DAVIS V. G.N. MORTGAGE CORPORATION
396 F.3d 869 (2005)
NATURE OF THE CASE: Davis (P) appealed a summary judgment for Mortgage (D) in P's action
alleging breach of contract, fraud, and violations of the Illinois Consumer Fraud Act (ICFA).
FACTS: P obtained a $288,000 adjustable rate mortgage from D. The only other party
present at the loan closing was Bogdanovich, the closing agent for TICOR Title Insurance
Company, which was the title company authorized by D to conclude the transaction. P was
presented with two stacks of paper, each purportedly consisting of 24 documents and totaling
43 pages. Ps admit that they failed to read or compare the two sets of documents thoroughly
at the time of the closing, They allege that Bogdanovich told them that the stacks were
identical in content and accurately represented the agreement between themselves and D,
including a provision setting forth a two-year prepayment penalty period. D eventually sold
the note to Countrywide. When ready to pay off in two years, Ps were surprised to learn they
had a 5 year prepayment penalty of six months interest instead of the two year provision.
The parties agree that D had initially proposed a three-year prepayment penalty period. The
loan file contains a document entitled 'Conditional Loan Approval,' containing notation of a
three-year prepayment penalty period. That document, however, is not signed. Upon reviewing
the unsigned copy of the mortgage contract that they retained from the closing, P discovered
two documents which they had not previously read entitled 'Prepayment Penalty Note
Addendum,' both of which had been drafted D. The riders were identical except that one
provided for a 'twenty-four month penalty period,' while the other provided for a 'sixty
month penalty period.' The one they signed at the closing was of the 'sixty month' species,
a fact which they do not dispute. Ps claimed they signed every document in the stack and
must have signed both versions. P paid off the 30-year in less than three years later by
refinancing at a much lower rate, and were assessed over $12,000 in penalties pursuant to
the terms of a five-year prepayment penalty rider included in the mortgage document. Ps sued
Ds, alleging that the prepayment penalty agreement was fraudulently obtained, that
enforcement of the penalty constituted a breach of contract and that the penalty violated
state consumer fraud laws. P claims that they had agreed to a twenty-four month prepayment
rider, but D had fraudulently induced them into signing one that provided for a penalty if
the loan was paid before sixty months had elapsed. P was unable to product evidence of a
signed two year agreement. Ds motioned for summary judgment and it was granted. P appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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