. Ct. 1998),

the ICFA does not require a plaintiff to “show actual

reliance or diligence in ascertaining the accuracy of misstatements,” Zimmerman v. Northfield Real Estate, Inc.,

510 N.E.2d 409, 417-18 (Ill. App. Ct. 1986). Thus, because

the Davises’ lack of due diligence in reviewing the document at the closing or requesting further assistance or

explanation of the prepayment penalty addendum during

the 96-hour review period is not dispositive of the consumer fraud claim, we will examine their ICFA claim

separately from the common law fraud claim. See Cozzi
No. 03-1617 21

Iron & Metal, Inc. v. U.S. Office Equip., Inc., 250 F.3d 570,

576 (7th Cir. 2001); Miller, 762 N.E.2d at 13.

The Davises contend that GN deceived them by enclosing

both a two-year and a five-year prepayment penalty agreement in the closing documents and representing to them,

through their agent Bogdanovich, that the unsigned and

undated documents reflected the Davises’ agreement with

GN for a two-year prepayment penalty period. They maintain that this resulted in their signing two inconsistent

penalty riders, one for five years and the other for two

(there is no evidence that a two-year rider was ever signed,

i.e., they never produced a signed two-year addendum and

their assumption that they did sign one is completely unsupported in the record). While it is suspicious, and at the

very least suggests poor business practices at GN, for the

Davises to be given a copy of both a two-year and a fiveyear prepayment penalty addendum at the closing, the fact

remains that they actually signed only the five-year rider.

Nowhere in the record do the Davises (nor does anyone else)

state definitively that a two-year addendum was signed nor

has any such signed addendum been presented to us in the

record, much less introduced into evidence. The circumstances surrounding the closing on the loan that the

Davises point to as proof of deception, including evidence

of Bogdanovich’s alleged misrepresentations, falls far short

of rising to the level of sufficient evidence to permit a reasonable trier of fact to find for the plaintiffs on this claim

when considering the signed five-year agreement. See

Zemco Mfg. Inc., 270 F.3d at 1123.

Moreover, when analyzing a claim under the ICFA, the

allegedly deceptive act must be looked upon in light of the

totality of the information made available to the plaintiff.

See Tudor v. Jewel Food Stores, Inc., 681 N.E.2d 6, 8 (Ill.

App. Ct. 1997); Saunders v. Michigan Ave. Nat’l Bank, 662

N.E.2d 602, 608 (Ill. App. Ct. 1996); see also Bober v. Glaxo

Wellcome PLC, 246 F.3d 934, 938-39 (7th Cir. 2001) (apply-
22 No. 03-1617

13 The Davises had also claimed in the district court that the

defendants violated the Illinois Interest Act, 815 ILCS 205/1 et

seq., by imposing a prepayment penalty without an effective agreement to do so. As we have shown, however, there was an effective

agreement between the parties—namely, a five-year prepayment

penalty addendum. In any event, as the district court correctly

(continued...)

ing the Illinois ICFA). In this case, GN alerted the Davises,

in a number of ways, to the fact that they were agreeing to

a five-year penalty period. First, the one-page, five-year penalty addendum that the Davises were asked to read and

that they did sign contained a disclaimer in bold at the top,

warning the Davises: “Do not sign this loan agreement

before you read it. This loan agreement provides for

the payment of a penalty if you wish to repay the

loan prior to the date provided for repayment in the

loan agreement.” (Emphasis in original.) Second, the addendum that they signed contains three separate references to

a sixty-month/five-year penalty period. Third, GN required

that the Davises execute this addendum to the mortgage

separately from the remainder of the document, apparently

in an attempt to denote its significance. Finally, though less

telling, GN provided the Davises with an Alternative

Mortgage Transaction Parity Act Disclosure form at the

closing (which the plaintiffs signed) informing them that a

prepayment penalty would be charged and that they should

refer to the accompanying loan documents for the details of

the provision. Even if there was some confusion on the

Davises’ part during the closing (and there may well have

been), at no time during the closing nor at anytime within

the three day grace period did the Davises ever question,

much less challenge the documents they had signed. In

sum, there is no evidence to establish by clear and convincing evidence that GN engaged in a deceptive act in the

course of obtaining the loan agreement from the

plaintiffs.13
No. 03-1617 23

13 (...continued)

pointed out, the five-year addendum was drafted in accordance

with the Alternative Mortgage Transaction Parity Act, which preempts the Illinois Interest Act when, as here, a non-federal housing creditor elects to be governed by and complies with federal

law. 12 U.S.C. § 3803(c); see also McCarthy v. Option One Mortgage

Corp., 362 F.3d 1008 (7th Cir. 2004). (No. 03-3474, 7th Cir. 2004);

Nat’l Home Equity Mortgage Ass’n v. Face, 239 F.3d 633, 635 (4th

Cir. 2001). As such, the appellants’ claim that the defendants

violated the Illinois Interest Act, to the extent it remained in

contention on appeal, fails.

B. Plaintiffs’ Request to Conduct Additional Discovery

Finally, the Davises claim that it was an abuse of discretion on the part of the trial judge to deny their motion for

a continuance to conduct additional discovery. Federal Rule

of Civil Procedure 56(f) provides that, if a party opposing a

summary judgment motion has demonstrated that it is unable to “present by affidavit facts essential to justify [its]

opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be

obtained or depositions to be taken or discovery to be had

or may make such other order as is just.” Fed. R. Civ. P. 56(f).

The Davises argue that, had they been allowed extra time

to depose their own broker as well as the title company

representative present at the closing (Bogdanovich) and

various other employees of the defendants—all of whom,

according to the Davises’ unsupported representations,

they were unable to obtain statements from through their

own efforts—that they would have been able to produce

evidence sufficient to withstand summary judgment.

“A trial judge’s decision to consider a defendant’s motion

for summary judgment before allowing the plaintiff to depose certain witnesses is a discovery matter, which we review

under the abuse of discretion standard.” Grayson v. O’Neill,
24 No. 03-1617

308 F.3d 808, 815-16 (7th Cir. 2002). We are very troubled

with the substance of the plaintiffs’ Rule 56(f) motion, which

leads us to conclude that the district court did not abuse its

discretion in denying additional discovery. Initially, we

note that the Davises’ assertion that no discovery occurred

prior to the district court’s summary judgment ruling is inaccurate. To the contrary, by late November 2001, both of

the defendants had complied with their initial discovery

obligations under Federal Rule of Civil Procedure 26(a)(1).

In particular, they had disclosed complete copies of the

Davises’ loan file, neither of which included a two-year signed

or unsigned prepayment penalty addendum.

Nonetheless, the Davises argued before the district court

that, because “a question of fact exists with regard to the

location of a two-year prepayment penalty rider signed by

the plaintiffs . . . , [they] must be allowed to depose all employees, agents, or representatives of defendants . . . who

had any physical contact with plaintiffs’ loan file.” Edelman

Dec. at 2. However, the plaintiffs fail to set forth any specific

evidence which they might have obtained from these depositions that would create a genuine issue as to this material

fact. The only reason to believe that additional, relevant evidence would materialize from deposing the defendants’ employees is the Davises’ apparent hope of finding a proverbial “smoking gun”—that is, someone who will testify that

he or she knows that a signed, two-year prepayment penalty

provision did actually exist at some time and that the

defendants have either hidden, destroyed, or otherwise disposed of this document. This, however, is based on nothing

more than mere speculation and would amount to a fishing

expedition, which is an entirely improper basis for reversing a district court’s decision to deny a Rule 56(f) motion.

Grayson, 308 F.3d at 817; United States v. On Leong Chinese

Merch. Assoc. Bldg., 918 F.2d 1289, 1294-95 (7th Cir. 1990).

Likewise, the Davises’ desire to now depose the GN and

Countrywide officials that had authority over their loan
No. 03-1617 25

(Brian Brandt and Patrice McPherson, respectively) is also

an insufficient reason for this court to hold that the district

court abused its discretion. Both Brandt and McPherson

stated via affidavit that the Davises’ loan file did not contain either a signed or unsigned two-year prepayment penalty addendum and the depositions sought would be solely

for purposes of casting doubt on the affiants’ credibility and

to reach “the unlikely possibility . . . [that] an adverse

witness may contradict an earlier statement or volunteer

an admission.” On Leong, 918 F.2d at 1294. However, this

is not a valid reason for a court to grant a motion for a continuance to conduct additional discovery because, as this

court has explained, Rule 56(f) “is not a shield that can be

raised to block a motion for summary judgment without

even the slightest showing by the opposing party that his

opposition is meritorious.” Id.

The Davises have failed to adequately explain, either in

their briefs before this court or in the declaration of their

counsel, Daniel Edelman, attached to their Rule 56(f) motion, and it remains a mystery why they failed to acquire

an affidavit or deposition testimony from Boatman and

Bogdanovich—the two third-party witnesses whose alleged

statements are necessary to support the plaintiffs’ belief

that they signed a two-year prepayment penalty agreement.

According to the Davises, Boatman would testify that she

informed them prior to the closing that GN agreed to a twoyear prepayment penalty period, while Bogdanovich would

state that she watched the Davises sign each document after having told them that the two stacks of documents were

identical and conformed to the terms of their agreement

with GN.

Assuming that both of these witnesses would need to be

subpoenaed before testifying, the plaintiffs had ample time

(a total of 74 days of open discovery) to attempt to secure

their testimony as well as approach the trial court and de-
26 No. 03-1617

14 While the plaintiffs had issued subpoenas to depose Boatman

and Bogdanovich on October 31, 2001, discovery was stayed shortly

thereafter by agreement of the parties so that settlement negotiations could occur. That agreed-upon stay remained in effect

apparently until the district court’s March 20, 2002, scheduling

order. Discovery was not postponed again until April 12, when the

trial judge ordered discovery to be stayed until it could rule on the

plaintiffs’ motion for leave to file an amended complaint. This stay

was lifted on May 23, 2002. Afterwards, discovery remained open

until July 12 of that year, when the district court again postponed

discovery pending its ruling on the defendants’ motions for

summary judgment.

mand compliance to their discovery requests if needed.14 Indeed, neither Boatman (who was the Davises’ own broker for

the loan), nor Bogdanovich (who worked for the title company that facilitated the closing and delivered the signed

copies to GN), is a GN employee. The plaintiffs’ only

explanation for their inability to acquire statements from

these third-party sources is a conclusory and self-serving

statement alleging that because their mortgage broker and

the title agent have existing relationships with GN, they

wish not to sour that bond by commenting on the Davises’

closing. However, this speculative explanation for the

Davises’ inability to gather evidence from Boatman and

Bogdanovich is feeble at best and, as such, is both inadequate and insufficient to avoid circuit precedent holding

that “[w]hen a party fails to secure discoverable evidence

due to his own lack of diligence, it is not an abuse of

discretion for the trial court to refuse to grant a continuance to obtain such information.” Pfeil v. Rogers, 757 F.2d

850, 857 (7th Cir. 1985).

Also, we are of the opinion and thus hold that the district

court did not commit a reversible error by denying the

Davises’ Rule 56(f) motion due to the fact that they have

failed to establish they suffered any actual or substantial

harm as a result of the denial of their discovery request.
No. 03-1617 27

Balderston v. Fairbanks Morse Engine Div. of Coltec Indus.,

328 F.3d 309, 319 (7th Cir. 2003). Regardless of what their

proposed discovery might possibly have uncovered, the fact

remains that the Davises failed to properly examine the

documents they were executing, for if they had, they would

have discovered that they had signed a five-year prepayment penalty agreement. Because the harm they suffered

was due to their own negligence, the Davises were not

justified in relying on any alleged representations made by

GN or its agent and are precluded from now claiming that

GN committed fraud. Finally, the Davises have failed to

demonstrate that additional discovery would reasonably

allow them to establish the deception prong of the Illinois

Consumer Fraud Act. The Davises’ justification for a

continuance of discovery in support of their ICFA claim is

not genuine and convincing, but barely colorable, especially

in light of their burden, i.e., to prove fraud by clear and

convincing evidence, Turzynski, 259 N.E.2d at 299. As

such, the Davises were not justified in pursuing additional

discovery under Rule 56(f), and the district court was permitted to use its discretion in denying the Rule 56(f)

motion. See Pfeil, 757 F.2d at 856.

III. CONCLUSION

Because the Davises have failed to establish the existence of a genuine issue of material fact as to any of their

claims, and because the defendants are entitled to a judgment as a matter of law on each of those counts, summary

judgment is proper. Fed. R. Civ. P. 56(c). In addition, the

plaintiffs have failed to “provid[e] a compelling argument

why discovery should be continued.” Balderston, 328 F.3d

at 318. Thus, the district court’s order granting the

defendants’ motions for summary judgment is AFFIRMED.
28 No. 03-1617

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—1-31-05