APPEAL from the Circuit Court of Marshall County; the Hon.
ALBERT PUCCI, Judge, presiding.
MR. JUSTICE STENGEL DELIVERED THE OPINION OF THE COURT:
Rehearing denied October 23, 1975.
Defendant Amelia Wiemer appeals from a decree of the Circuit Court of Marshall County which ordered her to quitclaim her 310-acre farm to plaintiff, Havana National Bank as trustee, under the terms of a trust agreement executed by defendant and her husband, since deceased. The question presented by this appeal is whether the trust deed and agreement are to be treated as a mortgage.
The basic facts surrounding the transaction between plaintiff and defendant are not disputed. In 1966 the Wiemers contracted to purchase a 310-acre farm in Marshall County for $120,000. Mr. Wiemer subsequently was disabled by a heart attack and was thereafter unable to engage actively in farming. In March of 1967 the Wiemers borrowed $25,000 from the Herget National Bank of Pekin, Illinois, assigning their interest in the purchase contract as security, and in June of 1967 they assigned their interest in the same contract to plaintiff as security for outstanding loans totaling more than $38,000. A $5,000 installment on the purchase contract was due on March 1, 1968, and remained unpaid at the time the Wiemers signed the trust deed and agreement in question. Earlier in 1968 the Wiemers had contracted to sell two acres of the farm for $10,000 and also had applied for a first mortgage loan from an insurance company.
On March 28, 1968, Wilbur Meadows, assistant to the president of plaintiff bank, came to Wiemers' home and secured their signatures on a trust deed and agreement. Mrs. Wiemer's testimony contradicts that of Meadows' concerning conversations and representations made that morning. Both agree that Meadows proposed that the bank, as trustee, take over the management of the farm, that the Wiemers' debts be consolidated, and that, after one year, the bank would attempt to sell the farm, or at least a part that was suitable for subdivision. The same day, after the deed and agreement were signed, Meadows paid the remaining $95,000 purchase price to the sellers of the farm and recorded a warranty deed from the sellers to the Wiemers, and also recorded the trust deed.
Also on the same day plaintiff entered into a "Supplemental Agreement" with Herget National Bank which established the priority of plaintiff's lien for $38,666.70 over Herget Bank's lien for $25,000 and which authorized additional loans under the trust arrangement. Meadows testified that Herget Bank loaned $60,000 of the money paid to the sellers, and the plaintiff bank advanced $35,000, in order to secure title in the Wiemers' name.
The following day the Wiemers signed a note to plaintiff for $40,000 (their prior debt plus interest). In June, 1968, plaintiff and Wiemers jointly executed a first mortgage on 240 acres as security for a loan of $70,000 from the insurance company previously contacted by the Wiemers. The proceeds of that loan were paid into the trust account, and used to repay the $60,000 loan from Herget Bank and part of the $35,000 loan from plaintiff. The Wiemers paid into the trust account the $10,000 proceeds from the previous sale of two acres, and also paid in various other sums from farm operations. When the $40,000 note to plaintiff became due, the Wiemers twice signed six-month extension agreements, both of which stated that the note would be paid from the sale of subdivision property.
Beginning in 1969, plaintiff as trustee advertised the farm for sale, and, in December, 1972, and January, 1973, contracted to sell the farm in two parcels for a total of $154,090. When the Wiemers learned of plaintiff's attempts to sell the farm, they recorded their affidavit notifying prospective purchasers that any sale by plaintiffs would be in violation of the Illinois Mortgage and Foreclosure Act (Ill. Rev. Stat., ch. 95, § 23.1 et seq.). In order to remove the cloud on title, plaintiff instituted this suit to compel defendant to execute a quitclaim deed to plaintiff.
Because the determinative question before us is construction of the trust agreement and deed, we must set out the relevant provisions of both.
After reciting Wiemers' overdue debt to plaintiff and Herget Bank and the "desire of the parties to arrange satisfaction of said indebtedness in lieu of foreclosure of the liens" of the previously assigned real estate purchase contract, the agreement provided for the Wiemers to execute a deed in trust to plaintiff as trustee, and, if requested by the trustee after payment of the purchase contract debt, to execute another deed conveying the premises to the trustee to perfect title in the trustee. Other provisions may be summarized as follows:
1. To pay off the purchase contract the trustee shall borrow at least $60,000 from Herget National Bank, secured by a first mortgage on the 240 acres used for grain farming, with the trustee entitled to refinance the loan from any other source. Additional money needed shall be borrowed from plaintiff bank, secured by a second mortgage with the same right to refinance.
2. When directed by plaintiff and Herget Bank, the trustee shall sell all or part of the farm, except that no part of the grain farming portion shall be sold to anyone other than the Wiemers for one year.
3. The net proceeds of sale of the grain farming portion shall first be applied to the first mortgage debt (Herget) and next to the second mortgage debt (plaintiff). The proceeds from the other part of the farm shall be paid first to plaintiff to discharge present and future debts, and second to Herget Bank. ...