Appeal from the Circuit Court of Champaign County; the Hon.
George S. Miller, Judge, presiding.
JUSTICE MILLS DELIVERED THE OPINION OF THE COURT:
A "due-on-sale" clause in the mortgage.
A covenant without a remedy?
The mortgagor is bound by his promise.
The parties signed a mortgage instrument and a promissory note in 1978. The mortgage instrument provided that plaintiffs, Kamal and Leila Abdul-Karim, mortgaged to defendant, First Federal Savings and Loan Association of Champaign (First Federal), property in the city of Champaign to secure the payment of a promissory note executed by plaintiffs payable to First Federal. The mortgage instrument contained, inter alia, a due-on-sale clause which provided:
"If * * * in case of the sale of said real estate without the written consent of the Mortgagee, * * * then all said mortgage indebtedness shall be at the option of the Mortgagee become due and payable, and this mortgage may be foreclosed * * *."
The promissory note contained plaintiffs' promise to pay First Federal $400,000 in monthly installments plus interest. The only default provision in the note related to untimely payments of the principal and interest. The note contained no due-on-sale clause, nor was there a clause in the note incorporating the provisions of the mortgage.
Plaintiffs attempted to sell the property in 1981. When First Federal learned of the pending sale it notified plaintiffs that it would either enforce the due-on-sale provision of the mortgage instrument or significantly increase the interest rate to be paid on the loan. Plaintiffs responded by filing a complaint in the circuit court of Champaign County seeking (1) a declaration of rights under the mortgage instrument and note, (2) an injunction to prevent First Federal from either enforcing the due-on-sale clause or increasing the interest charged on the loan, and (3) money damages resulting from plaintiffs' inability to sell their home. The trial court entered summary judgment in favor of First Federal and plaintiffs appealed.
Plaintiffs, citing 2140 Lincoln Park West v. American National Bank & Trust Co. (1980), 88 Ill. App.3d 660, 410 N.E.2d 990, argue that the absence of a due-on-sale clause in the note renders the due-on-sale clause in the mortgage instrument unenforceable. In 2140 Lincoln Park West, the plaintiff bank attempted to enforce a due-on-sale clause in a trust deed by foreclosing on the deed after the defendant transferred property subject to the deed. The appellate court, relying on Conerty v. Richtsteig (1942), 379 Ill. 360, 41 N.E.2d 476, and Oswianza v. Wengler & Mandell, Inc. (1934), 358 Ill. 302, 193 N.E. 123, stated:
"We believe the reasoning in Conerty and Oswianza to be sound and therefore adopt it. Applying the rationale in those cases to the facts presented here, we find the trust deed and the note are wholly independent documents, and unless there is sufficient language in the note that would incorporate a provision in the trust deed, that provision is entirely ineffective as to the note. It follows, therefore, that [the due-on-sale clause] of the trust deed is ineffective in triggering acceleration of the note as there is no language in the note that would so provide. Consequently, there can be no foreclosure of the trust deed since acceleration of the note ...