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05/22/87 John Henkel, D/B/A v. Robert W. Morris Et Al.

May 22, 1987

JOHN HENKEL, D/B/A NATIONAL BATTERY BROKERS, PLAINTIFF-APPELLANT

v.

ROBERT W. MORRIS ET AL., DEFENDANTS (DIANA JEAN MORRIS, DEFENDANT-APPELLEE)



APPELLATE COURT OF ILLINOIS, THIRD DISTRICT

508 N.E.2d 780, 155 Ill. App. 3d 816, 108 Ill. Dec. 469 1987.IL.672

Appeal from the Circuit Court of Mercer County; the Hon. Susan Gende, Judge, presiding.

APPELLATE Judges:

JUSTICE STOUDER delivered the opinion of the court. WOMBACHER, J., concurs. PRESIDING JUSTICE BARRY, Dissenting.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE STOUDER

Plaintiff, John Henkel, appeals from the judgment of the circuit court of Mercer County dismissing his complaint to foreclose on a mortgage and denying his post-trial motions to reconsider or for a new trial. We reverse and remand the case for a new trial.

Defendants Robert W. Morris and Diana Jean Anderson (F/K/A Diana Jean Morris) were divorced after extensive litigation. In the course of the dissolution proceedings, an order was entered on October 5, 1983, enjoining Robert from "disposing or secreting or hiding the marital assets provided, however, he shall continue to operate his business known as American Battery in the ordinary course of that business." On February 11, 1984, Robert gave a promissory note to Henkel in the amount of $15,000 secured by a mortgage on certain real estate jointly owned by himself and Diana Jean in exchange for a $15,000 line-of-credit agreement for merchandise to be provided to American Battery. Diana Jean did not sign any of the documents. Pursuant to the agreement, merchandise worth in excess of $15,000 was delivered to American Battery. Robert defaulted on the note, and Henkel sued to foreclose on the mortgage.

Prior to trial, the parties agreed to Henkel's voluntary dismissal of counts II and III of the complaint, which prayed for an accounting and for proceeds of insurance monies paid to Robert and Diana Jean as a result of the fire destruction of the residence on the subject property. The parties proceeded to trial with the understanding that the only issue remaining was whether Henkel's mortgage lien attached to one-half of the subject property or to the whole.

At trial, Henkel testified that he knew Robert and Diana Jean were having marital difficulties at the time the mortgage and other documents were executed. Henkel did not request a title search of the property prior to recording his mortgage on February 14, 1984, but a limited title search conducted by John Moeller, his attorney at the time, revealed the pending dissolution action.

Diana Jean testified for the defense. According to her testimony, she telephoned Henkel in May of 1984 to ask how much Robert owed on his line of credit with Henkel. Henkel, after conferring with Robert, told her that Robert did not want the amount disclosed and that Robert stated it was not her concern and that she should mind her own business. Ultimately, on August 24, 1984, the property in question was awarded to Diana Jean in the dissolution action "free and clear of any interest of [Robert] subject to any valid and legal liens against said property."

At the close of the evidence, Henkel argued that the mortgage was a valid lien against the entire tract and, in accord with the property distribution order, that Diana Jean took the property subject to that lien. Diana Jean, as a joint tenant and a nonsubscriber to the mortgage, contended that she held an undivided one-half interest in the parcel free and clear of Henkel's mortgage.

The following colloquy then ensued between the court and counsel:

"THE COURT: This Court is disturbed considerably by this matter. It notes that on October 13 [ sic ], 1983, there was an injunction entered that neither party would with regard to marital property dispose of them [ sic ] or in any other way affect them or their titles. The transaction referred to was many, many, many months later and in violation of that Court Order.

This is a Court of Equity. This Court is being asked now to state that any illegal act by Mr. Morris was a legal act and created a valid lien. That's the situation we are in, is it not, Mr. Bredberg?

MR. BREDBERG [Plaintiff's counsel]: Your Honor, we are in the -- My client has advanced monies or properties to Mr. Morris.

THE COURT: That was at his risk, Mr. Bredberg. This Court is asking you whether or not you agree there was an injunction issued which prohibited Mr. Morris from acting as he did act.

BREDBERG: I read the Morris divorce file. There was an injunction, yes, that is true, Your Honor.

THE COURT: And, do you characterize the lien on behalf of the Plaintiff as a valid lien?

BREDBERG: Yes, I do, Your Honor.

THE COURT: Mr. Wallace, do you have any response to the Court's indication of the difficulty it is having with regard to the law and the assumption and apparently [ sic ] agreement that this is a valid lien?

MR. WALLACE [Diana Jean's counsel]: This is a violation of the injunction. And, in contrast to what Mr. Bredberg says, I feel that actual notice and I think the Court can find that Mr. Henkel knew that from the evidence in this case, that he knew that there was a divorce action. So, that put him on notice in going and looking in the file. And, so he would -- He is charged with notice of this. And, I submit that with the violation of the injunction as the Court has indicated I think that that [ sic ] conceivably the Court ...


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