Appeal from the Circuit Court of Cook County; the Hon. CHARLES
S. DOUGHERTY, Judge, presiding. Judgment affirmed.
This appeal arises from a judgment of the Circuit Court of Cook County in favor of the plaintiff, Irving A. Levine, in a supplementary proceeding by citation brought by plaintiff under section 73 of the Civil Practice Act, chapter 110, Illinois Revised Statutes 1965.
The facts leading up to the present litigation as stipulated to by the parties, reveal that in December, 1957, the defendants, Jerome Pascal and Arlene L. Pascal, his wife, purchased and became owners in joint tenancy of a lot improved with a single-family home situated in Highland Park, Lake County, Illinois. The property was encumbered at that time with a first mortgage in the sum of $18,000 in favor of the First Federal Savings and Loan Association, Chicago, Illinois. Neither party to this case challenges the priority of this mortgage to the claims and liens at issue.
On February 23, 1960, defendants Jerome and Arlene L. Pascal entered into a written land trust agreement with the respondent, American National Bank of Chicago as Trustee, the trust being designated No. 15222. Under the terms of this land trust, Jerome Pascal and Arlene L. Pascal, his wife, were designated the beneficiaries of the trust as joint tenants with the right of survivorship and with the power of direction as to the beneficial interest. The agreement further designated the lot and home situated in Highland Park, Lake County, Illinois, as the subject matter and corpus of the trust. Defendants then deeded the property to American National Bank of Chicago as Trustee, who remains the title holder at this time.
A few years later, on May 22, 1964, the defendant, Jerome Pascal, assigned to his wife, Arlene L. Pascal, his beneficial interest and power of direction in Trust No. 15222, which was subsequently filed and noted by the Trustee.
In September of 1964, the Pascals negotiated with respondent Palos State Bank for a loan in the sum of $37,150.90. The defendants agreed to pledge as collateral the beneficial interest and power of direction of Trust No. 15222 then vested in defendant Arlene L. Pascal. Therefore, on September 25, 1964, Arlene L. Pascal executed an assignment to the Palos State Bank of the beneficial interest in land Trust No. 15222 for purposes of securing the loan to be made to her and her husband by the respondent. Neither at this time nor at any subsequent date did respondent, Palos State Bank, file either a financing statement with the Secretary of State, pursuant to section 9-401(c), chapter 26, Ill. Rev Stats 1965, or a mortgage with the local recorder's office, although all parties to this controversy admit that the defendants and the respondent did effectuate a binding security agreement between themselves.
Together with the assignment of the beneficial interest in Land Trust No. 15222 and the power of direction, Jerome and Arlene L. Pascal executed and delivered to the respondent, Palos State Bank, three promissory notes, following which the respondent loaned them the sum of $37,150.90. Thereafter, they defaulted on their payments due under these notes and on January 18, 1965, respondent, Palos State Bank, gave notice to them that legal proceedings would be instituted if they did not make good on the notes.
However, on February 16, 1965, approximately four months after the respondent, Palos State Bank, had lent the sum of $37,150.90 to the defendants, the plaintiff, Irving A. Levine, secured a judgment against the defendants in the sum of $17,622.50. The plaintiff's complaint in that action was based upon a promissory note dated April 21, 1962 and executed and delivered for value by the defendants in the principal sum of $18,000. Plaintiff sued on the note for the balance due plus interest and attorney's fees, totaling $17,622.50. Following judgment, plaintiff instituted action to execute on the judgment and to discover assets belonging to the defendants. On February 18, 1965, a writ of execution was issued by the Circuit Court of Cook County on the judgment, and the court clerk issued a citation to discover assets under authority of section 73, chapter 110, Civil Practice Act, Illinois Revised Statutes 1965.
Discovery initially was directed to the defendants and the respondent American National Bank as Trustee under Trust No. 15222. On March 26, 1965 the plaintiff issued a citation against the Palos State Bank, returnable the 6th day of April, 1965. On April 6, 1965, the Circuit Court continued the proceedings to April 20, 1965.
That day, the plaintiff presented affidavits representing that Arlene L. Pascal is the beneficiary of Trust No. 15222, that she assigned the beneficial interest to the respondent, Palos State Bank, that the parties did not sign or file a financing statement with the Secretary of State of Illinois as required by the Commercial Code, that as a result, the purported transaction was void as to plaintiff, and prayed that the court find the interest of Palos State Bank in the land Trust No. 15222 subordinate to the plaintiff's judgment lien.
On May 3, 1966, the Circuit Court of Cook County entered its final order finding the plaintiff, Irving A. Levine, to be the holder of a good and valid execution lien superior to the interest of Palos State Bank and ordering Arlene L. Pascal and the Palos State Bank to assign to the Sheriff of Cook County, the beneficial interest in land Trust No. 15222 for a subsequent sale for the benefit of the plaintiff.
Appellant, Palos State Bank, assigns error below on four separate legal issues. In the first place, appellant challenges any determination of this case under the provisions applicable to the Commercial Code of Illinois, chapter 26, Illinois Revised Statutes 1965. Palos State Bank argues that section 9-104(j) of the Commercial Code exempts from coverage any interest in or lien on real estate, and cites authority for the proposition that the beneficial interest in the land trust assigned to it is a real property interest.
Appellant next argues that even should the Commercial Code apply, the plaintiff is not a lien creditor under the provisions of section 9-301 of the Code so as to strip the Palos State Bank of its security interest in the beneficial interest of land Trust No. 15222.
Thirdly, appellant urges that regardless of the court's disposition of the question of plaintiff's status as a lien creditor, Palos State Bank had a perfected security interest in the beneficial interest of the land trust on the theory that recording the security assignment of the Palos State Bank with the land trustee was an act of possession intended by the Commercial Code ...