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Chicago T. & T. Co. v. Nat. Bk. of Albany Park

JANUARY 21, 1974.

CHICAGO TITLE & TRUST COMPANY, AS TRUSTEE, PLAINTIFF-APPELLANT,

v.

THE NATIONAL BANK OF ALBANY PARK IN CHICAGO ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. DONALD J. O'BRIEN, Judge, presiding.

MR. JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

Chicago Title and Trust Company, not individually but as Trustee Under Trust No. 55855 (plaintiff) appeals from an order granting the motion of National Bank of Albany Park in Chicago (Bank of Albany Park); Lake City Equity Finance Corporation (Lake City) and Ritchie Realty Company (collectively referred to as defendants) to dismiss plaintiff's complaint for an accounting. No evidence was heard. The trial court acted upon the pleadings, briefs filed by both sides and argument of counsel.

• 1 We will first summarize the pertinent facts which appear from the properly pleaded allegations of plaintiff's complaint, admitted by the motion to dismiss. (Holiday Magic, Inc. v. Scott, 4 Ill. App.3d 962, 963, 282 N.E.2d 452.) Plaintiff alleged execution by Harris Trust and Savings Bank, not individually but as Trustee Under Trust No. 33312, of three mortgage trust deeds upon the subject property, each of which provided for a waiver of all rights of redemption from sale under any decree of foreclosure thereof. (See Ill. Rev. Stat. 1971, ch. 77, par. 18b.) In order of priority, the indebtedness secured by these trust deeds was owned by Bank of Albany Park, Lake City and Jack and Julius Kaplan. The Kaplans, owners of the third and junior lien, were not made parties to the cause before us.

Plaintiff's complaint also alleged that defaults in payment of all of these mortgages were made by plaintiff's predecessor in title. A number of mechanics' liens were filed against the property and foreclosure proceedings were instituted by the lien claimants. The holders of the three mortgages all filed counterclaims for foreclosure. A decree of foreclosure was entered in the cause on August 17, 1971. The decree found the amounts of the indebtedness due upon each of the three mortgage liens, all of the mechanics' liens having previously been paid. The decree provided for sale of the subject property for payment of all of the liens and costs. It also provided for execution by the sheriff and delivery to the purchaser of a certificate of sale and recordation of the duplicate thereof. It also provided that upon the expiration of the statutory period of redemption, the sheriff was to issue a deed to the holder of the certificate of sale.

Plaintiff's complaint further alleged that the property was sold by the sheriff on September 30, 1971. Bank of Albany Park and Lake City were the successful bidders. Their bid was $698,753.70 which resulted in a surplus of $536.58 after payment in full of the first two liens owned by these purchasers. The record shows that the sheriff reported to the court that he had paid the surplus to Jack and Julius Kaplan on account of the third and junior lien which had remained unpaid. On October 20, 1971, the sheriff's report of sale and distribution of proceeds was approved.

Plaintiff also alleged that thereafter on February 1, 1972, plaintiff "still being entitled to said real estate" made demand upon defendant Ritchie Realty Company, as agent of the mortgagee in possession, for payment of all sums held by it "arising out of the operation of the premises, both before and after September 30, 1971" (date of the foreclosure sale). Plaintiff alleged that, despite waivers of redemption in all three of the mortgages, the decree of foreclosure had provided for redemption and for the issuance of a certificate of sale by the sheriff with delivery of the sheriff's deed to be delayed until expiration of the period of redemption. The complaint set forth a legal conclusion that the foreclosed mortgages had merged in the decree. Plaintiff also alleged "that since no deficiency decree" was entered in the case, plaintiff was entitled to possession of the property during the full period of redemption and to all monies resulting from operation of the property. Plaintiff alleged that the period of redemption was 12 months from the date of sale as "provided in Section 18, Ch. 77, of the Ill. Rev. Stats." The plaintiff also alleged that the sheriff's deed, recorded February 14, 1972, was without validity and should be set aside as a cloud on plaintiff's title.

In their motion to dismiss, the defendants averred that plaintiff's complaint showed that plaintiff had itself been a party to the foreclosure proceedings as a duly-named defendant and that the decree of foreclosure had provided that the grantees in the sheriff's deed were to be let into possession upon issuance of the deed. The motion set forth that the decree was at most erroneous in granting plaintiff a three-month period of redemption to which it was not entitled and, because plaintiff had never appealed from the decree, the attempted collateral attack thereon was invalid.

In this court, plaintiff contends that the purchaser at a mortgage foreclosure sale is not entitled to possession of the property or to the rents until the execution and delivery of a deed; since the foreclosed mortgages had merged into the decree of foreclosure, the rights of the purchasers at sale were governed completely by the decree not by the mortgage; and, because the purchasers received the full amount of their indebtedness at the sale, their debts were fully satisfied and they could not retain profits resulting from operation of the premises prior to the sale. The defendants urge that plaintiff was a party to the foreclosure and could have obtained an accounting in those proceedings. Having failed to do so, plaintiff should be barred from seeking relief in a separate action. Defendants also contend that all rents collected by them prior to the sale had been accounted for and that the waiver of redemption rights prevented plaintiff from obtaining an accounting for rents received after the sale. The final contention of defendants is that because of the existing deficiency on the third mortgage lien, plaintiff would not be entitled to the rents under any circumstances.

Prior to a discussion on the merits of the situation, it would seem useful to describe certain additional proceedings in the previous foreclosure litigation. As alleged in plaintiff's complaint, the proceedings originated as a foreclosure of a number of mechanics' liens. Holders of the three mortgages became parties to the cause and filed counterclaims for foreclosure of their liens. The mechanics' liens were all purchased in due course by Bank of Albany Park and all of the lien claimants were dismissed. Proof of the amounts due on all three mortgages was made in open court on July 22, 1971. Plaintiff was previously made a party defendant to the foreclosure and a general appearance had been filed for it by its counsel. The decree found the amounts due to the holders of all of the mortgages and granted them liens in the order of priority. The decree provided for sale of the property by the sheriff unless all three of the liens with interest and costs were paid. But, despite the waiver of redemption as regards all three of the mortgage liens, the sheriff was directed to issue a certificate of sale to the purchaser instead of a deed. (See Ill. Rev. Stat. 1971, ch. 77, par. 18b, enacted in 1957.) The decree further provided that, absent redemption, "upon expiration of the statutory period of redemption following the sale," the sheriff was to deliver a deed to the legal holders of the certificates of sale who should thereupon be let into possession.

On October 20, 1971, upon due notice to all parties in interest, the court entered an order approving the sale and the application of proceeds thereof. The order also directed that since the mortgages being foreclosed provided for waiver of redemption, there was a statutory redemption period of 90 days for creditors which would expire December 30, 1971. The court also found that the counterclaimants Jack Kaplan and Julius Kaplan, were entitled to a lien in the amount of $122,223.61 so that they were entitled to the surplus in the amount of $536.58 which the sheriff was ordered to pay to them on account of the amount due.

On October 12, 1971, the sheriff issued a certificate of sale to the purchasers (Bank of Albany Park and Lake City) reciting their bid at the sale and other matters and stating that if the premises were not redeemed within the time provided by law, the purchasers would be entitled to a deed from the sheriff on December 30, 1971. On February 3, 1972, the sheriff issued a deed conveying the property to these purchasers. The deed recited that no redemption had been made as provided by statute.

Further elucidation is hardly required to show the erroneous nature of the proceedings. In view of the waiver of redemption by the corporate trustee in all three of the mortgage trust deeds, as authorized by the statutory law of Illinois, the decree should have provided that the mortgagors and all persons claiming under them, which included plaintiff, were divested of all redemption rights and that upon confirmation of the sale the sheriff should immediately execute and deliver a deed conveying the property to the purchaser. Decree or judgment creditors of the mortgagor in its representative capacity as trustee or of the trust estate would then have the statutory three month period after the sale within which to effect redemption. (See Ill. Rev. Stat. 1971, ch. 77, par. 18b, enacted in 1957.) The decree itself and the order approving the sheriff's report of sale (neither entered by the judge who dismissed the complaint herein) are inconsistent each with the other and the decree is inconsistent with the applicable statute.

The matter of rents during the period before sale was the subject of negotiation during the pendency of the foreclosure between counsel for plaintiff and for Bank of Albany Park and Lake City. As a result, both attorneys signed a "letter of understanding" on December 21, 1970. This was some eight months prior to the foreclosure decree. The letter provided that Bank of Albany Park would take possession of the property under its assignment of rents and would use the services of Ritchie Realty Company as managing agent. The letter further provided that rentals collected from the property should be used for payment of mechanics' liens "as mutually agreed upon between us" and for payment of current and delinquent real estate taxes. Counsel for plaintiff was to be furnished with written bimonthly accounts of receipts and disbursements for his approval. The letter provided that the motion made by the mortgage lien holders for appointment of a receiver should be withdrawn without prejudice.

• 2 It readily appears from the above that the basic issue decided by the trial court was the sufficiency of the complaint which alleged the foreclosure of the mortgages, the decree and subsequent proceedings which satisfied the first two senior liens held by Bank of Albany Park and Lake City and then a demand by plaintiff for all sums resulting from operation of the premises both before and after sale which was rejected. Plaintiff's first contention is that it, as owner of the equity of redemption, and not the defendants, Bank of Albany Park and Lake City, as purchasers at the mortgage sale, was entitled to possession of the property and to the rents until delivery of the deed. Stated abstractly, this is an elementary and valid principle of foreclosure law decided by the early cases cited by plaintiff and still the law of Illinois. (Community Savings & Loan Association v. Cosmopolitan National Bank, 72 Ill. App.2d 202, 208, 219 N.E.2d 103; Schaeppi v. Bartholomae, 217 Ill. 105, 75 N.E. 447 and Sutherland v. Long, 273 Ill. 309, 112 N.E. 660.) However, the issue here is not simply and solely the right of plaintiff to the rents after sale and during the period of redemption but whether defendants or any other person had a superior right to these sums if any there were. As above noted, ...


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