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03/31/89 Mchenry Savings Bank, v. Pioneer National Title

March 31, 1989





540 N.E.2d 357, 186 Ill. App. 3d 238, 132 Ill. Dec. 617 1989.IL.454

Appeal from the Circuit Court of McHenry County; the Hon. Roland A. Herrmann, Judge, presiding.


JUSTICE REINHARD delivered the opinion of the court. UNVERZAGT, P.J., and INGLIS, J., concur.


Plaintiff, McHenry Savings Bank, filed a two-count complaint in the circuit court of McHenry County against Pioneer National Title Insurance Company (defendant) and St. Paul Fire and Marine Insurance Company (St. Paul) seeking money damages under a mortgage title insurance policy issued by defendant and pursuant to a bond issued by St. Paul. Plaintiff's action against St. Paul was subsequently dismissed with prejudice upon settlement, and St. Paul is not a party to this appeal. The circuit court granted defendant's motion for summary judgment.

Plaintiff raises two issues on appeal: (1) whether there is a material issue of fact as to whether plaintiff suffered a loss as defined in the policy, thereby precluding summary judgment; and (2) whether the trial court misconstrued the provisions of the title insurance policy.

The following facts are derived from the pleadings and documents attached thereto. Defendant issued a title insurance policy to plaintiff as mortgagee of a mortgage executed by Seymour and Tillie Keer (the Keers). The mortgage secured the sum of $56,000. The mortgage was later deemed to be fraudulent because the Keers did not sign it or receive title to the property, and the owner of the property received the loan proceeds as the purchase price of the property but still held title and possession of the property.

As a result of the defective title, defendant filed suit on plaintiff's behalf seeking to foreclose on the mortgage allegedly executed by the Keers or, alternatively, to declare an equitable lien on the property in favor of plaintiff. An equitable lien was established in favor of plaintiff in the amount of $58,796.73 plus costs. Although the record is incomplete regarding this separate litigation, it does contain a "Judgment of Foreclosure and Sale" which indicates that an equitable mortgage was recognized on behalf of plaintiff and further determined that plaintiff had an equitable lien in the amount of $59,019.97, which equalled the unpaid principal balance of $58,796.73 plus costs. This order further gives plaintiff the right to recover from the proceeds of a foreclosure sale an amount equal to its equitable lien. We note at this point that while it appears that the trial court in its judgment of foreclosure and sale and plaintiff in its appellate brief both use the terms "equitable lien" and "equitable mortgage" somewhat interchangeably, they are distinct concepts (see Hargrove v. Gerill Corp. (1984), 124 Ill. App. 3d 924, 930, 464 N.E.2d 1226), and, as the parties do not dispute this point, we will use the term "equitable mortgage." Apparently, as a result of this separate litigation, plaintiff received fee simple title to the property. Plaintiff then filed this suit against defendant and St. Paul.

Suing under the title insurance policy, plaintiff seeks $100,000 in damages against defendant and alleges that defendant refused to honor its claim under the policy. Plaintiff's alleged loss includes interest on the mortgage, court costs, attorney fees, and costs incurred for maintenance of the property.

Defendant filed a motion for summary judgment, contending that plaintiff had not sustained any actual loss within the meaning of paragraph 6 of defendant's title insurance policy, that plaintiff's claim was barred by paragraph 7 of the policy, and that plaintiff's coverage was limited by paragraph 11 of the policy, which provides that any recovery is limited to the restrictions of the policy.

In its reply to the motion for summary judgment, plaintiff argued that there was a genuine issue of material fact over the meaning of the insurance agreement and the amount of damages plaintiff had incurred. Plaintiff also contended that the loss it suffered was covered under the policy because the fraud in the mortgage documents caused a defect in the title. This defect resulted in plaintiff having only an equitable lien, thereby losing its right to collect interest on the mortgage. Plaintiff argued that merely limiting it to the amounts recovered in the foreclosure action did not make it whole. The court granted defendant's motion for summary judgment, finding in a written order that defendant had fulfilled its contractual obligations by curing the defects in the title and securing plaintiff's equitable lien on the property.

Plaintiff first contends that summary judgment was improperly granted because there exists a disputed question of material fact. Specifically, plaintiff argues that it alleged a "loss" in its complaint which defendant denied in its answer and, therefore, there is a question of material fact regarding whether plaintiff suffered an actual loss in this case thereby precluding summary judgment. Alternatively, plaintiff maintains that the trial court misconstrued the provision of the policy to the extent that it found that defendant fulfilled its obligation by securing an equitable lien on behalf of plaintiff. In this regard, plaintiff argues that defendant insured not simply the title to the property, but rather, insured against defects in the mortgage lien and plaintiff's ability to secure the underlying debt. Thus, it asserts that it should be able to recover under the policy for the lost opportunity to collect interest under its original mortgage because it was ultimately forced to foreclose on the equitable lien.

Summary judgment is proper where there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. (Ill. Rev. Stat. 1987, ch. 110, par. 2-1005(c); Puttman v. May Excavating Co. (1987), 118 Ill. 2d 107, 112, 514 N.E.2d 188.) A motion for summary judgment can be an aid in the expeditious Disposition of a lawsuit, but it is a drastic means of disposing of litigation and should be allowed only when the right of the moving party is clear and free from doubt. (Purtill v. Hess (1986), 111 Ill. 2d 229, 240, 489 N.E.2d 867.) Furthermore, the interpretation or construction of an insurance policy is one of law which is uniquely within the province of the court rather than the fact finder. (United Farm Bureau Mutual Insurance Co. v. Elder (1981), 86 Ill. 2d 339, 342-43, 427 N.E.2d 127.) Where the facts are clear and undisputed, it is the responsibility ...

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