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Members Equity Credit Union v. Duefel

March 31, 1998

MEMBERS EQUITY CREDIT UNION, PLAINTIFF,
v.
KEVIN DUEFEL AND CATHY DUEFEL, DEFENDANTS-APPELLANTS, (BILL MARTINSON, PETITIONER-APPELLEE).



Appeal from the Circuit Court for the 12th Judicial Circuit Will County, Illinois No. 96--CH--1180 Honorable William Penn, judge Presiding

The opinion of the court was delivered by: Justice Homer delivered the opinion of the court:

Members Equity Credit Union foreclosed on the junior mortgage it held on the residential property of Kevin and Cathy Duefel. At the time the judicial sale was confirmed, the trial court granted a motion filed by the successful bidder, Bill Martinson, requesting that the surplus from the judicial sale be distributed to him. Subsequently, the trial court modified the order of distribution to require Martinson to use the surplus to pay the first mortgage on the property which had not been adjudicated in this action. The Duefels appeal. Following our careful review, we reverse.

FACTS

Members Equity Credit Union commenced this action by filing a complaint to foreclose the junior mortgage it held on the Duefels' residence. The Judgement of foreclosure provided that any surplus should be remitted "to the mortgagor or as otherwise directed by the court." The property was also subject to a first mortgage held by First Chicago, although the first mortgage was not identified in the complaint or judgment of foreclosure.

Martinson purchased the subject real estate at the judicial sale, having submitted the successful bid of $58,000.00. After payment of the junior mortgage and court costs, there remained a surplus of $21,396.82. The trial court granted a motion filed by Martinson awarding him the surplus. According to an exhibit attached to Martinson's motion, the first mortgage held by First Chicago had a balance of approximately $28,000.00. Subsequently, the Duefels moved to vacate the order and asked the trial court to award the surplus to them. After a hearing, the trial court ordered Martinson to apply the surplus to the first mortgage indebtedness. The Duefels then filed this appeal.

ANALYSIS The sole issue on appeal is whether the trial court erred in ordering that the surplus resulting from the foreclosure of the junior mortgage be applied to payment of the first mortgage. A trial court's order of distribution of the surplus from a judicial foreclosure sale will not be disturbed on appeal absent a showing of an abuse of discretion. See Kankakee Federal Savings & Loan Ass'n v. Mueller, 134 Ill. App. 3d 943, 481 N.E.2d 332 (1985); Grubert v. Cosmopolitan National Bank of Chicago, 269 Ill. App. 3d 408, 645 N.E.2d 560 (1995).

Section 15--1512 of the Mortgage Foreclosure Act provides:

"The proceeds resulting from the sale of real estate under this Article shall be applied in the following order:

(a) the reasonable expenses of sale;

(b) the reasonable expenses of securing possession before sale ***;

(c) if the sale was pursuant to judicial foreclosure, satisfaction of claims in the order of priority adjudicated in the Judgement of foreclosure or order confirming sale; and

(d) remittance of any surplus to be held by the person appointed by the court to conduct the sale until further order of the court. If there is a surplus, such person conducting the sale shall send written notice to all parties to the proceeding advising them of the amount of the surplus, and that the surplus shall be held until a party obtains a court order for its distribution or until, in the absence of an order, the surplus is forfeited to the State." (Emphasis added.) 735 ILCS 5/15--1512 (West 1994).

The foreclosure Judgement in the instant case contained virtually the same language as the statute with respect to payment of expenses and satisfaction of claims. However, the Judgement provided that any surplus was to be remitted "to the mortgagor or as otherwise directed by the court." (Emphasis added.) *fn1

The Duefels argue that the trial court should not have allowed Martinson, the successful bidder, to recoup his own funds for the purpose of paying a superior lien which remained on the property. They point out that Martinson had notice, either actual or constructive, of the prior lien when he purchased the property. Further, the Duefels argue that because the first mortgage was not adjudicated in this ...


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