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Chicago Title Insurance Company v. Aurora Loan Services, LLC

Court of Appeals of Illinois, First District, Third Division

August 30, 2013

CHICAGO TITLE INSURANCE COMPANY, as Subrogee of WATERSIDE PARTNERS, LLC, Plaintiff-Appellant,
v.
AURORA LOAN SERVICES, LLC, Defendant-Appellee.

Appeal from the Circuit Court of Cook County No. 12 L 4228 Honorable John C. Griffin, Judge Presiding.

JUSTICE PIERCE delivered the judgment of the court, with opinion. Presiding Justice Neville and Justice Hyman concurred in the judgment and opinion.

OPINION

PIERCE, JUSTICE.

¶ 1 Plaintiff, Chicago Title Insurance Company, appealed the circuit court's order granting defendant's motion to dismiss the complaint with prejudice pursuant to section 2-619 of the Code of Civil Procedure (Code). 735 ILCS 5/2-619 (West 2010). For the reasons that follow, we affirm the circuit court's order.

¶ 2 BACKGROUND

¶ 3 Plaintiff filed a one count verified complaint on April 20, 2010, for breach of special warranty deed. According to plaintiff's complaint, Aurora Loan Services, LLC (Aurora) conveyed the subject property located at 201 N. Westshore Drive, Unit 2603 in Chicago, Illinois, to Waterside Partners LLC (Waterside) by special warranty deed on February 23, 2010. The special warranty deed was recorded on March 11, 2010. Chicago Title Insurance Company (Chicago Title), issued an owner's policy of title insurance for the subject property on March 11, 2010. Plaintiff alleged that Aurora breached its special warranty that it did not do anything or suffer anything to be done to encumber the property when Aurora: (1) failed to redeem a tax sale that was held prior to Aurora's ownership of the subject property; and (2) did not notify Waterside of a pending tax deed proceeding that ultimately divested Waterside of its interest in the property.

¶ 4 The following facts are agreed to by the parties. Pursuant to a judicial sale resulting from a foreclosure action, Aurora Loan Services obtained title to the property from Intercounty Judicial Sales Corporation on September 9, 2008. Prior to Aurora receiving the deed, however, delinquent special assessment taxes were purchased by the Salta Group, Inc. (Salta) on June 22, 2007. Salta recorded a lis pendens notice against the property. On February 22, 2010, Salta filed a petition for a tax deed under the June 22, 2007 tax sale. On February 23, 2010, Aurora conveyed the property to Waterside by special warranty deed. The tax sale was redeemable until June 21, 2010. Aurora did not redeem the 2007 tax sale although it did pay the special assessment taxes in 2009 and 2010. Aurora did not notify Waterside of the 2007 tax sale.

¶ 5 On March 2, 2010, Salta served Aurora with notice of a petition for issuance of a tax deed. Aurora did not notify Waterside of the petition for a tax deed. On October 29, 2010, a tax deed issued and Salta obtained title to the property. The tax deed was recorded on November 17, 2010. Waterside was then divested of its interest in the property. On December 6, 2010, Chicago Title paid its insured, Waterside, the policy limit and appraised value of the property, $290, 000. Chicago Title, as Waterside's subrogee, thereafter filed this lawsuit.

¶ 6 The special warranty deed executed by Aurora provided that Aurora "does covenant, promise and agree, to and with [Waterside], their heirs and assigns, that it has not done or suffered to be done anything whereby the said premises hereby granted are, or may be, in any manner encumbered or charged." Plaintiff alleged that the title insurance policy was issued without an exception for the 2007 tax sale and Waterside suffered a full title loss because of the issuance of the tax deed to Salta. Plaintiff alleged that defendant breached its special warranty in that it allowed the encumbrance of the lis pendens notice to remain on the property on the day the special warranty deed was delivered and recorded.

¶ 7 Defendant moved to dismiss the complaint pursuant to sections 2-603 and 2-619 of the Code. 735 ILCS 5/2-603 (West 2010); 735 ILCS 5/2-619 (West 2010). Defendant argued that the complaint should be dismissed pursuant to section 2-619 of the Code because it cannot be held liable for Waterside's loss under the terms of the special warranty deed. Specifically, defendant argued that the plain language of the special warranty was limited to actions done or suffered to be done by Aurora which created an encumbrance. Defendant argued that the encumbrance predated Aurora's ownership of the property and, therefore, was not within the scope of the special warranty made to Waterside. Aurora argues that the property was sold for unpaid taxes on June 22, 2007 and it did not obtain title to the property until September 9, 2008. Thus, the prior owner of the property, and not Aurora, caused the tax sale to occur on June 22, 2007. Therefore, defendant argued, under the terms of the special warranty deed, Aurora did not "do or suffer to be done" anything to cause the tax sale encumbrance and it cannot be held liable for an encumbrance caused by the prior owner.

¶ 8 Plaintiff argued in response that under the special warranty deed, defendant had (1) a duty to notify Waterside of the existence of the tax sale; and, (2) defendant breached the covenant against encumbrances by (a) failing to redeem the property from the tax sale; and (b) failing to notify Waterside of the petition for a tax deed. Plaintiff argued that defendant's inaction encumbered the property by creating a defect in title.

¶ 9 On October 25, 2012 after full briefing and a hearing on the motion, the circuit court granted the section 2-619 motion to dismiss with prejudice. The circuit court found that because the delinquent special assessment tax encumbrance predated Aurora's ownership of the property, the encumbrance did not occur while Aurora held title and Aurora did not cause the encumbrance, therefore, Aurora did not breach the special warranty deed. The circuit court also found that Aurora did not breach the special warranty deed for failing to notify Waterside of the existence of the tax deed petition.

¶ 10 ANALYSIS

¶ 11 Plaintiff argues that the circuit court erred in granting defendant's motion and dismissing the complaint with prejudice pursuant to section 2-619 of the Code. A section 2-619 motion for involuntary dismissal admits the legal sufficiency of the complaint, but raises defects, defenses, or other affirmative matter which avoids the legal effect or defeats a plaintiff's claim. 735 ILCS 5/2-619(a)(9) (West 2010); Mauvais-Jarvis v. Wong, 2013 IL App (1st) 120070, ¶ 64. The purpose of a section 2-619 motion to dismiss is to "provide litigants with a method of disposing of issues of law and easily proved issues of fact—relating to the affirmative matter—early in the litigation." Reynolds v. Jimmy John's Enterprises LLC, 2013 IL App (4th) 120139, ¶ 30. Affirmative matter is "something in the nature of a defense that negates the cause of action completely or refutes crucial conclusions of law or conclusions of material fact contained in or inferred from the complaint." In re Estate of Schlenker, 209 Ill.2d 456, 461 (2004); Illinois Graphics Co. v. Nickum, 159 Ill.2d, 469, 486 (1994). When a defendant has initially satisfied the burden of presenting an affirmative matter, the burden then shifts to ...


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