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Bank of Benton v. Cogdill

OPINION FILED SEPTEMBER 26, 1983.

BANK OF BENTON, PLAINTIFF-APPELLANT,

v.

DANNY M. COGDILL ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Williamson County; the Hon. Snyder Howell, Judge, presiding.

JUSTICE JONES DELIVERED THE OPINION OF THE COURT:

The plaintiff, Bank of Benton, Benton, Illinois, appeals from the trial court's judgment denying it a deficiency judgment and attorney fees following foreclosure of a mortgage and sale of the property subject to the mortgage. The bank asserts on appeal that this judgment was contrary to the law and the evidence and that the bank was entitled to a deficiency judgment and attorney fees where the amount realized from the judicial sale of the mortgaged property was less than the amount of the defendants' indebtedness. The defendants-mortgagors contend, however, that the court's judgment can be sustained on the basis of their affirmative defense in the foreclosure action that the bank had waived its right to a deficiency judgment by agreeing to take a deed to the mortgaged property in lieu of foreclosure. We find as a matter of law that no such agreement existed, and we accordingly reverse the judgment of the trial court.

On July 31, 1980, the plaintiff bank filed a two-count complaint for foreclosure of a first and second mortgage on real estate owned by the defendants, Danny and Carla Cogdill. In their answer to this complaint the defendants asserted that the plaintiff was not entitled to a deficiency judgment against them because, in March and April of 1980, the defendants had "tendered and offered to convey" their interest in the real estate to the plaintiff and were refused. At that time, the defendants stated, the real estate was of a fair market value sufficient to pay the amount of indebtedness due the plaintiff under its notes and mortgages. The defendants further alleged that the plaintiff was not entitled to attorney fees in the foreclosure action because this action was unnecessary and was due to the plaintiff's failure to accept the real estate in satisfaction of the debt.

Upon stipulation of the parties the court entered a partial summary judgment of foreclosure in favor of the plaintiff, reserving for later hearing the issues of the plaintiff's entitlement to a deficiency judgment and attorney fees. The total amount of indebtedness was stated as $81,673.05, plus attorney fees if found to be includable at a later hearing. The court conducted a sale of the real estate, and the property was sold to the plaintiff as high bidder for $63,000. The court then filed a report of sale and distribution in which it found a deficiency in the amount of $19,416.83.

Following the sale the plaintiff filed a motion for summary judgment on the remaining issues, asking the court to determine that it was entitled to a judgment for the deficiency plus attorney fees. The court made a record sheet entry order denying the motion, in which it stated:

"Consideration has been given to the arguments and facts as thus far presented. There is a shortage of case law and statute law as to the issues involved. The plaintiff contends that it is entitled to a deficiency judgment by reason of the judicial sale of the property for a lesser amount than was sufficient to liquidate the debt plus costs and attorney's fees. The defendants contend that the plaintiff is not entitled to said benefits by reason of the fact that, at least three (3) months before suit to foreclose was filed, the defendants tendered and offered to convey their interests in the realty to plaintiff who refused the tender and offer. Further, the defendants claim and assert that at the time of the tender, the fair market value of the property exceeded the total of the amounts due by way of principal and interest.

The plaintiff's position finds support in the pleadings and affidavits and other matters in the file. There seems no law [sic] supporting defendants' position. This case is concerned with both legal and equitable principles. The rights of the plaintiff must be considered in light of equity and good conscience. If the defendants were able to prove their position, it would shock one's conscience to permit the plaintiff to stiffen its position and procrastinate in the settlement and disposition of the business transaction between plaintiff and defendants, and thereby cause a deficiency of $19,416.83, and expect the defendants to make plaintiff whole. The defendants contend, in substance, that they tried to make the plaintiff `whole' yet plaintiff refused. The judgment of this court leaves the plaintiff to suffer whatever ills result from a situation that plaintiff could have avoided. The defendants yet must establish their position by proof. Motion for Summary Judgment denied."

A hearing was held on July 28, 1982, on the issues of the plaintiff's right to a deficiency judgment and attorney fees. At that hearing, defendant Danny Cogdill testified that he became unemployed in December 1979 and was unable to make his mortgage payments. In April 1980 he received a number of telephone calls from David Bauer, vice-president of the Bank of Benton, regarding when he would be able to make some payment on the overdue balance. Sometime shortly after April 25, 1980, defendant Cogdill received a letter from Bauer, which stated:

"If we do not have some assurance of payment on the loan, it may be necessary for us to start foreclosure action or have you deed the property to the Bank of Benton in satisfaction of the debt."

Mr. Cogdill testified further:

"A. On April 29, I contacted Mr. Bauer by telephone and informed him that we would accept the Bank's offer to deed the property over to the Bank of Benton in satisfaction of the debt against me.

Q. When you refer to the Bank's offer, are you referring to what's set forth or part of what's set forth in Defendants' Exhibit 2, the letter of April 25th?

A. Yes.

Q. What, if anything, did Mr. Bauer say to you at that time?

A. He said something to the effect that he would start the paper work pertaining to the conveyance of the deed in satisfaction of the debt and that he would be in touch with me shortly.

Q. What is the next thing that you did or heard?

A. The next thing I heard was I received a telephone conversation [sic] from Mr. Bauer approximately one week later stating that other Bank of Benton officials had declined his previous offer to accept the conveyance of the deed in satisfaction of the debt against it.

Q. What did he say to you about whether or not they were going to go ahead and go through with it?

A. He just said that he could not go through with it at that point.

Q. What, if anything, did you tell him?

A. I told him that's all that I knew to do because I was still unemployed and I had no money to make the payment and that they would just have to do whatever they saw fit.

Q. What, after that time, took place regarding the matter of the delinquency?

A. I received another telephone call, and I think a letter confirmed this, and they wanted to know if I had any other assets that I could pledge in addition to the property itself for satisfaction of the debt.

Q. What, if anything, did you advise them?

A. I advised them that the only thing I had of any value was an interest in a land trust pertaining to a new office building in Benton, Illinois, and that I would be willing to sign over this land trust interest which we ...


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