Appeal from the Circuit Court of St. Clair County. No. 99-CH-561 Honorable Alexis D. Otis-Lewis, Judge, presiding.
Justices: Honorable Clyde L. Kuehn, J., Honorable Terrence J. Hopkins, P.J., Honorable Melissa A. Chapman, J. Concur
The opinion of the court was delivered by: Justice Kuehn
Rule 23 Order filed June 11, 2003; Motion to publish granted July 17, 2003.
This case involves a determination of the priority of mortgage liens. FT Mortgage Companies appeals from the trial court's May 21, 2002, order resolving competing motions for a summary judgment on the matter of a lien priority in favor of Union Planters Bank, N.A. In reaching this decision, the trial court concluded that the doctrine of conventional subrogation did not apply to the facts at issue.
Charles and Theresa LaFore owned a home in Belleville, Illinois. In January 1994, they executed a note and mortgage in favor of Delmar Financial Company (Delmar) in the amount of $120,650. That mortgage was recorded on January 26, 1994.
In December 1996, the LaFores executed a second note and mortgage on their Belleville home, in favor of Equicredit Corp. of America (Equicredit). This mortgage amount was $28,740. Equicredit recorded its mortgage on December 27, 1996.
In February 1998, the LaFores executed a third note and mortgage on their home, in favor of Magna Bank, N.A. This mortgage amount was $138,068. Magna Bank, N.A., recorded its mortgage on March 25, 1998. Magna Bank, N.A., later merged with Union Planters Bank, N.A. (UPB), and the loan became UPB's loan.
Eight months later, in November 1998, the LaFores applied for a loan from the defendant, FT Mortgage Companies (FT), in a "cash-out refinancing" deal in which the proceeds would be utilized to pay off prior mortgages and still provide the LaFores with some cash. This mortgage was in the amount of $148,000 and was recorded on April 26, 1999.
In applying for this final mortgage, the LaFores only acknowledged the initial two mortgages-Delmar and Equicredit, omitting the UPB mortgage. FT's underwriting of the mortgage was premised upon the payoff and release of the Delmar and Equicredit mortgages. Its closing instructions additionally required the confirmation of the first-lien position of the FT mortgage, in the form of a "First Lien Letter."
FT did not conduct its own title searches and hired a title company to do so. Reliable Research (Reliable) conducted its title search and located only two mortgages on this property, but not the same two mortgages listed by the LaFores. Reliable found the Equicredit and Magna Bank, N.A., mortgages. Reliable did not list the Delmar mortgage. FT's instructions to Reliable were to pay off all existing liens on the LaFores' property, stating, "NO SUBORDINATE LIENS TO REMAIN OPEN AT CLOSING." Interestingly, Reliable took the loan proceeds and paid off two mortgages, but not the two mortgages it had located in its title search. Reliable paid off the Delmar and Equicredit mortgages totaling $136,379, and it paid nothing to UPB, leaving an approximate $138,000 mortgage outstanding. The sum of $3,892 was disbursed to the LaFores, and the balance of the FT mortgage went for closing costs. The UPB mortgage remained in effect.
Apparently, Reliable's closer made the erroneous assumption that Magna Bank, N.A., had assigned its mortgage to Delmar. A quick look at the title search would have revealed the error in this assumption, as the Magna Bank, N.A., mortgage was clearly dated and recorded after the Delmar mortgage.
Apparently, the LaFores made no further payments to UPB on its mortgage, and after the passage of four months, UPB filed this foreclosure case on August 30, 1999. FT filed a counterclaim seeking a declaration that the subsequently recorded FT ...