Page 21 - John Hundley 2011

New Developments Update

Sharp Thinking

No. 51 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. August 2011

Another Court Sustains Bank’s Use of 365/360 Interest Scheme

Another panel of the Appellate Court has
sustained a bank’s use of the 365/360 interest Special Update Issue
calculation scheme (see Sharp Thinking No. 43, From its inception Sharp Thinking has aimed to report
March 2011). on developments in the law. As that goal recognizes, the law
is not static – and no matter how thorough and perceptive an
Under the widely-used but sometimes con- analysis may be, it cannot stop further development.
troversial interest calculation system, the stated Accordingly, from time to time Sharp Thinking publishes
annual rate is divided by 360 days to determine a special update issues discussing new developments in areas
daily interest charge, which then is applied to all already covered – developments which individually do not
the actual days in the interest period. The effect justify another issue on the topic, but of which we want to
is that the bank or other financier receives 5 make you aware. This issue provides such updates on
extra days-worth of interest over the course of a several topics.
typical year. If a topic is of interest and you do not have the original
issue to consult for reference, please check it out on our
In Asset Exchange II, LLC v. First Choice website, www.thesharpfirm.com, or request it by e-mailing
Bank, 2011 IL App (1st) 103718 (July 12, 2011), Sara@lotsharp.com.
this system was attacked as violating the Illinois
Interest Act (815 ILCS 205), as being in breach of contract, and as constituting common-law fraud. Citing
RBS Citizens, N.A. v. RTG-Oak Lawn, LLC, 407 Ill.App.3d 183 (2011), discussed more fully in Sharp
Thinking No. 43, the court rejected all the challenges and affirmed the trial court’s dismissal of the subject
counts with prejudice.

Third-Party Releases Must Be Narrowly Tailored, Court Says

Bankruptcy courts’ power to enter releases in favor of third parties is a power that should be
exercised sparingly, a Northern Illinois bankruptcy judge has recently concluded.

Evaluating In re Ingersoll, Inc., 562 F.3d 856 (7th Cir. 2009), which was the focus of Sharp Thinking
No. 22 (July 2009), the court in In re Draiman, __ B.R. __, 2011 WL 1486128 (Bankr. N.D. Ill. 2011), said
a release of a third party “must be narrow” and “may not provide for ‘blanket immunity’”. Moreover, the
court said, the release may not affect matters beyond the jurisdiction of the bankruptcy court or unrelated
to the reorganization. Furthermore, the court noted, the “justification for granting third-party releases in a
plan of liquidation is far less compelling than in a plan of reorganization.” The court struck down proposed
releases which it found to be overly broad and not essential to the plan.

Home Repair & Remodeling Act Is Amended

The Home Repair & Remodeling Act, 815 ILCS 513, discussed in Sharp Thinking Nos. 31 (March
2010) and 38 (October 2010), has been amended to regulate situations where contractors agree to be

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Sharp Thinking is an occasional newsletter of The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
Thinking shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein
constitute educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal
advice on your particular situation, contact a Sharp lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.