APPELLATE COURT OF ILLINOIS, THIRD DISTRICT
527 N.E.2d 1033, 173 Ill. App. 3d 512, 123 Ill. Dec. 395 1988.IL.1250
Appeal from the Circuit Court of Will County; the Hon. Herman S. Haase, Judge, presiding.
PRESIDING JUSTICE STOUDER delivered the opinion of the court. SCOTT and WOMBACHER, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE STOUDER
This is a mortgage foreclosure action involving a dispute over priority of liens on real property commonly known as 9 Woodland Drive, Crete, Illinois (the premises). In the proceedings below, the circuit court of Will County held that with respect to the liens on the premises, the mortgage of Pathway Financial (Pathway) has priority over the trust deed of Skidmore, Owings and Merrill (Skidmore). Skidmore appeals from that interlocutory summary judgment.
On November 8, 1983, Philip and Rosemary Coman (the Comans) entered into a real estate contract (the contract), agreeing to sell the premises to Robert Talbot (Talbot) for $120,000. The contract contained a mortgage contingency provision for a $96,000 mortgage. Talbot executed a rider to the contract which provided that the Comans were to credit $24,000 to Talbot at the time of closing towards the purchase price of the property. Under the terms of the rider, Talbot was to repay the Comans in five annual installments of $6,657.83. A handwritten notation on the rider indicated that Talbot was to execute a loan for $24,000 with the seller's employer, Skidmore. There is no indication that either the Comans or Talbot ever informed Skidmore about either the contract or Talbot's subsequent loan negotiations with Pathway.
On November 15, 1983, Talbot executed a $96,000 loan application to Pathway. Under "Other Assets" Talbot listed a $15,000 "gift from parents" and $10,000 of "income expected from closing in next 30 days." With respect to the $15,000 gift, Talbot subsequently furnished Pathway with a gift verification form dated November 21, 1983, and executed by Walter and Helen Talbot. Talbot did not inform Pathway of either the rider to the contract or the loan negotiations with Skidmore. Pathway approved the loan.
At the closing on December 13, 1983, Pathway issued a $92,001.74 check to the Comans, the Comans executed a warranty deed to Talbot, and Talbot gave his $96,000 note and mortgage to Pathway. Talbot paid the remainder of the purchase price -- $24,000 -- in cash. Skidmore had wire-transferred $24,000 to Talbot's account at the Bank of Homewood on the day of the closing.
On December 15, 1983, Talbot, without giving notice to Pathway, executed a $24,000 note and trust deed to Skidmore. Skidmore's trust deed was filed with the Will County recorder's Office on December 23, 1983. Thereafter, on December 27, 1983, the deed to Talbot and Talbot's mortgage to Pathway were filed with the Will County recorder's office.
On November 12, 1985, Skidmore filed its foreclosure action against the premises. Thereafter, on November 21, 1986, Pathway filed its foreclosure action against the premises. The suits were consolidated, and Pathway and Skidmore sought summary judgment on the priority of their respective liens. The circuit court entered judgment declaring that the lien of the Pathway mortgage was superior to the lien of the Skidmore trust deed. Subsequently, the trial court entered an order preserving the lien of the Skidmore trust deed and Skidmore's redemption rights until the determination of this appeal. This appeal followed.
The issue in this case is whether Skidmore's recording of its trust deed before Pathway recorded the warranty deed and its mortgage gives Skidmore priority of lien on the premises. The underlying principle regarding priority of mortgage liens is that the first party to give notice of its lien on real property has the senior lien. Thus, where any party has actual or constructive notice of a prior lien, it will ordinarily take subject to that lien. (See Life Savings & Loan Association of America v. Bryant (1984), 125 Ill. App. 3d 1012, 1019, 467 N.E.2d 277, 282.) In this case each lender insists that it did not have actual notice of the other lender's lien. The issue, then, turns on whether either of the two lenders had constructive notice of the other lender's lien.
The primary means of charging any party with notice of an interest in real property is to record that interest. (See Ill. Rev. Stat. 1983, ch. 30, pars. 29, 30; Smith v. Grubb (1949), 402 Ill. 451, 84 N.E.2d 421.) In order for it to be effective as against subsequent purchasers and creditors, however, the recording must operate to give notice to those looking through the grantor-grantee index. (See Landis v. Miles Homes, Inc. (1971), 1 Ill. App. 3d 331, 335, 273 N.E.2d 153, 155 (Parties are "chargeable with knowledge of what appears in the grantor-grantee index, the legal record required to be maintained by the Recorder"); Housing Authority v. YMCA (1983), 112 Ill. App. 3d 65, 70, 444 N.E.2d 1138, 1142 ("It is a long standing rule in Illinois that purchasers of real estate are chargeable with notice of ...