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Farmers & Mechanics Bk. v. Davies

OPINION FILED MAY 28, 1981.

THE FARMERS AND MECHANICS BANK, PLAINTIFF-APPELLANT,

v.

RONALD

v.

DAVIES ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Knox County; the Hon. GALE A. MATHERS, Judge, presiding.

MR. JUSTICE ALLOY DELIVERED THE OPINION OF THE COURT:

Rehearing denied July 22, 1981.

Plaintiff Farmers and Mechanics Bank (Bank) of Galesburg appeals from the order of the circuit court granting defendant Harvey Ouderkirk's motion for judgment on the pleadings. The Bank had brought an action to foreclose on a mortgage. On this appeal, the Bank argues that there existed a question of fact concerning whether the mortgage was given as security for the notes which were attached to the complaint and formed the basis for the foreclosure action. The Bank contends that due to the presence of a fact question the court erred in entering judgment on the pleadings.

The record discloses that the Bank filed its complaint to foreclose on a mortgage that was executed on June 30, 1976, by the defendants Davies. The defendants Barbara and Ronald Davies were named as mortgagors and defendant Harvey Ouderkirk was made a party due to his interest in the real estate given as security in the mortgage to the Bank. A copy of the mortgage was attached to the complaint as an exhibit, as were copies of six notes signed by Barbara and Ronald Davies and alleged to be secured by the mortgage. The face amounts of the notes totaled $92,000. All of the defendants filed answers denying that the copies of the notes attached to the complaint were copies of notes secured by the mortgage.

Two provisions of the mortgage are pertinent to the issue on appeal. One provision, a typewritten provision, states that the mortgage was given to secure the payment of 13 promissory notes, with their principal amounts totaling $297,254.77, and each marked with the legend "This note secured by real estate mortgage dated June 30, 1976." The following provision in the mortgage is a preprinted form clause which states:

"Said Mortgagors agree to pay said Mortgagee any sum of money which he, they or either of them may now or hereafter owe said Mortgagee by reason of any note, check, draft or other paper upon which the name of the undersigned or either of them shall appear as maker or otherwise; and this mortgage and its accompanying note until discharged is to be a continuing security for the payment of any such sum or sums." (Emphasis added.)

Concerning the notes alleged by the Bank to be secured by the mortgage, which formed the basis for the foreclosure action, none of the six notes contained the legend, "This note secured by real estate mortgage dated June 30, 1976." They were notes signed either by one or both of the Davies, although they were in existence prior to the execution of the mortgage.

Defendant Harvey Ouderkirk filed a motion for judgment on the pleadings, alleging that the pleadings were insufficient as a matter of law due to the fact that the notes upon which foreclosure was based did not contain the required legend, "This note secured by real estate mortgage dated June 30, 1976." Defendant contends that the notes were not, therefore, secured by the mortgage. A hearing on the motion was held at which authorities were submitted. The court heard arguments of counsel thereafter, and then the motion for judgment on the pleadings was granted. No opportunity was given to the Bank to present evidence. On this appeal, the Bank argues that the judgment entered was erroneous since there existed a factual question in the case. Specifically, the Bank argues that there was a factual question as to whether the notes attached to the complaint, upon which foreclosure is sought, were intended to be covered by the mortgage.

Our initial focus is upon the procedural posture of the case. As both sides agree, on a motion for judgment on the pleadings (Ill. Rev. Stat. 1979, ch. 110, par. 45(5)), the trial court must ascertain whether an issue of fact is presented by the pleadings. If a factual question exists, the court must then determine which party, if either is so qualified, is entitled to judgment as a matter of law. Kravis v. Smith-Marine, Inc. (1974), 20 Ill. App.3d 483, 314 N.E.2d 577; Swidler v. Litvin (1969), 107 Ill. App.2d 227, 246 N.E.2d 895.

The question before the circuit court, and before this court on appeal, is whether the pleadings raise an issue of fact such that the Bank should have been permitted to present evidence in the case. The question asserted to have been presented in the pleadings is whether the notes now attached to the complaint were those intended by the parties to be secured by the mortgage. The Bank argues that a fact question exists on the intent of the parties, while the defendants argue that the exhibits, being the mortgage and the notes, conclusively show that the notes were not those intended to be secured by the mortgage, since they did not contain the specific legend noted in the mortgage. Both sides agree that intent is the question and that the initial inquiry must focus on the language of the instruments at issue.

The mortgage document has two provisions which concern the obligations for which the real estate security is given. The first provision, which was typed onto the pre-printed mortgage form, states specifically and concisely the obligations for which the real estate mortgage is given. It states that the mortgage is given to secure the payment of 13 promissory notes, with principal amounts totaling $297,254.77, and each marked with the legend, "This note secured by real estate mortgage dated June 30, 1976." The other provision, entirely general and part of the form document, was set out previously in the opinion, the pertinent section being the final clause. It states that the mortgage is a continuing security for all sums, past, present and future, which the mortgagors owe the Bank, whether arising from notes, drafts, checks or other paper executed by either or both mortgagors, until the mortgage "and the accompanying note" are discharged.

The notes which are now attached to the complaint and which are alleged by the Bank to have been intended to be covered by the mortgage do not contain the identifying legend specified in the more specific, typewritten clause of the mortgage document. None of them state, "This note secured by real estate mortgage dated June 30, 1976." In fact, four of the notes attached to the complaint are dated in months prior to June 1976, that is, prior to the existence of the mortgage. The notes, however, are notes owing to the Bank and signed by the signers of the mortgage.

• 1 The Bank initially argues that a fact question is presented as to whether the notes now attached to its complaint were the notes intended to be covered by the specific provision of the mortgage, which detailed 13 notes and identified them specifically and unambiguously as bearing the identifying legend. It is argued that parol evidence could have shown that the notes were indeed covered by the specific provision of the mortgage concerning the notes for which security was given. We disagree. In that specific provision, the mortgage, as noted, clearly and unambiguously sets forth the intentions of the parties that the mortgage secures 13 notes which bear the legend, "This note secured by real estate mortgage dated June 30, 1976." The parties thus provided for a clear and unmistakable method for identifying which notes were to be secured by the mortgage. The security is being given, by the mortgage, for 13 notes which on their faces state that they are secured by the June 30, 1976, mortgage. None of the six notes attached to the complaint and alleged to be secured by the mortgage conform to this explicit description in the mortgage itself.

In circumstances where the language of the parties is unambiguous and their intent thereby clear and specific, parol evidence is not permissible to show their intentions to be otherwise than stated by the unambiguous language. (Western Illinois Oil Co. v. Thompson (1962), 26 Ill.2d 287, 291, 186 N.E.2d 285; Bank of Naperville v. Holz (1980), 86 Ill. App.3d 533, 407 N.E.2d 1102.) In a mortgage context, parol evidence has been held admissible to show the intent of the parties with respect to the debt or obligations secured, where there are minor variations between the notes and the debt described in the mortgage. (Metropolitan Life Insurance Co. v. Kobbeman (1931), 260 Ill. App. 508, 511-12; Chicago City Bank & Trust v. Bremer (1914), 189 Ill. App. 258.) The rule is applied as to minor deviations where the "note is otherwise fully and properly described" in the mortgage. (260 Ill. App. 508, 511.) Such full and proper description and clear identification are not present in the instant case. The notes in the instant case lack the most distinguishing and identifying characteristic of the notes which are stated to be secured by the mortgage. They do not contain the legend, "This note secured by real estate mortgage dated June 30, 1976." Such an omission can hardly be considered minor or slight, where it is clear that the parties relied upon the inclusion of that identifying legend to indicate the notes covered by the mortgage. This mortgage provision is clear and unambiguous with respect to which notes are secured, and the notes in question do not, in any substantial way, correspond to the clear language of identification in that portion of the mortgage document. The only conclusion to be drawn from the exhibits is that these notes were not those notes ...


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