Davis v. G.N. Mortgage Corp.

United States Court of Appeals for the Seventh Circuit · 2005 · Contracts

Contractsparol evidenceintegrationfour cornersambiguityprepayment penaltymortgage addendumcommon law fraud

Facts

The Davises refinanced personal debt with a $288,000 adjustable rate mortgage from GN, later sold to Countrywide, and at closing they signed a separate prepayment penalty addendum stating a sixty-month penalty period. They later paid off the loan in less than three years and were charged over $12,000 under that signed five-year rider. The Davises claimed the parties had agreed to only a two-year penalty period and that the closing agent told them the duplicate document stacks were identical and reflected that deal. In their retained unsigned papers they later found both an unsigned two-year addendum and an unsigned five-year addendum, but neither GN's nor Countrywide's loan file contained a two-year addendum, and the Davises could not produce a signed two-year rider.

Issue

Whether the existence of an unsigned two-year prepayment addendum and alleged oral representations created a genuine issue of material fact sufficient to defeat summary judgment on the Davises' contract, fraud, and consumer fraud claims. Also, whether the district court abused its discretion by denying additional discovery under Rule 56(f).

Rule

Under Illinois law, when a written contract is fully integrated and facially unambiguous, parol or extrinsic evidence is inadmissible to vary or contradict its terms. A plaintiff alleging Illinois common law fraud must prove, among other elements, justifiable reliance, and reliance is not justified where the plaintiff had ample opportunity to read and ascertain the truth of the written agreement. Under the Illinois Consumer Fraud Act, the allegedly deceptive act is assessed in light of the totality of information available to the plaintiff. A Rule 56(f) request for more discovery cannot rest on speculation or a fishing expedition.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Peoria, Illinois, Lena Ortiz refinanced her home loan with Prairie Harbor Lending. At closing, she signed a separate rider stating in three places that a prepayment fee would apply during the first 48 months, but she later found in her own unsigned papers a different draft rider stating 12 months and claims the closer had said the papers matched her earlier deal.

If Lena sues the lender for breach of contract, arguing the unsigned 12-month draft and the closer’s statement create a fact issue about the real term, how should a court applying Illinois law rule?

Explanation. Illinois follows the four-corners rule. When the writings executed together are intended as the final and complete agreement and are facially unambiguous, parol evidence of prior or contemporaneous understandings is inadmissible to vary or contradict the written term. An unsigned draft in the borrower's file and alleged oral assurances do not create ambiguity in an otherwise clear signed rider.