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12/08/97 FIRST MIDWEST v. MARIANN POGGE

December 8, 1997

FIRST MIDWEST, A DIVISION OF JACKSONVILLE SAVINGS BANK, F/K/A JACKSONVILLE SAVINGS AND LOAN ASSOCIATION, A CORPORATION, PLAINTIFF-APPELLANT,
v.
MARIANN POGGE, BANKRUPTCY TRUSTEE FOR PATRICIA L. COX, DEFENDANT-APPELLEE, AND JAMES L. COX, ILLINI BANK OF AUBURN, A CORPORATION, CREDITTHRIFT OF AMERICA INC., A CORPORATION, LESTER L. ROYER, GRACE I. ROYER, UNKNOWN OWNERS AND NON-RECORD CLAIMANTS, DEFENDANTS.



Appeal from Circuit Court of Sangamon County. No. 90CH62. Honorable Robert J. Eggers, Judge Presiding.

Released for Publication January 6, 1998.

Honorable Robert W. Cook, J., Honorable John T. McCullough, J. - Concur, Honorable James A. Knecht, J. - Concur. Justice Cook delivered the opinion of the court.

The opinion of the court was delivered by: Cook

The Honorable Justice COOK delivered the opinion of the court:

In May 1988, Patricia Cox filed an action seeking the dissolution of her marriage to James Cox. They jointly owned a home located in Virden, Illinois, which was subject to a first mortgage held by the Illini Bank of Auburn. The couple also had taken out three loans from First Midwest, a division of Jacksonville Savings and Loan Association (First Midwest), and James Cox had taken out two individual loans from First Midwest.

By July 1989, three of the Coxes' loans with First Midwest were past maturity and in default, including the two individual loans to James Cox. In an effort to refinance and consolidate these overdue loans, First Midwest made another individual loan to James Cox in the principal sum of $8,356.07 on July 15, 1989. No new money was advanced. This loan was secured by a second mortgage on James Cox's undivided one-half interest in the real estate in Virden, Illinois. Due to the pending marriage dissolution action, Patricia Cox denied First Midwest's request to sign the note or mortgage but was aware that James had done so.

First Midwest was aware of the Coxes' pending divorce at the time of the July 15 loan and mortgage. James Cox told Gloria Leskovisek, First Midwest's vice-president, about the pending divorce a couple of months before the July 15 loan was made, while discussing possible restructuring financing options. Patricia Cox also told Leskovisek about the pending action in a telephone conversation on June 17, 1989. Patricia Cox told Leskovisek there was a pending marriage dissolution action and that she would not sign any new mortgages to consolidate or reduce payments on any existing loans.

The Coxes' marriage was dissolved on December 29, 1989, on a bifurcated basis. The property division in the marriage dissolution action was announced on July 18, 1990, by the Sangamon County circuit court. The court awarded the real estate in Virden, Illinois, to Patricia Cox and ordered James Cox to assume the indebtedness related to that property, including the July 15 loan by First Midwest. Pursuant to the judgment, James Cox conveyed his interest in the property to Patricia Cox by quitclaim deed.

The present foreclosure action on the home in Virden, Illinois, was initiated by plaintiff First Midwest on April 20, 1990, two months prior to the entry of the order awarding the property. On August 28, 1991, the trial court entered an order in this action to sell the subject real estate. The sale (to a third party) was completed on August 30, 1991, for the sum of $57,000. After payment of the first mortgage lien to Illini Bank of Auburn in the sum of $32,458.69, there were remaining sale proceeds of $24,541.31. From that amount, $12,000 was paid over to First Midwest "in escrow" to cover the subject loan, subject to the order of the court in this action.

On November 13, 1991, James Cox filed for bankruptcy and obtained a discharge of debtor on June 15, 1992. The discharge relieved him of several debts owed to First Midwest, including the July 15 loan. Patricia Cox then filed for bankruptcy on May 7, 1992, relieving her of several debts owed to First Midwest. On October 18, 1996, the trustee of Patricia Cox's bankruptcy estate, Marianne Pogge, was substituted as defendant in this foreclosure action.

First Midwest and defendant filed cross-motions for summary judgment to recover the $12,000 in escrow. Defendant claims that First Midwest's actual notice of the Coxes' pending divorce at the time of the July 15 loan made First Midwest's rights under the mortgage subject to the divorce settlement, in accordance with the equitable doctrine of lis pendens. Defendant argued that when James Cox's rights to the property were divested under the divorce settlement, First Midwest's were divested as well. First Midwest countered that the doctrine of lis pendens did not apply. First Midwest also argued that Patricia Cox was estopped from contesting the second mortgage because she should have litigated it in the dissolution of marriage proceedings. The trial court entered summary judgment in favor of the trustee. We reverse and remand.

Summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Bass v. Prime Cable of Chicago, Inc., 284 Ill. App. 3d 116, 121, 674 N.E.2d 43, 47, 220 Ill. Dec. 772 (1996). On appeal from an order granting summary judgment, the standard of review is de novo. USG Corp. v. Sterling Plumbing Group, Inc., 247 Ill. App. 3d 316, 318, 617 N.E.2d 69, 70, 186 Ill. Dec. 830 (1993).

Generally, a spouse has an absolute right to alienate his or her property, including the mortgage of his undivided one-half interest in jointly held property. Cadle Company II, Inc. v. Stauffenberg, 221 Ill. App. 3d 267, 269, 581 N.E.2d 882, 884, 163 Ill. Dec. 728 (1991). In the usual case, the mortgagor may then foreclose and recover such one-half interest in the case of default. Cadle Company II, Inc., 221 Ill. App. 3d at 270, 581 N.E.2d at 885. However, if the subject property was involved in a pending action at the time of the mortgage, the mortgagee's rights to that property may be limited by the doctrine of lis pendens. 735 ILCS 5/2-1901 (West 1992).

At common law, the equitable remedy of lis pendens bound purchasers or encumbrancers of property to the results of pending lawsuits that affected the title to or lien on that property. Norris v. Ile, 152 Ill. 190, 199-200, 38 N.E. 762, 764 (1894). A lis pendens is not an injunction as it does not formally restrain sale, conveyance, or purchase. E&E Hauling, Inc. v. County of DuPage, 77 Ill. App. 3d 1017, 1025, 396 N.E.2d 1260, 1266, 33 Ill. Dec. 536 (1979). Under the doctrine of lis pendens, one who obtains an interest in property during the pendency of a suit affecting it is bound to the result of that litigation as if he had been a party from the outset. E&E Hauling, 77 Ill. App. 3d at 1023, 396 N.E.2d at 1265. For the doctrine to be applicable, three requirements must be satisfied: (1) the property must be of such a character as to be subject to the rule, (2) the court must have jurisdiction both "of the person and of the res," and (3) the property involved must be sufficiently described in the pleadings. 3 R. Michael, Illinois Practice ยง 21.1 (1989) (Civil Procedure Before Trial). One purpose of lis pendens is the avoidance of endless litigation of property rights precipitated by transfers of interest and the necessity of then filing a new suit against the transferee. Admiral Builders Corp. v. Robert Hall Village, 101 Ill. App. 3d 132, ...


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