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Financial Freedom v. Kirgis

September 28, 2007


Appeal from the Circuit Court of Cook County, Illinois, County Department, Chancery Division. No. 02 CH 16900, consolidated with cause 05 CH 13128 but deconsolidated 9/22/05 Honorable Clifford L. Meacham, Judge Presiding.

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

Published opinion

Plaintiff, Financial Freedom, f/k/a Unity Mortgage Corp., d/b/a/ the Reverse Mortgage Co., filed a complaint to foreclose a reverse mortgage against numerous defendants including the deceased mortgagor/borrower, Mabel A. Kirgis (Mabel), and her son, Raymond Kirgis Jr. (Raymond). Raymond filed a motion to dismiss pursuant to section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619(6) (West 2002)) contending that the circuit court lacked subject matter jurisdiction because the foreclosure action had been filed against a deceased person and because it was t me barred by the statute of limitations promulgated in section 18-12 of the Probate Act of 1975 (755 ILCS 5/18-12 (West 2002)). The circuit court denied Raymond's motion to dismiss but certified the questions presented in the motion for interlocutory appeal (155 Ill. 2d R. 308). On review, this court denied Raymond leave to appeal. Subsequently, Raymond answered plaintiff's complaint and raised three affirmative defenses: (1) that the circuit court lacked subject matter jurisdiction because plaintiff filed a suit against a deceased person; (2) that under section 18-12 of the Probate Act, the foreclosure action was barred because more than two years had passed since the decedent's death; and (3) that the mortgage was produced by fraud.*fn1

Plaintiff filed a motion for summary judgment arguing that there were no genuine issues of material fact as to any of Raymond's affirmative defenses, and the circuit court granted that motion. Raymond now appeals, contending (1) that his motion to dismiss should have been granted and (2) that plaintiff's motion for summary judgment should have been denied. For the reasons that follow, we affirm.


The record below reveals the following relevant facts and procedural history. On September 16, 2002, plaintiff, the mortgagee, filed a complaint to foreclose a reverse mortgage against, inter alia, Mabel and her son Raymond upon belief that he was one of her heirs.*fn2

According to the complaint, Mabel was the sole owner in fee simple of the real property known as 1244 Campbell Avenue, Chicago Heights, Illinois (property). The complaint alleged that Mabel executed a reverse mortgage instrument with plaintiff on May 9, 1997, securing a maximum of $184,500 in principal indebtedness with a pledge of the said property as collateral. According to the complaint, this mortgage instrument was recorded and registered with the Department of Housing and Urban Development on May 22, 1997. The complaint further alleged that the borrower was deceased and that, therefore, pursuant to paragraph 9(a) of the mortgage instrument "all sums owed were immediately due and payable," the principal balance on the note and mortgage being $84,385.19 plus interest, costs, advances and fees. Accordingly, the complaint requested, among other things, a judgment of foreclosure and sale and a personal judgment for deficiency in the event that the amount obtained through the foreclosure sale was insufficient to satisfy the debt.

In support of the allegations in the complaint, plaintiff attached a copy of the reverse mortgage instrument and the adjustable rate note. Pursuant to that instrument, plaintiff agreed to lend to Mabel the maximum amount of $184,500 in principal, from which Mabel could take advances and cash payouts during her lifetime, and which she was not obligated to repay until after she either sold her property or died.*fn3 According to the instrument, in return Mabel "mortgag[ed], grant[ed], and convey[ed]" to plaintiff the said property. The reverse mortgage instrument was prepared by "Unity Mortgage Corp., d/b/a/ The Reverse Mortgage Co." Both the mortgage instrument and the adjustable rate note were signed by "Mabel A. Kirgis by Raymond W. Kirgis Jr., Attorney-in Fact."*fn4 Additionally, the mortgage instrument was publically notarized by Kevin B. O'Rourke. On October 21, 2002, defendant, Raymond, filed a motion to dismiss the complaint pursuant to section 2-619 of the Code, as against himself, Mabel, and "all unknown heirs and legatees of Mabel," contending that the circuit court lacked subject matter jurisdiction over the cause because the suit was filed against a dead person. According to that motion, the action was also time barred as it was filed on September 16, 2002, three years after the decedent mortgagor's death, in contravention of the two-year statute of limitations prescribed under section 18-12 of the Probate Act. In support of that contention, defendant attached the medical certificate of Mabel's death indicating that she had died on June 23, 1999.

On January 7, 2003, plaintiff filed a response to defendant's motion to dismiss contending that when it filed the complaint for foreclosure it was unaware of the mortgagor's death, and that it became aware of the mortgagor's death only after the process server was unable to serve process on her.*fn5 In addition, plaintiff argued that the Probate Act's statute of limitations on claims applies only to the filing of claims seeking entry of a personal judgment, and not to foreclosure claims.

On March 4, 2003, the circuit court heard arguments and denied defendant's motion to dismiss. The circuit court also ruled that plaintiff was barred from any deficiency in the event that the foreclosure sale of the property was insufficient to satisfy its claims.

Upon defendant's subsequent motion, the circuit court certified the following question for interlocutory appeal:

"Does section 18-12 of the Probate Act, 755 ILCS 5/18-12, bar a mortgage foreclosure action on a secured lien where the sole mortgagor and sole obligor on the underlying promissory note died more than three years prior to the filing of the foreclosure action?"

This court, however, denied defendant leave to file that appeal. See Financial Freedom f/k/a Unity Mortgage Corp. d/b/a The Reverse Mortgage Co., v. Kirgis et al., No. 1-03-1849 (June 23, 2003).

On July 17, 2003, defendant filed an answer and raised three affirmative defenses to plaintiff's complaint. Defendant again contended that this action must be dismissed because (1) the court lacked subject matter jurisdiction where a party files suit against a deceased person; and (2) plaintiff's claim was time-barred by the two-year statute of limitations articulated in section 18-12 of the Probate Act. In addition, defendant asserted that the mortgage was procured by fraud. In support of this third affirmative defense, defendant alleged that the mortgage was "an integral part of a scheme brought by Senior Citizen's Remodeling, Inc., (SCR), to defraud the elderly." In support of this assertion, defendant argued that SCR came to Mabel's home, suggested certain repairs and improvements on her home, and recommended a reverse mortgage as the means of obtaining these repairs and improvements. According to defendant, SCR intended that Mabel rely on its statements and obtain the reverse mortgage. Defendant asserted that Mabel relied on SCR's assurances and borrowed money to make the repairs and improvements through a reverse mortgage agreement with plaintiff. According to defendant, SCR procured and used the plaintiff's predecessor mortgage company to finalize the transaction and to collect the payment. According to the record, the company that entered into the reverse mortgage agreement with Mabel was the "Unity Mortgage Co., d/b/a (doing business as) The Reverse Mortgage Co." It is unclear from the record whether plaintiff, which filed its claim as "Financial Freedom Senior Funding Corp. f/k/a (formally known as) Unity Mortgage Co., d/b/a The Reverse Mortgage Co." is the same as the original reverse mortgage company, merely acting under a new name, or is in fact a purchaser of the original mortgage company.

On October 27, 2004, defendant filed an additional section 2-619 motion to dismiss plaintiff's complaint based upon a purported settlement agreement reached by the parties. In support of this contention, defendant attached a letter dated August 11, 2004 from plaintiff's counsel indicating that he had received verbal confirmation that defendant would accept plaintiff's settlement proposal.*fn6 On December 20, 2004, the circuit court voluntarily dismissed this section 2-619 motion.

On December 22, 2004, plaintiff, filed an amended complaint to foreclose mortgage solely in order to name Mary Scholze and Patricia Bishop as additional defendants, by "virtue of the fact that, upon information and belief, they are believed to be the heirs of Mabel A. Kirgis." The amended complaint also specifically alleged that Mabel did not execute the reverse mortgage instrument alone but, rather, that the instrument was executed on her behalf by her son Raymond.

On February 18, 2005, defendant filed an answer and affirmative defenses to plaintiff's amended complaint. Defendant admitted that the mortgage was executed by "Mabel A. Kirgis, by and through her agent-in-fact, Raymond Kirgis Jr.," and raised the exact same three affirmative defenses that he had raised in his answer to plaintiff's original complaint. (See above.)

On February 25, 2005, apparently without leave of court in presenting it, defendant also filed a counterclaim against plaintiff contending that plaintiff breached their settlement agreement.*fn7 According to the counterclaim, defendant and plaintiff had reached a settlement agreement, and defendant had repeatedly advised the court of the terms of such an agreement. However, rather than proceed on the agreement, according to the counterclaim, plaintiff demanded that defendant participate in the preparation of some kind of "application" pursuant to which he would supposedly be granted the loan already agreed to by the parties. The counterclaim contended that if defendant were forced to complete an additional application, he would have to satisfy a number of unstated contingencies not outlined in the original settlement agreement. In support of these contentions, defendant cited to Exhibit 1, a letter sent to defendant's attorney by counsel for plaintiff. That letter however, was not attached to the counterclaim and is not part of the record.*fn8

On March 21, 2005, plaintiff filed a motion for summary judgment. In that motion, plaintiff contended that it had proved that its mortgage lien against Mabel's property was valid, subsisting and unsatisfied and that defendant's two affirmative defenses failed as a matter of law.

As to the third affirmative defense, plaintiff asserted that (1) the fraud alleged against SCR was too vaguely and incompletely pleaded; (2) there was no allegation of fraudulent misrepresentation by plaintiff or anyone else associated with plaintiff; and (3) that even if SCR had acted fraudulently, plaintiff was a bona fide purchaser for value that took its interest without notice of any fraud tainting SCR's dealing with Mabel.

In support of his motion for summary judgment, plaintiff attached 13 exhibits. These included: (1) the original complaint; (2) the process server's affidavit, sworn on September 24, 2002, and indicating that he could not serve process on Mabel because she "passed away on 6/23/99"; (3) defendant's answer and affirmative defenses; (4) the order denying defendant's section 2-619 motion to dismiss; (5) the order certifying the question for interlocutory appeal; (6) the power of attorney appointing Raymond as Mabel's agent; (7) the "contract" entered into between SCR and Mabel for repairs to be done on her home for the sum of $15,000;*fn9 (8) a "settlement statement" by the Department of Housing and Urban Development signed by Raymond and showing that Mabel borrowed $55,000 from plaintiff's predecessor;*fn10 (9) the check used to pay SCR in the amount of $55,000, accompanied by an authorization from Mabel giving SCR permission to pick up her checks from plaintiff's predecessor and bring them to her; (10) a copy of plaintiff's business records listing all transactions that were made with respect to Mabel's account beginning with the inception of the loan; (11) an affidavit from plaintiff's attorney Sylvia Gotelli; (12) portions of the transcript of Raymond's deposition; and (13) an affidavit by plaintiff's attorney swearing to the veracity of all the exhibits attached.

As to the power of attorney, the document was dated May 9, 1997 and indicated that Raymond had the power to enter into, among other things, real estate, financial institution, borrowing, estate, and all other property transactions on Mabel's behalf.

As to the check for the repairs on Mabel's home, the check was for $55,0000 and was dated May 14, 1997, with "Republic Title Co., an Escrow Account," as the payor and Mabel as the payee. The check was endorsed by "Raymond, on behalf of Mabel," and then paid to the order of SCR. The check was accompanied with an authorization from Mabel, titled "Attention: Republic Title," and giving SCR permission to pick up Mabel's checks from plaintiff's predecessor and bring them to her. This authorization form was also signed by Raymond.

In addition, plaintiff's business records with regard to Mabel's account included all transactions between May 14, 1997, and June 30, 2002, and showed (1) an advance in the amount of $55,000 disbursed on May 14, 1997; (2) a "Line of Credit" charge dated September 30, 1997; and (3) two "Property Taxes" transactions, one on May 13, 2002, in the amount of $4 and the other on June 4, 2002, in the amount of $11,782.27.

More importantly, in the sworn affidavit by Sylvia Gotelli, Gotelli swore that she was an employee of plaintiff and manager of the maturity department. Gotelli stated that plaintiff does not and never has had any affiliation with SCR. According to Gotelli, plaintiff never authorized SCR to act or make representations for or on its behalf. Gotelli also averred that plaintiff never had any knowledge of any false representations or misstatements of fact made by SCR employees concerning Mabel's loan. Gotelli also stated that plaintiff never had any knowledge regarding any "intentions of SCR and/or its representatives, including whether or not its workers did or intended to perform in a workmanlike manner and/or whether it did or intended to perform as represented in its written agreement."

Gotelli also stated that, although plaintiff's files include all communications relevant to Mabel's loan, from the inception of Mabel's loan through the present, they do not contain any communication (written or oral) from Mabel (or any of Mabel's representatives), made prior to her death, regarding alleged fraud, misstatements of fact and/or alleged deception. Additionally, the files contain no communication of dissatisfaction or complaint from Mabel at the time of the borrower's second draw on this loan (in the sum of $14,000).

In addition, pages from Raymond's deposition made on May 6, 2004, established that from about 1994 through 1999, Raymond resided at the property together with his mother, Mabel, and with his wife. Raymond was the primary caregiver for Mabel, and after she died, he continued to live on the property with his wife, through 2004.

In his deposition, Raymond averred that SCR contacted his mother by telephone soliciting to have repairs done on her home. According to Raymond, his mother was interested because the home needed repair on the brick work, the siding of the house, the garage, the chimney, and the windows. Raymond testified that he was present when an individual from SCR came to the house to make estimates as to the amount that the repairs would cost. According to Raymond, the SCR representative walked around the house with Mabel and wrote down what Mabel wanted repaired and then next to that wrote the prices that SCR estimated these repairs would cost. Raymond identified the contract between SCR and Mabel as a one-page document listing these "estimates" and containing no signatures by any of the parties. According to Raymond, Mabel agreed to the terms that SCR indicated in that contract. According to Raymond, his mother was 84 years old but was mentally alert at the time she made the decision to do the home repairs based on SCR's "estimates."

Raymond also stated that an instrument giving him power of attorney to act on behalf of Mabel was made on June 19, 1994. He indicated that pursuant to this instrument, in 1997 when Mabel was approached by SCR, he had power to sign her checks. According to Raymond, Mabel suffered from arthritis, and as a result, he sometimes wrote out checks for her, which she would then sign.

Raymond also testified that SCR "looked to" The Reverse Mortgage Co. to finance the remodeling of Mabel's home and that, after the SCR made the estimate on the home repairs, representatives of the mortgage company came directly to Mabel's home. According to Raymond, the estimated total value of the loan was to be $15,000.*fn11

Raymond Kirgis testified that he photocopied three business cards from individuals he had dealings with in regard to the SCR repayments. These included two business cards of P. Richard Beem II, senior program representative of the "Reverse Mortgage Co./ Unity Mortgage Corp." and one business card of Nicholas L. Canellis, SRA, ASA, Appraiser Consultant of the American Society of Appraisers.

Raymond stated that Beem came to the house twice with all the loan documents and that, during the second meeting, the closing took place, at which he signed the reverse mortgage agreement on behalf of his mother. Raymond acknowledged his signature on three portions of the mortgage documents. He also stated that a check for $15,000 was then given by Beem to the SCR representative, who was also present.

After being shown the "Settlement Statement" indicating that $55,000 was disbursed to his mother, Raymond stated that his mother never got the $40,000 difference. Soon thereafter, however, he changed his mind and stated that he did not know if she ever got the $40,000.

According to Raymond, a week after SCR was paid at the closing, SCR workers arrived to repair the house and worked on it for about a month. Raymond testified that the repairs were poorly done. Raymond stated that soon thereafter he was notified by the State's Attorney's office that SCR was being investigated for fraud against senior citizens. Raymond later learned that as a result of this investigation SCR was dissolved. He stated that he received a check in the sum of $109.59 from Richard Devine in the State's Attorneys office as a recoupment of the loss suffered through SCR's work.*fn12 Raymond also testified that he did not change the appearance of the house after the poor repairs completed by SCR and that he did not do so because of the State's Attorney's investigation.

Raymond was next questioned regarding the fact that, after the closing of the mortgage two subsequent draws (cash disbursements) were made on the loan (one in the amount of $14,000 and the other in the amount of approximately $12,000). Raymond indicated that he was unaware that Mabel made the $14,000 draw and the he made no written request for $14,000. Raymond also testified that he was not aware that the real estate ...

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