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Barth v. Reagan





Appeal from the Circuit Court of Lake County; the Hon. Bernard E. Drew, Jr., Judge, presiding.


Plaintiff, Barbara G. Barth, brought this action in the circuit court of Lake County against defendants, James J. Reagan, her former attorney, and Northbrook Trust and Savings Bank (Northbrook), trustee of a land trust. Counts I and II of plaintiff's second amended complaint charged Reagan with legal malpractice. Proceedings relating to those counts continue at the trial level and are not involved in this appeal. Counts III, IV and V charged Northbrook with breaching its fiduciary obligations through various acts pertaining to its foreclosure on plaintiff's residence, legal title to which was held by Northbrook as trustee of a land trust known as trust No. LT-1233. The trial court granted Northbrook's motion to dismiss counts III, IV and V on the basis of res judicata, compromise and settlement and laches. Plaintiff appeals from that ruling, and Northbrook cross-appeals from the denial of its petition for attorney fees.

On August 10, 1976, plaintiff purchased a residence in Glenview, agreeing to assume the mortgage indebtedness owed by the seller to First National Bank of Chicago. Concurrently therewith, plaintiff entered into a land-trust agreement with Northbrook under which the residence was made the res of the trust. The trust agreement provided that plaintiff was to be the sole beneficiary and that her husband, Edward Barth, was to have sole control over the power of direction. The agreement also provided that all inquiries and bills were to be directed to plaintiff's attorney at the time, James J. Reagan.

On April 14, 1978, Northbrook entered into a loan transaction with Edward Barth in the amount of $29,600, a transaction which purportedly included plaintiff. The loan was evidenced by a note and security agreement and was secured by the assignment of plaintiff's beneficial interest in the land trust. Plaintiff alleges she had no knowledge of the loan and that her signature on the note and security agreement was forged, an allegation Northbrook admits must be taken as true for purposes of this appeal.

On November 30, 1979, another note bearing the signature of Edward Barth and the purported signature of plaintiff was given to Northbrook to secure a loan for $17,220.41, plus finance charges of $4,800, for the purpose of paying the original note balance by renewal. This note was also secured by an assignment of plaintiff's beneficial interest in the land trust. Plaintiff alleges her signature was again forged and that she had no knowledge of the loan. Plaintiff further claims her signature was forged on a revolving-loan agreement entered into with Northbrook on December 2, 1977, an agreement also bearing the signature of Edward Barth. It should be observed that plaintiff does not challenge the validity of Edward Barth's signature on any of the foregoing documents.

Because of the default in payments of these obligations, Northbrook brought an action in the circuit court of Cook County on April 30, 1980, to foreclose the security agreement and assignment dated April 14, 1978, which was in the nature of a mortgage. Personal jurisdiction over plaintiff was obtained by substituted service on Edward Barth. Neither Edward Barth nor plaintiff filed an appearance, it being plaintiff's contention that she never received notice of the action. On July 29, 1980, the court found plaintiff and Edward Barth to be in default and entered a decree of foreclosure and sale against them. An amended decree was subsequently filed on August 28, 1980. In both the original decree and amended decree, the court found the mortgage held by First National Bank of Chicago to be the paramount lien and ordered plaintiff's residence sold subject to that lien. The court further found the redemption period to be one year from May 16, 1980, the date of the last service of process, or six months from the sheriff's sale, whichever was later.

On September 30, 1980, Northbrook purchased plaintiff's residence at a sheriff's sale for $68,241.31. Thereafter, on October 9, 1980, the circuit court of Cook County entered an order approving the sale and directed that the first mortgagee, First National Bank of Chicago, be paid $23,233.51, the amount the court found due under the amended decree of foreclosure and sale. The court also ordered that the balance, $45,007.80, be paid to Northbrook. No deficiency was found to exist. A sheriff's deed was eventually issued to Northbrook on May 19, 1981.

Shortly after Northbrook received the deed, two of its representatives visited plaintiff and Edward Barth at their home and advised them that Northbrook now owned the property by virtue of the foreclosure. The representatives offered to sell the property back to plaintiff for $100,000. Plaintiff avers that this was the first time she learned of the foreclosure proceedings, of the indebtedness to Northbrook or of the defaults. In a letter dated June 8, 1981, Northbrook confirmed its offer to sell the residence back to plaintiff for $100,000. The offer, however, was contingent on plaintiff paying $650 per month as rent until closing. In addition, plaintiff was required to furnish satisfactory evidence by July 1, 1981, of the ability to close a cash sale by August 1, 1981. In the event she failed to provide such evidence by the specified date, she was expected, according to the letter, to vacate the premises by July 19, 1981.

After learning of the foreclosure and of Northbrook's offer to sell the property back to her, plaintiff retained counsel, who informed Northbrook in a letter dated June 17, 1981, that plaintiff intended to redeem the property. Because plaintiff was unable to arrange adequate financing, Northbrook filed a petition for a writ of assistance to evict her from the premises. Plaintiff, who by now had retained another attorney, responded by filing a petition for equitable redemption from foreclosure on July 23, 1981. The petition alleged plaintiff's lack of notice, the forgeries, as well as the inadequacy of the price received for the property at the sheriff's sale. Additionally, plaintiff charged Northbrook with improperly paying off the first mortgage held by First National Bank of Chicago. At this juncture it is worth noting that plaintiff never filed a section 72 petition (Ill. Rev. Stat. 1979, ch. 110, par. 72) (now Ill. Rev. Stat. 1981, ch. 110, par. 2-1401) to vacate the decree of foreclosure and sale and therefore the time period for obtaining such relief expired.

On October 15, 1981, following discussions between their attorneys, plaintiff and Northbrook entered into an agreement whereby Northbrook conveyed the property back to plaintiff for $73,871.49, a sum representing the amount paid by Northbrook at the sheriff's sale together with various costs. On the same day, counsel for both parties signed a stipulation — which was submitted by plaintiff's attorney — providing:

"It is hereby stipulated and agreed by and between the parties to the above-entitled action * * * that said action be dismissed with prejudice * * * and all matters in controversy for which said action was brought having been fully settled, compromised and adjourned."

Thereafter, on October 20, 1981, the stipulation was filed together with an order that can properly be characterized as a consent judgment. The order states:

"This cause coming on to be heard on this date upon the Stipulation for Dismissal with prejudice filed herein by the above plaintiff(s) and the above named defendant(s), and the Court having examined said Stipulation and being fully advised in the premises, finds that this cause of action has been fully compromised and settled and the parties have stipulated and agreed to dismissal of the complaint with prejudice * * *.

IT IS THEREFORE ORDERED that the petition of plaintiff against defendant for a Writ of Assistance be and the same is ...

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