Opinion ID: 789096
Heading Depth: 2
Heading Rank: 1

Heading: The District Court's Grant of Summary Judgment in Favor of the Mortgage Companies

Text: 12 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 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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (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). 13 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-by-line, Bogdanovich, the closing agent, told them that the stacks were identical and represented their agreement with GN in all material aspects, including the agreed-upon two-year 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. 14 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 two-year 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 agreed-upon 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.
15 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 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. 16 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., 185 Ill.2d 457, 236 Ill.Dec. 8, 706 N.E.2d 882, 884 (1999) (quoting Western Ill. Oil Co. v. Thompson, 26 Ill.2d 287, 186 N.E.2d 285, 287 (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 parol 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, 94 Ill.App.3d 57, 49 Ill.Dec. 577, 418 N.E.2d 431 (1981)); see J & B Steel Contractors, Inc. v. C. Iber & Sons, Inc., 162 Ill.2d 265, 205 Ill.Dec. 98, 642 N.E.2d 1215, 1217 (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 parol evidence is admissible to explain the terms of the ambiguous contract. Sunstream, 734 F.2d at 1266 (quoting Storybook Homes, Inc. v. Carlson, 19 Ill.App.3d 579, 312 N.E.2d 27, 29 (1974)) (internal quotations omitted); see Pappas v. Waldron, 323 Ill.App.3d 330, 256 Ill.Dec. 439, 751 N.E.2d 1276, 1282 (2001) (citing Air Safety, 236 Ill.Dec. 8, 706 N.E.2d at 884). 17 Accordingly, our task is to determine whether the loan agreement is fully integrated, clear and unambiguous, Krautsack v. Anderson, 329 Ill.App.3d 666, 263 Ill.Dec. 373, 768 N.E.2d 133, 146 (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., 205 Ill.Dec. 98, 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, 263 Ill.Dec. 373, 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., 325 Ill.App.3d 517, 259 Ill.Dec. 89, 757 N.E.2d 952, 958 (2001) (quoting Armstrong Paint & Varnish Works v. Continental Can Co., 301 Ill. 102, 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, 205 Ill.Dec. 98, 642 N.E.2d at 1218-20 (affirming the vitality of this rule, which was first established in Illinois in Armstrong, 301 Ill. 102, 133 N.E. 711 (1921)). 18 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 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, 259 Ill.Dec. 89, 757 N.E.2d at 957-58 (discussing J & B Steel, 162 Ill.2d 265, 205 Ill.Dec. 98, 642 N.E.2d 1215 (1994)). 19 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 parol 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., 236 Ill.Dec. 8, 706 N.E.2d at 884-85; Commonwealth Ins. Co. v. Titan Tire Corp., 2004 WL 2439727,  n. 4, ___ F.3d ___, ___ n. 4 (7th Cir.2004); see also See PPM Finance, Inc. v. Norandal USA, Inc., 392 F.3d 889 (7th Cir.2004) (stating that Illinois courts will look to extrinsic evidence to determine the parties intentions only if an agreement is ambiguous.). 20 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 parol evidence. Air Safety, Inc., 236 Ill.Dec. 8, 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., 236 Ill.Dec. 8, 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. Co., 2004 WL 2439727, , ___ F.3d at ___ (quoting Ocean Atl. Dev. Corp. v. Aurora Christian Schs., Inc., 322 F.3d 983, 1003-04 (7th Cir.2003)); see also Air Safety, Inc., 236 Ill.Dec. 8, 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,  n. 4, at ___ n. 4. 10 21 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., 392 F.3d 889, 890 (7th Cir.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.
22 The Davises, in a separate count of their complaint, go on to allege that GN perpetrated a common law fraud during 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, 119 Ill.App.3d 56, 74 Ill.Dec. 779, 456 N.E.2d 281, 283 (1983) (citing Turzynski v. Libert, 122 Ill.App.2d 352, 259 N.E.2d 295, 298 (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. 23 Under applicable Illinois law, an allegation of fraud must be established by clear and convincing evidence. Cwikla v. Sheir, 345 Ill.App.3d 23, 280 Ill.Dec. 158, 801 N.E.2d 1103, 1110 (2003). However, unlike the plaintiffs' breach of contract claim, Illinois substantive law instructs that we are free to consider parol 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, 227 Ill.App.3d 836, 169 Ill.Dec. 506, 591 N.E.2d 1384, 1390 (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 statement. Capiccioni v. Brennan Naperville, Inc., 339 Ill.App.3d 927, 274 Ill.Dec. 461, 791 N.E.2d 553, 558 (2003). 24 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., 79 Ill.2d 282, 37 Ill.Dec. 597, 402 N.E.2d 599, 601 (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, 243 Ill.App.3d 230, 183 Ill.Dec. 752, 612 N.E.2d 9, 13 (1993) (quoting Schmidt v. Landfield, 20 Ill.2d 89, 169 N.E.2d 229, 232 (1960)); see also Leon v. Max E. Miller & Son, Inc., 23 Ill.App.3d 694, 320 N.E.2d 256, 260 (1974); Miller v. William Chevrolet/GEO, Inc., 326 Ill.App.3d 642, 260 Ill.Dec. 735, 762 N.E.2d 1, 9 (2001). This rule applies with equal force in instances where fraud is alleged with respect to the execution of a written contract. See Belleville, 74 Ill.Dec. 779, 456 N.E.2d at 284; see also N. Trust Co. v. VIII S. Mich. Assoc., 276 Ill.App.3d 355, 212 Ill.Dec. 750, 657 N.E.2d 1095, 1103 (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. 25 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 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 three-day 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 [themselves] of the means of knowledge open to [them, they] cannot be heard to say [they were] deceived by misrepresentations. Elipas Enterprises, 183 Ill.Dec. 752, 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.
26 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 occurred; and (5) the damage complained of was proximately caused by the deception. Capiccioni, 274 Ill.Dec. 461, 791 N.E.2d at 558 (citing Connick v. Suzuki Motor Co., Ltd., 174 Ill.2d 482, 221 Ill.Dec. 389, 675 N.E.2d 584, 593 (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., 295 Ill.App.3d 1, 229 Ill.Dec. 334, 691 N.E.2d 807, 816 (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., 156 Ill.App.3d 154, 109 Ill.Dec. 541, 510 N.E.2d 409, 417-18 (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 Iron & Metal, Inc. v. U.S. Office Equip., Inc., 250 F.3d 570, 576 (7th Cir.2001); Miller, 260 Ill.Dec. 735, 762 N.E.2d at 13. 27 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 five-year 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. 28 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., 288 Ill.App.3d 207, 224 Ill.Dec. 24, 681 N.E.2d 6, 8 (1997); Saunders v. Michigan Ave. Nat'l Bank, 278 Ill.App.3d 307, 214 Ill.Dec. 1036, 662 N.E.2d 602, 608 (1996); see also Bober v. Glaxo Wellcome PLC, 246 F.3d 934, 938-39 (7th Cir.2001) (applying 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 29