Rice v. First Federal Savings and Loan Association of Lake County

First Federal Savings and Loan Association of Lake County (First Federal) (plaintiff) loaned the Rices (defendants) $12,000 for construction and took a mortgage, deducting a 1% fee for inspecting the work's progress. After construction was finished, defects caused the building's walls to crack severely. The Rices defaulted on their mortgage, First Federal sued in foreclosure, and the Rices counterclaimed that the fee-based inspections created a contractual duty owed to them, making First Federal liable for the negligent inspections that missed the defects. The trial court found no such duty and ordered foreclosure, and the Rices appealed.