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Land of Lincoln Sav. v. Mich. Ave. Nat'l Bk.

OPINION FILED FEBRUARY 26, 1982.

LAND OF LINCOLN SAVINGS AND LOAN, PLAINTIFF-APPELLEE,

v.

MICHIGAN AVENUE NATIONAL BANK OF CHICAGO, TRUSTEE, ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Will County; the Hon. JOHN VERKLAN, Judge, presiding.

JUSTICE ALLOY DELIVERED THE OPINION OF THE COURT:

Rehearing denied March 23, 1982.

Individual defendants Joseph M. Laraia, Ronald Berns, and Vincent A. Solano, Jr., appeal from a portion of the summary judgment order against them in this mortgage foreclosure action by Land of Lincoln Savings and Loan (hereinafter Land of Lincoln). Land of Lincoln had filed a mortgage foreclosure complaint, requesting sale of the real property and a deficiency judgment against the individual defendants. They answered, denying any default on the loan and challenging the complaint as insufficient to support a deficiency award against them. Land of Lincoln thereafter filed its motion for summary judgment, supported by exhibits and affidavits, which was opposed by the defendants, who submitted affidavits in opposition. After hearing, the court entered summary judgment for Land of Lincoln. A sale of the real property was ordered and the defendants were found personally liable for any deficiency which might result from the sale. The property was sold, and a deficiency of $42,776.18 resulted. A deficiency judgment in that amount was entered against the individual defendants Laraia, Berns, and Solano. The defendants now appeal from the entry of the deficiency judgment and raise numerous issues. They argue (1) that there were questions of fact raised concerning an extension of the date for payment of the loan, and that, therefore, the finding of default, which was a basis for the deficiency judgment, was in error. While not challenging the default finding as it affects the foreclosure and sale, they do challenge it, and assign it as error, as it affects the deficiency judgment. They raise other issues as to (2) whether they were guarantors on the note, rather than comakers, as the trial court found, and whether the deficiency judgment was proper. They also raise issues on the pleadings, including (3) whether the complaint properly pleaded the mortgage and note so as to support the deficiency judgment, and (4) whether there was proper pleading of the assignment of the note and mortgage to Land of Lincoln.

The record reveals that the original mortgage loan on this real property, located in the village of Bolingbrook, was taken out in July 1975. The original mortgage agreement was between Michigan Avenue National Bank of Chicago, as trustee under a land trust, and American Home Savings and Loan Association. By reason of a 1978 merger, Land of Lincoln is the successor of American Home Savings and Loan. The original mortgage agreement specified a principal of $280,000, due and payable on August 1, 1977, with monthly interest payments until that time. By loan modification agreement, the loan was extended to March 1, 1978. Prior to that time, and during the period of extension, two acres of the original property were sold and the proceeds applied to the loan, reducing the principal balance due to $170,000.

On March 1, 1978, another note and mortgage agreement were executed covering the subject real estate. The document was a standard form land trustee's note, secured by mortgage. The note was for a principal sum of $170,000, to be due and payable on May 31, 1979. Two installment interest payments, of $8,500 each, were provided for in the agreements, to be payable on November 1, 1978, and on May 1, 1979. The mortgagee was American Home Savings and Loan, predecessor to Land of Lincoln, and the mortgagor was Michigan Avenue National Bank of Chicago, as trustee under a trust agreement with the individual defendants as beneficiaries. In addition to execution by Michigan Avenue Bank, as trustee, the promissory note contained the following provision, typed onto the standard form below the officer for the trustee's signature:

"For value received, the undersigned personally and individually acknowledge herewith the receipt of the principal sum of One Hundred Seventy Thousand ($170,000.00) paid to them as evidenced by the within Note appearing on the reverse side and that they herewith agree and promise to pay to American Home Savings and Loan Association and according to the terms and conditions set forth on the within note and, in the event of the default in the payment of any set terms of said note, that they shall be individually and personally liable, both jointly and severally, and that all rights accruing in a personal obligation may be involked [sic] against them."

The individual defendants had executed the note under this provision, as "the undersigned."

The note contains no provision with respect to any conditions precedent or subsequent which would affect or alter the due dates for payment set forth in the note. The defendants, in their pleadings and affidavits, sought to establish that the original agreement between the parties was that the loan would be extended for a one-year period, until May 31, 1980, if the defendants were unable to sell the property before May 31, 1979, the due date set forth in the note and references in the mortgage agreement.

Prior to, and at the time of the March 1, 1978, execution of the note and mortgage herein at issue, the defendants were attempting to obtain a rezoning of the property from commercial to multiple family residence zoning. The affidavits of defendants Laraia and Solano, attached to defendants' response to motion for summary judgment, indicate that the change in zoning was suggested by plaintiff Land of Lincoln's loan officer, Livio Valli. The affidavits of the defendants also state that prior to and at the time of the execution of the note and mortgage the same Livio Valli had agreed that if they were unable to sell the property before May 31, 1979, the due date, that he would extend the loan for an additional year. It is the position of the defense that the mortgage and note were executed based upon that parol agreement with respect to extension. As noted previously, the note and mortgage themselves are silent as to any such provision, clearly and unambiguously providing for a due date of May 31, 1979.

The affidavits of the defendants indicate as well that the extension agreement was repeated and reaffirmed subsequent to the execution of the note and mortgage on several occasions. It is asserted in the affidavits that the defendants obtained a change in zoning, from commercial to single family, for the property, and in doing so were relying upon the representations of Livio Valli with respect to any extension of the note.

The first installment of interest on the note became due and payable on November 1, 1978. It was paid on December 7, 1978. Defense affidavits indicate that sometime prior to December 4, 1978, the parties reiterated the loan extension provision, in the event no sale was accomplished by stated due date of May 31, 1979.

After that due date had passed, in June 1979, the defendants offered Land of Lincoln the second installment of interest, under the note, and requested that extension documents be executed by the parties to show an extension of one year. Land of Lincoln's officer Livio Valli advised the defendants at that time that there would be no extension of the note, despite the tender of interest. The defendants then refused to tender the second installment until an extension agreement was executed, as had been agreed upon between the parties. Land of Lincoln thereafter filed the instant foreclosure complaint. The short form complaint filed by Land of Lincoln followed the form set forth in section 7(2) of the Illinois Mortgage and Foreclosure Act (Ill. Rev. Stat. 1979, ch. 95, par. 23.6). The complaint alleged that Land of Lincoln was the successor to American Home Savings and Loan, and it alleged the existence and execution of the note and mortgage. The mortgage was fully described in the body of the complaint and both the mortgage and the note were attached to the complaint as exhibits. As provided in the statute, Land of Lincoln sought a foreclosure on the mortgage and a personal deficiency decree against the named individual defendants, who were alleged to be personally liable for such deficiency.

The defense position, in their answer and during summary judgment proceedings, was that the defendants had signed the note as guarantors and that no deficiency could be obtained against them, as guarantors, based upon the single-count foreclosure complaint filed by Land of Lincoln. The defendants further argued on the summary judgment question that there were issues of fact presented concerning the default, specifically whether the note had been extended for one year, as per the agreements set out in their affidavits. They asserted that the plaintiff was estopped from enforcing the due date set forth, having agreed to an extension. The defense also challenged the pleadings, arguing that the complaint did not properly establish the assignment of the note and mortgage to Land of Lincoln.

The circuit court reviewed the entire record and heard the arguments of counsel on the summary judgment motion. Thereafter, it entered its order, granting the foreclosure, therein finding that the defendants had signed the note as comakers. Based on that finding, the court entered summary judgment against them for any deficiency which might result after sale of the real estate. The property was thereafter sold, and the amount realized was $189,000. The deficiency judgment later entered against the defendants was in the amount of $42,776.18. The defendants ...


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