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Nat'l Bk. of Austin v. First Wisconsin Nat'l

OPINION FILED SEPTEMBER 28, 1977.

NATIONAL BANK OF AUSTIN, TRUSTEE, ET AL., PLAINTIFFS-COUNTERDEFENDANTS-THIRD-PARTY DEFENDANTS-APPELLANTS,

v.

FIRST WISCONSIN NATIONAL BANK OF MILWAUKEE, DEFENDANT-COUNTERPLAINTIFF-THIRD-PARTY PLAINTIFF-APPELLEE.



APPEAL from the Circuit Court of McHenry County; the Hon. JAMES H. COONEY, Judge, presiding.

MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:

The plaintiffs, counterdefendants, are the trustee of a land trust holding legal title to the property in question (National Bank of Austin, as trustee under Trust No. 5010, hereinafter Austin Trust); the Builders and Developers of Eastwood Manor Unit No. 4 (BKT Enterprises, a partnership composed of Fred Brodie and James A. Taggart, hereinafter the Partnership); the partners individually as sole beneficiaries of the Austin Trust; and Sally Taggart, the wife of James Taggart. They appeal from a judgment which denied declaratory and injunctive relief relating to construction mortgages in the amount of $550,000 and $3,000,000, respectively. They also appeal from a judgment of foreclosure together with the order approving the report of sale and distribution which was entered on the counterclaim and third-party complaint filed by the defendant, counterplaintiff mortgagee (The First Wisconsin National Bank of Milwaukee, hereinafter First Wisconsin).

On June 15, 1972, the Austin Trust executed the two mortgages together with the notes secured by the mortgages. On the same date the Partnership executed two construction loan agreements. Fred Brodie, James A. Taggart and Sally Taggart also executed personal guarantees of the mortgages and notes. On August 14, 1973, the Austin Trust filed a declaratory judgment action against First Wisconsin. First Wisconsin answered and counterclaimed for foreclosure of the mortgages using the short form complaint (Ill. Rev. Stat. 1975, ch. 95, par. 23.6) and naming James Taggart, Sally Taggart, Fred Brodie, and the Partnership as having personal liability for a deficiency decree (Ill. Rev. Stat. 1975, ch. 95, par. 23.6(m)). In separate counts, First Wisconsin also sought judgment against the three individuals pursuant to their status as guarantors, and it sought judgment against James Taggart, Fred Brodie and the Partnership pursuant to their liability for the Partnership debt. First Wisconsin moved for summary judgment which was denied.

Thereafter the case was set for trial and the trial date continued from time to time pending various settlement negotiations. After failure of settlement negotiations, the attorneys for the plaintiffs, counterdefendants, filed a motion to withdraw which was allowed on February 7, 1975, at a hearing also attended by Fred Brodie and James A. Taggart. At the hearing the court advised plaintiffs, counterdefendants, that they must obtain substitute counsel or otherwise cause a supplemental appearance to be filed under a local court rule (Rule 14). In substance the rule gave a seven-day period to comply. At this time the plaintiffs, counterdefendants, advised the court that they would have counsel in two or three weeks. The court allowed them 21 days.

On March 14, 1975, First Wisconsin moved for a default on the basis that no appearances had been filed. Brodie and James Taggart were present in court at the hearing on the default motion. Brodie represented that they had been trying to get an attorney but did not have enough money and stated that they would have an attorney within five days. The court granted the motion for the entry of an order of default stating to Brodie and Taggart that if they or their counsel made an appropriate motion within 30 days, the default would be vacated but that if no steps were taken to secure counsel or to vacate the default within 30 days the court would hear the proveup of damages on April 15, 1975.

On the April 15 hearing to prove up damages James Taggart and Fred Brodie were present in court. Brodie represented that they would have funds available in 2 weeks to pay their previous attorney whom they claimed was holding their files. Taggart stated that they in fact had hired an attorney who would proceed as soon as they could get the file. The mortgagees' attorney and the attorney for various claimants who were in court objected to any further continuance. Counsel argued that the court should not permit the partners to appear as their own attorneys either for the Austin Trust or for the Partnership. The court refused to continue the matter and proceeded with the hearing. This colloquy followed:

"Mr. Taggart: Could I ask a question? May I ask the court, Your Honor, are we going to be allowed to answer this as individuals?

The Court: I do not know what you mean, `Answer.'

Mr. Taggart: Well, I mean to disclaim some of the things that he's saying. Are we going to be allowed to do that or do I have to have counsel to do that?

The Court: You have to have counsel.

Mr. Taggart: I have to have counsel. In other words, anything that is said today, I can't answer or come up and talk to you about it or prove differently? I'm not able to do that. I have to have counsel to do that?

The Court: Under the posture of the case, that is correct, you must have counsel.

The Court: * * * Let the record show that Mr. Taggart and Mr. Brodie left the Courtroom."

After hearing evidence as to damages, the trial court found in favor of First Wisconsin on its answer, counterclaim for foreclosure, and its third party claim. The trial court stated these findings in a judgment order dated April 15, 1975, and in addition entered a "Decree of Foreclosure and Sale" which found the Austin Trust had defaulted on the mortgages with resulting damage in the amount of $1,274,047.10. The decree ordered foreclosure of the mortgage and sale of the property and retained jurisdiction over all parties "for the purposes of * * * determining the character and amounts of the deficiency decrees to be entered in this cause as a result of the sale."

Thereafter Taggart and Brodie individually and "d/b/a BKT Enterprises" and Sally Taggart petitioned the court to vacate the default order alleging that the decree had materially affected their rights and that they were not allowed to defend. On May 16 the court denied the petition finding the petitioners had ample opportunity to secure counsel or file a supplemental appearance; there had been no showing of due diligence or to make meritorious defense, and the petition was insufficient as a matter of law under section 72 of the Civil Practice Act.

On the same day, May 16, a notice of appeal was filed by Brodie, the Taggarts and the Partnership. On the motion of First Wisconsin the appeal was dismissed in this court on June 17, 1975. First Wisconsin supported its motion with the argument that the appeal was not taken from a final order.

On July 15, 1975, the foreclosure sale took place. On July 17, 1975, the court entered its judicial report of sale and its order approving the report of sale and distribution. Among other things that document orders that First Wisconsin shall "have and recover a deficiency judgment against the Defendants James A. Taggart, Sally Taggart, Fred Brodie and BKT ...


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