Case Name: BANK USA, S.A., f/k/a United Savings Association, Plaintiff-Appellee, v. ANDREW L. SILL et al., Defendants-Appellants
Court: Illinois Appellate Court
Jurisdiction: Illinois
Decision Date: 1991-11-27
Citations: 221 Ill. App. 3d 598
Docket Number: No. 3—90—0744
Parties: BANK USA, S.A., f/k/a United Savings Association, Plaintiff-Appellee, v. ANDREW L. SILL et al., Defendants-Appellants.
Judges: 
Reporter: Illinois Appellate Court Reports, Third Series
Volume: 221
Pages: 598–604

Head Matter:
BANK USA, S.A., f/k/a United Savings Association, Plaintiff-Appellee, v. ANDREW L. SILL et al., Defendants-Appellants.
Third District
No. 3 — 90—0744
Opinion filed November 27, 1991.
HAASE, J., dissenting.
Greg G. Chickris, of East Moline, for appellants.
N.L. McGehee, of McGehee, Boling, Whitmire & Olson, Ltd., of Silvis, for appellee.

Opinion:
JUSTICE SLATER
delivered the opinion of the court:
This is an appeal from the circuit court of Rock Island County wherein the trial court, by judgment dated September 24, 1990, entered a deficiency judgment in a foreclosure proceeding in favor of plaintiff and against defendants Andrew L. Sill and Jean E. Sill (the Sills).
The Sills purchased a home in the City of East Moline on July 26, 1983, and secured financing for the purchase from United Savings Association of Silvis, Illinois, plaintiff's predecessor in interest. The Sills executed a 30-year note and mortgage providing for a monthly payment of $214 with interest at 13.25%. The Sills desired to sell the home in 1986 to defendants Paul and Cindy Williams (the Williams). The Sills contacted Bill Grimes, plaintiff's loan officer, concerning an assumption of the mortgage by the Williams. Mr. Grimes consented to the sale but no written agreement was entered into between any of the parties at that time.
Subsequent to the completion of the sale, plaintiff and the Williams entered into a "Loan Modification Agreement," wherein the parties reduced the monthly payment and interest rate on the remaining unpaid balance of the Sills' loan, but maintained the same amortization period. The agreement further provided that the terms and conditions of the original note and mortgage were to remain in full force and effect. This document was executed without the Sills' knowledge.
In August of 1987, the Williams became delinquent in their payments to plaintiff prompting a notice of acceleration letter from plaintiff's attorneys to the Sills. In this letter plaintiff's attorneys acknowledged that the Williams "assumed and agreed to pay" the debt but nonetheless maintained the Sills were obligated to cure the default under the original note and mortgage. The default was thereafter cured by the Williams. In September of 1987, a second notice of acceleration letter was sent to the Sills indicating that the Sills were liable under the note and mortgage but referring to the loan modification agreement as an "Assumption Agreement." This default was not cured, and a foreclosure proceeding was commenced resulting in a deficiency judgment against the Sills for $9,982.60.
Two issues are raised on appeal: first, whether plaintiff's execution of the loan modification agreement released the Sills from liability under the original note and mortgage; and second, whether plaintiff's actions of altering the terms of the note and mortgage without notice to the Sills released the Sills from liability under the original note and mortgage.
Regarding the first issue, paragraph 17 of the mortgage reads, in part, as follows:
"Transfer of the Property; Assumption. If all or any part of the Property or an interest therein is sold or transferred by Borrower without Lender's prior written consent, * Lender may, at Lender's option declare all sums secured by this Mortgage to be immediately due and payable. Lender shall have waived such option to accelerate if, prior to the sale or transfer, Lender and the person to whom the Property is to be sold or transferred reach agreement in writing to the effect that the credit of such person is satisfactory to Lender and that the interest payable on the sums secured by this Mortgage shall be at such rate as Lender shall request. If Lender has waived the option to accelerate provided in paragraph 17, and if Borrower's successor in interest has executed a written assumption agreement accepted in writing by Lender, Lender shall release Borrower from all obligations under this Mortgage and Note *."
Clearly, plaintiff did not exercise its option to accelerate the note pursuant to the provisions of paragraph 17. The question then is whether the loan modification agreement was in effect an assumption agreement accepted by plaintiff thereby releasing the Sills from liability. The loan modification agreement specifically states that all conditions and terms of the original note and mortgage, not altered by the agreement, were to remain in full force and effect. With this in mind, it is not unreasonable for plaintiff to have entered into a loan modification agreement with the Williams so long as the Sills would still be ultimately responsible for any liability that might arise in the future due to any default under the note and mortgage.
Additionally, the Sills' argument that plaintiff must have believed the loan to have been assumed by the Williams through the use of the assumption language in deficiency notices is without merit. Even though this language was used, it is clear that plaintiff sent these notices to the Sills and unquestionably stated that the Sills were obligated to cure the default or be subject to foreclosure proceedings.
Finally, paragraph 10 of the mortgage states that "[ejxtension of the time for payment or modification of the sums secured by this mortgage granted by lender to any successor in interest of borrower shall not operate to release, in any manner, the liability of the original borrower." This clause further supports plaintiff's argument that the loan modification agreement was not an assumption of the debt, but merely a revision of the amortization of the loan which the Williams agreed to pay.
Secondly, the Sills argue that plaintiff, by entering into the loan modification agreement, materially altered the terms of the original note and mortgage. The changes complained of are a lowering of the interest rate by 2.5% and a lowering of the monthly payment by $34.40 per month. These changes were made without the Sills' knowledge or consent. As authority, the Sills cite Prudential Insurance Co. of America v. Bass (1934), 357 E. 72, 191 N.E. 284, Conerty v. Richtsteig (1942), 379 Ill. 360, 41 N.E.2d 476, and Prudential Savings & Loan Association v. Nadler (1976), 37 Ill. App. 3d 168, 345 N.E .2d 782. These cases, however, are distinguishable because in each case, the mortgagee and the grantee of the original mortgage entered into agreements extending the payoff dates of the original notes to the detriment of the original mortgagors. In each respective case, the court reasoned that when the mortgagee accepted benefits from the grantee, the mortgagor became a surety of the underlying debt. Thereafter, when the debt was extended without the knowledge or consent of the surety, the surety no longer had the option of paying off the debt after the original maturity date and then seeking to recover the amount paid from the grantor. The surety instead had to wait until the extension period had expired. Because of this detriment to the surety, each court determined that the original mortgagor had been discharged as a surety of the debt. See Bass, 357 Ill. 72, 191 N.E. 284; Conerty, 379 Ill. 360, 41 N.E .2d 476; Nadler, 37 Ill. App. 3d 168, 345 N.E.2d 782.
In this case, the SEs may arguably be construed as sureties of the underlying debt, but no detriment to the SEs resulted from the subsequent execution of the loan modification agreement by plaintiff and the WEiams. The payoff date of the loan remained the same. There is no evidence that the balance due at any given time would be greater under the modified amortization schedule than under the original amortization schedule. In fact, it appears that the modification agreement was a benefit to the SEs because in the event the WEiams defaulted in paying the debt, interest did not accrue as rapidly on the debt as it would have under the original amortization schedule thereby decreasing the balance due.
We therefore affirm the trial court's order and judgment.
Affirmed.
GORMAN, J., concurs.