Appeal from the Circuit Court of Kane County. No. 98--CH--0702 Honorable R. Peter Grometer, Presiding.
The opinion of the court was delivered by: Justice Geiger
This appeal arises from a dispute concerning lien priority in a mortgage foreclosure proceeding. The issue is whether an assignee of a priority mortgage may maintain that priority position over a judgment creditor without recording the assignment of mortgage.
On July 24, 1994, Dale Kuiper and Beverly Kuiper executed a note and mortgage for the sum of $100,000 in favor of Medallion Mortgage Company (Medallion). The note and mortgage were filed with the Kane County recorder's office on August 1, 1994. Pursuant to their terms, the note and mortgage were assignable to third parties. On August 3, 1994, Medallion assigned the note and mortgage to the counterdefendant, Federal National Mortgage Association (FNMA).
On July 26, 1996, the counterplaintiff, Lisa Fortney, had obtained a judgment against the Kuipers in the amount of $650,000. Fortney recorded a memoranda of judgment with the Kane County recorder's office on June 25, 1997.
On September 8, 1998, FNMA filed this foreclosure action after the Kuipers defaulted on the note. In its foreclosure complaint, FNMA alleged that Fortney's judgment lien was inferior and subordinate to FNMA's first mortgage lien. On October 2, 1998, FNMA recorded the assignment it had received from Medallion.
Fortney filed a counterclaim in the foreclosure, alleging that her judgment lien was recorded prior to the FNMA lien and, therefore, had priority. Both Fortney and FNMA filed motions for summary judgment as to lien priority. The trial court entered an order denying Fortney's motion and granting FNMA's motion, ruling that FNMA had first lien priority.
On appeal, Fortney argues that, because her judgment lien was recorded prior to the FNMA assignment, her lien takes priority. Fortney argues that the transfer of the note and mortgage extinguished all of Medallion's interest and that FNMA did not stand in the shoes of Medallion with regard to lien priority. According to Fortney, section 30 of the Conveyances Act (765 ILCS 5/30 (West 1996)) required FNMA to record the assignment in order to maintain priority as to any bona fide purchasers or creditors who filed liens against the property.
FNMA responds that the lien filed by Medallion has never been released and that the assignment did not operate to extinguish the lien. Thus, FNMA reasons, it was not necessary for it to record the assignment in order to maintain first lien priority, as the original lien provided sufficient notice to third parties of the existence of the first mortgage. FNMA further argues that, after the assignment, it stood in the shoes of Medallion.
We review the trial court's summary judgment order de novo. Wiseman-Hughes Enterprises, Inc. v. Reger, 248 Ill. App. 3d 854, 857 (1993). A lien is a hold or claim that one party has on the property of another for a debt. Podvinec v. Popov, 266 Ill. App. 3d 72, 77 (1994), rev'd on other grounds, 168 Ill. 2d 130 (1995). A lien that is first in time generally has priority and is entitled to prior satisfaction of the property it binds. Cole Taylor Bank v. Cole Taylor Bank, 224 Ill. App. 3d 696, 704 (1992).
A mortgage is a type of consensual lien on real property. See 735 ILCS 5/15-1207 (West 1996). Specifically, it is an interest in land created by written instrument providing security in real estate to secure the payment of a debt. Resolution Trust Corp. v. Holtzman, 248 Ill. App. 3d 105, 111 (1993). Under the Illinois Mortgage Foreclosure Law (735 ILCS 5/15--1101 et seq. (West 1996)), a mortgage lien is created upon the recording of the mortgage with the recorder of deeds. See 735 ILCS 5/15-1301 (West 1996); see also Firstmark Standard Life Insurance Co. v. Superior Bank FSB, 271 Ill. App. 3d 435, 439 (1995).
The perfection of mortgage liens is governed also by the Conveyances Act (765 ILCS 5/1 et seq. (West 1996)). Section 28 of the Conveyances Act provides that deeds, mortgages, and other instruments relating to or affecting the title to real estate shall be recorded in the county in which such real estate is situated. 765 ILCS 5/28 (West 1996). The purpose of this section is to give third parties the opportunity to ascertain the status of title to the property. Lubershane v. Village of Glencoe, 63 Ill. App. 3d 874, 879 (1978). The purchaser of real estate may rely on the public record of conveyances and instruments affecting title unless he has notice or is chargeable with notice of a claim or interest that is inconsistent with the record. Bullard v. Turner, 357 Ill. 279, 283 (1934).
Section 30 of the Conveyances Act provides as follows:
"All deeds, mortgages and other instruments of writing which are authorized to be recorded, shall take effect and be in force from and after the time of filing the same for record, and not before, as to all creditors and subsequent purchasers, without notice; and all such deeds and title papers shall be adjudged void as to all such creditors and subsequent purchasers, without notice, until the same shall be filed for record." 765 ILCS 5/30 (West 1996).
The purpose of this section is to protect subsequent purchasers against unrecorded prior instruments. Farmers State Bank v. Neese, 281 Ill. App. 3d 98, 106 (1996). A presumption exists that the first mortgage recorded has priority. Firstmark, 271 Ill. App. 3d at 439. An unrecorded interest in land is not effective as to a bona fide purchaser without notice. Schaumburg State Bank v. Bank of Wheaton, 197 Ill. App. 3d 713, 720 (1990). However, where a party has constructive notice of a prior interest in real estate, the failure to record is not necessarily ...