Latimer v. Grundy County National Bank
Docket: No. 3—92—0356
Court: Appellate Court of Illinois; January 7, 1993; Illinois; State Appellate Court
The court affirmed a judgment allowing purchasers Robert R. Latimer and Linda I. Latimer to prepay their commercial installment land contract with Grundy County National Bank. The contract, which included a down payment and monthly installments over 15 years at 10% interest, specified that the total unpaid balance was due on June 1, 2003, "if not sooner paid." This language was interpreted by the court as evidence of the parties' intent to allow prepayment. The case marked a notable application of the majority rule that generally does not grant the right to prepay absent specific contractual language or statutory authority. However, since the contract explicitly allowed prepayment, the court upheld the lower court's decision. The majority rule is supported by principles of mutuality and freedom of contract, asserting that a creditor should have the reciprocal right to accelerate payments if a debtor has the right to prepay. The judgment reflects a recognition of the contractual terms over the default common law rule. Installment payment provisions in contracts serve both the purchaser and the vendor's interests. Mortgages and promissory notes are investment tools aimed at providing consistent income and predictable returns. Allowing prepayment without agreement can burden the mortgagee with additional taxes and reinvestment costs. The prevailing argument against prepayment is often tied to residential mortgages; however, the case involves a commercial transaction where both parties had equal bargaining power. It is concluded that a purchaser does not have a right to prepay under an installment loan agreement unless explicitly stated in the contract or authorized by statute. No relevant Illinois statutes were identified. The contract in question did, however, allow for prepayment, as indicated by the phrase "if not sooner paid," which holds significant meaning. The reasoning in Kruse v. Planer, where a similar phrase was interpreted as not conferring a prepayment right, is deemed flawed. In contrast, the North Carolina Supreme Court recognized that similar language in a deed of trust suggested that prepayment was possible. After reviewing relevant cases, it is determined that the language "if not sooner paid" in an installment contract does express a right to prepay, granting the purchaser the option to accelerate payment. Therefore, the trial court's order for the vendor to accept payment of the principal balance is upheld, and the judgment is affirmed.