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Citizen's Bank v. American National Bank and Trust Co. of Chicago

November 30, 2001


Appeal from the Circuit Court of Cook County. No. 99 CH 2235 Honorable Lester D. Foreman, Judge Presiding.

The opinion of the court was delivered by: Justice Greiman


This appeal presents the question of whether the appellants adequately pled causes of action for breach of contract, an accounting, breach of obligations owed to third-party beneficiaries, and breach of fiduciary duties. The trial court granted a motion to dismiss all four counts of the counterclaim pursuant to section 2-615 of the Illinois Code of Civil Procedure (735 ILCS 5/2-615 (West 2000)). The trial court also denied the appellants leave to replead, holding that there was no set of facts upon which they could rely to recover on their counterclaim. Accordingly, this appeal also presents the question of whether the trial court properly exercised its discretion in denying leave to replead. For the reasons that follow, we affirm.

In 1988, Commercial National Bank of Berwyn extended a mortgage loan (the original mortgage) to an Illinois land trust. American National Bank & Trust Co. of Chicago was the trustee of that land trust, and the beneficiaries were Tom and Judith Warren (individually, Judith and Tom, and collectively, the Warrens). Berwyn Bank was the predecessor in interest to the appellee, Citizens Bank-Illinois, N.A. (Citizens) ("bank" will be used to refer to Berwyn Bank or Citizens, where appropriate). The mortgaged property on South Cicero Avenue in Chicago (Cicero property) was then improved with a gas station / convenience store combination.

Five years later, the Warrens were divorced. As a consequence of the divorce, Judith was awarded ownership of the mortgaged property. The loan matured, and on April 1, 1993, the Warrens and the bank entered into a written loan and note modification agreement which provided for an extension and renewal of the mortgage debt and required Judith to make monthly tax escrow payments.

A few months after that, Judith and the trustee sold the Cicero property to Charanjeet Illinois Stations No. 6, Inc. (Charanjeet). Darshan S. Dhaliwal (Dhaliwal), who is the president of Charanjeet, personally guaranteed Charanjeet's obligations under the sale (Charanjeet and Dhaliwal are hereinafter referred to collectively as Charanjeet, appellants, or the counterplaintiffs). Judith and her land trust as sellers, Charanjeet as purchaser, and Dhaliwal as guarantor of the purchaser's obligation entered into articles of agreement for deed and purchase of assets (Articles). The bank is not a party to the Articles but is mentioned as the lender on the outstanding mortgage loan because Judith and Charanjeet expressly provided that the installment payments by Charanjeet to Judith mirror the mortgage payments that Judith owed to the bank.

Among the documents evidencing the original mortgage was an installment note. That note contained a "due-on-sale" provision that called for the loan to be paid in full if the Warrens ever sold the property. In recognition of the Warrens' obligations under this clause, Judith and Charanjeet sought the bank's consent before she closed the sale of the Cicero property to Charanjeet. The bank agreed not to accelerate the debt as it was entitled to do under the due-on-sale provision.

The bank executed a document (the Consent) evidencing its agreement not to call the loan, and it is this document about which the parties disagree. Appellee states that the Consent is the only document to which the bank was a party with the appellants, and that it did not agree to be bound by any obligations in the Articles between the Warrens and Charanjeet. Moreover, appellee claims that it did not release Judith from her obligations to the bank under the mortgage documents and, therefore, she was still required to make monthly tax escrow payments. Consequently, the bank contends, appellants never assumed Judith's debt or other contractual responsibilities to the bank. Rather, it claims that the bank merely accommodated the sale by Judith by waiving its right to invoke the due-on-sale provision, which would have required that all principal under the note be paid immediately at the time of sale.

Appellants, on the other hand, claim that the language of the Consent demonstrated that the bank acknowledged that Charanjeet assumed the obligations and certain contractual rights of Judith. For this, it points to the first paragraph of the Consent, which states that Citizen's predecessor consented:

"[T]o the transactions evidenced by that certain Articles of Agreement for Deed and Purchase of Assets dated July 23, 1993, by and between Judith A. Warren, American National Bank & Trust Company of Chicago, not individually, but as 'Trustee,' *** JJT Enterprises, Inc., Darshan S. Dhaliwal, and Charanjeet Illinois Stations No. 6, Inc."

Appellants note that in addition to acknowledging the underlying agreement by which obligations were assumed by Charanjeet, including the obligation to pay amounts determined by Citizens' predecessor for taxes, the bank agreed in a separate paragraph not to exercise its rights under "any prohibition against alienation or disposition" provided for in the original loan agreement.

Subsequent to July 23, 1993, Charanjeet made monthly payments directly to Citizens' predecessor, the Berwyn Bank, which were accepted and credited to Charanjeet. These payments included amounts earmarked for principal and interest, but also included payments that were calculated and requested by the Berwyn Bank to be paid into the special tax escrow account maintained by the bank. The bank accepted all of the payments made by or on behalf of Charanjeet and allegedly deposited the payments directed for taxes into the escrow account required by the loan modification agreement. The amounts paid for the anticipated taxes were based on the calculations made by the bank based upon what it calculated would be needed to pay the applicable real estate taxes when they became due.

After the Berwyn Bank assigned its interest to Citizens, Citizens continued to accept the payments made by Charanjeet. Like the Berwyn Bank, Citizens purportedly calculated all the amounts necessary for the payment of taxes and accepted the resulting payments from Charanjeet and deposited them into the tax escrow account. Charanjeet claims that it reasonably relied on Citizens not only to calculate the amount necessary for tax purposes, but to deposit and hold the amounts paid into the tax escrow account. Further, Charanjeet claims that it believed that Citizens was making the tax payments. However, as a result of Citizens' methods of accounting, Charanjeet alleges that the bank did not place all amounts intended by Citizens for tax payments into the interest-bearing account and did not pay all taxes when they became due. In fact, unbeknownst to Charanjeet, it alleges, taxes went unpaid on several occasions.

Charanjeet also claims that Citizens had full knowledge of Charanjeet's assumptions of Judith's obligations. Citizens, it asserts, communicated freely with Charanjeet and its representatives regarding the outstanding loan obligations, amounts necessary for taxes, possible refinancing of the loan, and the ...

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