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Financial Freedom Acquisition, LLC v. Std. Bank & Trust Co.

Court of Appeals of Illinois, First District, Sixth Division

June 13, 2014

STANDARD BANK AND TRUST COMPANY, as Trustee u/t/a dated March 18, 1991, a/k/a Trust No. 5193, Defendant-Appellant, (Unknown Beneficiaries of Standard Bank and Trust Company u/t/a dated March 18, 1991, a/k/a Trust No. 5193, Lawncastle Cove Condominium Association, United States of America--Secretary of Housing and Urban Development, Unknown Owners and Nonrecord Claimants, Defendants)

Page 777

Appeal fro the Circuit Court of Cook County. No. 10 CH 44740. Honorable Robert E. Senechalle, Jr., Judge Presiding.


In a mortgage foreclosure action, the counterclaim filed by defendant trustee, as the owner of the property, alleging violations of the Truth in Lending Act by the mortgagee and seeking damages and rescission of the transaction was properly dismissed, since the Act only allows obligors to seek rescission of a consumer credit transaction, the exculpatory clause the trustee executed precluded the trustee from being an obligor with the right to seek rescission, and the trustee's right to statutory damages was forfeited when it failed to raise the issue on appeal.

For APPELLANT: Wheeler & Wheeler, Westmont, Illinois.

For APPELLEE: Codilis & Associates, Burr Ridge, P.C.

JUSTICE REYES delivered the judgment of the court, with opinion Justice Lampkin concurred in the judgment and opinion. Justice Gordon dissented, with opinion.



Page 778

[¶1] This appeal arises from a mortgage foreclosure action filed by plaintiff, Financial Freedom Acquisition, LLC (Financial Freedom), against defendant, Standard Bank and Trust Company, as Trustee u/t/a dated March 18, 1991, a/k/a Trust No. 5193 (Standard Bank). Thereafter, Standard Bank filed a counterclaim against Financial Freedom alleging violations of the Truth in Lending Act (TILA) (15 U.S.C. § 1601 et seq . (2006)). The counterclaim sought damages as well as rescission of the loan transaction. Financial Freedom filed a motion to dismiss the counterclaim pursuant to section 2-619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2010)). Standard Bank now appeals from an order of the circuit court

Page 779

of Cook County granting Financial Freedom's motion to dismiss the counterclaim. Standard Bank contends on appeal the circuit court erred because it did not consider: (1) a land trust is a " natural person" under TILA; (2) it timely exercised its right to rescission; and (3) it has a contractual right to rescind the loan. For the reasons that follow, we affirm the decision of the circuit court.


[¶3] On October 14, 2010, Financial Freedom filed a complaint to foreclose the mortgage on 10420 S. Circle Drive, Unit No. 21B, in Oak Lawn, Illinois (the property), against Standard Bank, a land trust and current owner of the property.[1] Financial Freedom alleged the original lender was Marquette National Bank. Subsequently, Marquette National Bank transferred its interest to Financial Freedom.[2] Financial Freedom complained the mortgage was in default due to the death of the borrower, Mary Jane Muraida, which occurred on May 20, 2010. Financial Freedom further alleged the amount due was $38,269.15.

[¶4] Attached to the complaint were copies of the mortgage and note. The mortgage at issue was an adjustable rate home equity conversion mortgage, a type of reverse mortgage insured by the federal government through the Secretary of Housing and Urban Development. The mortgage provided the mortgagor was Standard Bank. In exchange for an amount up to $237,000, Marquette National Bank was given a security interest in the property. Standard Bank was the sole signatory on the mortgage.

[¶5] The mortgage contained an exculpatory clause executed by Standard Bank. The exculpatory clause provided in full:

" This MORTGAGE is executed by STANDARD BANK & TRUST COMPANY, not personally but as Trustee as aforesaid in the exercise of the power and authority conferred upon and vested in it as such Trustee (and said STANDARD BANK & TRUST COMPANY, hereby warrants that it possesses full power and authority to execute this instrument), and it is expressly understood and agreed that nothing herein or in said Note contained shall be construed as creating any liability on the said Trustee or on said STANDARD BANK AND TRUST COMPANY personally to pay the said Note or any interest that may accrue thereon, or any indebtedness accruing hereunder, or to perform any covenant either express or implied herein contained, or on account of any warranty or indemnification made hereunder, all such liability, if any, being expressly waived by Mortgagee and by every person now or hereafter claiming any right or security hereunder, and that so far as the Trustee and its successors and said STANDARD BANK & TRUST COMPANY personally are concerned, the legal holder or holders of said Note and the owner or owners of any indebtedness accruing hereunder should look solely to the premises hereby conveyed for the payment thereof, by the enforcement of the lien hereby created, in the manner herein and in said

Page 780

Note provided or by action to enforce the personal liability of any guarantor, if any."

[¶6] The note was executed on June 9, 2009, and signed by Muraida and Standard Bank. The note provided Muraida would not be personally liable for the amounts due on the note; instead the future sale of the property itself would be payment of the note. Sale of the property through the lender would only occur upon Muraida's death, if all of Muraida's title in the property were transferred, or if Muraida failed to use the property as her principal residence for more than 12 consecutive months.

[¶7] On July 19, 2011, Standard Bank, with leave of court, filed an answer to the complaint and a counterclaim. Standard Bank asserted that it entered into a consumer credit transaction with Financial Freedom's predecessor in interest, Marquette National Bank. Standard Bank alleged Financial Freedom failed to deliver material disclosures to Standard Bank as required by TILA. Standard Bank also asserted Financial Freedom failed to respond to the notice of rescission it sent on June 2, 2011, in violation of section 1635 of TILA. 15 U.S.C. § 1635 (2006).[3] Standard Bank sought rescission of the loan, termination of the security interest, statutory damages of $4,000 for ...

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