Appeal from the Circuit Court of Cook County. Honorable Margaret S. McBride, Judge Presiding.
Released for Publication June 25, 1997.
The Honorable Justice South delivered the opinion of the court: Hartman, P.j., and Hourihane, J., concur.
The opinion of the court was delivered by: South
The Honorable Justice SOUTH delivered the opinion of the court:
Appellant, Metropolitan Life Insurance Company (Met Life), appeals from an order of the circuit court of Cook County denying its cross-motion for summary judgment and granting appellee's, Bank One Chicago, N.A. (Bank One), motion for summary judgment.
On September 19, 1980, Met Life loaned $13,500,000 to the American National Bank and Trust Company of Chicago (Trustee). At that time, the Trustee held legal title to the real property, buildings and improvements now commonly known as the Woodfield Hilton Hotel, a 452-room hotel located at 3400 West Euclid Avenue, Arlington Heights, Illinois (the Hotel). George J. Ablah (Ablah) and the Magnum Hotel Corporation (Magnum) owned the beneficial interest in the land trust.
To secure the promissory note evidencing the loan, the Trustee executed a mortgage, assignment of rents, security agreement and Uniform Commercial Code (UCC-1) financing statement. To further secure the promissory note, Ablah and Magnum executed a security agreement. The security agreement granted Met Life a security interest in the hotel's existing and after-acquired furniture and equipment (F&E). Met Life perfected its security interest in the hotel F&E by filing UCC-1 financing statements with the Illinois Secretary of State's office.
On or about May 3, 1985, Ablah and Magnum entered into an agreement to sell the hotel real property and personalty to USW Arlington Hotel Corporation (USW). On or about June 25, 1985, the sale agreement was amended to provide for the transfer of the hotel F&E to the Magnum Hotel Trust (Grantor Trust).
Pursuant to the parties' security agreement, Ablah and Magnum had to obtain Met Life's authorization before the hotel could be sold. On June 28, 1985, after review of the sale agreement, Met Life consented to the sale by letter. On or about July 1, 1985, USW closed the purchase of the hotel, thereby acquiring ownership of the hotel real property and the hotel F&E. Subsequent to the sale, nearly all of the transferred F&E was replaced.
In February of 1987, USW established a $500,000 revolving line of credit with Bank One's predecessor, First Illinois Bank & Trust (First Bank), to cover taxes and insurance payments. To secure its obligations to First Bank, USW executed a series of security agreements granting First Bank a security interest in the hotel F&E.
On or about March 22, 1988, USW revoked and terminated the Grantor Trust and distributed the hotel F&E to the Woodfield Hotel Limited Partnership (the Partnership), its sole shareholder. USW then filed articles of dissolution, dissolving itself as a corporation.
Between 1990 and 1992, First Bank became Bank One. Bank One subsequently made new loans to the Partnership and required the Partnership to execute new security agreements. The last security agreement was executed on February 1, 1990. The 1990 security agreement granted Bank One a security interest in existing and after-acquired F&E. Bank One perfected its security interest by filing a UCC-1 financing statement on March 7, 1990.
In August of 1992, Bank One extended to the Partnership a new $500,000 revolving line of credit. To evidence the loan, the parties executed a business-purpose revolving promissory note (Promissory Note), a business loan agreement, a borrowing base addendum and a UCC-1 financing statement. Although the 1992 promissory note made reference to a 1992 security agreement, Bank One and the Partnership failed to execute a 1992 security agreement.
On December 1, 1992, the Partnership defaulted under Met Life's mortgage. On January 20, 1993, Met Life filed a complaint to foreclose its mortgage against the hotel's real property and personalty. On February 2, 1993, the Partnership stipulated to the entry of a decree of foreclosure and sale of the hotel real property and personalty.
On or about March 1, 1993, the Partnership defaulted under Bank One's 1992 promissory note. On March 25, 1993, Bank One moved to intervene in Met Life's foreclosure action. Upon intervention, Bank One filed a counterclaim asserting a prior security interest in the hotel F&E, and it requested the court to award Bank One the proceeds from the sale of the hotel F&E.
By agreement between Met Life and Bank One, the circuit court entered an order on April 1, 1993, that $500,000 of the proceeds from the sale of the hotel F&E shall be reserved for later determination of the validity and relative priority of the parties' liens. Thereafter, Met Life filed an amended complaint asking the circuit court to declare that its security interest in the hotel F&E was superior to Bank One's and to ...