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Johnson v. Matrix Financial Services Corp.

Case Date: 12/09/2004
Court: 1st District Appellate
Docket No: 1-03-2820 Rel

FOURTH DIVISION
December 9, 2004



1-03-2820

 
EVON W. JOHNSON and ROBERT E. JOHNSON,

                       Plaintiffs-Appellants,

                                 v.

MATRIX FINANCIAL SERVICES CORPORATION
and DOLPHIN MORTGAGE CORPORATION,

                       Defendants-Appellees.

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)		 Appeal from the
Circuit Court of
Cook County.




Honorable
Sheldon Gardner,
Judge Presiding.


JUSTICE QUINN delivered the opinion of the court:

The following facts, taken as true, appear in plaintiffs'dismissed, third-amended complaint: In March 2000, plaintiffs Evonand Robert Johnson retained the services of a mortgage broker,Dolphin Mortgage Corporation (Dolphin), "to act as their exclusivebroker to obtain a mortgage loan for them." Plaintiffs directedDolphin to obtain a 30-year mortgage loan for $173,569 at "thespecific interest rate of 8.75%" and authorized Dolphin to receiveup to 3.5% of the loan proceeds as its compensation. If Dolphincould not find a mortgage with the terms plaintiffs requested,Dolphin would receive 1% of the loan proceeds as compensation. InJune 2000, Dolphin brokered a mortgage loan for plaintiffs fromMatrix Financial Services Corporation (Matrix), but with aninterest rate higher than what plaintiffs had hoped for. Pursuantto their agreement, plaintiffs paid Dolphin a broker fee of$1,708.87 (1% of the loan principal obtained from Matrix), whichwas deducted from the loan proceeds. "Unbeknownst" to plaintiffs,however, Dolphin also received $4,149.86 from Matrix. Plaintiffsalleged that this payment was a "kickback" designed to "induce[Dolphin] to refer the loan to Matrix and to secretly raise theinterest rate of the loan above the 8.75% for which Plaintiffs werequalified." This $4,149.86 was not paid from the proceeds of theloan.

Plaintiffs alleged this kickback, known as a "yield spreadpremium"(1) (YSP), violated public policy as expressed in the RealEstate Settlement Procedures Act (RESPA) (12 U.S.C.