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Banco Popular v. Beneficial Systems

November 4, 2002

BANCO POPULAR, AS SUCCESSOR TRUSTEE TO PIONEER BANK, AS TRUSTEE U/T/A DATED APRIL 4, 1995, AND KNOWN AS TRUST #259971, AND MARSHA AZAR, PLAINTIFFS,
v.
BENEFICIAL SYSTEMS, INC., GEORGE KALTEZAS, HELENA KALTEZAS AND HOWARD HARRIS, DEFENDANTS.
BENEFICIAL SYSTEMS, INC., COUNTERPLAINTIFF-APPELLANT,
v.
BANCO POPULAR, AS SUCCESSOR TRUSTEE TO PIONEER BANK, AS TRUSTEE U/T/A DATED APRIL 4, 1995, AND KNOWN AS TRUST #259971, AND MARSHA AZAR, COUNTERDEFENDANTS-APPELLEES, AND BANCO POPULAR, AS SUCCESSOR MORTGAGEE TO PIONEER BANK, THIRD PARTY DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County, Chancery Division. The Honorable John K. Madden, Judge Presiding. No. 98 CH 10051

The opinion of the court was delivered by: Presiding Justice Gordon

Counterplaintiff-appellant Beneficial Systems, Inc. (BSI) appeals from the trial court's order denying its motion for summary judgment and granting summary judgment in favor of counterdefendants-appellees Banco Popular as successor trustee (BPT) and Marsha Azar (Marsha), and third party defendant-appellee Banco Popular as successor mortgagee (BPM). BSI asserts that the trial court erred in its decision in several respects, including that Marsha's failure to respond to BSI's request to admit facts resulted in judicial admissions that prevented her, as well as BPT and BPM, from presenting evidence during the summary judgment hearing; that these facts were sufficient to entitle BSI to summary judgment; and that even if it was proper for the court to consider other allegations, these raised genuine issues of material fact that precluded summary judgment. BSI asks that we reverse the grant of summary judgment in favor of Marsha, BPT and BPM and enter summary judgment in its favor, or, alternatively, vacate the judgments entered and remand for trial. Because we find issues of fact as to whether there was actual and constructive knowledge on the part of BSI of Marsha's, BPT's and BPM's interests in the property and because we find issues of fact as to the propriety of the levy and sale, we reverse the grant of summary judgment and remand.

BACKGROUND

George and Helena Kaltezas (the Kaltezases) owned property located at 1767-75 West Greenleaf in Chicago, Illinois, which contained a building on the premises. By 1994, the property had fallen into disrepair. The City of Chicago instituted a building code violation case against the Kaltezases, resulting in the filing of a lis pendens notice with the recorder's office in 1995.

The Kaltezases hired Morris Reynolds (Reynolds) to do work on the property. Eventually, Reynolds filed a complaint against the Kaltezases alleging breach of contract and seeking to place a lien on the property. On January 17, 1996, judgment was entered for Reynolds against the Kaltezases. This judgment was recorded with the Cook County recorder of deeds on May 3, 1996.

However, several months before the judgment, on March 30, 1995, the Kaltezases executed a quitclaim deed conveying all interest in the property to Marsha, through her nominee Saul Azar (Saul). The deed, which was delivered on May 13, 1995, stated that Marsha had "the right of equitable ownership in the property and building even if it is not recorded by way of deed conveying and vesting such legal ownership." Saul and Marsha paid all taxes to redeem the property as well as the water bill and brokers' commissions, placed a sign in the building's window that their company, Westridge Realty and Construction Co., was managing the property, changed the name of the tax addressee to Westridge, repaired the building, dealt with the local police department and alderman's office in rehabilitating the property, and leased the property to new tenants. Saul told Theodore Zimmerman, Reynolds' attorney, that he had purchased the property from the Kaltezases. Saul also appeared in open court to defend the building code case instituted by the City of Chicago. He filed a written appearance, stating that he was the owner of the property. Eventually, that case was dismissed when Saul and Marsha completed all necessary repairs on the property. Neither Saul nor Marsha, however, recorded the deed given to them from the Kaltezases.

After judgment was awarded to Reynolds against the Kaltezases, Reynolds assigned it to BSI on June 1, 1996. BSI's president, Dexter McClure (McClure), searched the records of the recorder's office, and although he found the lis pendens notice regarding the building code violation case on the property, he did not review the court file nor inspect the property itself.

On August 6, 1996, Marsha finally recorded her deed from the Kaltezases. In conjunction with this, Marsha recorded a deed in trust on the property as well as a mortgage in favor of Pioneer Bank, the predecessor trustee to BPT and predecessor mortgagee to BPM.

BSI delivered the judgment it received from Reynolds to the Cook County sheriff for levy and sale. BSI initially did so on August 16, 1996; the process was conducted in mid-June 1997, against the "right, title and interest of the Defendants George Kaltezas and Helena Kaltezas." On June 18, 1997, the property was sold, after notice by publication, to BSI as the successful bidder. BSI thereafter notified Marsha and BPT that the sale had occurred, what amount was bid and the date of redemption. The sale was later confirmed by the court, which ordered the sheriff to deliver the deed to BSI.

Marsha and BPT filed suit against BSI to set aside the sheriff's deed. BSI filed a countersuit to quiet title and establish its priority over BPM's mortgage. BPM, in turn, brought suit against BSI.

During this litigation, BSI submitted a "Request to Admit Facts and Genuiness of Documents" (request to admit) to Marsha, BPT and BPM. Specifically, requests number 11 and number 13 dealt with the issue of BSI's notice of Marsha's interest in the property:

"11. That at no time prior to June 1, 1996, was there any public record or notice of the interest of Marsha Azar or [BPT] in the subject property.

***

13. That at no time prior to June 1, 1996, neither [BSI], it shareholders, officers, agents nor its attorneys had any actual or constructive knowledge of the interest of Marsha Azar and/or [BPT] in the property ***."

Both BPT and BPM timely filed their objections and responses to this request. Marsha, however, never replied to this request.

BSI moved for summary judgment, asserting that because judgment on the lien was entered before Marsha recorded her deed, its interest in the property superseded hers, BPT's and BPM's. BSI also claimed that Marsha's failure to respond to its request to admit resulted in judicial admissions that BSI did not have actual or constructive knowledge of her interest in the property when it received the lien. Marsha, BPT and BPM also moved for summary judgment, arguing that because the Kaltezases no longer had an interest in the property once the deed was delivered to Marsha on May 13, 1995, ...


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