Appeal from the Circuit Court of Cook County. Honorable Everette A. Braden, Judge Presiding.
The Honorable Justice Theis delivered the opinion of the court: Hoffman, P.j., and O'brien, S., J., concur.
The opinion of the court was delivered by: Theis
JUSTICE THEIS delivered the opinion of the court:
The plaintiff, Firstmark Standard Life Insurance Company (Firstmark), and the defendant, Superior Bank FSB (Superior), both held mortgages on real estate commonly identified as 222 North Michigan Avenue. This real estate was the res of a land trust. After the trust defaulted on its loan, Firstmark filed a complaint seeking foreclosure; subsequently, Superior likewise sought foreclosure. Pursuant to section 2-1005 of the Illinois Code of Civil Procedure, both parties filed motions for summary judgment. (Ill. Rev. Stat. 1987, ch. 110, par. 2-1005.) The trial court granted Firstmark's motion and denied Superior's motion. Superior appeals the decision of the trial court, contending that the trial court erred in failing to apply the doctrine of conventional subrogation to give Superior's mortgage priority over that of Firstmark. We affirm the decision of the trial court.
The facts in this matter are, for the most part, undisputed. At the center of this appeal is the priority of mortgages held on a piece of commercial real estate in downtown Chicago. The property commonly known as 222 North Michigan Avenue was the res of a land trust under a trust agreement dated October 20, 1980, with Harris Trust and Savings Bank as trustee. Since 1981, ownership of the beneficial interest of the trust was transferred between four companies, all primarily owned by one individual, Richard Fanslow. The companies were Life Assurance Company of Pennsylvania (LACOP), Virick Limited (Virick), Nurses Guaranteed Retirement Life Insurance Company (Nurses), and N.R. Guaranteed Retirement, Inc. (N.R.) The record shows that by 1983, the property was subject to three mortgages. These three prior mortgages amounted to a sum which totalled over $3 million.
In November of 1983, the trust executed a $3.6 million promissory note in favor of Indianapolis Morris Plan Corporation (IMPC), which was secured by a mortgage of the same date. (This mortgage is hereinafter referred to as the "Firstmark mortgage.") The mortgage was recorded in Cook County on November 28, 1983.
In December of 1985, the trust executed a second promissory note, for the amount of $7.1 million. This note was made in favor of Lyons Savings and Loan Association, succeeded in interest by Superior Bank.
This note was also secured by a mortgage, which we will refer to as the "Superior mortgage." The mortgage contains the following clause:
"3.1 Representations as to the Mortgaged Premises. Mortgagor represents and covenants that: A. Mortgagor is the holder of the fee simple title to the Mortgaged Premises subject only to the Permitted Encumbrances; ***."
Attached to this mortgage is Exhibit B, a schedule of permitted encumbrances. Exhibit B states that "LYONS SAVINGS AND LOAN ASSOCIATION [Superior's predecessor in interest) takes subject only to" certain exceptions, including the mortgage held by IMPC securing the $3.6 million debt.
At the request of the beneficial owner, a portion of the proceeds loaned by Superior was used to pay off the three prior mortgages which existed at the time that the IMPC mortgage was secured. The remainder of the proceeds was disbursed to the beneficial owner.
In May of 1987, IMPC assigned its interest in the mortgage to Firstmark.
In September 1988, the trust defaulted on its loan. Firstmark filed an amended verified complaint for foreclosure, seeking to foreclose the mortgage that it held on the property. Firstmark named Lyons Savings and Loan Association (Superior's predecessor in interest) as a defendant in the matter. Superior answered the complaint and filed a counterclaim, also seeking to foreclose the mortgage.
Both parties subsequently filed motions for summary judgment, pursuant to section 2-1005 of the Illinois Code of Civil Procedure. (Ill. Rev. Stat. 1987, ch. 110, par. 2-1005.) The trial court granted Firstmark's motion and denied the ...