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02/03/89 the Rock Island Bank, v. Timothy O. Anderson Et Al.

February 3, 1989





534 N.E.2d 200, 178 Ill. App. 3d 1068, 128 Ill. Dec. 180 1989.IL.139

Appeal from the Circuit Court of Mercer County; the Hon. John Donald O'Shea, Judge, presiding.


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


This case presents a controversy between two financial institutions, each of whom claim a preferred security interest in a mobile home. For purposes of clarity, we do not discuss extraneous and immaterial details appended to the dispute. The simple scenario is that the Andersons purchased a mobile home from the defendant, First Federal Savings and Loan Association of Davenport, Iowa (First Federal), on October 28, 1982. Pursuant to statute, First Federal perfected its security interest in the mobile home by filing same with the Illinois Secretary of State and obtaining a notation on the title document to that effect. Ill. Rev. Stat. 1987, ch. 95 1/2, par. 3-202(b).

Some three months later, the Andersons placed the mobile home on leased ground in Mercer County, Illinois. They next proceeded to place it on a cinder block foundation, add a room to it and build an attached garage.

Almost three years later, in August of 1985, the Andersons borrowed money from the Rock Island Bank (Bank). For its security, the Bank took a trust deed along with an assignment of the leasehold interest where the mobile home was situated. What next occurred was that the Andersons defaulted on their loan with the Bank and the Bank filed a complaint to foreclose their trust deed.

At a hearing on that foreclosure suit, the trial court found a priority lien in favor of the Bank and against First Federal, assigning as a reason that First Federal was required to make a second filing of its security claim once the mobile home became attached to the real estate. (Ill. Rev. Stat. 1987, ch. 26, par. 9-313(7).) We disagree.

The trial Judge also ruled that the Bank could not pursue its foreclosure because the Bank possessed only a leasehold interest and not the fee interest in the real estate. Again, we disagree.

An analysis of the statutory language relied on by the trial Judge causes us to conclude that those statutory directives pertain only to persons who seek to obtain a security interest in a chattel which has not as yet been perfected. In the case at hand, however, the security interest of First Federal had been perfected some three years earlier. The statute relied on by First Federal provided that its security interest could be perfected by proceeding as it did. The statute uses the word "perfected." Black's Law Dictionary defines "perfect" as "complete, finished, executed, enforceable, without defect, merchantable and marketable." (Black's Law Dictionary 1351 (3d ed. 1933).) It goes on to define a "perfect instrument" as "one that is good as to all the world." (Black's Law Dictionary 1351 (3d ed. 1933).) In short, having perfected its security interest according to statute, there was nothing further that First Federal need do. Its security interest was perfect as defined in Black's Law Dictionary. That is to say, it was complete, finished and enforceable. It was good as to all the world.

Knowing that a mobile home already on the premises was to serve as security for a loan, the Bank could have protected itself by asking to see the title document and by checking with the Illinois Secretary of State. Had it done so, the prior lien of First Federal would have been discovered. First Federal, on the other hand, or any financial institution for that matter, is not in a position to continuously monitor and track the peregrinations of a mobile home. Nor are they required to do so.

Finally, we know of no reason why the Bank could not foreclose its trust deed whether or not it possessed the fee interest in the real estate. Of course, its interest would be no greater than the mortgagor could convey and that interest was, as we have indicated, inferior to the lien of First Federal.

For the reasons stated, the judgment of the circuit court of Mercer County is reversed and the cause is remanded for further proceedings ...

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