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MLC Corp. v. Cluxton
Citations: 10 Ill. App. 3d 239; 293 N.E.2d 475; 1973 Ill. App. LEXIS 2608Docket: No. 72-79
Court: Appellate Court of Illinois; March 1, 1973; Illinois; State Appellate Court
Elizabeth P. K. Cluxton appeals a foreclosure decree from the Circuit Court of Lake County, which denied her usury defense and her post-trial motion to vacate the decree. The case arose after her divorce from Harley E. Cluxton, during which she executed a junior trust deed to secure a $90,000 loan from MLC Corporation, of which only $50,000 was actually received. MLC Corporation also charged additional fees totaling $5,425. Following the initiation of foreclosure proceedings in September 1970, Cluxton claimed usury, seeking a penalty under Illinois law. The trial court denied her usury defense without a hearing, leading to a foreclosure decree on October 22, 1971. Cluxton's husband, Dr. Cluxton, did not respond to the proceedings due to a bankruptcy filing. Subsequent actions included the purchase of Dr. Cluxton's interest by Fred Brown and the sale of the property to MLC Corporation. The court will evaluate whether Cluxton, as a surety, could assert a usury defense, noting that due process requires a hearing on whether the loan's interest rates were usurious under Illinois law. MLC Corporation argues the loan was intended for business purposes, which could exempt it from usury claims, but no evidence was presented in the trial court to substantiate this. An affidavit from Dr. Cluxton indicated the loan was for business use, which further complicates the matter. Dr. Cluxton and his attorney received $50,000 in relation to a trust deed and a $90,000 note executed solely by Dr. Cluxton. Attorney Melvin E. Levinson provided a statement to Mrs. Cluxton regarding the loan, indicating that the funds would be used to settle various debts, including loans from National Boulevard Bank, Parkway Bank, Northern Trust Co., First National Bank of Lake Forest, and Jersild Judgment. Levinson stated that the funds would be managed under his supervision. Mrs. Cluxton alleged that Alan R. Edelson, an agent of MLC Corporation and trustee, was aware of the statement concerning the loan's distribution. Although Dr. Cluxton claimed the loan was for business purposes, it was reported to plaintiffs that the funds would cover existing debts; however, not all debts listed were actually paid. The trial court did not hold a hearing on whether the interest charged was usurious. The court referenced prior cases confirming that a surety could claim usury, ruling that Mrs. Cluxton, as a surety, had this right. The court denied the appellees' motion to dismiss the appeal related to the foreclosure sale, vacated the foreclosure sale, and reversed the trial court's decision, remanding for further proceedings. Judges T. Moran and Abrahamson concurred.