Appeal from the Circuit Court of Cook County; the Hon. Albert
Green, Judge, presiding.
PRESIDING JUSTICE LINN DELIVERED THE OPINION OF THE COURT:
Rehearing denied July 12, 1984.
Defendants, Adam and Ruth Bryant, entered into a contract with Katrina, Inc., for the purchase of property in Cook County, Illinois. Defendants paid an earnest money deposit and began making payments to Katrina, which did not hold legal title at the time the contract was entered into. Katrina subsequently executed a mortgage on the property in favor of plaintiff, Life Savings and Loan Association of America, and obtained legal title from the trustee.
Katrina was dissolved, and defendants continued to make mortgage payments to be credited against the balance of their contract price. Upon paying off the contract, defendants ceased making mortgage payments, and plaintiff brought foreclosure proceedings. Defendants counterclaimed to quiet title, asserting priority over the mortgage.
The trial court dismissed the counterclaim, finding that the mortgage was superior. Defendants now appeal.
We reverse the decision of the trial court.
On or about December 20, 1965, Adam and Ruth Bryant (Bryants or Vendees) entered into a real estate sale contract with Katrina, Inc. (Katrina or Vendor), to purchase property in Cook County, Illinois. The contract called for a $1,000 earnest money deposit on a total purchase price of $15,500 but contained no payment schedule for the balance owing. The contract did, however, contain the following provisions:
"This contract is subject to Katrina Inc. [sic] ability to purchase the above above mention [sic] property and also obtain a mortgage in the amount of $13,500.00 * * * in the event said mortgage cannot be obtain [sic] with in [sic] 45 days from date of contract then this contract becomes null and void and earnest money returned to purchaser.
In case of default of Martgage [sic] payment by Katrina, Inc. to mortgage Co. purchaser may make said mortgage payment out of contract payment and receive [sic] credit for same on contract payment."
Katrina did not hold legal title at the time the contract was entered into and obtained neither title nor a mortgage within the 45-day period. With knowledge of these facts, the Bryants began making payments under the contract and entered into possession of the property on January 29, 1966. The Bryants continued in open and notorious possession of the property up to and through January 30, 1967, at which time Katrina executed a mortgage with Life Savings and Loan Association of America (Life or Mortgagee) in the amount of $12,000 and, with the proceeds thereof, obtained legal title by deed from Oak Park Savings Bank, as trustee. The Bryants never expressly assumed the mortgage, nor did they join in its making. Life had notice of the Bryants' interest in and possession of the subject property at the time it obtained the mortgage from Katrina.
On December 11, 1968, Katrina was dissolved. The Bryants, who had been making mortgage payments on Katrina's behalf prior to the date of dissolution, continued to make payments through October 22, 1982, whereupon, alleging to have paid all amounts due under the purchase contract, the Bryants ceased making mortgage payments, leaving an outstanding balance on the mortgage of $1,254.68. Finding Katrina in default, Life elected to accelerate all sums due under the mortgage and instituted a foreclosure action, naming, among others, the Bryants as defendants.
The Bryants filed an answer with affirmative defenses and a counterclaim to quiet title. In response, Life filed a motion to dismiss, which the trial court granted. In its order of March 9, 1983, the lower court found that the purchase contract contemplated obtaining the mortgage and that the Bryants had therefore subordinated their interest in the subject property to the mortgage. The court ordered that the counterclaim, to the extent that it asserted priority over the mortgage, be dismissed along with the affirmative defenses. That part of the counterclaim seeking to quiet title was let stand. The Bryants filed a motion to vacate the ...