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Sterling Savings & Loan Ass'n v. Schultz

MAY 19, 1966.




Appeal from the Circuit Court of Cook County, County Department, Chancery Division; the Hon. DANIEL A. COVELLI, Judge, presiding. Reversed and remanded with directions.


Rehearing denied June 17, 1966.

Plaintiff, Sterling Savings and Loan Association, brought an action in March of 1963 to foreclose a mortgage on a residence at 1046 North Lathrop Ave., River Forest, Illinois, title to which was held by the Chicago City Bank and Trust Company, as trustee under a land trust. The beneficiaries of the trust, Alvin and Mary Schultz, and the trustee, were named as defendants in the foreclosure suit. Subsequently, the Bank of Lyons, the appellant here, was added as a party since it claimed an interest in the property because of a judgment which it held against Alvin Schultz in the amount of $62,038.41. This judgment had been entered on May 8, 1961, and execution had been issued and served.

After the amount found owing by the decree of foreclosure and other legal expenses had been satisfied from the proceeds of the sale, there remained an excess of $8,881.48 in the hands of the master.

The Bank of Lyons claimed the sum by virtue of a judgment lien, and because of an equitable lien created by the filing of a creditor's bill on April 13, 1962. Mary Schultz claimed this sum because of an equitable lien created by advancements made by her which helped to pay off a prior mortgage and because of an estate of homestead. The lower court ordered the sum of money paid to her. It is from this order that an appeal was taken by the Bank of Lyons.

The contentions of the appellant, the Bank of Lyons, are: (1) That the trial court erroneously ordered payment of the surplus funds to Mary Schultz; (2) that its judgment lien against the interest of Alvin Schultz in the land trust was prior to any claim of Mary Schultz; (3) that the filing of a creditor's complaint gave the bank an equitable lien upon the beneficial interests in the land trust; (4) that the court erroneously awarded Mary Schultz a homestead in the amount of $2,500.

The facts are: The property had been acquired in 1956 by the Chicago City Bank and Trust Company as trustee under land trust number 5596. The original beneficiaries of the trust were Sylvia and Norman Robinson, who later assigned their beneficial interests to Mary and Alvin Schultz. Initially, Alvin and Mary Schultz each had an undivided 50% beneficial interest in joint tenancy. On October 26, 1960, a decree of divorce was entered in favor of Mary against Alvin in the superior court of Cook County; said decree provided for alimony and child support, and provided that the premises here involved should be "sold by the plaintiff, Mary Schultz, and defendant, Alvin A. Schultz, and the net proceeds thereof shall be divided between the parties, share and share alike." The property was not sold as the decree provided.

However, on March 27 and 30, 1961, the Schultzes assigned their beneficial interests in the land trust to a nominee, and the nominee reassigned to each of them a 50% interest, not as joint tenants, but as tenants in common. On March 31, 1961, the mortgage to Sterling Savings and Loan was executed by the trustee of the land trust.

On May 8, 1961, the Bank of Lyons obtained its judgment of $62,038.41 against Alvin. Execution was issued on August 1, 1961, and was served upon Alvin on August 10, 1961. In order to enforce collection of the judgment, the Bank filed a creditor's bill in the circuit court of Cook County against Alvin and Mary Schultz on April 13, 1962.

That complaint set forth the entry of judgment and the service of execution upon Alvin. It alleged that Chicago City Bank held title to real estate in which Alvin had an interest, and that Mary had property which was owned by Alvin. The bill prayed that Alvin be decreed to pay the amount due, and to apply thereto any money or property, real or personal, in law or in equity, debts, choses in action, or equitable interest belonging to him or held in trust for him, or in which he is in any manner beneficially interested, and that he be enjoined from transferring any property in which he had an interest.

On May 10, 1962, Mary filed a petition in the divorce court alleging that $10,250 was due from Alvin for alimony and child support provided for in the divorce decree, and $2,639.17 for payments she had made on the existing mortgage. Judgment was entered on the same day for the amount claimed and interest thereon. On October 19, 1962, an order was entered in the divorce court modifying the decree of divorce and ordering Alvin to execute and deliver to Mary an assignment of his beneficial interest in the trust. This assignment, which was dated October 21, 1962, was not filed with the trustee of the land trust during the lifetime of Alvin, but was received by the trustee on May 23, 1963, three days after the death of Alvin. The assignment was not accepted by the trustee because it failed to comply with the provisions of the trust agreement. This agreement provided that an assignment in order to be effective must be delivered to the trustee prior to the death of the beneficiary making the assignment. Also, it might be pointed out at this time that even if the assignment had been delivered prior to Alvin's death, it would have been subject to the lien of the judgment creditor, the Bank of Lyons, as will hereinafter be pointed out in this opinion.

The foreclosure suit by Sterling Savings was filed on March 29, 1963. The suit was heard by a master in chancery who found that the mortgage was a valid lien and recommended entry of a decree of foreclosure. This recommendation was followed by the court and the decree was entered on October 15, 1964. It recited that if there was a surplus after the sale, said surplus should abide further order of the court. The sale was held in November, 1964, and after the amount of the mortgage and the expenses of the sale and other expenses were paid, there remained in the hands of the master $8,881.48.

Mary filed a petition on January 8, 1965, which petition recited: that the master held the sum of $8,881.48; that she and Alvin had acquired the property in 1956, each with a 50% undivided interest; that Alvin had assigned to her in October of 1962 his beneficial interest and that by reason thereof she was the owner of the entire beneficial interest. Mary claimed a homestead exemption in the statutory amount of $2,500, and alleged that she had made advancements in the amount of $9,447 in the form of payments on a prior first mortgage debt, and for upkeep and maintenance, which advancements were made prior to the judgment of the Bank of Lyons and prior to execution thereon. Hence, Mary claimed an equitable lien in the total amount of $11,947 on the property to cover her advancements and her claim for homestead. She asked that the master be ordered to turn over to her the sum of $8,881.48 and that she be declared to have an equitable lien to the extent of $3,065.52 out of any subsequent sale or disposition of the property.

Mary relied upon a finding by the master, subsequently adopted by the court in its foreclosure decree, that she had made the foregoing advancements. However, the master found that Mary did not have a lien or any interest in the premises by reason of these payments. At most, he found such payments might create a right of reimbursement or contribution against the beneficial interest of Alvin. He concluded that this determination must be made in the creditor's bill.

On January 26, 1965, the bank filed an answer to Mary's petition and a petition of its own, which in substance alleged that it had obtained a judgment against Alvin and had filed a creditor's bill, and therefore had succeeded to the beneficial interest in the land trust to the extent of the interest of Alvin as of the date of the filing of the creditor's bill, April 13, 1962. Hence, all transactions which attempted to transfer the interests of Alvin subsequent to said date were fraudulent as to the Bank of Lyons.

The petition prayed that the master be directed to hold the surplus of the sale, or that it be held by the clerk of the circuit court, pending a determination of the creditor's bill.

On February 5, 1965, the trial court found that Mary had an equitable lien on the premises in the amount of $9,447 plus a homestead in the statutory amount of $2,500. It ordered the sum of $8,881.48 be turned over to her, and further ordered that she have an equitable lien on the premises already sold in the amount of $3,065.52. The Bank of Lyons appeals from this order.

As a preface to this opinion it must be mentioned that Mary has taken two diverse positions on appeal as to the effect of her equitable lien; on the one hand she argues that it attached to the premises, and later she argues that it attached to the half-interest of Alvin in the trust. For the purposes of this appeal, as will be shown, it makes no difference to the decision upon which theory she attempts to base her claim.

The decision of the trial court which found that Mary had an equitable lien upon the premises must be reversed. Mary contends that certain contributions made by her to pay off a prior mortgage, and for upkeep and maintenance on the premises, gave rise to an equitable lien in her favor. The Bank of Lyons disputes this alleged lien because of a rule stated in several Illinois cases that an equitable lien is created where there is an express executory agreement in writing indicating an intention to make some property security for a debt or other obligation. (Cf. Byron v. Byron, 391 Ill. 256, 62 N.E.2d 790, where the court held that a mere verbal promise was not sufficient to sustain an equitable lien; also: Aldrich v. R.J. Ederer Co., 302 Ill. 391, 134 N.E. 726; Walker v. Brown, 165 U.S. 654; Sanner v. Sanner, 257 Ill. App. 305.) In the instant case, since the record discloses no agreement between Mary and Alvin indicating an intention to make the property at 1046 Lathrop Ave., River Forest, Illinois, security for a debt, the bank contends that there is therefore no lien.

Mary Schultz has cited the case of Oppenheimer v. Szulerecki, 297 Ill. 81, 130 N.E. 325, in which certain language indicates that an express agreement is not necessary to sustain an equitable lien. In that case the court granted a lessee an equitable lien upon certain premises that he had rebuilt after they had been destroyed by fire. The lessor had refused to restore the building even though the lease specifically required her to do so. Though there was no agreement in the lease making the cost of ...

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