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Illinois adheres to a "four corners rule" of contract interpretation, which provides that an 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. 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. In other words, under 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. 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.
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 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 twenty-four 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.
Did a genuine issue of material fact exist concerning whether or not the Davises signed a two-year prepayment penalty addendum to their loan at the closing?
The court found no breach of contract because the entire loan contract, including its 60-month prepayment penalty agreement, was clear, unambiguous, and fully integrated. The court rejected the Davises’ contention that the agreement was facially ambiguous because of the existence of an unsigned 24-month penalty addendum document in the Davises’ stack of closing papers. As to the fraud claim, the court held as a matter of law that the Davises could not meet the reliance element. The court found no violation of ICFA because there was no evidence that the Davises signed both a 24-month penalty addendum and a 60-month penalty addendum at closing. Further, the Davises never challenged the signed documents during the closing or during the three-day grace period. The court found no violation of IIA because there was an effective agreement. Finally, the Davises’ Fed. R. Civ. P. 56(f) discovery motion was properly denied.