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City of Chicago v. Chatham Bank of Chicago

DECEMBER 31, 1964.






Appeal from the Superior Court of Cook County; the Hon. ARTHUR A. SULLIVAN, Judge, presiding. Reversed.


This appeal is taken by counterdefendant, Gale Johnson, also known as Olive Gale M. Johnson, from an order entered by the Superior Court of Cook County, Illinois, on November 6, 1963, denying and dismissing with prejudice her motion to vacate the deficiency judgment entered against her on the counterclaim of October 25, 1962, filed by Dewey C. Thordarson, Louise C. Thordarson, and Julia Ann Thordarson, hereafter referred to as the Thordarsons, as intervenors. The original suit commenced on May 15, 1961, and sought to compel the Chatham Bank of Chicago, as trustee, under a land trust (title holder of record), and Chicago Title and Trust Company, as trustee, under a mortgage of record, to comply with certain ordinances of the City of Chicago, and to make repairs to a certain building. The complaint also asked for a mandatory injunction against the owner or owners.

On July 5, Gale Johnson filed a pro se appearance, although the complaint did not name her as a defendant. On September 25, 1961, the Thordarsons, who were the owners and holders of the mortgage of record and of the note thereby secured, filed their petition for leave to intervene and to file a counterclaim *fn1 to foreclose the mortgage. Such leave was given by the court in an order entered September 28, 1961, and a counterclaim was filed. In the petition to intervene it was alleged that the Thordarsons were the holders of bearer notes secured by a trust deed on the property at 4700-04 North Beacon Street and 1416 West Leland Avenue, Chicago, Illinois. These properties were the subject of the suit brought by the City of Chicago.

It was further alleged that the obligor on the bearer note was Gale Johnson, who was then in default on the notes and further in default under the terms of the trust deed and "contract of sale whereunder said premises were sold." The allegation that Gale Johnson was the obligor was not strictly accurate. She had not signed as payor of the notes, but only as guarantor.

The counterclaim prayed for foreclosure of the trust deed and joined as defendants Gale Johnson, Robert Johnson and the Chicago Title and Trust Company, as trustee, under Trust No. 37611, and as trustee under the trust deed which secured the notes held by the Thordarsons and executed by the Chatham Bank of Chicago, which was the original trustee under the land trust, the beneficiary of which was Gale Johnson. It was also alleged that the owner of the premises was Chicago Title and Trust Company, as trustee, under Trust No. 37611, and that Gale Johnson was personally liable for any deficiency which might eventuate after foreclosure sale.

It was also alleged in the counterclaim that an order had been entered in the original suit brought by the City of Chicago that the premises were to be vacated and boarded up until compliance with the applicable ordinances. It was further alleged that the owners of the premises had committed waste, allowed the property to fall into a state of gross disrepair, and that the premises were found to be in violation of the "code and ordinances aforesaid."

It was prayed that the mortgage be foreclosed; that if the sale of the premises showed a deficiency, a personal deficiency decree be entered and a receiver be appointed; and that the counterplaintiffs and mortgagees be placed "in possession of the property pursuant to Sections 22b, 52 et seq. Illinois Revised Statutes, Chapter 95."

The allegations in Count II of the counterclaim are not involved in the present appeal.

Attached to the counterclaim was a copy of a trust deed involving the premises in question from Chatham State Bank of Chicago, as trustee, under Trust No. 77, to Chicago Title and Trust Company, as trustee, dated November 20, 1959. Also attached was a copy of a note secured by the aforesaid trust deed, dated October 20, 1959, in the amount of $24,250, executed by Chatham Bank of Chicago, as trustee, under Trust No. 77. At the bottom of the note appears the notation: "The undersigned hereby unconditionally guarantee the payment of the above note and all advances thereon made and which may be made under the terms thereof, and agrees to all the terms and conditions of the above note."

On the back of the cover page of the note there is a notation that "For Value Received, the undersigned . . . hereby unconditionally guarantee(s) the payment of the within note and all costs, expenses and attorneys' fees . . ." In that notation there is a warrant of attorney. Both of these documents were allegedly signed by Olive Johnson.

On November 8, 1961, on the motion of the City of Chicago, the plaintiff in the original suit, the court entered an order appointing Dewey C. Thordarson as receiver. He was given the usual powers and rights of receivers appointed by the court, with power to make all necessary repairs for the restoration of the property to comply with recommendations made by the Commissioner of Buildings, which was the basis of the original complaint.

On November 14, 1961, an affidavit was filed wherein one Dolores S. Romotowski stated that she had served a counterclaim in foreclosure upon Olive Gale M. Johnson by mailing a copy of said counterclaim to the said Johnson at 4700 North Beacon Street, Chicago, Illinois, the last given address of the counterdefendant. On the same date the counterplaintiffs filed a petition stating that they had unsuccessfully attempted to contact Gale Johnson, beneficial owner of the property, in order to effect a settlement of the controversy concerning the default on the mortgage and the note. The petitioners asked that Gale Johnson, Robert Johnson, Chatham Bank, Chicago Title and Trust Company and "unknown owners" be made defendants in the instant proceeding. On the same day an order was entered directing the clerk to issue a summons against the designated counterdefendants. No summons was served on Gale Johnson. It was further ordered that Gale Johnson be required to answer said counterclaim in foreclosure within 30 days.

On March 30, 1962, counsel for counterplaintiffs filed an affidavit that Robert Johnson and "unknown owners" on due inquiry could not be found and that their places of residence could not be ascertained. Affiant further stated that the last place or places of residence of such defendants were also unknown. Attached was a receipt from the Chicago Daily Law Bulletin indicating that publication notice had been printed October 2, 9 and 16, 1962.

On May 29, 1962, the court entered an order of default against Gale Johnson for failure to answer the counterclaim, stating that the said counterdefendant had filed her appearance pro se in that court on July 5, 1961, and it further appeared that a copy of the counterclaim was served on the said Gale Johnson on November 13, 1961, by mailing to her last known residence.

On June 20, 1962, the counterplaintiffs filed an amendment to their counterclaim as Count III. This count is not within the scope of this appeal.

A decree of foreclosure was entered July 27, 1962, finding that there was due to the Thordarsons, counterplaintiffs, the sum of $50,325.54, and a master's sale was authorized. A notice of motion for the entry of a deficiency judgment was filed October 25, 1962, served by mail addressed to the various defendants, including Gale Johnson at 4700 North Beacon Street, Chicago, Illinois. On October 25, 1962, an order was entered in the trial court confirming the sale and fixing deficiency at $35,445.69, and entering judgment against Gale Johnson for such deficiency.

On March 25, 1963, a motion to vacate was filed on behalf of Gale Johnson. It was supported by her affidavit which, among other things, called the court's attention to the fact that the installment notes and the trust deed securing the same, which were the basis of the counterplaintiffs' foreclosure suit, were executed by the Chatham Bank of Chicago, not personally, but as trustee, under Trust No. 77; and that the notes further provided that ". . . No personal liability shall be asserted or enforceable against the promissor or any person interested beneficially or otherwise in said property, . . . the sole remedy of the holder hereof shall be by foreclosure of said Trust Deed . . . in accordance with the terms and provisions in said Trust Deed set forth . . ."

She further stated in her affidavit that she was the guarantor of the said installment notes, which guarantee appears on the reverse side of each of the notes; and that the jurisdiction of the court to award a foreclosure decree is limited to the obligation which the mortgage or trust deed is given to secure, and does not extend to collateral obligations.

On November 6, 1963, the court entered an order in which it denied the petition of Gale Johnson to vacate the deficiency decree, and also entered the further order that "there is no just reason for delaying enforcement or appeal of ...

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