APPEAL from the Circuit Court of Cook County; the Hon. ALBERT
S. PORTER, Judge, presiding.
MR. JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:
This appeal arises out of an action to foreclose a mortgage and accelerate full payment of the underlying debt. On defendant's motion to dismiss, the trial court held that paragraph 15 of the trust deed was ineffective to serve as a basis for acceleration of the note and foreclosure of the trust deed. On appeal, plaintiffs contend that the trial court erred since the note and trust deed are to be construed together, thereby providing the right to accelerate payment of the note and to foreclose the trust deed. We affirm the judgment of the trial court. The relevant facts follow.
Plaintiffs, 2140 Lincoln Park West, an Illinois General Partnership (Partnership), and Chicago Title and Trust Company, as Trustees, brought a foreclosure action against defendants, American National Bank and Trust Company of Chicago, as trustees, under Trust No. 38104 (Trust) dated November 17, 1975, and Unknown Owners on February 7, 1979.
Plaintiff Partnership is the former owner of a multiunit apartment building located at 2140 Lincoln Park West in Chicago. Following negotiations with the beneficiaries of the Trust, it conveyed the building to the Trust in November of 1975, and provided financing in the amount of $950,000. The mortgage provided that the loan be repaid in monthly installments at an interest rate of 8 1/2% per annum, with a maturing date in 1986. This instrument represents a "wraparound" mortgage, which allows existing mortgages to remain intact. It required that defendants make monthly payments to the Partnership, which in turn was required to continue monthly payments on the pre-existing senior mortgages.
The provisions relevant to this action are paragraphs 4 and 15 of the trust deed. Paragraph 4 provides:
"When the indebtedness hereby secured shall become due whether by acceleration or otherwise, holders of the note or Trustee shall have the right to foreclose the lien thereon."
Paragraph 15, as amended by the supplemental trust deed provides, in pertinent part, as follows:
"In the event of the sale of the premises, or in the event of the sale of more than 49% of the beneficial interest in the First Party to any entity other than a Permitted Investor Group as defined below, or a sale of more than 50% of the partnership interests or equity of the Permitted Investor Group after the initial syndication, the Holder of the Note may at its option, upon written notice to the First Party, declare all sums due under the Note to become immediately due and payable.
A "Permitted Investor Group" is an Investor Group of which Irwin Noparstak is and remains either a General Partner or a director and share holder to the extent of more than 10% of its equity."
Defendants admit that the entire beneficial interest of the Trust was assigned to others than a Permitted Investor Group. Thereafter, plaintiffs brought an action to foreclose the mortgage and acceleration payment of the note based on defendants' breach of the condition in paragraph 15. On defendants' motion to dismiss, the trial court held that paragraph 15 of the trust deed was ineffective to serve as a basis for a foreclosure action. Plaintiffs appeal that order.
Plaintiffs contend that the trial court erred in declaring paragraph 15 of the trust deed ineffective to serve as a basis for foreclosure, since the trust deed and note are to be construed together, thereby providing an enforceable right to foreclose the trust deed. In response, defendants argue that the trust deed and the note are separate instruments; consequently, the provisions found only in the trust deed have no effect on the material terms of the note. We agree.
• 1 Defendants cite as controlling authority Oswianza v. Wengler & Mandell (1934), 358 Ill. 302, 193 N.E.2d 123, and Conerty v. Richtsteig (1942), 379 Ill. 360, 41 N.E.2d 476, wherein the Illinois Supreme Court held that mortgages and notes are separate undertakings and that any provision in the mortgage not found in the note itself has no effect on the note. In Oswianza, plaintiff brought an action against defendant to recover the principal and interest due on four matured bonds that had been secured by a trust deed. The trust deed contained a no-action clause which vested in the trustee exclusive right to sue. The sole question in that case was whether the bonds by their terms were subject to the provisions of the trust deed affecting the right to sue. If so, plaintiff had no right to sue thereon. However, the trial court ruled in favor of plaintiff and the appellate court affirmed. The supreme court affirmed that decision.
In reaching its decision, the court recognized the general rule of contract construction that requires instruments executed at the same time and as part of the same transaction to be read and construed as constituting a single instrument. However, the court also recognized an ...