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Aetna Life Ins. Co. v. H.w. Stout & A.

OPINION FILED FEBRUARY 15, 1983.

AETNA LIFE INSURANCE COMPANY, PLAINTIFF,

v.

H.W. STOUT & ASSOCIATES, INC., ET AL., DEFENDANTS. — (ITT THORP CORPORATION, DEFENDANT-APPELLANT; THE PEOPLES STATE BANK OF NEWTON, DEFENDANT-APPELLEE.)



Appeal from the Circuit Court of Jasper County; the Hon. Bill Slater, Judge, presiding.

PRESIDING JUSTICE HARRISON DELIVERED THE OPINION OF THE COURT:

ITT Thorp Corporation (ITT) appeals from a supplemental order of the circuit court of Jasper County which directed that certain receiver's fees, receiver's attorney fees and property taxes be deducted from the proceeds of the sale of certain crops in which ITT held a security interest.

Resolution of the issues presented by this appeal requires that the facts be stated in some detail. Aetna Life Insurance Company (Aetna), a Connecticut corporation, held a mortgage on certain property of H.W. Stout and Associates, Inc., H. Wayne Stout, and C. Lavonne Stout. ITT held a second mortgage on the property, and the Peoples State Bank of Newton, Illinois (Peoples State Bank) held a third mortgage. ITT also claimed an interest in addition to that arising by virtue of its mortgage through a security agreement which included "farm products, and all other properties including general intangibles, choses in action, and other rights of debtor and all proceeds thereof" along with various items of farm equipment and other personal property.

On January 21, 1980, ITT filed a complaint for replevin (Jasper County case No. 80-L-2), seeking possession of the property covered by the security agreement or a judgment for the value thereof. On March 4, 1980, the circuit court ordered that the Stouts assemble the personal property covered by the security agreement and deliver it to ITT. This order was apparently not complied with and, pursuant to a petition filed by ITT, the circuit court on July 16, 1980, entered a rule to show cause ordering the Stouts to appear and show why they should not be held in contempt of court.

On July 30, 1980, Aetna filed a complaint seeking to foreclose its mortgage on the Stout property (Jasper County case No. 80-CH-12), and both ITT and Peoples State Bank counterclaimed for foreclosure on September 18, 1980, and October 21, 1980, respectively. On October 17, 1980, pursuant to a petition filed by Aetna, the court appointed First National Bank of Newton, Illinois, as receiver with respect to the property. The order appointing the receiver also directed ITT to harvest crops growing on a certain section of the land, and to cause those crops to then be stored at a named facility. H.W. Stout and Associates, Inc., along with Randel Stout, was ordered to proceed in similar fashion with respect to crops growing on another section of the land. In a separate order also entered on October 17, 1980, the court consolidated the replevin and foreclosure actions.

On February 10, 1981, the court entered a judgment of foreclosure and sale on behalf of Aetna. The court found the total amount due Aetna, including judgment on the note secured by the mortgage, late payment charge, interest, insurance costs and attorney fees to be $745,719.28, and ordered that the property be sold if this amount was not paid to Aetna within 21 days from the entry of the judgment of foreclosure.

On March 31, 1981, a supplemental judgment of foreclosure was entered on behalf of ITT. The court found:

"That ITT Thorp Corporation has a valid lien on the property * * *, which said lien is in the amount of $117,613.92 that this lien shall be subordinate only to that of plaintiff, Aetna Life Insurance Company, a Connecticut Corporation; and said ITT Thorp Corporation shall following sale of real estate * * *, have priority second only to Aetna [sic] Life Insurance Corporation as to proceeds of the Sheriffs Sale as previously ordered by the court and that the Peoples State Bank of Newton, Illinois, shall have priority subordinate to that of ITT Thorp Corporation."

The court further ordered that the bean crop which had been harvested be sold, and that, after crop expenses of $29,664.19 were paid to Randel L. Stout, the balance of proceeds realized from the crop sale be distributed to ITT.

A sheriff's sale of the Stout property was held on April 2, 1981, and Peoples State Bank, the third mortgagee, purchased the property with a bid of $759,319.89. Distribution of these proceeds resulted in the full satisfaction of Aetna's claim, and, after payment of expenses, the payment of $1 to ITT.

On April 6, 1981, Peoples State Bank filed a petition asking the court to reconsider the supplemental judgment of foreclosure. The petition alleged that the judgment did not reflect the agreement of the parties because, among other things, it did not require the proceeds of the beans to be used to pay the 1979 taxes and the fees of the receiver. The receiver filed its final report and petitioned for discharge on the following day. The report stated that the total proceeds of the crop sale amounted to $101,493.69, and that, after storage and other charges and expenses were paid, the sum of $64,019.01 was paid to ITT "as per Court Order." The receiver pointed out in the report that the 1979 taxes on the property were "still overdue in a sum in excess of $5,000, since the receiver was directed to sell the 1979 crops and distribute the proceeds without payment of said taxes." The report also asked that the receiver be allowed compensation of $2,253.60, and that the receiver's attorney be allowed $1,095.82 for his services and expenses, both sums having been withheld from the proceeds of the bean sale. ITT filed an objection to the report, claiming that the fees should not be paid from the crop proceeds where the receiver was appointed at the request of Aetna. In a supplemental order filed on July 3, 1981, the court allowed the requested fees, and further found that the 1979 taxes should be paid out of rents and profits received by the receiver. Since the post-expense proceeds of the crop sale had already been paid to ITT by the receiver, the court further ordered that ITT pay the receiver a sum sufficient to pay all 1979 property taxes on the land, together with all costs, interests and penalties incurred in connection with those taxes.

ITT filed a post-judgment motion on July 31, 1981, in which it urged the court to reconsider the order allowing for payment of taxes and receiver's fees out of the proceeds of the crops. On August 14, 1981, Peoples State Bank filed a petition for rule to show cause as to why ITT should not be held in contempt of court. The petition alleged that ITT had not paid the tax money to the receiver within the time allotted by the court, and that Peoples State Bank was forced to advance the funds to the receiver in order to avoid further penalties. The petition asked that ITT be held in contempt, that judgment be entered against ITT for the amount of the delinquent taxes plus the attorney fees and other costs incurred by Peoples State Bank.

A hearing on ITT's post-judgment motion was held on September 15, 1981, at which time the court declined to modify its prior order concerning the payment of taxes and receiver's fees. ITT filed notice of appeal on October 14, 1981.

On appeal, ITT asserts that the trial court erred in determining that the receiver's fees, the receiver's attorney fees, and the 1979 property taxes should be paid out of the proceeds of the crop sale. Before reaching the merits of these questions, however, it is necessary for us to ...


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