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                               Appellate Court                        Date: 2016.11.28
                                                                      11:11:30 -06'00'




                    Cole v. Davis, 2016 IL App (1st) 152716



Appellate Court   FRANKLIN A. COLE, as Trustee or Representative of the Franklin
Caption           A. Cole IRA-PEN, Bank One N.A. Account No. 262093-1000,
                  Plaintiff-Appellant, v. ALLISON S. DAVIS; GALLERY PARK
                  PLACE, LLC; DAVIS GROUP V; DAVIS GROUP, LLC; ALL
                  CHICAGO, LLC; NEW KENWOOD, LLC; and AMERICAN
                  HOUSING, LLC, Defendants-Appellees.



District & No.    First District, Fifth Division
                  Docket No. 1-15-2716


Filed             August 26, 2016



Decision Under    Appeal from the Circuit Court of Cook County, No. 2014-L-050986;
Review            the Hon. Brigid Mary McGrath, Judge, presiding.



Judgment          Certified question answered.



Counsel on        Paul E. Peldyak and Charles A. Brizzolara, both of Chicago, for
Appeal            appellant.

                  Arnold H. Landis, of Chicago, for appellees.



Panel             JUSTICE GORDON delivered the judgment of the court, with
                  opinion.
                  Justices Lampkin and Burke concurred in the judgment and opinion.
                                               OPINION

¶1        The present interlocutory appeal arises out of defendants’ alleged default on a promissory
     note. The parties entered into an agreement under the promissory note (the note) on November
     17, 2000, by which defendants agreed to pay plaintiff, by December 15, 2000, the principal
     sum of $100,000 with interest accruing at the publicly announced prime rate of Bank One,
     N.A. The note contains a confession of judgment clause, which authorizes any attorney to
     confess judgment on behalf of defendants for the amount outstanding at any time after the
     payment’s due date. After defendants allegedly failed to pay off the principal and interest to
     plaintiff by the due date, plaintiff filed a confession of judgment suit on December 24, 2014.
¶2        On January 7, 2015, the trial court entered judgment in favor of plaintiff for $153,453.97
     and costs of suit. Thereafter, defendants filed a motion to vacate and/or open the judgment,
     arguing that the confession of judgment clause in the note was invalid because it contained a
     variable interest rate. The trial court granted defendants’ motion. Plaintiff then filed a motion
     to certify a question under Illinois Supreme Court Rule 308 (eff. Jan. 1, 2015), arguing that
     Illinois courts have not addressed whether or not a confession of judgment clause is invalid
     where it contains a definite principal and a variable interest rate. Plaintiff further argued that
     section 3-112 of the Uniform Commercial Code (UCC) (810 ILCS 5/3-112 (West 2000))
     expressly authorizes the use of a variable interest rate in instruments like the promissory note
     in question. The trial court granted plaintiff’s motion, and we granted the appeal. For the
     following reasons, we answer the certified question in the affirmative.

¶3                                          BACKGROUND
¶4       Plaintiff filed a complaint against defendants on December 24, 2014. The complaint
     alleges that on or about November 17, 2000, defendants made and delivered the note to
     plaintiff. The complaint attaches a copy of the note, which is dated November 17, 2000. The
     note heading specifies that it is for $100,000 and designates the location as Chicago, Illinois.
     The body of the note provides:
                 “For value received, the Undersigned, and each of them, jointly and severally,
             promise to pay to the order of [plaintiff], Chicago, Illinois, the principal sum of
             $100,000. The principal sum shall bear interest at the rate of the publicly announced
             prime rate of BANK ONE, N.A. (which is not intended to be the lowest or most
             favorable rate at any one time) in effect from time to time (the ‘Prime Rate’), which rate
             of interest shall increase or decrease in a total amount equal to the amount by which the
             publicly announced Prime Rate of said bank is increased or decreased from time to
             time. Each change in the interest rate hereon shall take effect on the effective date of the
             change in the Prime Rate. Holder shall not be obligated to give notice of any change in
             the Prime Rate. The Prime Rate shall be computed on the basis of a year consisting of
             360-days and shall be paid for the actual number of days elapsed from the date
             principal or part thereof is drawn down, the Undersigned shall give Holder 24 hours
             written notice of intention to draw on the principal sum. This note may be prepaid at
             anytime without penalty. The Undersigned shall remit to Holder the outstanding
             principal sum and interest on December 15, 2000.
                 Any amount of the principal hereof which is not paid when due whether at stated
             maturity, by acceleration, or otherwise, shall bear interest payable on demand at an

                                                  -2-
             interest rate equal at all times to two per cent (2%) [being 200 base points] above the
             applicable rate in effect on this note at such maturity. All payments hereunder shall be
             applied first to interest on the unpaid balance at the rate herein specified and then to the
             principal.
                  All amounts outstanding under this note shall become immediately due and
             payable, at the option of Holder hereof, without any demand or notice whatsoever, in
             the event that the Undersigned or any of them be the subject of any assignment for the
             benefit or creditors of, or the commencement of any bankruptcy, receivership,
             insolvency, reorganization, dissolution or liquidation proceedings by or against any of
             them, or in the event that The Neighborhood Rejuvenation Partnership, L.P., an Illinois
             limited partnership (‘the Fund’), has not received firm commitments from investors of
             at least $17,000,000, and in respect of which there has been a closing, as that term is
             defined in the agreement of limited partnership in respect of the Fund, or is for any
             reason deprived of or surrenders its rights to build under existing authorities or its tax
             and zoning status, or if Gallery Park Place LLC ceases to be a functional part of and
             beneficiary of the Fund and its operations.
                  Advances of principal under this note will be made by Holder only upon 24 hours
             notice to Holder at his place of business in Chicago, Illinois.
                  All advances made by the Holder and all payments made by the Undersigned on
             account of the unpaid principal amount hereof, shall be recorded on the grid attached
             hereto. The Undersigned and each of them agrees that in any section or proceeding
             instituted to collect or enforce collection of this note, the amount endorsed on the
             reverse side of the note at that time shall be prima-facie evidence of the unpaid
             principal balance of this note. This note shall be governed by and construed under the
             law of the State of Illinois in all respects.
                  The Undersigned and each of them irrevocably authorizes any attorney of any court
             of record to appear for it in term time or vacation, at any time and from time to time
             after payment is due hereof, whether by acceleration or otherwise, and confess
             judgment, without process, in favor of holder hereof, for such sum as may appear to be
             due and unpaid hereon, together with interest, costs, and reasonable attorneys’ fees,
             and to waive and release all errors which may intervene in such proceeding, and
             consents to immediate execution upon such judgment, hereby ratifying and confirming
             all that said attorney may do by virtue hereof.”
     The note contains defendants’ signatures.
¶5       The complaint further alleges that on June 12, 2001, by which date defendants had not paid
     their debt under the note, the parties entered into a letter agreement amending the note. The
     complaint attaches a copy of this letter agreement. The letter agreement is addressed to Allison
     S. Davis, Esq., and is signed by plaintiff, the sender of the letter agreement. The letter
     agreement is dated June 12, 2001. The body of the letter agreement provides:
                  “Reference is made to that certain promissory note dated November 17, 2000,
             payable December 25, 2000 to Franklin A. Cole, IRA-PEN, Bank One N.A. Account
             #262093-1000, a copy of which is attached hereto. (The Note).




                                                  -3-
                  Though by its term the Note was payable on December 15, 2000, and interest in
              respect thereof has not been paid, the parties have from time to time agreed to extend
              the due date and the date for payment of interest so that the Note is not now in default.
                  In order to assure that payments of principal and interest are made in a timely and
              manageable fashion the parties agree to amend the terms of The Note as follows:
                      (1) All accrued interest at the prime rate as charged from time to time by Bank
                  One (the ‘prime rate’) shall be paid as of May 31, 2001 on the date of the execution
                  of this letter. Thereafter accrued interest shall be paid on June 30, 2001 and at the
                  end of each calendar quarter thereafter at the prime rate as defined in such Note so
                  long as the Note is not in default.
                      (2) The principal balance of the Note shall be paid in 3 installments, $25,000 on
                  or before September 30, 2001; $25,000 on or before November 30, 2001 and the
                  balance of such note, $50,000 on or before March 31, 2002.
                      (3) In all other respects the Note shall remain in full force and effect.
                  If this arrangement is in accordance with your understanding and satisfactory to
              you, please sign and cause each of the parties noted below to sign this letter at which
              time it will become a binding amendment to The Note.”
     The letter agreement contains the signatures of plaintiff and defendants.
¶6        The complaint next alleges that defendants failed to pay their debt under the note according
     to its amended terms and defaulted on it. It alleges that demand for payment was made upon
     defendants, but they failed to pay. The complaint alleges that plaintiff was the holder and
     owner of the note and that no part thereof had been paid except the principal sum of $6999.97,
     and several interest payments aggregating $24,088.07, for which defendants had been credited.
     The complaint alleges that a schedule of payments that were made and amounts paid is
     attached to the complaint, although no schedule of payments is attached to the complaint in the
     record.
¶7        The complaint alleges that defendants owe plaintiff the sum of $93,000.03, “with interest
     at that certain rate of interest announced from time to time as its Prime Rate by Bank One N.A.
     (and its successor bank, J.P. Morgan Chase N.A.) (the ‘Prime Rate’), and after September 30,
     2001, the Prime Rate plus 200 basis points (the ‘Interest Charge’) percent per annum from
     September 30, 2001 to the present, on the principal outstanding and unpaid.” The complaint
     prays that judgment be entered against defendants “in the sum of $93,000.03 with accrued
     interest of $59,859.02 computed at the Interest Charge to January 31, 2013, and thereafter until
     the date of entry of judgment at the per diem interest rate of $13.56 together with attorneys’
     fees for $500 and costs of suit.”
¶8        Following the complaint’s prayer for judgment is the confession of judgment, which is
     attached to the complaint. The confession of judgment states that:
                  “[Defendants], by Robert P. Groszek,[1] their attorney, waive service of process and
              confess that there is due from [defendants] to [plaintiff] the following:
                      Principal $100,000.00 less amounts paid: $6,999.97
                      Balance: $93,000

        1
         Robert P. Groszek is not defendants’ present counsel. The record does not indicate if or when
     defendants ever retained Groszek.

                                                 -4-
                       Interest (to 5/5/14) $66,029.95
                       Per Diem ($13.56 to 12/9/14 219 days: $2,969.64
                       Attorneys’ Fee: $ 500.00
                       Total: $162,499.62”
¶9          The confession of judgment next provides that “[defendants] agree that judgment may be
       entered against them for the total of the above and for costs, release and waive all rights as
       authorized in the warrant of attorney.” The confession of judgment contains a signature from
       John P. Bergin,2 who is designated as the attorney for defendants.
¶ 10        On January 7, 2015, plaintiff filed “Documents in Support of Entry of Judgment.” This
       filing included an affidavit of Cass D. Scholes of JPMorgan Chase Bank (successor to Bank
       One, N.A.) with the calculation of amount due. In his affidavit, Scholes averred that he is vice
       president of JPMorgan Chase Bank (the Bank), N.A, and manager of the loan administration
       unit, which handled the calculation of interest due on various notes on behalf of the Bank in its
       custodial or trustee capacity. Scholes confirmed that the Bank was the custodian of the note at
       issue in the present case. Scholes averred that he performed the calculations of interest and
       principal due and that as of May 5, 2014, a total of $159,029.98 (the sum of the outstanding
       principal, $93,000.03, and accumulated interest of $66,029.95) was due under the note.
       Scholes’ affidavit contains his signature and is notarized. A table showing Scholes’ calculation
       of defendants’ debt under the note is attached to the January 7, 2015, filing.
¶ 11        On January 7, 2015, the trial court entered judgment on behalf of plaintiff for $153,453.97
       and costs of suit.
¶ 12        On January 20, 2015, defendants filed a motion to vacate and/or open the judgment by
       confession entered on January 7, 2015.3 In this motion, defendants argued that the judgment
       for confession should be vacated and/or opened (1) because the power to confess judgment
       was invalid, insofar as the variable interest rate required consultation of extrinsic evidence to
       determine the extent of defendants’ liability, (2) because there was another action pending
       between the same parties for the same cause in the same court, (3) because plaintiff waived his
       right to a judgment by confession, and (4) because plaintiff’s authority to file this lawsuit on
       behalf of the holder of the note was not established.
¶ 13        On February 18, 2015, plaintiff filed a response to defendants’ motion to vacate and/or
       open the judgment. Plaintiff argued that the power to confess judgment is not invalid because

           2
              John P. Bergin is not defendants’ present counsel. The record does not indicate if or when
       defendants ever retained Bergin.
            3
              Although not relevant to the present appeal, defendants’ motion claimed that plaintiff originally
       filed a lawsuit against defendants on February 7, 2013, which plaintiff voluntarily dismissed on
       December 9, 2014, before filing the present lawsuit. Defendants’ motion attached documents from the
       first lawsuit, including plaintiff’s complaint, defendants’ answer, plaintiff’s amended complaint,
       defendants’ response to plaintiff’s motion for summary judgment, and defendants’ response to
       plaintiff’s motion to clarify the designation of plaintiff. In his response to defendants’ motion to vacate,
       plaintiff agreed that he voluntarily dismissed this first lawsuit on December 9, 2014. The grounds for
       dismissing the first lawsuit appear to have been related to defendants’ contention that the plaintiff in the
       first lawsuit was improperly designated. Although defendants raise issues in their appellee brief about
       whether or not plaintiff is properly designated in the present lawsuit, such issues are not relevant to this
       appeal, which is solely aimed at answering the question certified for review by the trial court.

                                                        -5-
       of the note’s variable interest rate. Plaintiff contended that Illinois courts have only held
       confessions of judgments invalid for indefinite principal amounts, not indefinite amounts of
       interest. Furthermore, plaintiff argued that section 3-112 of the UCC allows interest in such an
       instrument to be fixed or variable. Addressing defendants’ other arguments, plaintiff countered
       that there was no other action pending between the parties, that plaintiff had not waived his
       right to a judgment by confession, and that his authority to file this lawsuit was self-evident
       from the verified complaint.
¶ 14       In their reply, defendants largely reiterated the same arguments that they made in their
       motion but additionally introduced a written memorandum decision from a different circuit
       court case in support of their argument that a variable interest rate invalidates a confession of
       judgment clause. In that memorandum opinion, the judge found that a confession of judgment
       clause containing a variable interest rate attainable from the Wall Street Journal Prime Index
       was impermissible because it required extrinsic evidence to prove the amount for which
       judgment was authorized.
¶ 15       On May 20, 2015, the trial court granted defendants’ motion and opened the January 7,
       2015, judgment. The trial court opened the judgment on the basis that “the note contains a
       variable interest rate requiring evidence de hors the record.”
¶ 16       On June 23, 2015, plaintiff filed a motion to certify a question of law under Illinois
       Supreme Court Rule 308 (eff. Jan. 1, 2015). In his motion, plaintiff argued that prior Illinois
       case law has not answered the question of whether a confession of judgment containing a
       definite principal and variable interest rate can be valid. Plaintiff further argued that all
       relevant Illinois case law precedes the adoption of section 3-112 of the UCC, which condones
       the use of variable interest rates. As such, plaintiff contended that this issue of first impression
       warranted an interlocutory appeal under Rule 308. Defendants did not respond to plaintiff’s
       motion.
¶ 17       On September 25, 2015, the trial court granted plaintiff’s motion for interlocutory appeal
       under Rule 308. The trial court certified the following question to this court:
                    “Whether a confession of judgment under a note drafted under the Uniform
               Commercial Code is valid where the note references a variable interest rate and has a
               definite principal sum?”
       On October 1, 2015, plaintiff filed a petition to this court for leave to appeal. This court granted
       the appeal on November 5, 2015.

¶ 18                                             ANALYSIS
¶ 19       Illinois Supreme Court Rule 308 (eff. Jan. 1, 2015) provides a remedy of permissive appeal
       from interlocutory orders where the trial court has deemed that they involve a question of law
       as to which there is substantial ground for difference of opinion and where an immediate
       appeal from the order may materially advance the ultimate termination of the litigation. We
       apply a de novo standard of review to legal questions presented in an interlocutory appeal
       brought pursuant to Rule 308. Simmons v. Homatas, 236 Ill. 2d 459, 466 (2010). De novo
       consideration means we perform the same analysis that a trial judge would perform. Khan v.
       BDO Seidman, LLP, 408 Ill. App. 3d 564, 578 (2011). Additionally, we are limited to the
       issues raised in the certified questions and will not go beyond those questions to consider other
       matters. See Townsend v. Sears, Roebuck & Co., 227 Ill. 2d 147, 153 (2007) (“An interlocutory


                                                    -6-
       appeal pursuant to Supreme Court Rule 308 is ordinarily limited to the question certified by the
       circuit court ***.”).
¶ 20       As noted above, the trial court has certified the following question of law: “Whether a
       confession of judgment under a note drafted under the Uniform Commercial Code is valid
       where the note references a variable interest rate and has a definite principal sum?” Defendants
       contend that the confession of judgment clause in the note is void under Illinois case law
       interpreting section 2-1301(c) of the Code of Civil Procedure (Code) (735 ILCS 5/2-1301(c)
       (West 2000)), which authorizes confessions of judgment. Plaintiff argues that the note’s
       confession of judgment clause is not inconsistent with Illinois case law and is expressly
       condoned by section 3-112 of the UCC. We find that the certified question is an issue of first
       impression in Illinois and that section 3-112 of the UCC dictates the outcome.

¶ 21                             I. Illinois Law on Confessions of Judgment
¶ 22        The power to confess judgment derives from section 2-1301(c) of the Code (735 ILCS
       5/2-1301(c) (West 2000)), which provides that “any person for a debt bona fide due may
       confess judgment by himself or herself or attorney duly authorized, without process.” By its
       terms, the statute does not apply to consumer transactions or to agreements that do not meet
       certain jurisdictional requirements. 735 ILCS 5/2-1301(c) (West 2000). Neither party argues
       that the note in question is part of a consumer transaction nor that the statute’s jurisdictional
       requirements are not met. Despite the statute’s otherwise open-ended language, Illinois case
       law views confessions of judgment “circumspectly” and has imposed other limitations on the
       power to confess judgment. Grundy County National Bank v. Westfall, 49 Ill. 2d 498, 500-01
       (1971). Accordingly, a review of relevant case law interpreting the power to confess judgment
       is necessary to establish the precise parameters of the power.
¶ 23        In Little v. Dyer, 138 Ill. 272, 281 (1891), the Illinois Supreme Court held that the statutory
       right 4 to confess judgment does not extend to “uncertain and unliquidated” sums. Little
       involved a lease of real estate. Little, 138 Ill. at 278-79. The confession of judgment clause5 in
       the lease warranted an attorney “to waive process and service thereof,” and “to confess
       judgment from time to time for any rent which may be then due by the terms of this lease, with
       costs, and to waive all errors and all right of appeal from any such judgment or judgments.”
       (Emphasis and internal quotation marks omitted.) Little, 138 Ill. at 278. Furthermore, the
       amount owed under the lease would include “so much additional rent” as would accumulate
       from the lessor’s payment of water and gas bills and maintenance of the premises. Little, 138
       Ill. at 279. The supreme court found that the confession of judgment clause was invalid
       because the amount owed under the lease could not be ascertained without judicial inquiry.
       Little, 138 Ill. at 279-80.
¶ 24        Importantly, the Little court explained the rationale and policy behind limiting the scope of
       confessions of judgment, and subsequent cases have not elaborated on the explanation offered

           4
             At the time of Little, the confession of judgment statute provided “ ‘any person, for a debt
       bona fide due, may confess judgment by himself or attorney duly authorized, either in term time or
       vacation, without process.’ ” Little, 138 Ill. at 277 (quoting Ill. Rev. Stat. 1891, ch. 110, ¶ 66).
           5
             Although we refer to clauses in instruments providing for confessions of judgment as “confession
       of judgment clauses,” the case law alternatively refers to such clauses as “warrants of attorney” or
       “cognovit clauses.”

                                                     -7-
       in Little. The Little court observed that a determination of the unliquidated debt owed under the
       lease would require a judicial investigation and an evidentiary hearing to ascertain and thus
       would directly contradict the characteristic of confessions of judgment that they be “without
       process.” Little, 138 Ill. at 278. Furthermore, the court stressed that “[i]t would be absurd to
       contend that such unrestricted power was given to the creditor or his attorney, and a rule such
       as that would be in the highest degree productive of fraud, and subversive of justice, and would
       be tantamount to making one of the parties in interest not only both plaintiff and defendant, but
       court also,—and that, too, in his own cause.” (Emphasis omitted.) Little, 138 Ill. at 279.
¶ 25       More recent cases have followed and refined the doctrine of Little. See Grundy, 49 Ill. 2d at
       501; see also State National Bank v. Epsteen, 59 Ill. App. 3d 233, 234-35 (1978). For instance,
       in Grundy, our supreme court found a confession of judgment clause in a loan guaranty
       agreement to be legally insufficient where the loan instrument guaranteed payment from the
       defendant to the plaintiff (a bank) of “any and all indebtedness, liabilities and obligations of
       every nature and kind of said Debtor to said Bank, and every balance and part thereof, whether
       now owing or due, or which may hereafter, from time to time, be owing or due, and howsoever
       heretofore or hereafter created or arising or evidenced to the extent of [blank].” (Internal
       quotation marks omitted.) Grundy, 49 Ill. 2d at 501. The blank space was not filled in at the
       time the defendant signed the agreement, but was later filled in by the bank for the amount of
       $50,000. Grundy, 49 Ill. 2d at 500-01. The agreement contained a confession of judgment
       clause authorizing any attorney to confess judgment in favor of the defendant at any time.
       Grundy, 49 Ill. 2d at 501-02. After the bank successfully obtained a confession of judgment in
       court for the $50,000, the defendant appealed, arguing that the confession of judgment clause
       was void because the extent of liability could be determined only by evidence outside of the
       instrument. Grundy, 49 Ill. 2d at 500. The court agreed, finding that the instrument “[did] not
       state the amount which may be confessed nor permit its ascertainment.” Grundy, 49 Ill. 2d at
       502. Accordingly, the confession of judgment clause was void because “[t]he extent of liability
       [could] be ascertained only by evidence dehors the instrument granting the power to confess
       judgment.” Grundy, 49 Ill. 2d at 502.
¶ 26       This court found Grundy distinguishable in Sears Bank & Trust Co. v. Scott, 29 Ill. App. 3d
       1002, 1010 (1975). Scott involved a sales contract whereby the defendant contracted to
       purchase an automobile from the plaintiff. Scott, 29 Ill. App. 3d at 1003. The contract stated a
       fixed sum owed and specified that the defendant would pay off the sum in monthly
       installments. Scott, 29 Ill. App. 3d at 1003. The contract authorized confession of judgment for
       the amount of the fixed sum or for any lesser amount that a court might find due under the
       contract. Scott, 29 Ill. App. 3d at 1003-04. The plaintiff obtained a confession of judgment, and
       the defendant appealed, arguing that the judgment was impermissibly entered for an uncertain
       and unliquidated amount. Scott, 29 Ill. App. 3d at 1004, 1010. However, this court found that
       the confession of judgment was valid because “the instrument as written established a definite
       sum owed and thus set a limit on the authority conferred.” Scott, 29 Ill. App. 3d at 1010.
       Because the judgment entered was within the specified limitation, it was valid. Scott, 29 Ill.
       App. 3d at 1010.
¶ 27       This court subsequently found Grundy controlling and Scott distinguishable in Epsteen.
       Epsteen, 59 Ill. App. 3d at 235-36. Epsteen involved a “Limited Continuing Guaranty and
       Security Agreement,” in which the defendant guaranteed prompt payment “of any and all
       indebtedness not in excess of the aggregate principal sum of . . . ($120,000.) and the interest


                                                   -8-
       thereon, upon which [defendant] is now or hereafter may become obligated to you.” (Internal
       quotation marks omitted.) Epsteen, 59 Ill. App. 3d at 234. The potential debt under the
       instrument included “all indebtedness of whatsoever kind” that existed or might arise and
       contained a confession of judgment clause. (Internal quotation marks omitted.) Epsteen, 59 Ill.
       App. 3d at 234. After the trial court entered judgment for $71,483.35 in favor of the plaintiff,
       the defendant appealed, and this court vacated the judgment. Epsteen, 59 Ill. App. 3d at
       233-34. This court found the confession of judgment clause legally insufficient, citing Grundy
       for the proposition that “[i]f the extent of liability can be established only by evidence dehors
       the instrument granting the power, the power to confess judgment is invalid and any judgment
       entered under the warrant is void.” Epsteen, 59 Ill. App. 3d at 235.
¶ 28       In Epsteen, this court distinguished Scott as follows:
               “The instant instrument, unlike that in Scott, established no certain and liquidated
               amount at the creation of the instrument. It is true that the instant argument [sic]
               contains a ceiling amount of $120,000 of possible liability which may arise from future
               dealings. However, even considering this ceiling amount, any certain liquidated
               amount due and owing can be established only by resort to documents dehors the
               instrument. Indeed, to establish any indebtedness whatsoever a consideration of
               documents dehors the instrument is necessary.” Epsteen, 59 Ill. App. 3d at 236.
¶ 29       Finally, this court found Grundy and Epsteen distinguishable, and Scott analogous, in
       Ninow v. Loughnane, 103 Ill. App. 3d 833, 838 (1981). In Ninow, the defendants and the
       plaintiffs entered into an agreement for the defendants to purchase the plaintiffs’ corporation.
       Ninow, 103 Ill. App. 3d at 835. The agreement contained a payment schedule for the
       defendants to pay off a fixed principal sum at a fixed interest rate. Ninow, 103 Ill. App. 3d at
       835. The agreement also had a renegotiation provision, which provided that the parties could
       renegotiate the payment schedule in the event of default “upon good cause shown.” Ninow,
       103 Ill. App. 3d at 836. The agreement contained a standard confession of judgment clause.
       Ninow, 103 Ill. App. 3d at 837. When the defendants defaulted on the agreement, the plaintiffs
       filed a complaint to confess judgment. Ninow, 103 Ill. App. 3d at 835-36. The trial court
       granted judgment by confession in the plaintiffs’ favor. Ninow, 103 Ill. App. 3d at 836. On
       appeal, the defendants argued that the confession of judgment was void because the confession
       of judgment clause and the renegotiation provisions were inconsistent and thus rendered the
       extent of their liability unascertainable from the face of the instrument. Ninow, 103 Ill. App. 3d
       at 837-38.
¶ 30       This court found that the confession of judgment clause was valid. Ninow, 103 Ill. App. 3d
       at 839. This court distinguished Grundy and Epsteen on the grounds that the instruments in
       Grundy and Epsteen did not “state a liquidated sum for which the signatory was liable at the
       creation of the instrument. Rather, each set for a ceiling amount for which the signatory could
       become liable, and for which judgment could be confessed.” Ninow, 103 Ill. App. 3d at 838.
       This court found that the agreement was similar to the instrument in Scott, insofar as the
       agreement, like the agreement in Scott, “establishe[d] the total amount of defendants’
       indebtedness to plaintiffs at the time of signature and further contain[ed] a schedule by which
       such payments [were] to be made.” Ninow, 103 Ill. App. 3d at 838. Furthermore, this court was
       not persuaded by the defendants’ arguments that the renegotiation provision rendered the
       extent of their liability indefinite because pursuant to the renegotiation clause the “payment” of


                                                   -9-
       the balance, and not the “amount” of the balance, was subject to renegotiation. Ninow, 103 Ill.
       App. 3d at 838-39.
¶ 31       Based on the foregoing case law, defendants argue that the confession of judgment clause
       in the case at bar is legally insufficient. Specifically, defendants rely on the language from
       Epsteen that “[if] the extent of the liability can be established only by evidence dehors the
       instrument granting the power, the power to confess judgment is invalid and any judgment
       entered under the warrant is void.” Epsteen, 59 Ill. App. 3d at 235. Because defendants’ debt
       under the note requires consultation of the prime rate of Bank One, N.A.—i.e., evidence
       dehors the instrument granting the power—to determine the accrued interest, defendants assert
       that the confession of judgment clause is necessarily invalid.
¶ 32       For his part, plaintiff argues that Illinois case law has never addressed the exact situation
       presented by the confession of judgment clause in the present case. Plaintiff contends that the
       case law has only held confession of judgment clauses to be invalid where the principal
       amount owed was indefinite. Plaintiff argues that the above cases, by contrast, have never
       addressed the present situation, in which the principal amount is fixed in the instrument but the
       interest rate is variable. Accordingly, plaintiff concludes that case law to date is distinguishable
       and that section 3-112 of the UCC is controlling (an argument we address below).
¶ 33       First, the present case is distinguishable from Grundy and Epsteen. As this court observed
       in Ninow, Grundy, and Epsteen are similar in that the instrument in both cases did not “state a
       liquidated sum for which the signatory was liable at the creation of the instrument. Rather, each
       set for a ceiling amount for which the signatory could become liable, and for which judgment
       could be confessed.” (Emphasis added.) Ninow, 103 Ill. App. 3d at 838. By contrast, the note in
       the present case clearly states a liquidated principal amount for which defendants were liable at
       the creation of the instrument. The only uncertainty regarding the amount owed stems from the
       amount of interest that would accrue on the fixed principal.
¶ 34       Furthermore, contrary to defendants’ assertion, the plain language of Epsteen does not
       render the confession of judgment clause in the note legally insufficient. As noted, Epsteen
       cited Grundy for the proposition that “[if] the extent of the liability can be established only by
       evidence dehors the instrument granting the power, the power to confess judgment is invalid
       and any judgment entered under the warrant is void.” (Emphasis added.) Epsteen, 59 Ill. App.
       3d at 235. On appeal, defendants rely exclusively on this language. However, in both Grundy
       and Epsteen, the instruments themselves provided no evidence of any liability whatsoever.
       Thus, the extent of liability could be established only by extrinsic evidence. In the case at bar,
       the extent of defendants’ liability is primarily evidenced by the note itself, but requires
       extrinsic evidence for exact calculation of interest. In other words, the extent of defendants’
       liability is not calculable only by evidence dehors the instrument. Accordingly, the above
       language from Epsteen does not invalidate the note’s confession of judgment clause.
¶ 35       Second, the rationale and policy for restricting confessions of judgment does not apply in
       the present case. As noted above, the Little court reasoned that a confession of judgment clause
       that requires an evidentiary hearing and judicial inquiry would contravene the basic
       characteristic of such clauses that they provide relief “without process.” Little, 138 Ill. at 278.
       Calculation of the amount owed under the note in the present case does not require an
       evidentiary hearing or judicial inquiry; plaintiff has demonstrated as much by attaching
       documents—the accuracy of which defendants do not dispute—that transparently show the
       simple calculation of the amount owed under the note. The Little court also expressed concern

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       that a limitless power to confess judgment would be conducive of fraud, “subversive of
       justice,” and would allow a plaintiff to function as his own opponent and his own judge. Little,
       138 Ill. at 279. It is hard to imagine how the power to confess judgment in the present case
       would be in any way conducive of fraud or subversive of justice. The note simply documents a
       $100,000 loan that must be paid back at a publicly announced interest rate. Transparent
       calculation of the amount owed under the note is attached to the complaint. It is again
       noteworthy that defendants do not dispute the existence of their debt to plaintiff or the accuracy
       of plaintiff’s computation of their debt.
¶ 36       For the above reasons, we find that the note’s confession of judgment clause is not legally
       insufficient. As noted, Illinois case law has not addressed the situation presented on this
       appeal, where the principal owed is fixed in the instrument but the interest rate is variable.
       Accordingly, we proceed to analyze the effect of section 3-112 on the dispute.

¶ 37                   II. The Effect of Section 3-112 on Confessions of Judgment
¶ 38       In 1991, the Illinois legislature adopted updated sections of article 3 of the UCC. Pub. Act
       87-582 (eff. Jan. 1, 1992). Article 3 of the UCC governs “negotiable instruments.” 810 ILCS
       5/3-102(a) (West 2000). Section 3-104(a) provides a definition of negotiable instrument:
               “Except as provided in subsections (c)[6] and (d),[7] ‘negotiable instrument’ means an
               unconditional promise or order to pay a fixed amount of money, with or without
               interest or other charges described in the promise or order, if it:
                       (1) is payable to bearer or to order at the time it is issued or first comes into
                   possession of a holder;
                       (2) is payable on demand or at a definite time; and
                       (3) does not state any other undertaking or instruction by the person promising
                   or ordering payment to do any act in addition to the payment of money, but the
                   promise or order may contain (i) an undertaking or power to give, maintain, or
                   protect collateral to secure payment, (ii) an authorization or power to the holder to
                   confess judgment or realize on or dispose of collateral, or (iii) a waiver of the
                   benefit of any law intended for the advantage or protection of any obligor.”
                   (Emphasis added.) 810 ILCS 5/3-104(a) (West 2000).
¶ 39       In turn, section 3-112(b) contains provisions on interest in negotiable instruments:
               “Interest may be stated in an instrument as a fixed or variable amount of money or it
               may be expressed as a fixed or variable rate or rates. The amount or rate of interest
               may be stated or described in the instrument in any manner and may require reference
               to information not contained in the instrument. If an instrument provides for interest,

           6
              Subsection (c) provides: “An order that meets all of the requirements of subsection (a), except
       paragraph (1), and otherwise falls within the definition of ‘check’ in subsection (f) is a negotiable
       instrument and a check.” 810 ILCS 5/3-104(c) (West 2000). Subsection (c) does not apply here because
       the note is not a check.
            7
              Subsection (d) provides: “A promise or order other than a check is not an instrument if, at the time
       it is issued or first comes into possession of a holder, it contains a conspicuous statement, however
       expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by
       this Article.” 810 ILCS 5/3-104(d) (West 2000). Subsection (d) does not apply here because the note
       contains no such statement.

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                but the amount of interest payable cannot be ascertained from the description, interest
                is payable at the judgment rate in effect at the place of payment of the instrument and at
                the time interest first accrues.” (Emphasis added.) 810 ILCS 5/3-112(b) (West 2000).
       The official comment to section 3-112 of the UCC specifies that “[t]he purpose of subsection
       (b) is to clarify the meaning of ‘interest’ in the introductory clause of Section 3-104(a). It is not
       intended to validate a provision for interest in an instrument if that provision violates other
       law.” Unif. Commercial Code § 3-112, 2 U.L.A. 82, Official Comment (2004).8
¶ 40       The note in question is a negotiable instrument, as defined in section 3-104. As noted, a
       negotiable instrument is “an unconditional promise *** to pay a fixed amount of money, with
       *** interest,” that “(1) is payable to bearer at the time it is issued ***; (2) is payable on demand
       or at a definite time; and (3) does not state any other undertaking or instruction by the person
       promising *** payment to do any act in addition to the payment of money.” 810 ILCS
       5/3-104(a) (West 2000). Furthermore, section 3-104(a) explicitly allows for negotiable
       instruments to contain confession of judgment clauses. 810 ILCS 5/3-104(a) (West 2000). In
       the case at bar, payment of the note in question is not conditioned on anything, the note is for a
       fixed sum ($100,000) with interest, the note was payable to plaintiff when it was issued, the
       note was payable at a definite time (December 15, 2000), and the note permissibly contains a
       confession of judgment clause. Accordingly, the note is a negotiable instrument. Defendants
       have made no arguments to the contrary.
¶ 41       Since the subject note is a negotiable instrument, section 3-112 applies. Section 3-112(b)
       explicitly allows for interest to be stated at a “variable rate or rates.” 810 ILCS 5/3-112(b)
       (West 2000). Although the official comment makes clear that section 3-112(b) “is not intended
       to validate a provision for interest in an instrument if that provision violates other law” (Unif.
       Commercial Code § 3-112, 2 U.L.A. 82, Official Comment (2004)), we have concluded that a
       variable interest rate in a confession of judgment clause where the principal is fixed does not
       violate Illinois law. Accordingly, we answer the certified question in the affirmative: A
       confession of judgment under a note drafted under the UCC is valid where the note references
       a variable interest rate and has a definite principal sum.

¶ 42                                           CONCLUSION
¶ 43       The certified question is an issue of first impression. We have found that a note containing
       a confession of judgment clause with a fixed principal amount due and a variable interest rate
       is not legally insufficient under Illinois case law interpreting the statutory right to confess
       judgment. We have further concluded that section 3-112 of the UCC is applicable and
       explicitly allows for negotiable instruments, like the note in question, to contain a fixed
       principal and a variable interest rate.

¶ 44       Certified question answered.




           8
             The official comment to section 3-112 of the UCC was not adopted by the Illinois legislature, and
       is thus not part of section 3-112 (810 ILCS 5/3-112 (West 2000)). Nevertheless, the official comment is
       instructive to an interpretation of section 3-112.

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