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04/08/96 FIRST NATIONAL BANK NORTHBROOK v. STEWART

April 8, 1996

FIRST NATIONAL BANK OF NORTHBROOK, N.A., PLAINTIFF-APPELLEE,
v.
STEWART TITLE GUARANTY COMPANY, DEFENDANT-APPELLANT.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE JEROME T. BURKE, JUDGE PRESIDING.

The Honorable Justice Wolfson delivered the opinion of the court: Buckley and Braden, JJ., concur.

The opinion of the court was delivered by: Wolfson

The Honorable Justice WOLFSON delivered the opinion of the court:

In this case the title company issued a location note endorsement to the bank. The endorsement's description of the land was mistaken. The bank did not see or rely on the mistake until after its loss took place. The bank seeks to recover its loss from the title company. The trial judge said it could. We reverse the trial judge.

BACKGROUND

On January 2, 1982, Jeffrey Grossman (Grossman) and Donald Grauer (Grauer) entered into an agreement to form the "3105 MacArthur Drive Partnership." This partnership became the beneficial owner of American National Bank and Trust Company of Chicago Land Trust Agreement Number 55216, dated May 2, 1982, as well as American National Bank and Trust Company of Chicago Land Trust Agreement Number 54628. Together, these land trusts were the legal owners of the entire rectangularly-shaped parcel of land, consisting of 47,798 square feet.

This rectangular parcel of land (herein referred to as Lot 32) had a 160 foot frontage on MacArthur Drive and extended back approximately 298 feet. It was improved with a building, having the address of 3105 MacArthur Drive, Northbrook, Illinois.

In August 1983, Grossman applied to the First National Bank of Northbrook (First National) for a $525,000 loan. This loan was to be secured by Grossman's personal guarantee and a mortgage on the real property commonly known as 3105 MacArthur Drive, Northbrook, Illinois. In connection with this loan request Grossman presented First National with an appraisal dated December 1981. This appraisal assessed the market value of Lot 32 at $650,000. An update of the appraisal, dated August 10, 1983, reassessed the market value of the property at $700,000. This also was given to First National.

Unknown to First National, however, Lot 32 was divided into two parcels with ownership vested in the two different land trusts. The front half, Parcel A, encompassed 28,035 square feet. It consisted of the 160 foot frontage on MacArthur Drive and was improved with the building having the address of 3105 MacArthur Drive. The back line of Parcel A, which divided it from the rear half, Parcel B, was an irregular zig-zag pattern. Parcel B consisted mainly of the parking lot used by Parcel A. Ownership of Parcel A was vested in Land Trust Agreement Number 55216. Ownership of Parcel B was vested in Land Trust Agreement Number 54628.

The loan committee of First National Bank approved the loan to Grossman and the partnership on August 9, 1983. When Grossman was asked to supply a survey and legal description of the property to be mortgaged as security for the loan, Grossman submitted a survey and legal description for Parcel A only. The survey and legal description clearly indicated that the square footage of Parcel A was about half the size of the property for which the appraisal was made. The discrepancy was not noticed.

In January 1984, First National closed on the mortgage which secured the loan to Grossman. The mortgage document gave First National a mortgage on the property held in Trust Agreement Number 55216. The legal description for Parcel A was incorporated into the mortgage document. It did not include Parcel B.

On March 30, 1984, a lender's title insurance policy was obtained from Stewart Title Guaranty Company (Stewart). The legal description of Parcel A was used in the title policy.

In 1988, the 3105 MacArthur Drive Partnership and Grossman wanted to refinance the mortgage. First National approved the refinance and new mortgage documents were prepared. Once again, the mortgage documents, which were signed and dated May 9, 1988, indicated that the property being mortgaged was the property held in Land Trust Number 55216. The legal description for Parcel A was used.

On June 28, 1988, the bank requested a title policy for the refinance from Stewart. Attached to the request was a copy of the title policy issued in 1984, a copy of the 1983 survey, and the signed refinanced mortgage. A title policy for the property legally described in the mortgage (Parcel A, not Parcel B) was issued on August 5, 1988. ...


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